Ferrexpo Annual Report 2023

FY2023 Annual Report · Ferrexpo

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D E T E R M I N E D

Ferrexpo plc
Annual Report & Accounts 2023

Contents

We are determined to
protect our people and
our assets so that we
may continue to operate
and contribute positively
to Ukrainian society and
the economy.

As a leading European
supplier of premium iron
ore pellets we are enabling
the transition to green steel.
Our products are important
to Ukraine and to customers
around the world.

Strategic Report

Executive Chair’s Statement
Chief Financial Officer’s Statement
Operating during a time of war
Our Business
Business Model
Value Proposition
Strategic Framework
KPIs
Operational Review
Market Review
Financial Review
Responsible Business Review

Introduction

Safety
Net Zero Pathway
Double Materiality Assessment
Life Cycle Assessment
TCFD Disclosures
Diversity, Equity and Inclusion
Governance
Non-Financial Information Statement
Stakeholder Engagement – Section 172
Risk Management
Principal Risks
Viability Statement

02
04
06

08
10
12
14
18
22
26

32
34
36
38
42
43
60
62
63
64
72
74
91

Corporate Governance

Financial Statements

Additional Disclosures
Alternative Performance Measures
Glossary

158

235
236
238

WE ARE DETERMINED

Look out for our
operational Q&As

Throughout the report this year,
you will find Q&As from our colleagues
across different areas of our business
discussing what it is like operating during
a time of war.

References to Ferrexpo plc
For references to Ferrexpo plc in this report see glossary.

Ferrexpo plc Annual Reports & Accounts 2023

Executive
Chair and CFO
statements

Operating
during a time
of war

Operational
Review

Market
Review

Financial
Review

Responsible
business

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS02

Executive Chair’s Statement

Ferrexpo has demonstrated a
strong performance during a
time of war and we should be
proud of our achievements.
In the face of extraordinary
circumstances, we have
continued to produce, export,
and preserve cash.

Dear Shareholder
The challenges that Ferrexpo faced in
2023 cannot be understated. After two
years of war in Ukraine, our people and our
business continue to be severely affected.

Our strategy to move early and right-size our
business, so that we are more responsive
to ever changing circumstances, is working.
During the year, we have worked tirelessly
to protect our people, preserve the integrity
of our assets, and contribute to local society
and the national economy. In the face of
such extraordinary circumstances, we
have continued to produce and export our
products and preserve cash. I believe that
the company has performed exceptionally
well and despite the challenges we
should be proud of our achievements.

War
This announcement covers the financial year
2023, the second year of war since Russia
commenced its full-scale invasion of Ukraine in
February 2022 and at the time of the publication
of this report it is already the third year.

Beyond the challenges in Ukraine, it would
appear that the wider world is entering a
new era of geopolitical uncertainty. Old
conflicts have reignited, new ones are
emerging, and autocratic leaders and their
nationalist agendas are prevailing in and
across many countries and regions.

Against this increasingly volatile and complex
backdrop, it is perhaps inevitable, regrettably,
that when it comes to Ukraine, a certain level
of ‘war weariness’ is starting to appear.

Weariness, however, is not an option for the
people of Ukraine who at no point have lost
sight of what is at stake – the very existence
of the Ukrainian state. It is my observation
that the Ukrainian identity has strengthened
over this period, which has bolstered the
resilience and commitment of Ukrainians
– who remain as determined as ever.

Reconstruction
Today, even during a time of war, Ukraine
is already considering what sort of state it
wants to be when the war is over, and how
to reconstruct its political system, economy
and society as a whole. In December 2023,
this thinking took a decisive direction when
the EU opened member accession talks with
Ukraine. Setting a path for the integration of
Ukraine into the EU is the right thing, and one
in which Ferrexpo can play a critical role.

As Ukraine embarks on the task of economic
reconstruction, government and business
must work together to agree on the steps
needed to create an investment environment
that will help rebuild Ukraine as quickly
as possible and shorten the path to EU
membership. This includes upholding the
rule of law, creating a level playing field for
business and gaining the trust of a new set
of investors who see prospects for rapid,
sustained growth in the country after the
war. It also means rooting out much of the
corruption that is endemic in Ukraine.

Ferrexpo plc Annual Reports & Accounts 2023

Limitations on our logistics corridors have
again constrained our ability to export,
which forced us to limit production levels.
We have been able to operate one, sometimes
two, of our four pellet lines to match the
reduced export capacity available to us.
The lack of access to Black Sea export
routes, in particular, sharply reduced
opportunities to export product volumes
to the Middle East and Asia, however, this
has started to ease since early 2024.

Thanks
There were some Board changes during the
year. Ann-Christin Andersen and Graeme
Dacomb resigned from the Board and I would
like to express my thanks to both. I would
also like to extend my thanks to Jim North
who stepped down as CEO in April 2023.
I had the pleasure over eight years to observe
the tremendous positive impact Jim had on
modernising and expanding Ferrexpo. Jim
is both a pragmatic realist and a visionary,
and he possesses the rare balance of being
technically brilliant and a skilful diplomat. The
war impeded his objectives to grow Ferrexpo
towards an annual net-zero production of
24 million tonnes, but he has left us a road
map that we will resume when the time is right.

Following Jim’s departure I assumed
responsibility as interim Executive Chair,
leading the business with an experienced
Executive management team whom in
2024 will celebrate working at Ferrexpo for
a collective 100 years, and in the industry
for 150 years. As I said in last year’s report
when I was Non-executive Chair, strong
governance is essential now more than ever,
and whilst my interim role as an Executive
Chair is admittedly a combined role, we do
not believe now is the right time to make
any significant management changes.

Finally, I wish to thank each and every
one of our employees as well as our local
communities for the bravery and resolve
they have continued to show in the face
of such fierce adversity and express my
gratitude to all those associated with
Ferrexpo for their contribution and continued
support over the past 12 months.

Lucio Genovese
Executive Chair, Ferrexpo plc

Ferrexpo holds a pivotal position in shaping
Ukraine’s future. As a UK-based public
limited company, we uphold governance
standards that instil confidence in international
investors, safeguarding their investments. Our
commitment extends beyond financial security;
we aim to bolster and expand our capabilities
to drive growth in the Ukrainian economy.
With a focus on producing premium products
essential for steel producers’ decarbonisation
efforts, especially within Europe, we are poised
to facilitate the growth of sustainable trade
between Ukraine and the EU. Our dedication
to this cause marks our distinctive role in
Ukraine’s reconstruction. Ferrexpo is uniquely
positioned to lead the charge towards a
prosperous and sustainable future for Ukraine.

People
Our future hinges upon our people – our
steadfast workforce, their families, and the
communities we serve. This commitment
unequivocally extends to those members of
our workforce who are bravely serving in the
Armed Forces of Ukraine. We honour their
sacrifice and eagerly anticipate their return
to the roles we have preserved for them.

Ferrexpo stands out for its unparalleled
combination of large-scale and top-tier
assets within our industry. However, it is
the unwavering dedication of our workforce
that truly fuels the productivity of these
assets. So, at this point, I’d like to express
our heartfelt gratitude to each and every
member of our team for their tireless
efforts and unwavering determination.

I am deeply saddened that 19 of our
colleagues were killed serving in the Armed
Forces of Ukraine in 2023, bringing the total to
35 since February 2022. We bow for each of
these brave souls. May they rest in peace and
be remembered for their extraordinary courage
and sacrifice. At the date of this report, 641
of our colleagues are serving in the armed
forces, equal to 9% of our total workforce.

Safety and wellbeing
Throughout the year, Ukraine has continued to
face regular attacks from Russia, influencing
how we ensure the wellbeing of our people,
who remain our primary concern. We are
committed to ensuring their safety and offering
comprehensive physical and psychological
support during these challenging times.
Examples of this include providing protective
clothing for those serving in the armed forces,
building bomb shelters for those working in
industrial functions, the provision of meals
for those on longer shifts, permitting those in
administrative functions to work from home
and offering child care in safe bomb shelters.
We continue to provide broader assistance
through our humanitarian aid programmes,
which have provided housing, food and

medicine, funded the donation of equipment,
and support programmes and initiatives.

Safety must be thought of in new and broader
terms. For example, as the war evolves we
are starting to see people return from the
armed forces. The rehabilitation of veterans
into the workforce is challenging, especially
for those with physical and mental injuries.
We have helped with physical rehabilitation,
including prosthetics, and emotional
trauma. This extends to support for family
members too. It is our role to foresee and
adapt to these changes, so that we can
continue to keep our people as safe as
possible and support their wellbeing.

Skills
The enlisting of such a large amount of
our Ukrainian workforce, particularly those
with technical skills, has had an inevitable
impact on our human and operational
capacity. The workforce that remained
on site have proven remarkably agile
and flexible, ensuring the continuity of all
activities. Our training centres have risen to
the challenge to help people develop new
skills, including internally displaced people
joining our workforce, and for others learning
to upskill and cross-skill, to provide the
optimum flexibility across our workforce.

The determination of our employees has
proven invaluable in overcoming some
disruptions to vital infrastructure, an
inevitable eventuality of Russia’s regular
attacks on Ukraine. While we did suffer
some downtime as a result of damage to
electricity transformers, roads and bridges,
our speedy repairs, sometimes working with
various authorities has meant that operational
disruptions were mostly short lived.

Assets and logistics
Thanks to the resilience of our employees
the Company’s assets remain intact
and operational. Together, we have
continued to seek to preserve Ferrexpo’s
underlying value as well as the Company’s
significance for the Ukrainian economy.

During the year, we continued to invest in
our assets, such as the construction and
commissioning of the press filtration complex,
to improve the quality of our products.
Resources have been devoted to undertaking
desktop reviews and engineering analysis.
By completing these studies at a time of
considerable constraint, we will not only
be in a far better position to recommission
production in the future, but also have more
clarity when we reinitiate upgrade and
expansion projects. We will continue with
this advanced preparatory work into 2024.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS04

Chief Financial Officer’s Statement

The challenges of the last year have
accelerated our learning and adoption
to make us more agile and responsive
to ever changing circumstances.
The cohesion shown by our employees
across the business demonstrates a team
that is unified and working together to
overcome any challenges that they face.

Dear Stakeholders,
As we reflect on 2023, another year blighted
by Russia’s ongoing invasion of Ukraine,
I am proud that we are able to report
operating and financial results that reflect
the determination of our people in these
difficult times. The cohesion shown by our
employees across the various departments
of the business demonstrates a team that is
unified and working together to overcome any
challenge they face. This fortitude has made
us stronger and allows us to understand what
our people and operations are capable of.

While the challenges of the past year
have been formidable, they have also
accelerated our learning and adaptation,
making us more agile and responsive to
the ever evolving situation on the ground.

As we started 2023, we once again faced
significant uncertainties surrounding the
energy supply in the winter months, given
previous attacks on the electricity grid
and other infrastructure. This compelled
us to manage our working capital and
stocks effectively to mitigate the potential
risk of blackouts while ensuring we could
fulfil our obligations to customers.

Pleasingly, the team’s cohesiveness,
coupled with our proactive planning ahead
of time meant we were able to manage
through this uncertain start to the year.
As we headed for the second quarter, and
bolstered by a strong liquidity position, we
seized market opportunities and restarted
an additional pelletiser, thereby increasing
our production capability and flexibility.

With stable production from the first pellet line,
and an initial contribution from the second
pellet line, total iron ore pellet production for
the first half was almost 2 million tonnes, a 57%
increase compared to the second half of 2022.

Unfortunately, any expectations for further
growth in production and sales in the
second half of the year were thwarted
by the continued inability to use the
Black Sea for exports, which would have
justified us further expanding capacity for
exports to the Middle East and Asia.

Despite these setbacks, we adjusted our
operational plans swiftly, leveraging alternative
routes into Europe and other Black Sea
ports, to maintain sales levels while reducing
production to align with market conditions.
As a result, we ended the year producing at the
logistics capacity available to us at 4.2 million
tonnes of pellet and concentrate production.

Ferrexpo plc Annual Reports & Accounts 2023

WE ARE DETERMINED

Look out for our Q&As with colleagues

Throughout this year’s report, colleagues from different functions across the
business share their insights to explain what it is like working during a time of war.

See the pages below for their stories:

Culture
page 15

Facilities
page 17

Procurement
page 21

Sales
page 25

Internal reporting
page 29

Translation
page 31

CSR
page 35

Processing
page 37

HR
page 41

Administration
page 61

Logistics
page 67

Transport
page 68

Communications
page 71

In terms of budgeting, we encountered some
surprises, notably in logistics challenges
and costs, however iron ore prices were
strong in the final quarter helping to offset
these costs. Indeed, for the year as a whole
our unit costs reduced. All in all, thanks to
years of investment prior to the war, our
quality assets and premium product range
continues to ensure our net cash position.

It was important that throughout 2023, we
maintained a prudent approach to cash
allocation, focusing on key operational and
capital projects essential for sustaining our
business amid volatile wartime conditions.

The Group operates in an evolving political,
fiscal and legal environment in Ukraine and
the risks associated with this heightened
further in 2023 and early 2024. As result, the
Group has recognised provisions totalling
US$128 million, including US$124 million
for one specific ongoing legal dispute. See
details in Note 2 Basis of preparation and
Note 30 Commitments, contingencies and
legal disputes to the Consolidated Financial
Statements in respect of the possible
impact on the Group’s business activities.

Looking ahead to the start of the new
year, we remain cautiously optimistic.
In particular, logistics costs have improved,
providing us with a favourable environment
to capitalise on market opportunities.

As we navigate the complexities of operating
in a dynamic geopolitical landscape, our focus
remains on building resilience, optimising
our assets, and enhancing operational
flexibility. Our high quality assets have been
instrumental in providing stability amidst
uncertainty, underscoring the importance
of prudent investments made in the past.

In conclusion, while the road ahead will
no doubt continue to present its share of
challenges, we are confident in our ability to
navigate through uncertainty and are prepared
to continue delivering the embedded value
in our quality assets to our shareholders.
We appreciate your continued support and
trust as we navigate these uncertain times.

Nikolay Kladiev
Chief Financial Officer, Ferrexpo plc

1. Source: Independent research provided by CRU.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS06

Operating during a time of war

The full-scale invasion of Ukraine commenced
on 24 February 2022. With all our production
based in Ukraine, our workforce and operations
are affected by the ongoing war. In this section we
explain how the war is affecting our people and
how we are managing the business at this time.

People
The safety and wellbeing of our people
is paramount, especially during a time
of war. At the end of 2023 our Ukrainian
workforce comprised 6,432 employees
and 933 contractors. In addition, 641
colleagues are currently serving in the Armed
Forces of Ukraine, whom we support on
an ongoing basis with safety equipment,
clothing and other essentials throughout
the time that they are in the military.

As the war progresses, the availability of
people and skills is becoming more complex.
More members of our workforce are being
conscripted to join the armed forces. Ferrexpo
employees are attractive candidates because
they possess the technical and mechanical
skills that the army needs, the very skills that
are critical to our production processes.

During 2023, more than 700 employees
resigned or left our business. Although
our operations are over 250 kilometres
from the front lines, many have chosen to
leave the region and move to the far west
of Ukraine or abroad. This is in addition
to the 900 or so that left in 2022.

The business continues to carry a large
workforce while operating at a reduced
capacity. This means that to date there
has been the sufficient amount of people
to continue operations. As the business
continues to restore idled capacity, many
employees are back to a full working week,
with some already working overtime. We
are also recruiting more people, including
younger and older people, and more women.
At our Ferrexpo Technical Expertise Centre,
multiple initiatives have been established
to upskill, cross-skill and reskill employees,
including fast tracking vocational training
and qualifications programmes.

In 2023, 67 colleagues were demobilised from
the armed forces, 46 of whom have returned
to work. During the year, we expanded our
support for veterans to include physical
rehabilitation and psychological support.
Veterans unable to return to their previous
functions due to factors such as noise and
vibration, are offered the opportunity to train
and qualify for other more suitable roles.

Ferrexpo plc Annual Reports & Accounts 2023

Remembering
those we have lost
Tragically, 19 colleagues were
killed serving in the armed forces
during 2023, bringing the total
to 35 since February 2022.

2023

Yuriy Bilenko, age 38

Serhii Buhuev, age 42

Oleksiy Bulba, age 45

Serhiy Chemkayev, age 44

Maksym Chystyakov, age 24

Volodymyr Holub, age 54

Oleksiy Khanilevych, age 24

Rostyslav Ledovskyy, age 25

Dmytro Lysachenko, age 28

Roman Lytvynenko, age 31

Vitaliy Med, age 40

Ihor Novohatniy, age 39

Volodymyr Pavlenko, age 43

Petro Perovskiy, age 25

Andrii Petrenko, age 49

Serhii Pizniy, age 34

Oleksandr Smyrnov, age 32

Vladyslav Solomko, age 33

Oleksandr Terlenko, age 48

2022

Dmytro Belikov, age 32

Oleksiy Bridnya, age 33

Andriy Chernya, age 37

Oleksandr Chugainov, age 54

Guy Dudka, age 52

Andriy Dukanych, age 33

Serhiy Kharlamov, age 57

Serhii Kondyk, age 31

Denys Koshovyy, age 31

Oleksiy Nazimov, age 25

Kostyantyn Orchikov, age 30

Oleksandr Scherbakov, age 28

Denys Svyrydov, age 50

Yaroslav Taran, age 50

Oleksiy Yatskov, age 36

Anatoliy Zakupets, age 37

Slava Ukraini.

In response, the Group sales strategy focused
on premium European customers that could
be reached by rail or a combination of rail and
river barge using the Company’s owned barge
fleet company First-DDSG Logistics. Another
export route was later developed by rail to the
Ukrainian border, and onward transportation
by barge through inland waterways to
a Black Sea port in another country.

The business learnt to be nimble and adapt
to the many challenges it faced in 2023.
Altering mining and processing to produce
different products to meet customer needs,
sourcing supplies of critical inputs, managing
inventories to reduced logistics capacity, and
finding alternative routes to supply customers.

The determination of the workforce, the
flexibility of our operations, and our premium
products sold to premium customers are
our strengths, and explain how we are
continuing to operate during a time of war.

Humanitarian support

US$25M

Local communities
During the early stages of the war, it was clear
that the local communities where we operate
needed humanitarian support. Although many
people left, displaced people fleeing the war
in the eastern regions passed through, and in
some instances, settled in the Poltava region.
In early 2022 the Ferrexpo Humanitarian
Fund was established, which combined with
associated CSR funding at the date of this
report has donated US$25 million to foster
over 100 individual programmes and initiatives.

As the war protracts, the needs of society
are changing. In the early stages of the
war, the immediate focus was to help
house and feed people. This situation
has settled now. Indeed, of the many
new people that settled in the region,
102 have taken employment at Ferrexpo.

The focus of humanitarian support has
evolved. Presently, we are committed to
supporting our colleagues actively serving
in the armed forces, as well as aiding in
the rehabilitation of veterans. Additionally,
contributions are directed towards addressing
critical national emergencies, such as
providing assistance to the residents of
the Kherson region in the aftermath of
the Nova Kakhovka Dam explosion.

In Horishni Plavni, the town centred on our
operations, we continue to offer community
support through commitments to cultural and
social programmes, education and medical
facilities, and infrastructure. This support
also includes programmes and initiatives
that support sports, social clubs and arts,
along with physical and mental health.

Operations and logistics
Our operations are large in scale. The process
flow is relatively simple: mining, processing
and beneficiation, with considerable built-
in production flexibility at each stage.

During 2023, reduced logistics availability
forced us to reduce production to a
roughly a third of our full capacity.

In addition to people, our operations rely on
many inputs, including, energy, chemicals
and equipment. Since the start of the full-
scale invasion, we have learnt to adapt to
ever-changing conditions. This can mean
finding new suppliers as our traditional
suppliers have suffered from the war, or
where logistics routes are no longer available.

Before the full-scale invasion, Ferrexpo
transported its products using its own fleet
of rail wagons and barges to customers in
Europe, or via rail to Ukrainian Black Sea ports
for onward transportation by ship, primarily
from the Group’s joint venture facilities at the
Port of Pivdennyi. Access to Ukrainian Black
Sea ports was severely restricted in 2023, with
only a handful of vessels leaving with cargoes
of iron ore towards the end of the year.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS08

Our Business Model

Ferrexpo is a vertically integrated,
pure-play iron ore pellet producer
and supplier

What we do

MINING

PROCESSING

TRANSPORTATION
AND LOGISTICS

The competitive advantages that help us to create value

QUALITY
ASSETS

LOW-COST
PRODUCTION

GLOBAL
DISTRIBUTION

Our world-class, long-life
deposits hold 5.7 billion tonnes of
JORC-compliant mineral resources.

Contiguous open pit mines use
modern equipment and have an
industry-leading safety performance.

Our ore processing metallurgical
beneficiation and pelletiser plants
produce a variety of pellets at a
competitive cost.

Established and efficient large-scale
plants with built-in operational flexibility
to supply evolving customer needs.

Owned transport equipment and
logistics infrastructure, including
rail, ports, river and ocean vessels.

Flexible handling and shorter
delivery times to Europe and
MENA than global peers.

50years

Mineral Reserves

12MT

Annual capacity from
four pelletising lines

3rd

Largest exporter of
pellets globally (pre-war)

REINVESTMENT INTO PEOPLE, TECHNOLOGY INNOVATION AND R&D

Ferrexpo plc Annual Reports & Accounts 2023

What we do

The competitive advantages that help us to create value

Our high quality products are preferred by premium steel producers
around the world and are enabling the transition to green steel,
whilst at the same time supporting the Ukrainian economy.

MARKETING

The outcomes we deliver

ECONOMIC

ROBUST PRE-WAR EARNINGS TRACK RECORD

SHAREHOLDER DISTRIBUTIONS

FISCAL CONTRIBUTIONS

PREMIUM
PRODUCTS

SOCIAL

We have relationships with premium
steel mills around the world, serving
customers in Europe, MENA, Asia
and North America.

Our premium products enable us
to add more value for customers,
supporting higher margins.

65-67%

Fe content in all our products

INVESTMENT IN UKRAINE

SUPPORT DURING TIME OF WAR

SUPPORTING OUR WORKFORCE AND COMMUNITIES

DEVELOPING OUR WORKFORCE

ENVIRONMENTAL

ENABLING GREEN STEEL

SUPPORTING THE DRIVE TO NET ZERO

See how our activities create value
for all of our stakeholders on page 64

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS10

Value Proposition

Why
invest in
Ferrexpo?

What’s the industry challenge?

The essential
nature of steel

Transition to
green steel

>1.85BN

Total steel production
in 2023 (tonnes)

Global greenhouse
gas emissions currently
generated through steel
production

Iron ore is the main ingredient to make
steel, on which our everyday lives depend.
If something is not made of steel, it is made
using it. Steel is also integral to the energy
transition, critical for energy generation
technologies such as wind turbines,
transmission infrastructure and usage, and
end-user products such as electric vehicles.

However, traditional steel production
is emissions-intensive. Legislation and
environmentally conscious end-users
are facing a shift to lower and zero carbon
steel. Consequently, steel producers will
be forced to transition to lower and zero
carbon feedstocks and production methods.

US$1.7T

Value of iron ore-steel value chain
in 2022

+200MT
green steel

Forecast global lower and zero
carbon steel demand growth
by 2030

30%

Forecast growth in demand
for steel by 2050

80MT DR pellets

Forecast global demand growth
for DR pellets by 2030, over one
third of which in Europe

Ferrexpo plc Annual Reports & Accounts 2023

Why are we well positioned for the future?

Our industry-
leading products

Our unique scale,
structure and
infrastructure

Our focus on
responsible
operations

-37%

Lower global warming
potential of steel made
with Ferrexpo DR pellets

+50years

Life-of-mine high grade
magnetite deposits

0.32LTIFR

Improved safety performance.
2023 below five-year historical
average 0.69

Ferrexpo is already a leading supplier
of premium iron ore pellets and Direct
Reduction Iron (“DR”) pellets, the products
needed to transition to lower carbon steel.
When used in an electric arc furnace
(“EAF”), our DR pellets are proven to
improve productivity and lower-carbon
emissions by over a third compared to
the traditional sinter and coal process.

As the only publicly listed, vertically
integrated iron ore pellet producer and
supplier of its size in Europe, Ferrexpo is
uniquely positioned. The established scale
of our assets, and the infrastructure,
technology and skills that we have invested
in over decades are difficult to replicate.

Before the war, Ferrexpo was the world’s
third-largest exporter of iron ore pellets.
We have committed to decarbonisation and
Net Zero by 2050. Our safety performance
is industry leading. We are a significant
contributor to the local communities where
we operate, and the Ukrainian economy.

100MTPA

Large scale

50% reduction

Forecast DR grade pellet deficit by
2031 as pellets outpace traditional
concentrates

Mines and pellet lines ensure
variable and flexible production

2050 net-zero pathway, targeting
50% reduction in Scope 1 and 2
by 2030

Pellet
efficiency

Owned logistics
infrastructure

US$25M

DR pellets command premium
prices due to their efficiency in
lower carbon steel making

Providing multiple export routes
to a global customer base

Funding for more than 100
humanitarian projects and initiatives

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

Strategic Framework

Strategic direction

Strategic goal

Goals

High quality
production

Focus on
sustainability

Low cost
operations

World class
customer network

Focus on higher
grade premium iron
ore products needed
to enable the transition
to lower-carbon steel.

Through sustainable,
ethical partnerships,
realise value for all
stakeholders. Prioritising
support for Ukraine
during a time of war.

Conserve the integrity
of our assets, and
continue investing to
maintain competitive
cost of production.

Working in partnership
with our customers to
improve efficiencies
and decarbonise
steel production.

Disciplined capital
allocation

Prudent capital framework
that balances operational
and societal demands
during a time of war.

Ferrexpo plc Annual Reports & Accounts 2023

Achievements in 2023

Focus for 2024

– High grade focus with 100% of all pellet and

concentrate production grading 65% Fe or higher.
– Second pelletiser line restarted adding production

capacity and flexibility.

– Resilient performance in challenging conditions during

a time of war.

– Continue to develop product portfolio.
– Continue to invest in high grade and lower carbon forms of iron ore.
– Completion of press filtration technology to improve product quality

and cost efficiencies.

–

Improved safety performance with an LTIFR of 0.32
below the five-year trailing average of 0.69.
– Zero fatalities for the third consecutive year.
– Completion of a double materiality exercise.
– Completion of a life cycle assessment for DR pellets.
– Ongoing activities funded by Ferrexpo Humanitarian

Fund.

– Continue strong safety performance.
– Respond to the needs of our workforce and local communities

during a time of war.

– Undertake a further life cycle assessment for blast furnace
pellets to better understand environmental impact of other
portfolio products.

– Use the findings in the double materiality work to enhance our

– Lowering of Scope 1 and 2 emissions by 2% per unit

annual Responsible Business Report.

of production basis.

– Publish a Climate Report that complies with latest regulations.

– C1 costs fell by 8% to US$76.5 per tonne due to

– Ensure that operations can continue to be flexible and

devaluation of Ukrainian hvyrnia, lower gas prices and
cost saving initiatives.

adapt to customers’ needs.

– Balance supply risks for key consumables with effective

cost control.

– Continue to implement cost-saving initiatives across the

Group’s operations.

– The Group maintained contact with its global customer
base through its sales teams in Europe, the MENA
region and Asia.

– Focus on accessible logistics resulted in 81% of sales
to European customers, with the balance of sales to
MENA customers.

– Agreements signed with European customers to

explore longer-term cooperation to decarbonise the
steel value chain.

– Balance sheet strength with net cash position

increasing marginally to US$108 million.

– Ongoing capital investment, totalling US$101 million
for the year, including sustaining and modernisation
capital expenditure.

– Continue to analyse safe and cost effective solutions for seaborne

markets, including Ukrainian Black Sea ports.

– Continue to liaise with customers and suppliers on decarbonisation
efforts, to develop future sales in DR pellets in electric arc furnaces.

– Ensure that the needs of all stakeholders are met and balanced

through a measured approach to capital investment and balance
sheet maintenance.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS14

Key Performance Indicators (“KPIs”)

Measuring our performance

Financial KPIs

Underlying EBITDA

(Loss)/Profit after tax

Net cash flow from operating activities

US$130M

-US$85M

US$101M

2023

US$130M

2023

-US$85M

2023

US$101M

2022

2021

2020

2019

US$765M

2022

US$220M

2022

US$301M

US$1,439M

2021

US$871M

2021

US$1,093M

US$859M

US$586M

2020

2019

US$635M

US$403M

2020

2019

US$687M

US$473M

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

Underlying EBITDA is an Alternative
Performance Measure – please see
page 236 for more details.

The Group calculates the underlying
EBITDA as profit before tax and finance plus
depreciation and amortisation, adjusted
for net gains and losses from disposal of
investments property, plant and equipment,
effects from share-based payments, write-offs
and impairment losses and exceptional items.

The remuneration packages of the
Group’s executive management team
include references to Underlying EBITDA.
See page 143 for more details.

2023 performance
Underlying EBITDA in 2023 fell 83% to US$130
million, mainly due to lower production, sales
volumes, realised prices and pellet premiums,
partially offset by an 8% decrease in C1 costs.

Underlying EBITDA also includes operating
foreign exchange gains of US$31 million
in 2023 compared to US$339 million in
2022. These foreign exchange differences
are predominantly dependent on the
fluctuation of the exchange rate of the
Ukrainian hryvnia against the US dollar.

2024 outlook
The future performance of the Group is largely
dependent on the ongoing war situation in
Ukraine and the levels of achievable sales due
to logistics restrictions.

In addition to Alternative Performance
Measures, Ferrexpo considers the IFRS
results of the Group to be an important
measurement of profitability. Loss after tax
is reported in the Group’s Consolidated
Income Statement on page 171. Loss after
tax is the earnings of a business after all
income taxes have been deducted.

2023 performance
For the financial year the Group reported a
loss of US$85 million, due to provisions for
ongoing legal proceedings and disputes
in Ukraine totalling US$128 million as at
31 December 2023. Without the effect from
these provisions, the result for the financial
year 2023 would have been a profit of US$46
million, compared to US$220 million in 2022.

2024 outlook
Like other factors, the Group’s
outlook for the year ahead is heavily
dependent on the war situation.

In addition to the factors discussed in
the Underlying EBITDA section, loss after
tax also considers the tax impact on the
Group and other factors such as interest
and finance expenses. Given that Ferrexpo
remains in a net cash position, with no
debt, these are currently not material in the
Group’s overall financial performance.

In light of the Group’s net cash position and
operations being based in Ukraine, the Group
does not expect to take on any new material
debt facilities in 2024, but remains in contact
with a number of potential capital providers.

Ferrexpo plc Annual Reports & Accounts 2023

Net cash flow from operating activities
represents the cash flow generating ability
of the Group, and measures the funding a
company generates from ongoing, regular
business activities, such as production
and sales. It is reported in the Group’s
Consolidated Statement of Cash Flows
on page 174. It also indicates the level of
cash flow available for investments, returns
to shareholders and debt reduction.

2023 performance
The net cash flow from operating activities
for the year was US$101 million, and was
considered by the Group in its capital
allocation framework, including capital
expenditure, shareholder returns, and
exceptional bail payments for managers
of one of the Group’s subsidiaries.

Despite the lower cash flow generation, the
Group maintained a closing balance of cash
and cash equivalents at US$115 million as
of 31 December 2023 (2022: US$113).

2024 outlook
The Group’s financial performance, including
net cash flow from operating activities,
is dependent on the ongoing war, with
a wide range of potential outcomes.

The Group continues to focus on high grade,
high quality forms of higher margin iron ore,
which the Group expects will allow it to remain
competitive throughout the commodities cycle.

WE ARE DETERMINED

Mykola Stakhiv,
Head of the Corporate Museum, FPM

The Ferrexpo museum in Horishni
Plavni is a place of cultural pride
for the local community. Managed
by Mykola, the museum collection
covers the history of the local
region and Ferrexpo. It is also an
important learning institution
through its affiliations with local
schools.

What is the biggest impact the
war has had on your job?
With the beginning of a full-scale invasion,
the opportunities to update exhibitions,
accept excursions, and implement
museum projects were significantly limited.

What has the war taught you
about how you do your job?
Since the start of the war in 2014 and
through the COVID pandemic, we have
learned to work under restrictions and with
extreme conditions. Although on a smaller
scale, we continued to conduct excursions
and exhibitions, working with more archival
materials. We have also been cooperating
with Ferrexpo employees serving in the
armed forces to accession documents,
photos, and items from the war as
evidence of Russian aggression.

What do you look forward to most
about your job when the war ends?
In the future we hope to create a museum
website and digital archive so that we can
widen our audiences. There are lots of
opportunities for new exhibitions. I believe
that preserving history is important. It is
important for the development of Ferrexpo
and the corporate spirit of its employees.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

C1 cash cost of production

US$76.5/T

2023

2022

2021

2020

2019

US$76.5/T

US$83.3/T

US$55.8/T

US$41.5/T

US$47.8/T

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

C1 cash cost of productionA (“C1 costs”)
is an Alternative Performance Measure –
please see page 236 for more details.

The C1 cash cost of production is the cost
of production processes to the factory
gate, divided by production to derive a
cost per tonne figure. This is an industry
standard measurement and can be used
to assess the relative competitiveness.

The remuneration packages of the Group’s
executive management team include
references to the Group’s C1 cash cost of
production. Please see page 143 for more.

2023 performance
C1 costs per tonne depends on production
volumes due to large fixed overheads. The
average C1 costs for 2023 fell 8% to US$76.50
per tonne, mainly due to devaluation of the
local currency in the second half of 2022, the
positive net effect of lower gas prices and
higher electricity and cost saving initiatives,
partially offset by the negative effects of fixed
cost absorption from operating below capacity.

2024 outlook
The war in Ukraine affects a range of
production outcomes. Should risks and
restrictions ease in the coming year,
the Group would expect its C1 cash
costs to reduce, as the Group would
benefit from economies of scale through
operating at an increased capacity.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS16

Key Performance Indicators (“KPIs”) continued

Non-financial KPIs

Lost-time injury frequency rate (“LTIFR”)

Diversity in management roles

Greenhouse gas emissions

0.32 LTIFR

22.3% female

89kg/t

2023

2022

2021

2020

2019

0.32

0.51

0.41

0.79

0.58

2023

2022

2021

2020

2019

22.3%

2023

20.9%

20.1%

18.2%

17.5%

2022

2021

2020

2019

89kg/t

91kg/t

92kg/t

110kg/t

132kg/t

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

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

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

Safety is the Group’s highest priority.

An organisation’s LTIFR is a lagging indicator
of safety. It is calculated as the number of
lost-time injuries incurred by an organisation’s
workforce (being employees and contractors)
per million hours worked. LTIFR is an industry
standard measurement and an important
indicator of how safe the work environment is.

The remuneration packages of the
Group’s executive management team
include references to the Group’s LTIFR.
Please see page 143 for more details of
the Group’s incentive programme.

2023 performance
The Group’s LTIFR has remained at a relatively
low level for approximately five years, falling
from an average of 1.18 (2016–2018) to an
average of 0.32 for 2023, ahead of the Group’s
historical five-year trailing average of 0.69.

Safety performance is also measured via
the number of fatalities at the Group’s
operations, which have remained fatality
free for more than three successive years.

2024 outlook
The Group has maintained a low level of
injuries and injury incidents in recent years.
The Group aims to continue this progress,
through targeting zero lost-time injuries.

In 2022, Ferrexpo introduced a ‘Zero
Harm’ policy that aims to ensure all
workers return home safely from every
shift. Please see page 34 for more on
our approach to health and safety.

Ferrexpo has initiatives to promote
diversity in many forms – including
based on gender, disability, sexual
orientation and cultural diversity.

Gender diversity is measured in a number
of ways, including total workforce and
female representation in management
positions. The Group prefers to focus on
female representation in management
roles as it is a reflection of women
progressing their careers at Ferrexpo.

The remuneration packages of the Group’s
executive management team, include
references to the Group’s workforce diversity.
Please see page 143 for more details.

2023 performance
Female representation in managerial
positions increased to 22% in 2023
following a multi-year trend from 18% in
2019. The Group target is 25% by 2030.

2024 outlook
The Group’s diversity programme is
targeting female representation in a number
of departments, at a range of levels within
our organisation. Our lead programme for
promoting gender diversity in management
roles is our Fe_munity Women in Leadership
programme (“Fe_munity”), which is now
in its fourth year of selecting and training
high potential future female leaders of our
business. This programme has trained over
200 participants since this project’s inception.

Please see page 60 for more on our
approach to diversity in our workforce.

The Group understands the importance
of climate change and we report emissions
of greenhouse gases (Scope 1, 2 and 3) to
track decarbonisation efforts. Due to the
war in Ukraine, we consider emissions per
tonne, not absolute emissions, as the most
representative performance measure.

The remuneration packages of the Group’s
executive management team, include
references to the Group’s greenhouse gas
emissions. Please see page 143 for more.

2023 performance
Scope 1 and 2 emissions per tonne fell 2%
in 2023, reflecting a reduction in the ancillary
activities due to lower production and more
electricity being sourced from cleaner
sources including hydro and nuclear power.

However, no DR pellets were produced in
2023, consequently, Scope 3 emissions
on a unit basis increased to 1.33 tCO2/t
of pellet production from 1.24 tCO2/t
in 2022. Absolute Scope 3 emissions
nevertheless decreased 25% year-on-year
due to the overall lower production.

2024 outlook
The Group aims to continue its
decarbonisation pathway, although
a protracted war may require some
revisions to its targets in future. The
current targets are a 50% reduction in
Scope 1 and 2 emissions by 2030.

Due to the war in Ukraine, it is difficult
to estimate short-term outcomes in
emissions reduction, but we remain
focused on our goal to decarbonise.

Ferrexpo plc Annual Reports & Accounts 2023

Sales volume by region

81% to Europe

2023

2022

2021

Region

Europe

MENA

Asia

Other

2023

2022

2021

3,397

4,655

5,268

777

611

1,402

917

4,290

389

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

Sales during 2023 have been restricted due
to limited access to Ukrainian Black Sea
ports, and therefore focused on premium
European customers accessible by rail.

Located in Europe, Ferrexpo is closer to
European and MENA customers, whilst
still competitive with global peers to Asian
markets. This was demonstrated during the
Covid-19 pandemic when we successfully
pivoted sales towards China, increasing our
total sales to this market to over 50%.

2023 performance
In 2023, over three quarters of all sales were
to European customers. During this period,
we were able to strengthen our relationships
with these customers and commitments to
jointly improve efficiencies and decarbonise
together. Transporting by rail, inland waterways
and sea, provided multiple logistics channels
to reach European customers. The remaining
19% of sales were in the MENA region.

A total of over 100,000 tonnes of DR pellets
were sold from stocks during the year.

2024 outlook
Towards the end of 2023, there were examples
of others exporting via Ukrainian Black Sea
ports. Ferrexpo plans to resume exporting
via this route and start up an additional
pellet line depending on the ability to export
consistent and sufficient volumes in a safe and
cost effective manner whenever possible.

WE ARE DETERMINED

Nataliya Orekhova,
Canteen Manager, FYM

What is the biggest impact the
war has had on your job?
The war taught me to work even when it is
difficult emotionally and physically. I go to
work because people need me, because
they need a hot meal and a friendly face
to ask them: “How are you doing?”

When the war finishes, what will
be different for your work?
The war has already changed my
job, I now realise more than ever how
important it is. When the war ends there
will be more pleasant reasons to get
together, without the joyful moments
being interrupted by air raids.

Across our operations there are
various kitchens and canteens
that serve food for our workforce
and visitors. Nataliya joined
Ferrexpo in July 2012 as a chef,
and since 2016 has been valued
as the Canteen Manager at the
Yeristova operation.

As the war progresses, what
has changed in how you undertake
your work?
I’ve always associated my work with
pleasure, from the positive emotions of
delicious food. After February 24, 2022,
everything changed, and at work too.
The preparation of food for banquets
turned into cooking for internally
displaced people. And the leisure time I
used to enjoy during peace time turned
to support for children and adults who
lived in temporary accommodation.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
18

Operational Review

During 2023, the Group maintained
production, operating two mines
and up to two of four pelletiser
lines, achieving production of
4.2 million tonnes.

Viktor Lotous,
Head of Ferrexpo’s
Operations in Ukraine
(FPM General Director)

As a large scale premium iron ore pellet
and concentrate exporter, access to
logistics is critical. Due to the ongoing war
in Ukraine, our activities in 2023 reduced
according to available export logistics.
Attacks on Ukraine’s electricity energy and
transport infrastructure also continued, at
times limiting our ability to import supplies,
and produce and export our products.

Health and safety
2023 was the third consecutive year that
we have reported zero fatalities at our
operations. For the year, the Group reported
a rolling 12-month LTIFR of 0.32, below the
historic five-year trailing average of 0.69.

Reserves and resources
Ferrexpo controls licences covering a
series of contiguous deposits located
along the Kremenchuk Magnetic Anomaly,
a magnetite deposit that extends for
more than 50 kilometres. The Group has
mines on three deposits and additional
licences for deposits immediately to
the north of our current operations.

Across the Group’s three active mines,
JORC-compliant Ore Reserves are estimated
to be 1,615 million tonnes of iron ore, with
an iron (“Fe”) content of 32% Fe (2022:
1,627 million tonnes grading 32% Fe).

The JORC-compliant Mineral Resource
estimate across our three mines is 5,737 million
tonnes of iron ore, with an iron (“Fe”) content
of 32% Fe (2022: 5,749 million tonnes grading
32% Fe), which is inclusive of Ore Reserves.

Processing activities
Reflecting reduced logistics availability,
processing volumes decreased
by 33% during 2023 to 12 million
tonnes (2022: 17 million tonnes).

In addition, at a number of exploration
properties immediately north of our active
mines, we have exploration stage properties
with a combined non-JORC compliant
Mineral Resource estimate of 14 billion tonnes
of iron ore, grading 34% Fe (collectively
referred to as the “Northern Deposits”).

A table detailing the Group’s JORC-compliant
Ore Reserves and Mineral Resources as at
1 January 2024 is detailed on page 21.

Mining activities
Throughout the year, we continued to scale our
mining operations according to the processing
plant ore requirements, determined by logistics
availability. Mining activities focused on the
Poltava and Yeristovo Mines, with volumes
totalling 36 million tonnes (2022: 55 million
tonnes). Different sections of the pits were
mined depending on the concentrate and
pellet quality required by individual customers.

In 2022, the Group produced 353,000
tonnes of DR pellets, equivalent to 6% of
total output. No DR pellets were produced
in 2023, however, sales of 100,000 tonnes
from stocks were achieved. Nevertheless,
during this challenging time for the country,
the work on DR pellets continues, in particular,
we are improving our pellet production
technology by finding a technical solution
for the coating of our pellets. This was made
possible through the initiative of internal
experts united by a common goal to enhance
the quality of final products. A temporary
solution for coating of FDP pellets has
already been implemented at Pellet Lines
1 & 2. Now we are elaborating a permanent
solution for all four pelletising lines to install
the system that will coat FDP pellets with a
mixture tailored to customer requirements.
The development of design documentation
is underway. Due to these projects, steel
customers are expected to improve their
technological manufacturing processes.

See our KPIs on pages 14

Ferrexpo plc Annual Reports & Accounts 2023

Following Russian attacks on Ukraine’s energy
infrastructure during 4Q 2022, the Group
was forced to temporarily cease production
for several weeks. In preparation for similar
attacks in 4Q 2023, throughout 2Q and 3Q
2023, the Group built stocks of finished pellets
at its operations and at various staging points
across its logistics network in Ukraine and
overseas so that it would be able to continue
supplying its customers. Fortunately, there
were far fewer attacks in 4Q 2023, so the
Group was able to reduce production and
drawdown from it stocks to supply customers.

Growth programme
The Group’s expansion and decarbonisation
programmes remain longer-term objectives.
The initial Wave 1 programme to add 3 million
tonnes production capacity a year continues to
be analysed for implementation after the war
ends. Desktop work, including optimisation
studies, is ongoing, however wherever possible
investment has been deferred. Nevertheless,
despite the ongoing war, various capital
expenditure projects aimed at improving
product quality and efficiencies advanced. For
example, in July 2023 the Company installed
and implemented the first stage of modern
press filtration technology at the pellets
workshop. This technology helps to strengthen
finished pellets, whilst increasing productivity
and reducing iron losses, which results in costs
savings and a reduction in Scope 1 emissions.

Operational performance

(000’t unless otherwise stated)

2023

2022

YoY change

Production

Iron ore mined

Strip ratio

Iron ore processed

Concentrate production

Pellet production

– Direct reduction pellets (67% Fe)

– Premium blast furnace pellets (65% Fe)

Commercial concentrate production

Iron ore sales

– Pellets

– Concentrate

– Total products sold

12,112

18,837

2.0

1.9

11,576

17,375

5,314

3,845

307

3,868

306

4,174

8,025

6,053

353

5,700

124

6,055

128

6,183

(36%)

(33%)

(34%)

(36%)

(100%)

(33%)

148%

(36%)

140%

(32%)

Outlook
Logistics availability will continue to determine
sales and production during 2024. The Group
intends to continue the operation of two
pelletiser lines. Depending on the availability
to export through different Black Sea ports,
the opportunity to expand production further
with the restart of the third pelletiser line
remains. This will be contingent on sufficient
supply of consumables, a balanced and
skilled workforce, and logistics capacity.

During the first phase of the war in 2022,
the Group responded quickly to protect
its employees and protect the integrity of
its assets. During 2023, the Group has
become more agile and flexible, and was
able to deliver to its closest customers.

Whilst the Group cannot with any certainty
offer production and cost guidance for 2024,
there are some opportunities to enhance
efficiencies, production and sales.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS20

Operational Review continued

JORC-Compliant Ore Reserves and Mineral Resources1

JORC-compliant Ore Reserves

Gorishne-Plavninske-Lavrykivske (“GPL”)

Yerystivske

Total

Proven

Probable

Total

Fe
total
%

Fe
magnetic
%

818

288

1,106

Fe
total
%

Fe
magnetic
%

1,119

496

1,615

Fe
total
%

Fe
magnetic
%

301

208

509

Measured

Indicated

Inferred

Total

JORC-compliant Mineral Resources

Fe
total
%

Fe
magnetic
%

Gorishne-Plavninske-
Lavrykivske (“GPL”)

Yerystivske

Bilanivske

Total

467

257

336

1,060

Fe
total
%

Fe
magnetic
%

744

382

217

1,343

Fe
total
%

Fe
magnetic
%

2,827

1,208

1,702

5,737

Fe
total
%

Fe
magnetic
%

1,616

569

1,149

3,334

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 2024. The Group previously reported a resource estimate of 326Mt for the Galeschynske deposit.

Ferrexpo plc Annual Reports & Accounts 2023

WE ARE DETERMINED

Nataliia Mozghova,
Head of the Department of Equipment, Raw Materials
and Materials Procurement Strategy, FPM

Nataliia has worked at Ferrexpo
for 24 years. She joined as an
economist and ten years later
established the procurement
service where she is now the
department head.

How has the war most affected
your work?
We have always taken our responsibilities
seriously and worked hard to ensure the
best prices and quality of goods and
services for our enterprises in Ukraine.
Before the full-scale invasion, we had
developed procurement strategies for most
of the goods and services, which allowed us
to sign long-term contracts with suppliers
based on formula pricing. We had a
predictable, stable, and wide base of reliable
suppliers. Logistics was not a problem – we
could purchase for deliveries through ports,
railways, and any other means beneficial
for the company. With the onset of the war,
many suppliers lost their businesses due
to occupation and the destruction of their
operations. Logistics paths were interrupted,
and ports closed. Some of the foreign
and Ukrainian enterprises we worked with
fell under sanctions, and many suppliers
initially refused to deliver products due to
the dangers and a refusal to cooperate
on formula pricing. This forced us to work

on monthly contracts which significantly
increasing our administrative burden.
However, despite all the challenges, we
made every effort to continue supplying
our enterprise with everything needed
in a timely manner. I am proud that we
have been able to successfully maintain
a stable procurement process.

What has the war taught you
in procurement work?
The war taught us flexibility. We became
more responsive to change, developed an
understanding, and significantly improved
our patience skills when urgent purchases
were needed for different divisions of
Ferrexpo. During the war, the procurement
teams at Ferrexpo reorganized into a single
and united team. Despite the somewhat
different approaches in procurement
policies we had before the war, we are glad
that we now work as a unified team with
well-coordinated systems.

How will the end of the war
affect your work?
Our great hope is that we can work with more
stability after the war – these are the main
changes we look forward to. We have come
to understand that we are capable of a lot if
we work as a united team. We will continue
to look for the best suppliers, continue
negotiations, and continue to provide the
best service we can for our colleagues.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS22

Market Review

Stronger than
forecast iron ore prices
supported reduced
sales volumes.

Yaroslavna Blonska,
Acting Chief Marketing Officer

Benchmark iron ore prices gained 15%
over the year and ended 2023 at an
18-month high. Pellet premiums, however,
remained weak throughout much of the
year, improving only in the last few months,
which bodes well for the year ahead.

Ferrexpo produces premium iron ore pellets
with a minimum 65% Fe content, which
are priced off quoted market benchmarks,
and include a pellet premium that takes
into account quality specifications.

The 65% Fe iron ore fines price opened the
year at US$131 per tonne. As China emerged
from strict pandemic related restrictions and
in anticipation of stocking ahead of the peak
Chinese construction season, prices rose
to a peak US$149 per tonne in 1Q 2023.

Actual demand, however, did not meet
expectations, and consequently prices fell
in 2Q 2023 to a low of US$110 per tonne.

Uncertainty prevailed through the remainder
of 2Q and into 3Q 2023 as the market
responded to short-term macro-economic
and construction industry signals.
This resulted in volatile prices, oscillating
between US$110 and US$135 per tonne.

A clearer and more positive picture emerged
in 4Q 2023 as China asserted its pursuit of
accelerated economic growth dependent
on steel-intensive sectors. At this time,
market supply was tight with inventories at
historically low levels. Therefore, a strong
rally in prices ensued in 4Q 2023, increasing
over 20% from October 2023 to end the
year just shy of US$150 per tonne.

The price of iron ore is very dependent
on China. In 2024, government policy
supporting industrial sectors has stimulated
demand for steel. However, certain risks
remain. The margins for manufacturing
steel are still low, due to weak demand
for rebar, used in construction.

However, market commentators
are forecasting flat supply for 2024,
with limited growth from the largest
producers, Australia and Brazil.

Customer sales in 2023

4.2MT

During the first full year of war, the
Group achieved sales of 4.2 million
tonnes. With no access to the
Ukrainian Black Sea ports, exports
were constrained to the availability
of rail capacity for exports direct
to Europe and alternative Black
Sea ports.

Ferrexpo plc Annual Reports & Accounts 2023

Chart: CISA daily crude steel production (Mt)

2.50

2.25

2.00

1.75

1.50

First Mid Last
Jan
2023

First Mid Last
Feb

First Mid Last
Mar

First Mid Last
Apr

First Mid Last
May

First Mid Last
Jun

First Mid Last
Jul

First Mid Last
Aug

First Mid Last
Sept

First Mid Last
Oct

First Mid Last
Nov

First Mid Last
Dec

2022

2021

High grade premiums
The premium for higher grade 65% Fe
iron ore fines contracted by a third in 2023
to US$12 per tonne. This is typical when
there is weakness in the steel market as
producers prefer lower cost iron ore grades to
preserve their margins. However, premiums
improved marginally during December
2023 due to disruptions to global supply.
Longer term, as steel production is forced
to decarbonise, it is expected that margins
should widen further because higher grade
ores generate less emissions in steel making.

Iron ore pellet market
review & outlook
Iron ore pellets are preferred by steelmakers
because they can increase productivity and
lower emissions. This is mainly because with
pellets, there is no need for a coal intensive
process in steel making called sintering.

In 2023, the iron ore pellet market experienced
some volatility, though remained robust.
Overall pellet supply globally grew by
1%1. Brazilian producers recommissioned
capacity that was idled following tailings
disasters. The increase in exports from
Brazil offset supply disruptions from Ukraine
and Russia. Because of Chinese steel
production margins, there was less incentive
to consume pellets and, consequently, pellet
premiums deteriorated throughout the year.

Chart: Iron ore prices (2023)

200

150

100

Jan 23

Feb 23

Mar 23

Apr 23 May 23

Jun 23

Jul 23

Aug 23

Sep 23

Oct 23

Nov 23

Dec 23

Platts 65%

Platts 62%

Chart: Chinese domestic steel margins (2023)

260

240

200

160

120

-40

-80

1. Source: CRU

-120

2023

Apr

Jul

Oct

AMVSA00 - MVS HRC China Domestic Steel Mill Margin

AMVSB00 - MVS RebarChina Domestic Steel Mill Margin

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS24

Market Review continued

Chart: Monthly Brazilian pellet exports (Mt)

2019

2020

2021

2022

2023

2024

CISA daily crude steel production (Mt/d)

Brazilian pellet exports

Looking ahead to 2024, the recovery of iron
ore prices due to the Chinese government
supporting economic growth, a recovery
in European demand, and ongoing supply
constraints, market commentators are
forecasting an improvement in steel
margins and, therefore, pellet demand.

By the end of 2023, several blast furnaces
in the region had restarted, whilst a large
European producer was forced to suspend
exports due to infrastructure constraints.

Therefore, in an improving pricing
environment, an increase in demand for
Ferrexpo’s pellets is being observed.

Market development efforts
Ferrexpo has continued its market
development efforts despite the ongoing war.
In 2023, Memorandums of Understanding
were signed with several premium steel makers
in Europe and Asia for the supply of high
grade direct reduction (“DR”) pellets to help
them transition to lower carbon steel making.

DR pellet demand growth is forecast to
significantly outpace traditional pellets and
therefore one of our strategies is to focus on
this premium product. We are collaborating
with a variety of potential customers around
the world to test our product suitability
and tailor DR pellet specifications to suit
each customer’s technical requirements.
These include reducing silica content
(gangue elements), coating (to improve
physical interaction in the DR module), and
improving on pellet compression strength.

2022

YoY change

120

139

–

(5%)

(34%)

(38%)

(34%)

(14%)

(20%)

Summary of industry key statistics

(All figures US$/tonne, unless stated otherwise)

Iron ore fines price (62% Fe, CFR China)1

Iron ore fines price (65% Fe, CFR China)1

Average 65% Fe spread over 62% Fe1

Atlantic (blast furnace) pellet premium1

Direct reduction pellet premium1

C3 freight (Brazil – China)2

C2 freight (Brazil – Netherlands)2

2023

120

132

Global steel production (million tonnes)3

1,850

1,832

1. Source: S&P Global Commodity Insights.
2. Source: Baltic Exchange.
3. Source: World Steel Association.

Ferrexpo plc Annual Reports & Accounts 2023

FE content %

WE ARE DETERMINED

Wallace Woo and Aly Mansour

Based in Ferrexpo’s Dubai office,
Wallace Woo is the Marketing
Portfolio Optimisation Manager,
specialising in commodity and
freight markets and Aly Mansour is
the Regional Marketing Manager for
the Middle East.

What is the biggest impact the war
has had on your job?
The war severely disrupted supply chains
so we had to move fast and establish
alternative export channels by sea, road
and rail to minimise any impact on our
customers. This meant a lot of travel to
ensure close cooperation with existing and
new logistics partners. This collaboration
remains vital because we want to maintain
high standards of quality control.

What has the war taught you?
Frequent communication with our
stakeholders, especially customers and
shipping partners, was key. Even in an
uncertain environment we want them
to remain confident in Ferrexpo’s ability
to deliver in a stable manner. We learnt
that through frequent and transparent
dialogue, together we were able to generate
creative solutions to overcome complex
logistics problems due to the war.

When the war finishes, what will
be different for you?
We look forward to helping Ferrexpo
return to full capacity and, in particular,
growing the huge potential for our high
grade direct reduction pellets. We have the
opportunity to become a leading partner in
the decarbonisation of the steel value chain.
We are actually already working closely
with certain customers on commercial and
technical initiatives. It is exciting to think how
Ferrexpo will play a big role in green steel.

Ferrexpo
Premium
Pellets

Ferrexpo
Direct
Reduction
Pellets

62 Index
(Medium
Grade
Benchmark)

65 Index
(High
Grade
Benchmark)

Ferrexpo 2023 sales portfolio

10%

90%

Long term contracts

Other

3.7mt

0.4mt

Ferrexpo continues to sell the
majority of its products under
long-term contracts, which secures
stable offtake volume for the Group
and commands greater certainty of
supply for customers.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
26

Financial Review

Cash positive operations
during a time of war have
allowed for continued
controlled investment whilst
maintaining a stable net
cash position.

Nikolay Kladiev,
Chief Financial Officer

Net cash position

US$108M

Stable net cash position in difficult
and challenging environment (2022:
US$106 million).

Net cash flows from
operating activities

US$101M

Positive operating cash flow
generation, although lower than
previous year (2022: US$301 million),
affected by the war.

Summary
The ongoing war in Ukraine continued to
affect the Group’s operational and financial
performance in 2023. Taking into account
logistics and energy limitations throughout
2023, production volumes were aligned
with sales potential to manage the working
capital and maintain a strong net cash
position. The general market and price
environment was favourable for iron ore
products, whilst energy prices developed
differently to 2022 (higher electricity price,
and lower gas price), the Group’s operating
cash flow generation declined compared to
the previous year, which included two months
of sales prior to Russia’s full-scale invasion.

Despite the ongoing war, we invested
US$101 million into our assets in Ukraine
in 2023 and were able to finish the year
with a net cash position of US$108
million as at 31 December 2023.

Revenue
Group revenues declined by 48% to
US$652 million in 2023 (2022: US$1,248
million), mainly due to restricted access
to export routes. Consequently, sales
volumes were 32% lower at 4.2 million
tonnes in 2023 (2022: 6.2 million tonnes).

In addition to lower sales volumes, Group
revenue in 2023 was affected by a 5% decline
in the annual average benchmark iron ore
price (65% Fe) and a 28% decline in the annual
average pellet premium. On the positive side,

lower rates for international freight improved
the Group’s net back realised prices for sales
under the International Commercial Terms
(“Incoterms”) of FOB (“Free on Board”).
However, due to lack of access to Ukrainian
Black Sea ports, the Group’s FOB sales were
lower than in 2022, which included almost
two months of access to the port of Pivdennyi
before the war began. For more information
on the market factors governing pricing of the
Group’s products, please see pages 80 to 85.

Since the beginning of the war, the Group’s
export routes have predominantly involved
either the railing of products direct to European
customers, or the railing of iron ore pellets to
the Group’s barging subsidiary on the River
Danube for delivery to specific customers in
Europe, or by barge to other non-Ukrainian
Black Sea ports, for onward sale by ship. This
incurs higher logistics costs and a longer cash
conversion cycle. More detail is provided in
the ‘Market Review’ section of this report.

C1 cash cost of production
Cost of sales in 2023 totalled US$362 million,
compared to US$582 million in 2022. The
decrease predominantly results from the lower
pellet production volume, which decreased
from 6.1 million tonnes in 2022 to 3.8 million
tonnes (-38%). The Group’s production volume
is currently aligned to accessible logistics
capacity to minimise the working capital
outflow. The C1 cash cost of production
(“C1 costs”) reflects the Group’s operating

Ferrexpo plc Annual Reports & Accounts 2023

Underlying EBITDA margin

20%

Underlying EBITDA margin remains
positive (2022: 61% boosted also by
significant foreign exchange gains
in 2023).

Capital investment

US$101M

Continued unavoidable investments
in 2023, aligned to lower cash flow
generation (2022: US$161 million).

Breakdown of C1 costs in 2023

US$76.5/t

(2022: US$83.3/t)

Electricity

Natural gas and sunflower husks

Fuel (including diesel)

Materials

Personnel

Maintenance and repairs

Grinding media

Royalties

Explosives

32%

11%

16%

The numbers above are rounded to full decimals.

costs for the production of iron ore pellets from
its own ore, with a breakdown of the different
cost components shown in the table below.

Additionally, there was a positive effect from
the decrease of the Group’s average C1 costs,
decreasing to US$76.5 per tonne, compared
to US$83.3 per tonne in 2022 (-8%). The C1
costs per tonne also depends on the Group’s
production volumes. The change in 2023 is
predominantly driven by the effects of the
significant devaluation of the local currency
in the second half of 2022, the positive net
effect of lower gas prices and higher electricity
and additional cost saving initiatives, which
were partially offset by the negative effects
from the fixed cost absorption as the Group
operated its assets below nameplate capacity.

The main C1 costs drivers are the price of
electricity, natural gas and diesel in Ukraine
being outside of the Group’s control, which
collectively represent 48% (2022: 49%) of the
total cost base as presented in the table below.

Following a sharp increase in global energy
prices during 2022, the average Brent price
for oil in 2023 and the average price for
natural gas decreased by 17% and 68%
respectively in US dollar terms, compared
to the 18% and 67% increases recorded in
2022. The average electricity price in Ukraine
increased in 2023 by 12% in US dollar terms,
peaking at US$112 per megawatt-hour
(“MWh”) in November 2023, compared to
an average of US$83 per MWh in 2022.

Another important component of the Group’s
C1 costs that is outside of the Group’s control
are the royalties in Ukraine, which accrue and
are paid based on a tiered system, which came
into effect in January 2022. Based on this
regime, royalties are calculated based on the
benchmark index price for a medium-grade
(62% Fe) iron ore fines price and computed
based on the cost of different iron ore products.
The rate varies between 3.5%, 5.0% and 10%
depending on benchmark index price for 62%
Fe. The total royalty expense totalled US$25
million in 2023, compared to US$41 million in
2022, mainly driven by the lower production
volume, but also by the effect of lower index
prices during some periods in 2023.

Group operating costs, denominated in
Ukrainian hryvnia (“UAH”), account for
approximately two thirds of the Group’s C1
costs. Consequently, changes in hryvnia to
dollar rates can have a significant impact
on the Group’s operating costs, including
the C1 costs. The UAH depreciated in the
last quarter of 2023 from 36.569 to 37.982
to the US dollar as of 31 December 2023,
resulting in a significantly lower effect on the
Group’s C1 costs than in the previous year.

In line with previous years, the Group’s
C1 costs represent the cash cost of the
production of iron pellets from own ore
(‘to the mine gate’), divided by production

volume from own ore. This excludes non-
cash costs such as depreciation, pension
costs and inventory movements, as well as
the costs of purchased ore, concentrate
and gravel. The C1 cash cost of production
(US dollars per tonne) is regarded as an
Alternative Performance Measure (“APM”).

Breakdown of C1 costs
C1 costs in 2023 were down by 8% in 2023
to US$76.5 per tonne, with this decrease
principally related to the reduction in the
unit cost of energy such as natural gas
and fuel (principally diesel), partially offset
by higher electricity costs in Ukraine. This
change is demonstrated in the chart on the
right, with energy-related costs comprising
48% of our C1 costs (2022: 49%).

The considerable reduction of the proportion
for natural gas and sunflower husks, driven
by a significant decrease of the prices for
gas on the global markets, was offset by the
increase of the proportion for the electricity,
driven by higher prices in Ukraine. See
section “C1 cash cost of production” for
further information on price changes.

The increase of the proportion for materials
and personnel is the net effect from the
flat fixed component and the higher local
inflation, partially offset by the effects from the
devaluation of the local currency in Ukraine.

In light of the ongoing war in Ukraine
resulting in lower production activities,
the Group scaled further back on the
maintenance and repair programme for
its mining and processing equipment.

Selling and distribution costs
Total selling and distribution costs decreased
to US$161 million in 2023 (2022: US$236
million), mainly reflecting lower sales via
seaborne markets due to the unavailable
Black Sea ports in Ukraine, but also due to
the overall lower sales volume in 2023. As a
result, CFR sales volume decreased to 168
thousand tonnes, compared to 1,218 thousand
tonnes in 2022, reducing the international
freight costs from these sales by US$51
million. However, international freight costs
in 2023 were also affected by higher freight
costs for the export of some of the Group’s
products through an alternative Black Sea
ports, with some of the services provided by
the Group’s barging subsidiary First-DDSG.

Seaborne logistics routes are generally the
lowest cost and most efficient way for delivering
the Group’s products to its customers. Since
the full-scale invasion of Ukraine, the Group
has established new logistics routes and
relationships with alternative logistics providers
and port operators. These routes rely heavily
on rail, where capacity is restricted and
demand is high from other industries, and also
on river barges, which combined are more
expensive. Although the situation generally

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
28

Financial Review continued

improved in 2023 compared to 2022, the
Ukrainian rail network continues to be under
pressure to handle goods otherwise exported
via Ukraine’s Black Sea ports. This is further
exacerbated by the long journey time through
Ukraine’s western borders. Whilst improving,
the journey time is still slightly longer than
before the war, resulting in a negative impact
on the Group’s cash conversion cycle.

Applicable rail tariffs remained unchanged
in 2023, after a 70% increase in July 2022
for 20 types of cargo – even when using the
Group’s own rail wagons. The effect from
the higher tariffs was however partially offset
in US dollar terms due to the significant
depreciation of the local currency in July 2022.

General and administrative expenses
General, administrative and other expenses
in 2023 remained stable at US$64 million
compared to 2022. Positive impacts from
effective cost management and savings
have, however, been offset by higher legal
costs relating to Group’s ongoing legal
disputes. See Note 30 Commitments,
contingencies and legal disputes to the
Consolidated Financial Statements for further
information on the ongoing legal challenges
and disputes of the Group in Ukraine.

Other operating expenses
Other operating expenses decreased from
US$310 million in 2022 to US$29 million
in 2023, predominantly due to a non-cash
impairment loss of US$254 million recorded
in the first half of 2022 on the Group’s
non-current operating assets, including
property, plant and equipment, goodwill and
intangible assets, and other non-current
assets. The recorded impairment loss in
2022 resulted from the Group’s lower cash
flow generation and higher war-related
discount rate. The Group’s non-current
operating assets have been tested again for
impairment as at 31 December 2023 based
on the Group’s latest long-term model. The
impairment test performed did not result in
an additional impairment loss or a partial or
full reversal of the recorded impairment loss.

Ukrainian hryvnia vs. US dollar2

UAH per USD

Spot 15.04.24

39.399

Opening rate 01.01.23

36.568

Closing rate 31.12.23

37.982

Average 2023

36.574

Average 2022
32.342

Key Financial Performance Indicators

US$ million (unless stated otherwise)

Total pellet production (kt)

Sales volumes (kt)

Iron ore price (65% Fe Index, US$/t)1

Revenue

C1 cash cost of production (US$/t)

Underlying EBITDA A

Underlying EBITDA A margin

Debt servicing

Capital investmentA

Closing net cash

Currency
Ferrexpo prepares its accounts in US
dollars. The functional currency of the
Group’s operations in Ukraine is the
Ukrainian hryvnia, as approximately two
thirds of the Group’s operating costs are
historically denominated in local currency.

As a result of the significant balance in foreign
currencies currently held by the NBU, the local
currency remained relatively stable until the
end of 2023, compared to a depreciation of the
Ukrainian hryvnia by 34% during the financial
year 2022. The Ukrainian hryvnia remained
unchanged at 36.568 to the US dollar from
21 July 2022 to 3 October 2023, when the
National Bank of Ukraine (“NBU”) lifted the
peg in place since the devaluation of the
local currency from 29.255 to 36.568 (34%).
With a continuation of Martial Law during
2023, the NBU has maintained significant
currency and capital controls in Ukraine.
These measures limit the possibility to convert
balances in local currency into US dollars,
and the ability to transfer US dollars between
onshore and offshore accounts of the Group.
See Note 30 Commitments, contingencies
and legal disputes to the Consolidated
Financial Statements for further information.

Operating and non-operating foreign
exchange gains/losses
Given that the functional currency of the
Ukrainian subsidiaries is the hryvnia, a
depreciation of the hryvnia against the US
dollar results in a foreign exchange gains
on the Group’s Ukrainian subsidiaries’ US
dollar denominated receivable balances from
the sale of pellets. The operating foreign
exchange gains were US$31 million in 2023
compared to a gain of US$339 million in
2022, when the hryvnia depreciated by 34%.

As for the operating foreign exchange gains,
the non-operating foreign exchange losses are
mainly due to the depreciation of the hryvnia
against the US dollar. The non-operating
foreign exchange lossed decreased from
US$63 million in 2022 to US$8 million in 2023

Ferrexpo plc Annual Reports & Accounts 2023

2023

3,845

4,174

132

652

76.5

130

20%

101

108

2022

YoY change

6,053

6,183

139

1,248

83.3

765

61%

161

106

(36%)

(32%)

(5%)

(48%)

(8%)

(83%)

(41pp)

(100%)

(37%)

and is primarily related to the translation of
US dollar denominated loan payable balances
of the Group’s Ukrainian subsidiaries.

For further information on the operating
foreign exchange gains and the non-operating
foreign exchange losses, please see Note
9 Foreign exchange gains and losses to
the Consolidated Financial Statements.

Underlying EBITDA
Despite the loss for the year, underlying EBITDA
remained positive in 2023, but decreased by
83% to US$130 million, mainly due to lower
operational performance as a result of the
war and lower operating foreign exchange
gains in 2023 compared to 2022. The effect of
US$131 million of provisions recognised as at
31 December 2023 for ongoing legal disputes
is considered as an exceptional item and is
therefore excluded from the Group’s underlying
EBITDA. In agreement with the Group’s
definition of the underlying EBITDA (see page
236 in the Alternative Performance Measures
“APMs” section), the Group’s underlying EBITDA
includes operating foreign exchange gains of
US$31 million in 2023 compared to US$339
million in 2022. These foreign exchange
differences are predominantly dependent on
the fluctuation of the exchange rate of the
Ukrainian hryvnia against the US dollar.

Additionally, the decrease of the underlying
EBITDA is also affected by a decrease of the
sales volumes by 32% and realised prices by
21%, driven by lower benchmark iron ore fines
price and pellet premiums in 2023, partially
offset by an 8% decrease in C1 costs.

Net finance expense
The Group’s finance expenses remained stable
at US$5 million compared to US$4 million
in 2022. The vast majority of the expense
is related to the calculated interest on the
Group’s pension scheme, without any cash
outflow effects, and to bank charges. With the

1. Source: S&P Global Commodity Insights.
2. Source: National Bank of Ukraine.

WE ARE DETERMINED

Volodymyr Plotnikov and Iryna Mokhtan

What is the biggest impact the
war has had on your jobs?
The war has reduced our ability to plan
with as much confidence as we used to.
Nevertheless, we realise the importance
of our work and how it contributes to
the sustainability of the Company in the
current circumstances. So we continue
working without losing optimism.

What do you look forward to most
about your job when the war ends?
During the war we’ve acquired new
knowledge and skills and learnt to be
more resourceful, all of which have
enhanced our performance. We look
forward to applying what we have learnt
to post-war scenarios as Ferrexpo regains
leadership in the industrial sector and
contributes to Ukraine’s recovery.

The Project Management Office
Reporting Team are part of the
finance function based at FPM.
Their work is broad, involved in
all aspects of financial and ESG
reporting and modelling. Managed
by Volodymyr and supported by
Irina, their work supports all the
functions of the business across
all our offices worldwide.

How has the war changed how you
perform your work?
On the one hand the war has reduced
our productive working hours due to
interruptions from air raids. On the other
hand, our work load has increased as we
are required to prepare more calculations
more frequently, to model changing
scenarios. To an extent, this has helped
to shift the focus from the negative news
and adapt to the new working conditions,
but also to increase personal productivity.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

exception of lease liabilities, the Group does
not have any outstanding interest-bearing
loans and borrowings, therefore there are no
interest expenses incurred on finance facilities.

At the same time, interest income increased
five-fold to US$5 million compared to US$1
million in 2022 as the Group invested the
available funds in deposits due to the rise in
interest rates on the global financial markets.

Further details on finance expense are
disclosed in Note 10 Net finance expense
to the Consolidated Financial Statements.

Income tax
In 2023, the Group’s income tax expense
was US$16 million (2022: US$119 million). The
effective tax rate for 2023 was 26.1% (2022:
35%). The effective tax rate for the financial
year 2023 was affected by effects from the
recognition of provisions for legal disputes in
Ukraine totalling US$131 million, which are not
tax deductible and an additional allowance of
US$10 million on deferred tax assets recognised
by the Group’s two major subsidiaries in
Ukraine. For further information see Note 30
Commitments, contingencies and legal disputes
and Note 11 Taxation. The effective tax rate
in the comparative year was predominantly
driven by an impairment loss of US$254 million
on the Group’s non-current operating assets,
which is not tax deductible in Ukraine.

In 2023, the income tax paid by the Group
totalled US$13 million (2022: US$110 million), of
which US$12 million was paid in Ukraine (2022:
US$91 million). The income tax paid includes
withholding tax considered as income tax paid.

Further details on taxation are
disclosed in Note 11 Taxation to the
Consolidated Financial Statements.

Items excluded from
underlying earnings
The underlying EBITDA in the comparative
year was adjusted by the impairment loss
of US$254 million recorded in 2022 as a
result of a reduction in the carrying value
of the Group’s assets in Ukraine due to
the war. The impairment test performed
as of 31 December 2023 did not result in
an additional impairment loss or a partial
or full reversal of the recorded impairment
loss. See Note 13 Plant, property and
equipment to the Consolidated Financial
Statements for more information.

As announced on 29 January 2024, following
subsequent and unexpected events in Ukraine
in relation to a claim against one of the Group’s
Ukrainian subsidiaries, the Group recorded
a provision for legal disputes in the amount
of US$124 million (UAH4,727 million). The
provision is in respect of a contested sureties
claim lost in a court of appeal in Ukraine. The
Group’s subsidiary in Ukraine filed a cassation
appeal to the Supreme Court of Ukraine and

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS30

Financial Review continued

the first hearing scheduled for 20 March 2024
did not take place as the presiding judge
recused himself. Following the appointment
of a new panel of judges, on 1 April 2024
the Supreme Court suspended the possible
enforcement of the decision of the court of
appeal. A Supreme Court hearing on 17 April
2024 considered primarily procedural matters
and the next court hearing is scheduled for
27 May 2024. Further to that, the Group also
recognised a provision in the amount of US$4
million (UAH136 million) following a negative
decision from a court of appeal in respect
of a claim made by two former minority
shareholders of one of the Group’s major
subsidiaries in Ukraine. The effect of the total
provisions recognised as at 31 December
2023 in the amount of US$131 million for the
above-mentioned legal disputes is considered
as an exceptional item and is therefore
excluded from the Group’s underlying EBITDA.

For further information see Note
30 Commitments, contingencies
and legal disputes.

Loss for the year
The Group’s result for the financial year
2023 is a loss of US$85 million, mainly
resulting from the recognition of provisions
for ongoing legal proceedings and disputes
in Ukraine totalling US$131 million as at
31 December 2023. Without the effect from
these provisions, the result for the financial
year 2023 would have been a profit of US$46
million, compared to US$220 million in 2022,
reflecting a 82% decrease in the Group’s
operating profit as a result of the ongoing
war, as well as significantly lower net foreign
exchange gains of US$23 million in 2023,
compared to US$276 million in 2022.

Cash flows and cash and
cash equivalents
Operating cash flow before changes in working
capital decreased by 76% to US$103 million
compared to US$434 million in the previous
year. The lower operating cash flow generation
is driven by the Group’s lower operating profit.
There was an overall working capital inflow
of US$13 million compared to an outflow of
US$20 million in 2022. The inflow in 2023
largely reflects the increase of the trade
receivable balance due to increased sales
volumes in the last two months of 2023, the
significant decrease of the inventories as a
result of the Group’s destocking activities
and positive effect from regular VAT refunds
received in 2023, resulting in a significant
decrease of the outstanding VAT balance
in Ukraine as at 31 December 2023.

The lower net cash flow from operating
activities of US$101 million, compared to
US$301 million in 2022, was considered by the
Group in its capital allocation, including capital
expenditure and shareholder returns, and
exceptional bail payments for four managers

of one of our subsidiaries in Ukraine in 2023.
See sections below for further information.

Despite the lower overall cash flow
generation, the Group managed to
maintain its closing balance of cash and
cash equivalents at US$115 million as of
31 December 2023, compared to US$113
million as of 31 December 2022.

The balance of cash and cash equivalents
held in Ukraine amounts to US$11 million
as at 31 December 2023 (31 December
2022: US$45 million). Following the adopted
Martial Law in Ukraine, the National Bank of
Ukraine (“NBU”) has introduced significant
currency and capital control restrictions in
Ukraine. These measures are affecting the
Group in terms of its cross-border payments
to be made, which are restricted and may
be carried out only in exceptional cases. For
further information see Note 30 Commitments,
contingencies and legal disputes to the
Consolidated Financial Statements.

Capital investment
Capital expenditure in 2023 totalled US$101
million compared to US$161 million in 2022.
Of the total amount spent in 2023, sustaining
and modernisation capital expenditure
was US$31 million (2022: US$57 million),
covering the activities at all of the Group’s
major business units. Due to the ongoing
operational and logistics constraints as
a result of the ongoing war in Ukraine,
the Group further reduced the level of its
investments in sustaining capital expenditure
projects, by reviewing and optimising the
level and timing of its repair activities.

The Group also reconsidered the timing of its
strategic development projects resulting in a
reduction of the related capital expenditure to
US$70 million, compared to US$104 million
in 2022. As such, major projects advanced in
2023 include US$22 million spent on stripping
activities for future production growth and
US$13 million spent on the enhancement of
the Group’s press filtration complex, which will
help raise pelletising capacity in the near term
once operations return to full capacity. The
Group continued to invest US$22 million in the
concentrator and pelletiser projects as part of
the Wave 1 Expansion Programme to manage
previously entered commitments and also spent
US$3 million in the development and exploration
of the Belanovo deposit, as well as US$1 million
in a hydrolysis plant for the trial of hydrogen use
as a fuel in the Group’s pelletiser. For further
information on the Group’s activities to grow
its business in 2023, please see page 19.

Considering the lower cash flow generation no
ordinary dividends were paid during the 2023
calendar year (2022 total: 13.2 US cents or
US$155 million). The Group has a shareholder
returns policy outlining the Group’s intention
to deliver up to 30% of free cash flows as
dividends in respect of a given year. The Group

Ferrexpo plc Annual Reports & Accounts 2023

has announced on 18 January 2024 an interim
dividend of 3.3 US cents for the financial year
2023, reflecting that the Group performed well
in the second half of 2023, which was due for
payment to the shareholders on 23 February
2024. Following subsequent and unexpected
events in Ukraine relating to a claim against
one of the Group’s Ukrainian subsidiaries, the
Group announced on 20 February 2024 the
decision to withdraw this interim dividend. For
further information see Note 30 Commitments,
contingencies and legal disputes.

Debt and maturity profile
Ferrexpo has maintained a strong balance
sheet in 2023, including the absence of gross
debt and the net cash position of US$108
million as at 31 December 2023 (2022: US$106
million). With the exception of lease liabilities,
the Group does not have any outstanding
interest-bearing loans and borrowings
as of 31 December 2023 and 2022.

As of 31 December 2023, the credit ratings
agency Moody’s had a long-term corporate
and debt rating for Ferrexpo of Caa3, with a
negative outlook. The credit ratings agency
Fitch maintains a CCC+ with a negative
outlook rating on the Group. While the
credit rating of Ferrexpo is capped by the
sovereign credit rating of Ukraine, the ceilings
for credit ratings ascribed to Ferrexpo by
Moody’s and Fitch are higher (one notch
above sovereign, Ca, for Moody’s and three
notches above sovereign, CC, for Fitch). In
December 2023, S&P reinstated the Credit
Rating of Ferrexpo at CCC, at the same level
with the sovereign credit rating of Ukraine.

Related party transactions
The Group enters into arm’s length transactions
with entities under the common control of
Kostyantin Zhevago and his associates.
All these transactions are considered to
be in the ordinary course of business.

During the financial year 2023, the Group
made bail payments totalling US$15
million on behalf of four members of the
top management of one of the Group’s
subsidiaries in Ukraine in respect of various
legal actions and ongoing court proceedings
initiated by certain governmental bodies
against the Group’s subsidiaries and
members of the top management in Ukraine.
See also below under Contingent liabilities
and legal disputes and Note 34 Related
party disclosures to the Consolidated
Financial Statements for further details.

Contingent liabilities and
legal disputes
The Group is exposed to risks associated with
operating in a developing economy during a
time of war and the current circumstances
facing the Group’s controlling shareholder.
As a result, the Group is subject to various
legal actions and ongoing court proceedings

WE ARE DETERMINED

Dmitriy Kampaniets and Daria Leschenko

The translation and interpretation
team at Ferrexpo is an important
and integral part of the
organisation. The eight strong team
collectively speak six languages.
They work not only on site dealing
with technical aspects of the
business, but also travel with
management to provide support
during technical visits, events and
trainings, and critically, during
business negotiations.

As the war progresses, what has
changed in your job function?
There is a stronger sense of unity. We
are one people with one enemy, so we
should not have discord among ourselves.
Accordingly we’ve noticed that there is
more empathy and a desire to help each
other at work. We aim to complete our
work professionally and quickly, which
means that mutual assistance with
colleagues has significantly strengthened.

What is the biggest impact the war
has had on your job?
The war has hardened our characters,
like pellets in a kiln. We want to contribute
as much as possible to victory. Seeing
how the Company is facing so many
challenges, we have come to understand
the importance of our work: the correct
interpretation with foreign specialists helps
colleagues make the right decisions faster;
the correct translation of an equipment
operating manual helps with proper
maintenance and lower costs. We do
everything to be as useful as possible
for the Company and for Ukraine.

What do you look forward to most
about your job when the war ends?
When the war ends, we will welcome
the return of our employee warriors.
We relish the time when there is more
live communication in our work, so
that we can see the versatility and
application of knowledge and skills so
that the Company can grow again.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

initiated by different government agencies in
Ukraine. There is a risk that the independence
of the judicial system and its immunity from
economic and political influences in Ukraine is
not upheld, consequently Ukrainian legislation
might be inconsistently applied to resolve the
same or similar disputes. As a result, the Group
is exposed to a number of higher risk areas
than those typically expected in a developed
economy, which require a significant portion
of critical judgements to be made by the
management. In respect of the contested
sureties claim, if the final Supreme Court ruling
is not in favour of FPM, the claimant may take
steps to appoint either a state or a private
bailiff and request the commencement of the
enforcement procedures, which could have
a material negative impact on the Group’s
business activities and its ability to continue
as a going concern, as the assets of FPM
could be seized or subject to a forced sale.
In addition to the afore-mentioned claim, a
supplier and related party to the Group filed by
an application to open bankruptcy proceedings
(“creditor protection proceedings”) against
the Group’s major subsidiary in Ukraine. The
possible commencement of the enforcement
of the decision of the Ukrainian court of
appeal, which is currently suspended by
a decision of the Supreme Court, and the
possible opening of creditor protection
proceedings might potentially affect the
Group’s ability to continue as a going concern.

See Note 2 Basis of preparation and Note
30 Commitments, contingencies and legal
disputes to the Consolidated Financial
Statements as well as the Principal Risks
section on pages 72 to 90 for further details.

Going concern
As at the date of the approval of these
Consolidated financial statements, the war is
still ongoing and poses a significant threat to
the Group’s mining, processing and logistics
operations within Ukraine. As a result, a
material uncertainty still remains as some of
the uncertainties remain outside of the Group
management’s control, with the duration and
the impact of the war still unable to be predicted
at this point of time. In addition to the war-
related material uncertainty, the Group is also
exposed to the risks associated with operating
in a developing economy, which may or may not
be exacerbated by the war and/or the current
circumstances facing the Group’s controlling
shareholder (see Ukraine country risk on pages
75 to 79). As a result, the Group is exposed
to a number of risk areas that are heightened
compared to those expected in a developed
economy, such as an environment of political,
fiscal and legal uncertainties, which represents
another material uncertainty as at the approval
of these consolidated financial statements.

See Note 2 Basis of preparation to the
Consolidated Financial Statements
for further information.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS32

Responsible Business Review

As the war in Ukraine protracts,
we continue to prioritise our workforce
and the communities where we operate.
However, we must also keep sight of our
broader sustainability and environmental
objectives, so that we continue to
contribute to the global steel industry’s
pathway to low emissions.

Natalie Polischuk
Chair, Health, Safety,
Environment and Community
(“HSEC”) Committee

In this section, I would like to present the
report on the work of HSEC Committee
for 2023, having been appointed Chair of
the Committee in May 2023. The activities
of HSEC Committee include oversight of
Ferrexpo’s policies and strategic supervision
of management systems aimed at achieving
the health and safety of our employees,
supporting the communities in which we
operate and managing environmental risks.
As a responsible business, we have an
important role to play in supporting society
and the economy, and also as a trusted
environmental steward. As a public company
quoted on the London Stock Exchange,
adhering to strict international governance
and environmental standards, we are an
established example of how to operate to
global standards in a Ukrainian context.

People first
Amid wartime conditions, we continue
to prioritise safety and wellbeing
of our employees, as their lives are
the top priority for Ferrexpo.

The full-scale war has had a significant
impact on Ferrexpo people. Since February
2022, a total of 754 of our employees have
been drafted to serve in the Armed Forces
of Ukraine, while 35 tragically lost their lives
defending the country. Our approach has been
to do everything possible in the circumstances
to help our employees and their families.

We have established a comprehensive
support programme providing material,
medical, psychological and employment
assistance for both those drafted to the
Armed Forces and the returning veterans.

While no one in Ukraine, including our
employees, can be absolutely safe amid
full-scale war and frequent missile attacks on
the region, we are doing everything possible
to protect the safety of our workforce and
wider community, for example the provision
of safe childcare and bomb shelters for
employees and their children in local schools.
Such support is conducted through Ferrexpo
Humanitarian Fund, which was established
in February 2022 and has initiated over
100 projects and initiatives. Each project is
approved by the HSEC Committee to ensure
good governance in the approval process.
Examples of projects supported include
providing accommodation, meals, donating
vehicles and equipment, and providing medical
support. At the same time, we continue to
implement our critical long-term safety at
workplace initiatives, such as training to
eliminate the most common types of high-
risk incidents at the production sites.

While needs change as the war prolongs,
our people want to be continuously employed
in a safe manner, and live in a community
that fosters their wellbeing. Ferrexpo Charity
Fund, which has been providing direct

Ferrexpo plc Annual Reports & Accounts 2023

US$25M

Total humanitarian support provided
to date, including the Ferrexpo
Humanitarian Fund and associated
CSR funding, assisting more
than 100 individual projects.

support to local communities for more than
12 years now, continues to work together
with stakeholders, including local authorities,
residents and public organisations, to
develop and implement social projects.

While placing primary importance on
protecting the safety of our employees,
we also strive more widely to foster a trust-
based work environment, exhibiting zero
tolerance for discrimination based on any
personal attributes. We remain dedicated
to safeguarding labour and human rights
throughout the business, in line with UN
Sustainable Development Goals.

Advancing sustainability initiatives
and climate change
It is important that we don’t lose sight of our
sustainability commitments, however at the
same time, we must acknowledge that the war
is affecting how we will need to consider our
long-term decarbonisation roadmap. Whilst
significant investments cannot be made at
the moment and some of the initiatives and
projects are currently suspended due to war,
Ferrexpo maintains its ongoing ecological
approach and practices and continues to plan
for a greener future. It is pleasing to report
that during 2023 two significant projects were
completed with our environmental consultants
Ricardo plc: Life Cycle assessment
and Double Materiality assessment.

Through working with Ricardo, Ferrexpo
aims to further develop its forward-looking
understanding around climate change and
the Group’s pathway to net-zero emissions
and a clear picture of iron ore pellets in the
decarbonisation of the global steel industry.

The Life Cycle assessment independently
verified that when a steel manufacturer
uses Ferrexpo DR pellets, in an electric arc
furnace, to produce a tonne of steel billet,
37% less carbon is emitted compared to
traditional steel production methods.

This is significant for Ferrexpo because
it establishes the critical role that our
products play in enabling the transition to
lower carbon steel production. During the
year ahead, we plan to undertake further
studies to understand more about our other
products, and work with some of our premium
steel customers in Europe to assess other
opportunities to decarbonise further.

The Double Materiality assessment combines
impact materiality with financial materiality,
providing a more in-depth analysis of what
issues are material to us as an organisation.
The results demonstrated that topics relating
to governance and responsible business
were considered the most important by
stakeholders, closely followed by our role
in enabling the transition to green steel and
how we can ensure ongoing employment
for our workforce. Sustainability risks
cannot be considered in isolation. As
part of the project, we engaged senior
managers of the Group in the discussion
on their integrated strategies for managing
sustainability risks and opportunities.

Responsible business and
sustainability reporting
In 2023, we published our eighth
Responsible Business Report, which
can be found on our website. The report
provided a comprehensive overview of our
sustainability initiatives and performance
across many of the standards under the
framework published by the Global Reporting
Initiative. It also provided an opportunity
to highlight some of the remarkable
achievements made by our colleagues
in the most difficult of circumstances.

Our stated target is to reduce carbon Scope
1 and 2 carbon emissions by 2030 (baseline:
2019). During 2023, our emissions fell 2%
compared to the previous year, representing
a 32% reduction compared to 2019. We are
continuing to progress certain initiatives that
will contribute to significant further reductions,
for example, the implementation of trolley
assist haulage systems in our mines. However,
work on this, as for so many other projects, is
limited to desktop optimisations at this time
as the engineering and equipment suppliers
are unable to visit Ukraine. It is likely that
our carbon reduction targets will need to be
revisited as the war prolongs. Once the war
is over and its impact is assessed, we plan to
return to our decarbonisation journey in full.

The remainder of this section of the
Annual Report provides a more detailed
assessment and reporting of the most
important responsible business, climate
and sustainability topics. Whilst we
prioritise the safety and wellbeing of our
people, we have also made progress on
all fronts, demonstrating our ongoing
responsible contribution to society, the
economy and the environment.

I would like to thank all our workforce
for their resilience and for embracing
the fundamental values of sustainability
to help deliver this progress under the
most challenging circumstances.

Natalie Polischuk
Chair, HSEC Committee

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS34

Responsible Business: Safety

Protecting the
safety of our people

Our workforce comprises
over 8,000 employees
and contractors. 95%
of our workforce is based
in Ukraine, with many
currently serving in the
armed forces. During a
time of war, protecting
their safety and wellbeing
is paramount.

Health and safety performance

Safety indicators (lagging)

Fatalities

Lost time injuries

Lost time injury frequency rate (“LTIFR”)

All injuries frequency rate (“AIFR”)

Near miss events

Significant incidents

Restricted work days

Severity rate (average lost days per incident)

Safety indicators (leading)

Health and safety inspections

Health and safety meetings

Health and safety inductions

Training hours

Hazard reports

High visibility management tours

Protecting our people
At Ferrexpo, we have a global workforce
comprising over 8,000 employees and
contractors, and colleagues some of whom
are currently serving in the Armed forces
of Ukraine. 95% of the workforce is based
in Ukraine, mainly at our operations in the
Poltava region, but also other colleagues
work in other functions and services in Kyiv
and another locations across Ukraine.

Given the scale of our workforce and
the nature of our activities, it was never
an option to evacuate our people during
the war. Our people wish to and need to
continue working. Being employed is critical
during a time of war. Therefore, it is our
responsibility to take extensive measures
to protect our workforce during this time,
both in the workplace, and, where possible,
in the communities where they live.

Measures taken have included remote
working for those with suitable roles, to
ensure that they were as far from the front
line as possible. Measures for our on-site
workforce have included the provision of
air-raid shelters, adjusting shift patterns
to align with night-time curfews and the
provision of free meals in light of disruption
to supply chains in local communities.

Ferrexpo plc Annual Reports & Accounts 2023

2023

2022

Change

0.32

0.64

675

169

6,282

1,466

2,897

7,264

688

149

0.51

0.99

934

104

5,413

1,388

5,332

6,828

740

157

–

(44%)

(37%)

(35%)

–

(50%)

(28%)

63%

16%

(46%)

(7%)

(5%)

WE ARE DETERMINED

Olga Mokra, Acting CSR Manager, FPM

Corporate Social Responsibility
is managed at a local level by a
team of professionals. Olga started
working at our Belanovo operation
as a CSR Specialist in 2020,
transferring recently to FPM as
Acting CSR Manager.

As the war progresses, how has
your job changed?
After the initial shock I actually found
a real thirst to work more and to work
harder. I joined the team managing our
Humanitarian Fund and find the work
immensely rewarding. Time is critical, and
we’ve had to learn to work fast, which we
have achieved by being united. Despite
everything possible and impossible,
we are able to complete our work.

What has the war taught you
about how you do your job?
War is not the time to give in to doubt.
It is important not to let emotions get
in the way. The war taught me to be
focused and balanced, and how to make
decisions and complete actions quickly.

When the war ends, what will be
different in your work?
Work will be different not only compared to
how it is now, but also how it was before the
war. So many challenges have arisen during
this time and we have learnt to overcome
them. I think the last thing I will want to do is
to slow down. In fact, we will not have time
to rest, because after the war our workload
will likely increase as we restore Ukraine.

Zero

The Group recorded a third
successive year without a fatality.

In the early phases of the war, when
uncertainty arose over the continued provision
of social services, the Group commenced
an on-site childcare facility for the children of
employees, which was staffed by Ferrexpo
volunteers, to ensure that children could be
close by and safe during such an uncertain
period of time. As the war evolved, the
need for such facilities diminished as life
began to resume in Ukraine, with schools
opening and a ‘new normal’ beginning.

As the conflict evolved in 2022, so did our
response. We focused our efforts on the
supply of key equipment such as armoured
ambulances and food packages to towns
along the front line. In late 2023, needs shifted
again, and psychological wellbeing has
become more important as people try to deal
with the stress of living in a protracted war.

At the time of this report, 641 of our brave
colleagues are serving in the Armed Forces
of Ukraine. We are proud of their efforts to
defend Ukraine, and continue to support
them by providing personal protective
equipment and other essentials.

In 2023, the Group recorded a third
successive year without a fatality. The
average recoded lost-time injury frequency
rate (“LTIFR”) for the year was 0.32, an
improvement on the 0.51 recorded last year
and materially below the historic average.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
36

Responsible Business: Environmental Stewardship

Net Zero pathway

We recognise the importance of addressing
climate change and the need for Ferrexpo
to present a clear and considered approach
towards reducing our emissions footprint.

Greenhouse gas emissions footprint and energy consumption (2023/2022)

2023 Data (% change to 2022)

2022 Data

Absolute basis
(kilotonnes CO2e)

Unit basis
(kg CO2e per
tonne)

Absolute basis

(kilotonnes CO2e)

Unit basis
(kg CO2e per
tonne)

Scope 1 emissions
Scope 2 emissions

Subtotal (S1+S2)
emissions

247 (-27%)
137 (-39%)

57 (+4%)
32 (-11%)

384 (-32%)

89 (-2%)

Scope 3 emissions

5,707 (-25%) 1,326 (+7%)

Total emissions

6,092 (-26%) 1,416 (+7%)

Biofuels emissions
(reported separately)

Energy consumption
(kWh)

4 (-39%)

1 (-12%)

2,162,913,319 (-29%)

–

3,052,942,993

341
223

564

7,642

8,206

55
36

1,237

1,329

–

‘Unit basis’ represents the intensity ratio, aligning to requirements of SECR (Streamlined Energy and Carbon Reporting).

Ferrexpo plc Annual Reports & Accounts 2023

Scope 1 emissions
Scope 1 direct emissions principally relate
to three activities at our operations – diesel
consumption (primarily used in mining
activities), natural gas (primarily used in
pelletising activities) and gasoil (primarily
used in inland waterway logistics activities).
Collectively, these three sources of emissions
represented 97% of Scope 1 emissions in
2023 (2022: 97%), with emissions from the
consumption of diesel and gasoil for transport
making up 60% of Scope 1 emissions (2022:
55%) and natural gas making up 37% of
Scope 1 emissions (2022: 43%). In addition,
we track a further 15 sources of Scope 1
emissions across our operations, ensuring
that multiple aspects of our operations
are covered in our emissions estimates.

Absolute Scope 1 emissions fell by 27%
in 2023, in part reflecting lower production
due to war related constraints. Scope 1
emissions on a unit of basis rose 4%, due
to an increased utilisation of alternative
logistics channels for exports, which have
resulted in an increased consumption of
gasoil. Calculations of Scope 1 and Scope
2 emissions have been independently
assured for a third successive year.

Scope 2 emissions
Scope 2 indirect emissions relate exclusively
to our purchasing of electricity from third
parties, which is predominantly used in our
concentrator equipment. On an absolute basis,
this fell by 39%, also due to lower production.
On a unit basis, Scope 2 emissions fell
by 11% due to an increased proportion
of electricity being sourced from cleaner
sources including hydro and nuclear power.

Scope 3 emissions
For Ferrexpo Scope 3 emissions primarily
relate to the type of iron ore pellet produced,
since the downstream processing of iron ore
accounted for 96% of Scope 3 emissions
in 2023. In 2022, direct reduction (“DR”)
pellets represented 6% of all production,
resulting in lower Scope 3 emissions for
that year. However, in 2023, no DR pellets
were produced. Consequently, Scope 3
emissions in 2023 on a unit basis increased
to 1.33tCO2/t of pellet production from
1.24 tCO2/t of pellet production in 2022
respectively. Absolute Scope 3 emissions
nevertheless decreased 25% year-on-year
due to the overall lower production in 2023.

Methodology
Ferrexpo’s methodology for calculating its
GHG emissions footprint utilises, where
possible, emissions factors provided by the
Greenhouse Gas Protocol, which is in line
with reporting requirements under the Global
Reporting Initiatives (“GRI”) framework for
reporting sustainability topics. Through using
carbon factors provided by the Greenhouse

WE ARE DETERMINED

Serhiy Palekha, Pelletising Plant Manager

Serhiy has worked at Ferrexpo for
over 20 years. He started his career
as a foreman at the FPM pellet
production workshop. He was
appointed manager of the
pelletising plant at FPM in 2017.

As the war progresses, what has
changed in your role?
After the full-scale invasion, we had to
perform our work completely differently.
Sometimes we operate with only
one pelletiser line, sometimes with
two. Sometimes we were forced to
shut down altogether. In the first few
months, planning for the future seemed
incomprehensible. Before the war we
always had planned production and for
maintenance for years ahead. All this had
to be adjusted as we changed the way
we operate at a variably reduced scale.

What has the war taught you
about how you do your job?
It became clear that the production and
maintenance departments had to work
closer together. Many of our colleagues
that are skilled in maintenance and
repair work have joined the armed
forces. As we prepare plans to operate
three lines, co-operation is going to
be more important than ever that we
work across our departments and help
each other out whenever necessary.

When the war ends, what will be
different for you in your job work?
When the war ends I look forward to
the safe return of our colleagues from
the pelletising plant who are currently
fighting on the battle front. As we restore
production to all four pelletiser lines, we
will need our colleagues to return so that
we can minimise any skills shortages.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

-2%

Scope 1 and 2 emissions fell 2%
in 2023, in part reflecting lower
production due to war related
constraints.

Gas Protocol, the Group is able to provide
carbon dioxide-equivalent emissions figures
(“CO2e”) that also account for emissions of
both methane (CH4) and nitrogen oxide (N2O).

Water
Our operations include multiple water cycle
interactions, from the water ingress into our
mines, to recycling water in our processing
operations, to the River Dnipro, which
flows adjacent to our operations. Testing
of water quality has continued throughout
2023, with any discharged water quality
tested across more than 12 different
chemical elements or attributes. In our
processing plant, where water is utilised in
the processing of iron ore, we once again
recycled 97% of process water (2022: 98%).

Waste generation
The Group generates solid form waste in
its mining operations (overburden in the
form of waste rock and sand), as well as
emissions of other gases and dust from
its mining and processing operations.

During 2023, waste removal from
mining activities fell by 45% due to lower
production. It is important to note that the
overburden and waste removed from our
mining operations is non-hazardous and
is stored in on-site waste dumps designed
by our mine planning department.

Aside from greenhouse gases, gaseous
emissions include those emitted from our
processing operations (NO2, SO2, and CO),
with emissions from such sources declining
by an average of 30% during the year, in line
with mining volumes. Dust emissions in 2023
increased 9% compared to the previous year.

Elsewhere in our operations, we continued
to expand our domestic waste recycling
programme with collection bins and
sorting facilities. All four of our main
operating subsidiaries in Ukraine now
have active recycling programmes.

ISO-certified systems
Ferrexpo now has an ISO-compliant
environment management system (ISO
14001:2015) at both FPM and FBM, with the
latter achieving accreditation during 2022.
This is in addition to accreditation of our
Energy Management System (ISO 50001:2018)
at the same two subsidiaries, with FBM
also acquiring this accreditation in 2022.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS38

Responsible Business: Double Materiality Assessment

In 2023, Ferrexpo continued its sustainability
strategy on many fronts, including by proactively
initiating a Double Materiality Assessment (“DMA”).

The DMA has been conducted in collaboration
with our sustainability consultants, Ricardo
Plc, and is a process used to evaluate
and understand the impact of Ferrexpo’s
activities not only on our own financial
performance (financial materiality – outside-
in) but also the impact of the Company’s
activities on the environment and society
(impact materiality – inside-out). Our strong
commitment to sustainable business
practices is evident through our proactive
approach, ensuring compliance with
regulations while reinforcing our responsibility
to our employees and communities.

We conducted the materiality assessment
by following the guidance documents
from the European Financial Reporting
Advisory Group (“EFRAG”), which, at the
time of our assessment, were in draft form.
Additionally, we referenced the Annex
associated with the Corporate Sustainability
Reporting Directive (“CSRD”), which contains
the European Sustainability Reporting
Standards. This underscores our dedication
to staying abreast of new sustainability
standards and regulatory requirements, and
adopting best practices in sustainability.

The work involved proactively contacting
a range of stakeholders, demonstrating
our strong commitment and dedication to
fostering engagement and transparency,
even in challenging times.

Stakeholder analysis
Ferrexpo conducted a comprehensive
stakeholder mapping exercise, identifying
over 70 stakeholders categorised into
11 groups, comprising both internal and
external stakeholders. Using a matrix to
assess stakeholder importance based
on their interest and influence, Ferrexpo
identified Directors and Executives (internal),
Auditors (external), and Suppliers (external)
as having the highest interest and influence.
It is essential to emphasise that stakeholder
mapping is an iterative process, allowing
Ferrexpo to continually update and refine its
approach to ensure effective stakeholder
engagement and management.

Identification of material topics
related to sustainability matters
Ferrexpo diligently collaborated to identify
and compile a comprehensive list of 21
sub-topics encompassing Environmental,
Social and Governance (“ESG”) topics, while
considering their potential impacts, risks, and
opportunities (“IROs”). This process involved
leveraging various sources such as Ferrexpo’s
previous impact materiality assessment (using
the GRI universal standard for reporting),
European Sustainability Reporting Standards
(ESRS) 1 AR16, international and sector-
specific standards (International Financial
Reporting Standards (“IFRS”), Sustainability
Accounting Standards Board (“SASB”)), ESG
raters, regulations and competitor analysis.
This meticulous approach ensured that
our sustainability strategy is well informed,
addressing both financial and multi-
stakeholder sustainability matters that are
critical for both Ferrexpo and our stakeholders.

Materiality assessment process

Our materiality assessment process in 2023 included the following:

STAKEHOLDER
ANALYSIS

IDENTIFICATION
OF MATERIAL
TOPICS

STAKEHOLDER
ENGAGEMENT

IMPACT
MATERIALITY

FINANCIAL
MATERIALITY

DOUBLE
MATERIALITY
MATRIX

Ferrexpo plc Annual Reports & Accounts 2023

and perspectives of colleagues in Ukraine
during a time of war. By understanding the
needs and experiences of our workforce
during this challenging period, we will better
adapt and respond to their concerns.

Additionally, we interviewed a total of 17
internal and external stakeholders, including
Directors and Executives from Ferrexpo,
auditors, bank institutions, brokers, customers,
NGOs, suppliers, trade associations, and
investors. These interviews helped to further
identify and validate the potential material ESG
topics from an impact perspective (external
interviews), risks and opportunities from a
financial perspective (internal interviews with
Directors and Executives), as well as provide
context on external stakeholder views and
expectations related to the ESG topics.

Impact materiality
We rigorously assessed our direct and
indirect impact on both the environment
and society, under the guidance of our
sustainability consultants, Ricardo Plc. To
ensure comprehensiveness, the results of the
stakeholder questionnaire were applied to
an impact materiality scoring assessment to
evaluate the scale of actual and/or potential
negative and positive impacts from their
perspective, considering both perceived
impact and scope (i.e. how widespread
the impact is). We further conducted an
internal assessment that considered the
extent and potential for irremediability of the
actual negative impacts. Under the EFRAG
guidance, materiality is based on the severity
of the impact, which considers scale, scope,
irremediability as it relates to actual impacts,
including likelihood for potential impacts.

Stakeholder engagement
Internal and external stakeholders were invited
to complete an online materiality questionnaire.
A total of 156 internal and external responses
were captured in both English and Ukrainian.
The online questionnaire asked respondents to
rank the impact of the Ferrexpo’s activities on
the selected ESG sub-topics. The information
gathered from both internal and external
stakeholders, including their ranked impact,
directly informed the materiality of the topics.

This analysis revealed that both our internal
and external stakeholders have a profound
interest in Social and Governance issues,
specifically focusing on areas such as
Employee Health and Safety, Employee Rights
and Training, Employment and Turnover,
Responsible Business, and Corporate
Governance. Of particular note is the
internal stakeholder feedback we received,
which predominantly originated from within
Ukraine. This ‘bottom-up’ response provided
a valuable snapshot of the sentiments

Ferrexpo 2023 Double Materiality Matrix

Y
T
I
L
A
I
R
E
T
A
M

T
C
A
P
M
I

L
A
C
I
T
I
R
C

T
N
A
C
I
F
I
N
G
I
S

T
N
A
T
R
O
P
M
I

E
V
I
T
A
M
R
O
F
N
I

1.1

1.9

2.7

3.3

3.4

1.5

2.1

2.8

1.2

1.6

1.7

2.3

2.6

1.8

2.4

3.2

1.3

2.2

2.5

3.1

1.4

INFORMATIVE

IMPORTANT

SIGNIFICANT

CRITICAL

FINANCIAL MATERIALITY

Key

ENVIRONMENTAL ISSUES

1.1 Air Quality and GHG emissions
1.2 Biodiversity
1.3 Climate Change
1.4 Energy Management and Sourcing
1.5 Green Technologies
1.6 Land Use
1.7 Pollution
1.8 Resource Management
1.9 Water and Waste Management

SOCIAL ISSUES

2.1 Community
2.2 Conflict Risk
2.3 Diversity and Inclusion
2.4 Employee Health and Safety
2.5 Employee Rights and Training
2.6 Employment and Turnover
2.7 Green Steel
2.8 Supply Chain Management

GOVERNANCE ISSUES

3.1 Corporate Governance
3.2 Data Privacy and Security
3.3 Responsible Business
3.4 Risk and Compliance

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
40

Responsible Business: Double Materiality Assessment continued

To validate the accuracy and robustness
of our assessments, moderation sessions
were conducted internally, followed by
additional sessions with our stakeholders.
These sessions fostered dialogue and
ensured consensus on final scores,
culminating in a comprehensive and
reliable materiality assessment.

Financial materiality
To perform the financial materiality, we
identified and evaluated the risks and
opportunities associated with each
sustainability sub-topic. To achieve this,
an initial list of risks and opportunities was
compiled for each sustainability sub-topic,
drawing influence from internal and external
reputable sources to ensure all relevant
financial aspects were considered when
defining sustainability sub-topics. These
sources included the Capitals Coalition,
TCFD and SASB, Ferrexpo’s risk register
and internal stakeholder interviews. A final
financial materiality score for sustainability
sub-topics was derived by aggregating the
averages of likelihood of occurrence and
monetary impact (financial magnitude) scores
for each associated risk and opportunity.
These scores were then categorised
into levels such as Minimal, Informative,
Important, Significant, or Critical.

Additionally, as recommended by EFRAG,
each sub-topic was assigned a Dependencies
on Capitals, evaluating how different
forms of capital (such as financial, natural,
human, social, and manufactured) can
impact both financial and sustainability
performance. This provided valuable insights
into their interconnectedness with our
Company activities. To ensure accuracy and
comprehensiveness, these rankings were
shared and verified during a concluding
Impact and Financial Materiality Workshop.
This collaborative effort ensured that all
potential financial impacts on the Company
were adequately considered and addressed.

Double Materiality results
The results from both the impact materiality
assessment and the financial materiality
assessment have been consolidated to
form Ferrexpo’s Double Materiality Matrix.

Based on the Double Materiality Matrix, nine
material topics were identified, shown in the
upper green corner. The materiality threshold
was meticulously examined to gauge the
probability and potential financial impacts
across short-, medium-, and long- term
horizons. This evaluation was integrated with
our enterprise risk management framework
to identify, examine and agree on the
potential financial effects. The threshold
was established collectively through internal
stakeholder consensus. Moving forward,
we will continue to refine these thresholds,
particularly, as we update our risk register,
aiming to introduce suitable quantitative criteria
where applicable. These nine topics are,
therefore, considered material to Ferrexpo:

Category

Market and
technology

Description

Risks

Key risk areas: (1) demand for low emissions steel, and (2) movement towards circular economy
principles.

Through the scenario analysis conducted, the key risk themes across the scenarios that have been
identified include a slight decrease in profit due to a decrease in global iron ore price, and increased
demand for steel produced with a lower carbon emissions footprint (trending towards lower emissions
and ultimately zero emissions “Green Steel”). IEA SDS predicts a reduced carbon emissions footprint of
steel from 1.4tCO2/t steel in 2019 to 0.6tCO2/t steel in 2050. IEA STEPS predicts a reduction in carbon
emissions footprint of steel from 1.4tCO2/t steel in 2019 to 1.1tCO2/t steel in 2050, with both scenarios
predicting an increase in EAF’s share of global steel production to rise to c.50% by 2050.

Opportunities

Potential material opportunities: (1) demand for low emissions steel, and (2) movement towards circular
economy principles.

Through the scenario analysis conducted, the key opportunity themes across the scenarios include the
strong position Ferrexpo currently holds with regards to the movement towards “Green Steel” (via direct
reduction (“DR”) pellets and EAF steelmaking), with there being potential to increase pellet premiums
and revenues.

Physical

Risks

Potential material opportunities: (1) Sea level rise (chronic), (2) Increase in storm intensity (acute), and (3)
Climate induced conflict.

Through the scenario analysis conducted, the key risk themes across the scenarios include an increase
in global sea level rise, an increase in global storm intensity and frequency, and a possibility for
increased global conflict (more applicable for IEA STEPS and IPCC SSP4 scenarios).

Opportunities

Not applicable – through the scenario analysis, only risks have been identified.

Policy and legal Risks

Key risk areas: (1) shipping targets and regulations on carbon emissions, (2) carbon pricing/tax targets
and regulations on carbon emissions, and (3) a climate change related energy crisis in Ukraine.

Through the scenario analysis, the key risk themes across the scenarios include the introduction of
global carbon prices (set global prices for IEA STEPS and IEA SDS, and regional specific carbon prices
for IPCC SSP4), a potential risk of insufficient energy access in Ukraine in IPCC SSP4, and a need for
investment in decarbonising the shipping sector across all scenarios.

Opportunities

Potential material opportunities: (1) shipping: targets and regulations on carbon emissions, (2) carbon
pricing/tax: targets and regulations on carbon emissions, and (3) a climate change related energy crisis
in Ukraine.

Through the scenario analysis conducted, the key opportunity themes across the scenarios includes a
competitive advantage in the market should Ferrexpo successfully decarbonise its shipping operations,
a financial advantage should Ferrexpo decrease their emissions to below the market average (secured if
2050 net zero targets are achieved), and opportunity for Ferrexpo to diversify and become independent
of Ukraine‘s national grid through the Group producing its own renewable energy.

Reputational

Risks

Key risk area: (1) increase in climate consciousness amongst customers, investors and other
stakeholders.

Through the scenario analysis, the key risk themes across the scenarios include an increase in positive
sentiment towards green steel and/or iron ore from consumers and investors, resulting in potential for
financial loss from not meeting customer and investor demands.

Opportunities

Potential material opportunity: (1) increase in climate consciousness amongst customers and investors.

Through the scenario analysis, the key opportunity themes across the scenarios include an opportunity
for Ferrexpo to upscale production of iron ore pellet types that are compatible with “Green Steel” to
appeal to the market before other market competitors.

Ferrexpo plc Annual Reports & Accounts 2023

Scenario analysis aims to look at the resilience of a business against different climate change scenarios, varying in the speed and severity of climate
change over time, and the associated response by governments worldwide in terms of policy change.

As depicted in the figure opposite, climate change driven impacts on the operating environment may take the form of market and technology shifts,
reputational factors, the impact of changes (or insufficient change) to government policy and legal frameworks, and physical impacts.

Risks and opportunities may take the form of a transition risk, whereby companies do not respond quickly enough to a changing operating
environment and/or shifting stakeholder expectations. Physical risks include the more obvious, direct impacts on a business, such as flooding and
increasing storm events near a business’s operations, or more indirect impacts such as rising sea levels, and the impact that this could have on
global trade routes and access to customers.

In evaluating the impact on a business, climate change risks and opportunities may affect a wide range of factors, such as a company’s operating
costs, ability to generate revenues, supply chains, ability to operate continuously, and the timing of key company events and/or milestones.

Businesses will need to have an answer to the key question:
“What strategy is in place to transition business models to ones
that remain valuable once ambitious climate policies are in place?”

APPLY CLIMATE SCENARIOS

Markets and
technology shifts

Reputation

Transition
risks and opportunities

Policy and
legal

Physical climate
change

Physical
risks and opportunities

Evaluate business impacts:

• Operating costs

• Revenues

• Supply chain

• Business interruption

• Timing

Source: Ricardo Plc.

APPLY CLIMATE SCENARIOS

CLIMATE RISKS AND OPPORTUNITIES: SPECIFIC TO SECTOR, GEOGRAPHY AND TIME

Market and
technology shifts

– Reduced market

–

demand for emissions
intensive products.
Increased demand
for low carbon products
and services.

Policy and legal

Reputation

Physical risks

– Ambitious targets to
decarbonise sectors,
such as the energy and
transport sectors.
Increased cost of
production and taxes.

–

– Loss of trust and brand
value if not risks and
impacts are not
addressed.

– Opportunity to enhance
reputation through
responsible purpose.

– Access to finance.

– Chronic changes to
weather resulting in
fundamental shifts.
– More frequent acute
weather events,
such as fires, storms,
and flooding.

– Supply chain disruption.

– Disruptive business

– Liability risks.

models.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS48

Responsible Business: TCFD Disclosures continued

Climate
scenario
analysis

In undertaking our modelling exercise,
climate scenarios were selected on the
basis of giving a range of outcomes (rate
of environmental change and severity of
change) as a result of different levels of
legislative ambition taken by governments
in the coming years. Scenarios were also
selected on the basis of being produced
by a range of reputable independent
authorities on climate change.

1. International Energy Agency (“IEA”)
Sustainable Development Scenario
(“SDS”)

Description: a “well below” 2°C scenario,
achieved through policies that adhere to
the Paris Agreement.

Summary:

This path sets out a plausible path to concurrently
achieve universal access to energy, the objectives of
the Paris Agreement, and a reduction in air pollution.

Characteristics:

– A well below 2°C pathway.
– Surge in clean energy policies and green investment.
– All existing net zero pledges achieved in full.
– Extensive efforts to realise near-term emissions

reductions.

– Number of western economies to reach net zero

emissions by 2050, China by 2060, and a number
of other countries by 2070 latest.

– In alignment with the United Nations Sustainable

Development Goals.

Source: Ricardo Plc.

Scenario metric

IEA SDS (Sustainable Development Scenario)

IEA STEPS (Stated Policies Scenario)

IPCC SSP4 (Shared Socioeconomic Pathway 4)

Average global temperature increase (°C) by 2050

Average global temperature increase (°C) by 2100

1.7°C

1.6°C

Policy intervention

Time horizon

Transition risks
(as a function of carbon price, with pricing correct as of
studies completed in June 2022)

Transition risks
(as a function of carbon intensity of steel production)

Orderly or disorderly transition

Potential overall impact on Ferrexpo (determined via stakeholder
interviews and desktop studies, categorised on basis of
occurrence and likelihood, see risk matrix on page 45 for more).

Low

Medium

High

Increased policy beyond what has already
been committed to, from 2021

Only policies that are active in 2021, including what has

Increased policy after 2030, demonstrating

been committed to and what has been proposed

a rapid transition to decarbonisation

Present day to 2100

HIGH
(US$95/t) in 2050
Global carbon price

HIGH
(0.6tCO2/t) by 2050

Orderly

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

Ferrexpo plc Annual Reports & Accounts 2023

2. IEA Stated Policies Scenario (“STEPS”)

3. IPCC Shared Socioeconomic Pathway 4

(“SSP4”)

Description: a worst case, “business as

usual scenario” (one of two modelled here).

A more conservative benchmark whereby

governments are assumed to not reach all

announced goals.

Summary:

Divided approach to climate change

continues to widen through unequal

investments in human capital.

Summary:

The STEPS scenario provides a more conservative

Inequality (A Road Divided). Highly unequal investments

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

in human capital, combined with increasing disparities

granted that governments will reach all announced goals.

in economic opportunity and political power, lead to

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

increasing inequalities and stratification both across

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

and within countries.

other energy-related objectives, taking account not just of

existing policies and measures, but also a look at those

that are under development.

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

– A gap widens between an internationally connected

place to reach goals and other energy-related objectives.

society that contributes to knowledge and capital

– Takes into account not just existing policies and

measures but also those under development.

– Includes “Fit for 55” measures announced by the

European Commission in July 2021 (55% reduction in

emissions by 2030 compared with 1990 baseline).

intensive sectors of the global economy, and a

fragmented collection of lower income, poorly

educated societies that work in a labour intensive,

low-tech economy.

– Social cohesion degrades, and conflict and unrest

become increasingly common.

– Technology development is high in the high-tech

economy and sectors.

– Globally connected energy sector diversifies, with

investments in both intensive fuels like coal and

unconventional oil, but also low carbon sources.

2.0°C

2.6°C

Present day to 2100

MEDIUM

(US$90/t) in 2050

Global carbon price

MEDIUM

(1.1tCO2/t) by 2050

Potential for orderly or disorderly

Present day to 2100

MEDIUM

Regional carbon price in the short term,

global carbon price in the long term

2.2°C

3.7°C

N/A

Disorderly

2. IEA Stated Policies Scenario (“STEPS”)

3. IPCC Shared Socioeconomic Pathway 4
(“SSP4”)

Description: a worst case, “business as
usual scenario” (one of two modelled here).
A more conservative benchmark whereby
governments are assumed to not reach all
announced goals.

Description: a worst case, “business as
usual scenario” (one of two modelled here).
Divided approach to climate change
continues to widen through unequal
investments in human capital.

Summary:

The STEPS scenario provides a more conservative
benchmark for the future, because it does not take it for
granted that governments will reach all announced goals.
Instead, it takes a more granular, sector-by-sector look
at what has actually been put in place to reach these and
other energy-related objectives, taking account not just of
existing policies and measures, but also a look at those
that are under development.

Inequality (A Road Divided). Highly unequal investments
in human capital, combined with increasing disparities
in economic opportunity and political power, lead to
increasing inequalities and stratification both across
and within countries.

Characteristics:

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

place to reach goals and other energy-related objectives.

– Takes into account not just existing policies and
measures but also those under development.
– Includes “Fit for 55” measures announced by the

European Commission in July 2021 (55% reduction in
emissions by 2030 compared with 1990 baseline).

– A gap widens between an internationally connected
society that contributes to knowledge and capital
intensive sectors of the global economy, and a
fragmented collection of lower income, poorly
educated societies that work in a labour intensive,
low-tech economy.

– Social cohesion degrades, and conflict and unrest

become increasingly common.

– Technology development is high in the high-tech

economy and sectors.

– Globally connected energy sector diversifies, with
investments in both intensive fuels like coal and
unconventional oil, but also low carbon sources.

1. International Energy Agency (“IEA”)

Sustainable Development Scenario

(“SDS”)

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

achieved through policies that adhere to

the Paris Agreement.

This path sets out a plausible path to concurrently

achieve universal access to energy, the objectives of

the Paris Agreement, and a reduction in air pollution.

Characteristics:

– A well below 2°C pathway.

– Surge in clean energy policies and green investment.

– All existing net zero pledges achieved in full.

– Extensive efforts to realise near-term emissions

reductions.

– Number of western economies to reach net zero

emissions by 2050, China by 2060, and a number

of other countries by 2070 latest.

– In alignment with the United Nations Sustainable

Development Goals.

Scenario metric

Average global temperature increase (°C) by 2050

Average global temperature increase (°C) by 2100

Policy intervention

Time horizon

Transition risks

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

studies completed in June 2022)

Transition risks

(as a function of carbon intensity of steel production)

Orderly or disorderly transition

1.7°C

1.6°C

Present day to 2100

HIGH

(US$95/t) in 2050

Global carbon price

(0.6tCO2/t) by 2050

HIGH

Orderly

IEA SDS (Sustainable Development Scenario)

IEA STEPS (Stated Policies Scenario)

IPCC SSP4 (Shared Socioeconomic Pathway 4)

Increased policy beyond what has already

been committed to, from 2021

Only policies that are active in 2021, including what has
been committed to and what has been proposed

Increased policy after 2030, demonstrating
a rapid transition to decarbonisation

2.0°C

2.6°C

2.2°C

3.7°C

Present day to 2100

MEDIUM
(US$90/t) in 2050
Global carbon price

MEDIUM
(1.1tCO2/t) by 2050

Potential for orderly or disorderly

Present day to 2100

MEDIUM
Regional carbon price in the short term,
global carbon price in the long term

N/A

Disorderly

Worst case, “business as usual” scenarios

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS50

Responsible Business: TCFD Disclosures continued

Materiality assessment

Key topic:

Low carbon emissions steelmaking.

Shipping targets and regulations on
carbon emissions.

Key topic:

Carbon pricing and taxes.

Summary:
Increasing regulations on the shipping
industry as carbon emissions targets
are introduced, with measures
similar to the EU’s Carbon Border
Adjustment Mechanism (“CBAM”),
will likely increase costs.

Given the current regulatory landscape,
this factor is unlikely to impact the Group
in the short term (0 to 5 years), but over
the medium to long term will likely pose
a risk, as it will increase the Group’s cost
base as technology to aid decarbonisation
is implemented. However, this topic may
present an opportunity to the Group if
Ferrexpo is successful in decarbonising
its shipping operations, potentially
providing a competitive advantage.

This topic is assessed to be a medium
to high risk across all three climate
change scenarios for 2050 to 2100.

Summary:
Mandatory pricing and taxes of carbon
emissions, increasing the operating costs
for those consuming fossil fuels and/
or generating industrial emissions.

In the medium to long term, carbon
pricing will negatively impact profitability
through increasing operating costs. This
risk will be exacerbated if the Group fails
to adequately reduce emissions over
time. If the Group does, however, reduce
its emissions, then this will present the
Group with an opportunity as it will have a
competitive advantage over its peer group.
Significant opportunity lies in achieving
net zero targets, ahead of others.

This topic is assessed to be a medium
to high risk across all three climate
change scenarios for 2050 to 2100.

Summary:
Increasing market demand for low carbon
emissions steelmaking, which in turn
will affect demand for the various raw
materials required for the production
of steel. In the short term, this shift
presents an opportunity to Ferrexpo
as the drive towards Green Steel will
increase demand for direct reduction
(“DR”) pellets, which are a form of iron
ore that can be used in direct reduced
iron-electric arc furnace (“DRI-EAF”)
steelmaking. Through this opportunity,
Ferrexpo can increase the premium paid
for its products by customers, potentially
increasing revenues as a result.

In the long term (2050 to 2100), the
movement towards green steel presents
a risk to the Group as other market
competitors will begin to supply green
steel producers, resulting in an increase
in competitor products, such as DR
pellets for use in DRI-EAF steelmaking.
In this scenario, Ferrexpo would lose
its competitive advantage to be a
market leader that it currently has.

This topic is assessed to be a medium
to high risk across all three climate
change scenarios for 2050-2100.

Ferrexpo plc Annual Reports & Accounts 2023

Scenario analysis: in detail

DEMAND FOR LOW CARBON EMISSIONS STEELMAKING |

MARKET AND TECHNOLOGY SHIFTS

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

The carbon intensity of steel:

Financial impacts

To meet national, international and
industrial climate targets, the general
market is required to shift towards lower
carbon emissions steelmaking.

Opportunity for Ferrexpo:
short term

Ferrexpo is in a strong position to support
this shift through producing more green
steel, increasing the premium and revenue
as a result.

? Risk to Ferrexpo: long term
Other competitors in the market may start
to produce green steel too, including direct
reduction (“DR”) pellets for use in electric
arc furnaces. Potential for Ferrexpo no
longer to be seen as “market leaders”
in the transition.

–

IEA SDS: assumes a decrease in steel
carbon intensity from 1.4tCO2/t in 2019
to 0.6 tCO2/t by 2050.
IEA STEPS: assumes a decrease in steel
carbon intensity from 1.4tCO2/t in 2019
to 1.1 tCO2/t by 2050.

Electric arc furnace (EAF) uptake:

–

IEA SDS: assumes an increase in EAF
share of steel production from 29% in
2019 to 57.5% by 2050.
IEA STEPS: assumes an increase in EAF
share of steel production from 29% in
2019 to 47.4% by 2050.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



– Any correlation between changes in

revenue/market price and any change
in global steel carbon intensity due to
carbon policy impacts.

Performance against competitors

– The carbon intensity of Ferrexpo

products compared to competitors.

Geographical spread of
market changes

– Any change in global steel production

methods due to technology
development and consumer preference.
– Any trends in these KPIs geographically,
compared to the location of Ferrexpo
market base.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Establish manufacturing capability for technology and equipment required to
integrate into market shift to green steel. The sooner Ferrexpo can integrate
technologies that aid the reduction of carbon emissions, such as use of green
hydrogen in the pelletising process, the further Ferrexpo will be ahead of other
market competitors.

Short–medium
term

Monitor Ferrexpo product carbon emissions intensity compared to other
market competitors to ensure Ferrexpo can stay ahead as market leaders in
this transition, ensuring increased premium and revenue.

Medium–long
term

Incorporate continuous monitoring of global steel carbon emissions intensity
requirements and incorporate into the Ferrexpo business strategy. Decisions
on diversification and development of low energy intensive steel can thereby
be influenced.

Continuous

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

Responsible Business: TCFD Disclosures continued

MOVEMENT TOWARDS CIRCULAR ECONOMY PRINCIPLES |

MARKET AND TECHNOLOGY SHIFT

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Global movement towards circular
economy principles, driving an increase in
scrap steel recycling and repurposing rates.

Risk to Ferrexpo:
medium–long term

Reduced demand for virgin iron ore,
resulting in a decrease in Ferrexpo sales
and growth.

The repurposing rates, recycling rates
and volume of scrap steel output:

–

IEA SDS: assumes an increase in metallic
scrap input from 32.1% in 2019 to 45.3%
by 2050.
IEA STEPS: assumes an increase in
metallic scrap input from 32.1% in 2019 to
44.7% by 2050.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Financial impacts

– Any correlation between changes in

revenue/market price and global scrap
steel recycling rates.

Geographical spread of market/
technology changes

–

Identify potential methods /
technologies / equipment which can
be utilised to repurpose / recycle
scrap steel.
Identify main countries where circular
economy shift is increasing, and
companies that are adopting the scrap
steel recycling method.
Identify markets for repurposed and
recycled steel to establish client base
for products.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Map out the existing and potential client base to develop an understanding of
key markets and clients.

Short–medium
term

Incorporate into Ferrexpo business strategy: continuous monitoring of
global scrap steel recycling rates, including identification of main countries
where a shift to a circular economy is increasing. Decisions on investment,
diversification, and development of new products can therefore be influenced.

Continuous

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Ferrexpo plc Annual Reports & Accounts 2023

SHIPPING: TARGETS AND REGULATIONS ON CARBON EMISSIONS |

POLICY AND LEGAL

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Carbon emission targets and regulation
on the shipping sector are introduced.
This may include the EU’s Carbon Border
Adjustment Mechanism (“CBAM”), making
more energy intensive shipping methods
more expensive.

Opportunity for Ferrexpo:
medium-long term

If Ferrexpo is successful at decarbonising
its shipping operations, it may provide a
competitive advantage, should regulations
and additional CBAM legislation be
introduced.

Risk to Ferrexpo:
medium-long term

Increased costs on Ferrexpo from shipping
decarbonisation technology requirements.

The intensity of shipping sector targets
introduced:

–

IEA SDS: assumes international shipping
emission trajectory consistent with a 50%
reduction by 2050 from a 2008 baseline.
Ban of trucks with internal combustion
engines by 2035.

IEA STEPS: 30% improvement in energy
efficiency per tonne-kilometre in new ships
and policies to aid the decarbonisation of
shipping.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Financial impacts

– Any revenue and/or market price
changes influenced by the need
for investment in decarbonisation
technologies to achieve any shipping
targets implemented.

Performance against competitors

– The cost of CBAM for Ferrexpo,

compared to competitors. There could
also be positive reputational impacts if
Ferrexpo is seen as a market leader in
the area and vice versa.

Distribution of policy changes

– The financial impact on Ferrexpo is

dependent on the nature of shipping
policy implemented. If financial policies
to support any technology transition
are available, the impact on industry
is reduced.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Assess technologies that are available to decarbonise Ferrexpo shipping
operations, and if these are plausible solutions that could support Ferrexpo
in aligning with potential future shipping regulations and targets.

Short–medium
term

Invest in the technology required to meet any shipping targets and regulations.
This is dependent on the scale and boundary of policies introduced, when and
where they are introduced, and the technology that is available at the time.

Medium–long
term

Monitor the targets and regulations that are introduced to the shipping sector
in different regions whereby Ferrexpo operates. Assess the quantitative
financial risks of these scenarios and incorporate this risk into all business
plans and decision-making.

Continuous

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

Responsible Business: TCFD Disclosures continued

CARBON PRICING/TAX: TARGETS AND REGULATIONS ON CARBON EMISSIONS |

POLICY AND LEGAL

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

A mandatory (increasing) global carbon
price for fossil fuel and industrial emissions.

Opportunity for Ferrexpo:
short–medium term

Financial advantage compared to market
competitors if emissions are reduced to
levels below the market average. If 2050
net zero target is achieved, then this may
present and opportunity for Ferrexpo.

Risk to Ferrexpo:
medium–long term

?
Decrease in profits due to increase in
carbon tax, if Ferrexpo does not sufficiently
reduce it’s carbon emissions.

Global mandatory carbon price
(USD/tCO2):
–

IEA SDS: assumes 35 by 2040, 95 by
20501.
IEA STEPS: assumes 65 by 2030, 75 by
2040, 90 by 20501.
IPCC SSP4: assumes regional carbon
price in the short term, global carbon price
in the long term.

–

Increases beyond this expected to 2100.
IEA scenario carbon price assumes that
Ferrexpo operates in emerging and
developing economies. Carbon price for
operating in advanced economies is larger.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Financial impacts

– Any correlation between changes in

revenue/market price and any change
in mandatory carbon price.

Performance against competitors

– Progress in emission reductions
achieved compared to targets.
– Ferrexpo emissions and carbon tax

compared to competitors.

Distribution of policy changes

– Any difference in carbon price

geographically and the relevance
to Ferrexpo operations.

– Any difference in carbon price,
boundary and scope based on
markets/industries and the relevance
to Ferrexpo operations.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Understand the capacity for technology, equipment and offsetting required
to transition Ferrexpo to a net zero business by 2050.

Short–medium
term

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Monitor Ferrexpo product carbon intensity and carbon footprint compared
to other market competitors to ensure Ferrexpo can stay ahead of market
leaders, ensuring increased revenue in comparison. Carbon tax boundaries
and scope should be monitored as this will determine if Ferrexpo products
can support the market in reducing the carbon tax burden.

Incorporate net zero roadmap and continuous monitoring of global carbon
prices into Ferrexpo business strategy. Decisions on diversification and
development of carbon reduction technology/processes can thereby be
directly influenced. Emission reduction performance against targets should
be regularly monitored to asses exposure and vulnerability to risk.

Medium–long
term

Continuous

Carbon pricing correct as of timing of studies completed (June 2022).

Ferrexpo plc Annual Reports & Accounts 2023

ENERGY CRISIS IN UKRAINE |

POLICY AND LEGAL

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Climate change related natural,
economic or political events, which
could leave Ukraine’s energy system
vulnerable to crises.

Opportunity for Ferrexpo:
continuous

Ferrexpo’s mining operations are located
in Ukraine and are highly energy intensive,
with Ferrexpo very sensitive to changes
in energy provision.

Risk to Ferrexpo:
short–medium term

?
Opportunity for Ferrexpo to diversify and
become independent of the Ukraine energy
grid through producing their own renewable
energy.

Energy policy: access and renewable
make-up:

–

IEA SDS: assumes fair access to clean
energy for all, globally, meaning impact
of risk is minimal.
IEA STEPS: assumes not all governments
will reach announced goals*.
IPCC SSP4: assumes uncertainty in the
fossil fuel market*.

* Ukraine’s climate and energy policy has been rated
as highly insufficient by the Climate Action Tracker,
suggesting a vulnerability of Ferrexpo to this risk.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Financial impacts

–

Increased energy costs due to instability
in Ukraine’s energy market and the
impact of this on revenue.

Performance against competitors

– Monitoring of competitor risk to similar

constraints.

– Access to clean and sufficient energy in
Ukraine, compared to other countries.

Composition of Ukraine energy

– Renewable composition of the grid,

compared to Ferrexpo renewable and
emission targets.

– The cost/benefits of private renewable
generation compared to grid supply.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Assess the cost/benefit of investing in a private renewable energy supply,
independent of the Ukrainian grid.

Short–medium
term

Monitor the political instability of Ukraine, mitigation options/influence to
overcome this, and integrate the impacts of this risk on Ferrexpo operations
and reputation into business decisions and long-term plans.

Continuous

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
56

Responsible Business: TCFD Disclosures continued

CONSUMER AND INVESTOR CONSCIOUSNESS |

REPUTATION

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

An increase in positive sentiment towards
Green Steel (and associated sources of iron
ore) from both consumers and investors.
Assumes an associated increase in
demand for climate action transparency.

Opportunity for Ferrexpo:
short-medium term

Ferrexpo are moving towards the scaled
production of iron ore for the Green Steel
market. There is an opportunity to upscale
this production and become a key player in
the market.

Risk to Ferrexpo:
medium–long term

?
Risk of reputational loss if net zero targets
are not met, and/or competitors perform
better in the sector than Ferrexpo,
potentially leading to financial losses.

Consumer and investor demand for
climate action:

–

IEA SDS: Not specified. This scenario
models a world that achieves sustainable
development, and in such a scenario,
Ferrexpo would have to outperform current
targets to compete with its competitors.
This is more likely a risk than an opportunity.
IEA STEPS: Not specified. Assumes
extensive change but not all government
and industry targets are met, suggesting
Ferrexpo has an opportunity to become a
market leader.
IPCC SSP4: Not specified. In a disorderly
transition, it is likely this is more an
opportunity than a risk to Ferrexpo.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Financial impacts

– Any changes in revenue/market price,
correlated to Ferrexpo’s reputation on
climate action and sustainability.

– Understanding consumer and investor

opinions on Ferrexpo and climate action
would be beneficial for this risk/
opportunity.

Performance against competitors

– Benchmarking sustainability

performance, communication and
reputation against competitors.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Benchmarking exercise of Ferrexpo sustainability and climate action
achievements, and communication and reputation performance against
competitors. A particularly beneficial aspect of this will be understanding
both consumer and investor opinions of Ferrexpo, including in its recent
roadmap to net zero.

Short–medium
term

Consideration should be given to the communication of any climate and
sustainability action. As we move closer towards carbon budgets and net zero
targets, focus will be on those who can not only achieve sustainability, but
demonstrate and communicate it effectively. Consumers and investors are
likely to become more scrutinous of greenwashing.

Medium–long
term

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Climate and sustainability action should be taken, taking into account the
benchmarking previously completed. Foresight will be needed to stay ahead
of competitors.

Continuous

Ferrexpo plc Annual Reports & Accounts 2023

CLIMATE-INDUCED CONFLICT |

PHYSICAL RISKS

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Climate change related natural, economic
or political events create political instability
and/or conflict that impacts on Ferrexpo
operations and trade.

? Risk to Ferrexpo: continuous
In a world of climate induced political
instability, there is an increased potential
that Ferrexpo operations, employees or
supply chain will be negatively impacted,
potentially leading to deceased profits,
sales, funding and reputation.

The frequency of climate-induced
political instability:

–

IEA SDS: assumes sustainable
development is achieved, reducing the
likelihood of climate-induced conflict.
IEA STEPS: assume sustainable
development is not achieved, and covers
the possibility of policies, commitments
and targets not being reached. Climate-
induced conflict is therefore plausible in
this scenario.
IPCC SSP4: physical impacts most
extreme in a 3.7°C scenario, and transition
is more disorderly, therefore climate-
induced conflict is likely.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



Revenue changes

– Any correlation between climate-
induced conflict or instability and
revenue.

Performance against competitors

– Benchmarking against competitors on
climate conflict mitigation, and support
provided for employees impacted.
Potential reputational impacts from this.

Distribution of instability

– The impact of this risk is heavily

–

determined by the location of any
climate-induced political instability
compared to Ferrexpo operations.
Indirect impacts may encompass
Ferrexpo trade routes (e.g. shipping
of products) and so these should be
closely monitored.

04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Assess climate-induced conflict and political instability by likelihood, Ferrexpo
operating and trading locations and Ferrexpo business plan timeframes.

Short–medium
term

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Incorporate the risks identified in the short–medium term into decision
making. The likelihood of climate-induced political instability and/or conflict
is increased by the physical impacts of climate change, the climate change
policy implemented and where these both occur. This risk is difficult to
distinguish from non climate-induced instabilities but should still be
recognised where possible.

Continuous

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS58

Responsible Business: TCFD Disclosures continued

SEA LEVEL RISE (CHRONIC) |

PHYSICAL RISKS

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Global sea level rise increase, leading to
direct or indirect impacts on Ferrexpo
operations, employees or supply chain.

? Risk to Ferrexpo: continuous
Disruption to ports and navigation routes,
particularly from the port of Pivdennyi in
Southern Ukraine and in receiving ports.
Disruption also to employees and the
Ferrexpo general supply chain.

Sea level rise along distribution routes
and ports:

–

IEA SDS: Not specified. Under a 1.5°C
scenario, the IPCC SSP2 suggests an
average global sea level rise of 0.2m by
2050 and 0.4m by 2100, exposing
128–139 million people.
IEA STEPS and IPCC SSP4: Not
specified. Under a >2°C scenario, sea
level rise is modelled between 0.32–0.63m
by 2100*.

* Comparable scenario: IPCC’s Relative Concentration

Pathway (“RC”) 4.6-6.

Financial impact

– Any revenue/market price changes

correlated to an increase in sea level
rise. This could be indirect e.g. port/
distribution disruption from sea level
rise.
Impacts of sea level rise on assets,
and insurance for assets.

–

Employees and reputation

– There is also a reputation risk here,

dependent on how Ferrexpo responds
to employees, operational facilities and
supply chains facing disruption due to
sea level rise.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Assess the quantitative risk of sea level rise to Ferrexpo’s supply chain and
shipping operations, including the most vulnerable shipping routes, ports,
customers and employees. Incorporate this risk into decision making.

Short–medium
term

Research mitigation and adaptation options for those areas of Ferrexpo
operations, supply chain and workforce identified as at risk from sea level rise.
If those identified are outside of Ferrexpo’s direct operations, consider
engaging with those third parties to increase resilience to sea level rise.

Medium–long
term

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Ferrexpo plc Annual Reports & Accounts 2023

INCREASE IN STORM FREQUENCY AND INTENSITY (ACUTE) |

PHYSICAL RISKS

01. DESCRIPTION

02. SUGGESTED KPIS TO MONITOR THE RISK

03. DATA REQUIRED TO ANALYSE IMPACTS

Outline

Increase in storm frequency and intensity,
leading to direct or indirect impacts on
Ferrexpo’s operations, employees or
supply chains.

? Risk to Ferrexpo: continuous
Disruption to ports and navigation routes,
and in receiving ports. Disruption also to
employees and Ferrexpo’s general supply
chain.

Sea level rise along distribution routes
and ports:

–

IEA SDS: Not specified. Under a 1.5°C
scenario, storm intensity and frequency
are likely to increase.
IEA STEPS: Not specified. Under a >2°C
scenario, storm intensity and frequency
are likely to increase. The magnitude of
this impact is likely to be larger than the
IEA’s SDS scenario.
IPCC SSP4: Not specified. Under a >2°C
scenario, storm intensity and frequency
are likely to increase. The magnitude of
this impact is likely to be larger than the
IEA’s SDS scenario.

Financial impact

– Any revenue/market price changes
correlated to an increase in storm
frequency and intensity. This could
be direct (e.g. damage to Ferrexpo
infrastructure, product and employees),
or indirect (e.g. port/distribution
disruption and widescale economic
impacts).

Employees and reputation

– There is also a reputational risk here,

dependent on how Ferrexpo responds
to employees and facilities facing storm
disruption.

POTENTIAL IMPACTS ON THE FOLLOWING AREAS

Revenues

Expenditures

Assets and
liabilities

Capital and
financing



04. SCENARIO RISK/

OPPORTUNITY RATING

05. POTENTIAL STRATEGIC ACTIONS TO MANAGE RISK AND TIMEFRAME

Source: Ricardo Plc.

Date

2050

2100

Assess the quantitative risk of an increase in storm frequency and intensity
to Ferrexpo’s supply chain and shipping operations, including the most
vulnerable shipping routes, ports, customers and employees. Incorporate
this risk into decision making.

Short–medium
term

Research mitigation and adaptation options for those areas of Ferrexpo’s
operations, supply chain and workforce that have been identified as being at
risk from an increase in storm frequency and intensity. If those identified are
outside of Ferrexpo’s directly-owned operations, Ferrexpo should consider
engaging with those third parties to increase resilience to these storms.

Medium–long
term

IEA SDS

IEA STEPS

IPCC SSP4

Overall impact
on the business:

Low

Medium

High

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS60

Responsible Business: Diversity, Equity and Inclusion

Ferrexpo places great
importance on creating a
workplace culture in which
all contributions are valued,
different perspectives are
embraced, and biases are
acknowledged and mitigated.

Greg Nortje,
Chief Human Resources Officer

Ferrexpo places great importance on creating
a workplace culture in which all contributions
are valued, different perspectives are
embraced, and biases are acknowledged
and mitigated. This commitment is set out in
the Company’s Diversity, Equity and Inclusion
(“DEI”) Policy which was adopted by the Board
in 2019. This policy is designed to prohibit all
forms of unfair discrimination (on the basis of
disability, pregnancy and parenthood, race,
national or ethnic origin, age, gender, sexual
orientation, political opinion, and social origin).

In support of the Policy, the Company’s
diversity initiatives are focused on helping
us to develop a diverse workforce that
embraces difference and an inclusive
working environment where all employees
regardless of their background, marital
status, age, ethnicity, sexual orientation
or gender can realise their full potential.

DEI progress in 2023
Our DEI efforts have increased significantly
in recent years, with increased stakeholder
focus and a greater emphasis on companies
having a sustainable, inclusive culture. Our
DEI efforts continued in 2023, but some
planned internal events could not be held
due to disruption arising from the war in
Ukraine and were held over to 2024.

Activities that were progressed included
an inaugural ‘school for clerks’, involving
32 employees with disabilities, with the
aim of equipping these employees with

appropriate practical life skills to support
their inclusion and equal participation
in the ‘normal’ life of the company.

Fe_munity Teens programme was also
offered online to 54 teenagers drawn from
the local community surrounding the Group’s
operations. This new programme is part of
Ferrexpo’s Corporate Social Responsibility
work within the local communities surrounding
our operations and is built around the themes
of self-discovery, self-directed learning and
personal growth. The programme, in keeping
with the broader Fe_munity programme, aims
to accelerate the development of participants as
they navigate the challenges and gender biases
that might hinder their personal progression
at secondary or at tertiary education level
or generally within broader society. It is
particularly noteworthy that this programme
was conceptualised and run by the alumni of
the previous three Fe_munity programmes.

In 2023, DEI sensitivity and unconscious bias
training was also provided to students who
are attending the local technical college as
well as students that are enrolled in a special
maths and science class in one of the schools
in Horishni Plavni, that is sponsored annually
by Ferrexpo. The proportion of managerial
roles held by women rose from 20.9% in 2022
(81 female managers) to 22.3% in 2023 (87
female managers), with this upward trend
expected to continue into 2024, despite the
war in Ukraine. This trend means that the
Group is tracking well to achieve its stated

Ferrexpo plc Annual Reports & Accounts 2023

30.9%

Positions held by women accounted
for 30.9% of our total employee
workforce in 2023 (2022: 28.7%)1.

22.3%

Women in management roles
across the Group increased to
22.3% in 2023 (2022: 20.9%)2.

25%

Target of 25% of management
positions to be held by women by
2030. Progress to date has seen an
increase from 18% in 2019 to 22.3%
in 2023.

1. Of the total employee workforce in 2023 (6,889) (2022:
7,983), 2,130 positions were held by women and 4,759
held by men.

2. Of the total number of management roles in 2023 (391), 87
positions were held by women and 304 were held by men.

WE ARE DETERMINED

Victoria Shcherbak and Tamara Shvets

Victoria and Tamara work as
administrators at Ferrexpo’s
Kyiv office, where they contribute
to creating a comfortable and
positive work environment for
their colleagues.

How has the war changed your
approach to work?
We have learnt to adapt and sometimes
learn on the fly. We cannot halt life and
stop planning due to the war. What’s our
plan b, our plan c? Imagine driving a car
and the satellite navigation charts a route,
but suddenly the road is blocked. The tech
doesn’t complain, it provides an immediate
alternative route. The ability to navigate
in uncharted territories has become a
new skill.

What has the war taught you about
how you perform your job?
Two things: make it a priority to replenish
your mental and emotional reserves, and
always have backup external batteries!
Simple and disciplined self-care methods
are mandatory, this includes getting
sufficient sleep, outdoor walks, cultivating
positive emotions, and incorporating
humour into everyday life. Tackling
significant challenges becomes more
manageable by breaking them down
into simple and comprehensible steps.

When the war is over, what will be
different for you in your job function?
After the war concludes our focus will shift
from crisis response to building out strategic
initiatives. The end of the war marks a
transition from reactive roles to proactive
engagement. And we will be armed with the
resilience that we have developed during
war time. Resilience is a choice to live, a
choice that embodies the enduring hope
that will guide us through reconstruction.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

target of at least 25% of managerial roles
to be held by women by 2030. The overall
number of women in the workforce also
improved in 2023 to 30.9% (2022: 28.7%).

Our Inclusion School, which is a training
programme for our employees in Ukraine,
began in 2021, and restarted in late 2022
flowing into the early part of 2023. Topics
covered in this programme are aimed at
fostering inclusiveness and diversity, and
how this can help Ferrexpo’s business model.
More than 200 of Ferrexpo’s employees
completed this course by the end of 1Q
2023. Online learning covers topics such as
identifying different forms of discrimination,
why it is important to eliminate prejudice
and how tolerance can help Ukraine
to tackle its wartime challenges. Our
Inclusion School was also extended at the
beginning of 2023 to include local authority
employees who are keen to learn more about
challenging prejudice and discrimination.

The activities in 2023 helped to generate
a positive working environment that
supports people’s mental health
and wellbeing, regardless of age,
gender or other characteristics.

Additionally, the Group’s 2022 Responsible
Business Report is available on our website
at https://www.ferrexpo.com/responsibility/
responsible-business-reports/

Gender diversity targets for 2030
At Ferrexpo, we have a gender diversity
target of ensuring 25% of managerial roles
are filled by women by 2030. To date, our
diversity efforts have enabled us to progress
the level of women in management roles
from 18% in 2019 to 22.3% in 2023, which
has been possible through a range of
diversity initiatives in Ukraine and across
the Group, as well as sustainability-linked
incentives within the Group’s Remuneration
Policy (see page 143 for more details).

We are specifically targeting diversity at the
managerial level, rather than total diversity, as
this helps to encourage career progression
and opportunities for women, which may
not otherwise be available. Our workforce
does, however, include a higher proportion of
women (2023: 30.9%) than our mining-sector
peers that operate in the developing world1.

External recognition in 2023
Our DEI efforts are not going unnoticed, with
external recognition of the forward thinking
that Ferrexpo is introducing to its business.

In 2023, the Group’s multi-component
Fe_munity programme, covering corporate,
all Ukraine and teenagers, won first prize
at the all Ukrainian HR PRO Awards in
the Diversity and Inclusion category.

1. Comprising mining companies in the FTSE 350 Index
where the main focus of mining is outside of Australia
and Canada.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS62

Responsible Business: Governance

Governance:
Building trust

With good corporate governance, companies are able
to build trust with their stakeholders. Through trust,
companies can enjoy the benefits of a strong brand
that stakeholders can associate with.

Board composition
Effective corporate governance starts with the
Board of Directors (“Board”). As of the date of
this document, Ferrexpo’s Board comprises
six Directors – including two Executive
Directors and four Independent Non-
executive Directors. For more details of the
Board composition and activities during the
year, please see the Corporate Governance
section of this report (page 93).

Board changes and
position appointments
During the year, in February 2023, Natalie
Polischuk was appointed a member of the
Committee of Independent Directors.

Following the Annual General Meeting, in
May 2023, Jim North resigned as an Executive
Director and Nikolay Kladiev was appointed as
an Executive Director. Ann-Christin Andersen
resigned as an independent Non-executive
Director and Natalie Polischuk was appointed
as Chair of the Group HSEC’s Committee.

At the end of June 2023, Jim North resigned
as Chief Executive Officer. Following his
resignation as Chief Executive Officer, the
decision was taken to combine the roles
of the Chair and Chief Executive Officer on
an interim basis as with the ongoing war in
Ukraine and the need for business continuity
it was not considered the right time to
commence an external search process for a
new Chief Executive Officer. To this end, in
July 2023, Lucio Genovese was appointed
to act as Executive Chair on an interim basis
and assume leadership of the Group.

In October 2023, Stuart Brown was appointed
as an independent Non-executive Director and
a member of the Audit Committee. Following
an orderly handover process, Graeme
Dacomb resigned at the end of December
2023 as an independent Non-executive

Director and Chair of the Audit Committee. In
January 2024, Stuart Brown was appointed
as Chair of the Audit Committee and a
member of the Remuneration Committee.
Most recently in February 2024, Stuart
Brown was appointed a member of the
Committee of Independent Directors.

FTSE Women Leaders Review
The FTSE Women Leaders Review is an
independent, business-led framework
supported by the Government, which sets
recommendations for Britain’s largest
companies to improve the representation
of Women on Boards and in Leadership
positions. As a result of this work, the FTSE
Women Leaders Review recommends
that companies listed within the FTSE 350
have at least 40% female representation
at Board level by the end of 2025, as
well as at least one woman appointed as
chair, senior independent director (“SID”),
CEO or CFO by the end of 2025.

As of the date of this report, Ferrexpo’s
Board is 33% female (31 December 2022:
43%), meaning that although Ferrexpo
met the requirement for a female in one of
the stated roles, with Fiona MacAulay as
the Group’s SID, due to Board changes
the recommendation for Board gender
diversity set by the FTSE Women Leaders
Review was unfortunately not met.

The Group is also focusing on increasing
diversity further down its organisational
structure; details of this work can be found
on pages 60 to 61, and in the Corporate
Governance Report on page 93.

20%

Female representation on the
Group’s Executive Committee
(one out of five members).

33%

Female representation on the
Group’s Board of Directors
(two out of six Directors).

40%

Target for gender diversity
at Board level, as set by the
FTSE Women Leaders Review.

Three of the Group’s six Directors
appointed in the past four years.

Ferrexpo plc Annual Reports & Accounts 2023

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.

Parker Review
The Parker Review was an independent
review in 2021 led by Sir John Parker, which
considered how to improve the ethnic and
cultural diversity of UK Boards to better reflect
their employee base and the communities
they serve. In order to encourage progress
in ethnic diversity, the Parker Review
proposed a target of one Director from an
ethnic minority group on the Boards of
FTSE 250 companies by December 2024.

The search for an independent Non-executive
Director from a minority ethnic group has
been launched and is ongoing.

Corporate governance controls
The Group’s financial advisors are Liberum
Capital Limited (“Liberum”), which also
provide broking services to the Group. As a
London-listed company, it is best practice for
the Company to have a Sponsor to provide
advice and guidance on certain corporate
matters, with BDO LLP appointed in this role.

Stakeholder engagement
As a responsible, modern company, we aim to
engage with our shareholders, to understand
their concerns and priorities. Shareholder
engagement is conducted via a range of
methods – from various reports published on
an annual basis (Annual Report and Accounts
and Responsible Business Report), to our
corporate website and social media channels.

We also endeavour to engage with
stakeholders located within Ukraine and
overseas, with this made possible through
communications in both Ukrainian and English.
In 2023, we communicated in both languages
across the majority of our social media
channels and the 2022 Responsible Business
Report, as well as selected press releases.

Please see page 48 for more details of how we
engage with each of our stakeholder groups.

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
2022 available on the Group’s website and the report for 2023 expected to be released during the course of 2024.

Reporting requirements

Reports, policies and standards

Additional information

Risks

Environmental

Climate Change Report
Tailings Management

Employees

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

Human rights

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

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

Greenhouse gas emissions (pages 36 to 37)
Energy consumption (page 36)
www.ferrexpo.com/responsibility/protecting-environments

Health and safety (pages 34 to 35)
Diversity, equity and inclusion (pages 60 to 61)
www.ferrexpo.com/responsibility/workforce-development
www.ferrexpo.com/responsibility/safety-performance

Diversity, equity and inclusion (page 60)
Ferrexpo Code of Conduct
www.ferrexpo.com/about-ferrexpo/corporate-governance/
policies-and-standards

Operating during a time of war (pages 6-7)
Social engagement (page 64)
www.ferrexpo.com/responsibility/supporting-communities

Internal controls (page 119)
Governance (page 62)
Governance Report (pages 93 to 157)
www.ferrexpo.com/about-ferrexpo/corporate-governance/
policies-and-standards
www.ferrexpo.com/whistleblowing

Business Model (page 8)
Risk Management (page 72)
Viability Statement (page 91)
Going Concern Statement (page 155)

Key Performance Indicators (page 14)

Principal Risks, pages 74
to 90

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS64

Stakeholder Engagement – Section 172

Ongoing engagement with all stakeholders is
important so that we can understand what is
important to them, and how we can generate
value together.

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

Section 172 factor

Key examples

Employees and wider
workforce

– Operating during a time of war
– Responsible Business: Safety
– Responsible Business: Diversity, equity and inclusion
– Operating during a time of war: Q&As with various functions and colleagues
– Case study: Double materiality

Suppliers and
customers

– Market Review
– Strategic Framework
– Case study: Double Materiality

Local communities

– Operating during a time of war

Environment

– Responsible Business: Net Zero pathway
– Case study: DR pellet life cycle assessment
– Case study: Double materiality
– Scenario analysis selection and TCFD disclosures

High standards of business – Business Model

Investors

– Responsible Business Review
– Responsible Business: Governance
– Risk Management

– Executive Chair’s Statement
– CFO’s Review
– Business Model
– Value Proposition

Ferrexpo plc Annual Reports & Accounts 2023

Page

06
32
32
45

22
12

36
42
38
43

08
32
62
72

02
04
08
10

The Group considers its
stakeholders to include:

1. Workforce

See page 66

2. Customers

See page 67

3. Suppliers

See page 68

4. Communities

See page 69

5. The Environment

See page 69

6. Government

and its agencies

See page 70

7. Investors

See page 70

In addition, throughout this report are 12
Q&As with colleagues in various functions
across the business discussing how the war
is affecting how they work, what has changed
and impacts on our various stakeholders, and
how they anticipate that they will adapt to
working life when the war is over. The
purpose of these Q&A-style case studies are
to convey a deeper insight into the people
and culture of Ferrexpo, and the determined
spirit they collectively demonstrate.

The Board of Directors acts to promote
the long-term sustainable success of the
Company for the benefit of shareholders as a
whole. This long-term sustainable success
includes governing the business in the short
term during a time of war and more broadly
the challenging operating environment in
Ukraine. In doing so the importance of having
due regard to the matters set out in Section
172(1)(a) to (f) of the Companies Act 2006 is
recognised, notably:

–

–
–

–

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 and
briefings on directors’ duties and updates
in relation to corporate governance
developments and stakeholder engagement.
New directors appointed to the Board receive
tailored, individual briefings on their duties
and obligations as part of their induction.

The following section outlines the Group’s
different stakeholder groups, engagement
activities conducted in 2023 and feedback
that was received as part of this work. Each
section provides an overview of the work
completed to date in response to this
feedback, and any further plans that the
Board has for the year ahead.

How considering stakeholders in
decision making works in practice
The Group engages regularly with
stakeholders, with interactions largely led
by the day-to-day management team with
Board-level interactions where appropriate.
Where management-level engagement has
taken place, feedback is provided to the
Board by way of regular reporting and
updates at meetings to help inform decision
making and ensure stakeholder views and
considerations are taken into account.

During Board discussions, the Board
considers as appropriate the various
stakeholders’ interests and the potential
impact of decisions on relevant stakeholder
groups for the purposes of Section 172 of the
Companies Act 2006. This includes
considering competing stakeholder interests
and the differential impact certain decisions
may have on different constituencies.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS66

Section 172 continued

1. Workforce

Ferrexpo’s talented and engaged
workforce is a core strength of
Ferrexpo’s business, on which we
continue to rely during a time of war.
Through a close working relationship
between employer and employees,
company and contractors, we are
able to respond to the evolving needs
of our workforce.

Our engagement activities in 2023
Ferrexpo aims to communicate with its
workforce, which is based in a number
of geographic locations and a range of
settings, in a variety of ways to communicate
effectively with different individuals and
groups in multiple languages. The type
of communication channels used to
communicate with members of the workforce
varies. We use a range of methods including
electronic communications tools (such as
email, online learning, electronic bulletins,
corporate websites and messaging
platforms), social media channels and
traditional print media, both our own company
newspaper in addition to local and national
media at our operations in Ukraine, and also
our corporate offices, including Switzerland
and the United Kingdom.

We engage throughout the calendar year.
Given that more than 95% of our workforce
is located in Ukraine, it is important that
where possible the Board maintains a
strong presence in the country, both in Kyiv
and in the region in which we operate.

In normal circumstances, Directors frequently
visit our operations in Ukraine, however this is
difficult during a war. But, in December 2023,
over two days, Ukrainian resident Independent
Non-executive Director Mr Lisovenko,
also Non-executive Director Designate
for workforce engagement, visited our
operations in Ukraine and hosted a number
of engagement sessions with a cross section
representing a range of stakeholder groups
within our workforce, including operations
personnel, a selection of middle managers
from all three business units, senior female
leaders, alumni of our Fe_munity Women in
Leadership programmes and people with
disabilities and community stakeholders.

During the engagement sessions, members
of the workforce made comments and
suggestions on a range of matters and
posed questions for subsequent response
by the Board. In February 2024, the Board
considered the comments, concerns,
suggestions and questions and will provide
feedback to the workforce via established
communication channels. For example,
members of the workforce requested more
detail in respect of the current approach
of running one and sometimes two pellet
lines, in response to logistics constraints
caused by the war and that the quality of
personal protective clothing be improved.

In addition to direct engagement, such as
face-to-face meetings in the workplace, the
Group utilises its website, public reports and
social media channels. As of February 2023,
the Group had over 20,000 followers across
Facebook, Instagram and LinkedIn, with
the majority of subscribers being located in
Ukraine. The Group typically issues 20 to 30
posts on social media a month, with each post

Ferrexpo plc Annual Reports & Accounts 2023

representing an opportunity to convey topics
of interest to stakeholders. These posts not
only cover corporate news, but also topics of
important local and national interest and news
about local personalities, including for example
a video series about veteran rehabilitation.

Workforce engagement occurs across
multiple languages, to ensure that the Group
communicates with both its Ukrainian and
international stakeholders. The Group has
communicated on social media platforms
in both English and Ukrainian for several
years, and in 2022 published its Responsible
Business Report in Ukrainian for the first time,
helping to keep local stakeholders informed
of the Group’s sustainability initiatives.

Further details on our engagement with
the workforce can be found in the section
‘Operating during a time of war’ on pages
6 to 7, in the sections on ‘Responsible
business: safety’ on page 34 and ‘Responsible
business: diversity, equity and inclusion’
from page 60, the case study ‘Double
materiality’ on pages 38 to 40, and in the
various employee Q&As listed on page 5.

Our response to feedback
The Board understands the importance of
Ferrexpo having a strong presence within
Ukraine, where more than 95% of our
employees and contractors are based, to
ensure effective engagement. As such, the
Board includes two Ukrainian Independent
Non-executive Directors and one Ukrainian
Executive Director. Through this presence,
Vitalii Lisovenko, the Board’s nominated
representative for workforce engagement,
was able to visit our operations during 2023.

The Board regularly interacts with the
Group’s executive management team
through its various committees, and the
Health, Safety, Environment and Community
(“HSEC”) Committee comprises three
Directors of the Group and one member
of the executive management team.

Plans for engagement in 2024
Engagement activities will continue into
2024 to understand the evolving concerns
and requirements of our workforce.

Mr Lisovenko, independent Non-
executive Director Designate for workforce
engagement, will visit our operations in
Ukraine and host a number of engagement
sessions with a cross section representing
a range of stakeholder groups within our
workforce and community stakeholders.

The Group typically conducts an employee
engagement survey every year and intends
to complete such an exercise during 2024.

2. Customers

WE ARE DETERMINED

Ralf Jina and Sandra Groher

Ralf and Sandra work at
First-DDSG, our Danube barging
business. Balázs manages logistics
and commercial matters, and
Sandra HR related matters,
including crewing activities.

As the war progresses, what has
changed for you?
We had to shift operations from the
Upper Danube region and long distance
routes to the Lower Danube shuttling to
alternative Black Sea ports, rethinking
our strategy and operations, in particular
how we manage our fleet of 220 vessels
and barges. We redirected many barges
to support increased Ukrainian demand
there. There were difficulties initially, for
example crews could not simply leave
Ukraine; so we had to bring the vessels
to the people, not the other way around.
We are proud we stepped up to the
challenge and supported Ukraine.

What has the war taught you about
how you do your job?
It’s shown us the need to act swiftly,
even how to anticipate the next move
and stay ahead. It’s not enough to simply
’react’ to a change, one has to adopt a
strategic manner. For example, there was
a period when good crews were hard to
come by and retain so we kept in close
contact with our crewing companies
to really understand the needs of the
crews and respond accordingly. It’s been
challenging, but also rewarding to see
what we can achieve in uncertain times.

How will the end of the war affect
your work?
There will be more change, but we feel
ready for it. We’ll be taking everything we’ve
learned during this period and use it in
the future. I’m confident that the lessons
we have learnt will guide us through the
post-war adjustments. We know now that
we can deal with whatever comes our way.

Our customers are important to the
business, with investments in high
grade and high quality forms of iron
ore designed to meet their needs.
Through constructive, long-term
customer relationships, the Group
aims to generate value for all
stakeholder groups.

Our engagement activities in 2023
The Group continues to experience
material disruption to its logistics network
following Russia’s full-scale invasion
of Ukraine in February 2022, which
resulted in limited access to Ukrainian
Black Sea ports and reduced access
to the Ukrainian railway network.

As a result, our ability to deliver our products
to customers in 2023 was limited to 4.2 million
tonnes sold during the year (2022: 6.2 million
tonnes). In the early stages of the war, our
marketing team held extensive discussions
with customers, and through strong, long-
standing relationships the Group was able
to redirect sales to European customers
by rail and later via alternative Black Sea
ports to the MENA region and Europe.

Further details of the restrictions imposed as
a consequence of the conflict are provided
in the section ‘Operating during a time of
war’ on pages 6 to 7 and in the section
‘Market Review’ on pages 22 to 25.

Our response to feedback
Customers are increasingly focused on climate
change and sustainability, particularly in
Europe due to legislative or other requirements
for steel producers to reduce their carbon
emissions. To provide clarity to customers,
the Board was proud to issue the Group’s
first standalone Climate Change Report in
December 2022 and later accelerate its carbon
reduction targets. Changes included an
increase to the medium-term (2030) emissions
reduction target to 50% (from 30%) and
inclusion of Scope 3 emissions targets within
the Group’s suite of forward-facing targets.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
68

Section 172 continued

3. Suppliers

The Group’s suppliers are
important for sustainable
operations, especially during a
time of war. Suppliers represent
a principal aspect of the local
and global footprint that the Group
creates through its day-to-day
business activities, which helps
develop a positive local presence
and a brand that is identifiable to
other stakeholder groups such as
potential investors and customers.
Through conducting ourselves in a
clear and transparent fashion, we
hope to also promote Ukraine as a
destination for other businesses.

Our engagement activities in 2023
The Group’s operations paid a total of
US$514 million to suppliers in 2023 (2022:
US$912 million). Given the location of our
operations and the situation in Ukraine, the
Group has continued to engage extensively
with its suppliers – many of whom are facing
similar challenges to Ferrexpo. It has been
important to seek clarification on the status
of their operations during the war and where
necessary identify alternative suppliers
where disruptions have occurred or the
risk of disruption is perceived to be high.

Through engagement, the Group has
continued to raise awareness of the need for
humanitarian support caused by the invasion
and encouraged customers to make donations
directly to various relief funds. We are grateful
for these acts of kindness. The Group is
proud to have long-standing relationships
with a number of local and international
suppliers, which have helped to support the
Group during the ongoing war in Ukraine.

Further details on our engagement with
suppliers can be found in the section
‘Operating during a time of war’ on
pages 6 to 7.

Our response to feedback
The Group is an important player in the
local economy in the Poltava Region, and
therefore it is important that it maintains
constructive relationships with suppliers,
for example by paying suppliers promptly.

By imposing a Code of Conduct and engaging
with suppliers, the Group aims to reduce
the risks associated to it through issues
in the supply chain such as environmental
concerns and modern slavery.

WE ARE DETERMINED

Petro Tsektor, Road Vehicle Driver, FPM

Petro’s driving career spans 23
years, though he only joined
Ferrexpo ten years ago. He started
at Ferrexpo driving mining trucks,
before he changed to driving cars
in 2016.

What is the biggest impact the war
has had on your job?
After the full-scale invasion, not much
has changed in my work. I always check
the vehicle several times before the trip,
its technical condition and the availability
of all documents. I’m steadfast; I make
sure to reach the destination on time.

What has the war taught you about
how you do your job?
Under martial law conditions, I pay particular
attention to the route, especially if I am on
a business trip to populated areas that are
close to the battle front. I need to think, in
advance, of several options for the route,
taking into account the weather conditions
and focusing on safety of both my
passengers and myself. For me, the main
thing is to be optimistic about every trip!

What do you look forward to most
about your job when the war ends?
After the Victory, I want to travel around
Ukraine to hero-cities and settlements that
were most affected by enemy attacks.
It will be important to always remember,
and tell the next generations about
what happened. Of course, there will be
more business trips, and the emotional
state of my passengers will be better.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

Ferrexpo has spent US$25 million on over 100
projects and initiatives. Projects are individually
reviewed and approved by members of the
HSEC Committee, to ensure that governance
standards are maintained. Many projects are
proposed by local community leaders and
groups. The Group will continue to support
Ukraine and communities throughout the
country through the Ferrexpo Humanitarian
Fund, the Ferrexpo Charity Fund and
associated CSR funds during this difficult time.

Plans for engagement in 2024
As the war prolongs, the needs of our
workforce, local communities and Ukrainian
society are changing. The original focus on the
immediate need to provide accommodation,
food and medical services has lessened and
the focus is shifting to longer-term issues such
as veteran rehabilitation and mental health.
The HSEC Committee is reviewing how best
to respond to the evolving needs and provide
targeted support in the appropriate manner.

5. The
Environment

The natural environment is important
to the Group as it demonstrates the
present day success of our business
with multiple stakeholder groups and
also that of future generations. The
natural environment encompasses
many factors, from greenhouse gas
emissions and emissions of other
gases into the air, to our interactions
with the water cycle, land
rehabilitation and biodiversity around
our operations, amongst others.

Our engagement activities in 2023
Climate change is a key focus area
for a number of stakeholder groups,
with rising pressure to act to limit
the effects of climate change.

Engagement on the natural environment
occurs with local and national government
bodies to ensure compliance with local
legislation and best practice. Engagement
with local communities is conducted through
regular meetings with community leaders
and representatives. The Group interacts
with its workforce through regular staff
meetings and internal communications,
which includes feedback mechanisms
to ensure local voices are heard.

Engagement helps suppliers improve
their services, as well as gaining a better
perception of the Ferrexpo business, in turn
facilitating the Group’s ability to operate.

Plans for engagement in 2024
Supplier engagement is expected to
continue into 2024 with a similar focus as
in previous years – seeking local goods
and services where possible, to support
the Ukrainian economy, and engaging to
ensure supplier governance throughout
Ferrexpo’s supply chain. In addition, the
Group is increasingly engaging to understand
the greenhouse gas emissions footprint
of suppliers, as this is directly relevant
to Ferrexpo’s Scope 3 emissions.

Plans for engagement in 2024
The Group is in regular contact with its
customers. This includes regular meetings
with actual or potential customers and also
visits to their operations around the world.
One area of focus for the Group is the DR
pellet market, which is forecast to outpace
other iron ore products in terms of demand,
especially in Europe and the MENA region.

4. Communities

Our social licence to operate is
earned by successful engagement
with the communities where we
operate and broader society.
Ferrexpo has established close
relationships with its local
communities and continues
to work hard to maintain their respect.

Our engagement activities in 2023
The Group has developed strong ties with
local communities. Ferrexpo is a large local
and economic contributor in the Poltava
Region. We also understand the connection
between our workforce in Ukraine and
the communities, many of whom rely on
Ferrexpo for their socio-economic stability.

Our deep relationships with local stakeholders
enabled us to engage quickly and
meaningfully at the start of the full-scale
invasion in February 2022 to understand the
immediate material issues and risks facing
communities and how we could effectively
respond with humanitarian support.

We also published our Responsible Business
Report in Ukrainian to foster engagement
with local audiences on sustainability topics,
which are particularly relevant to them.

The Group regularly engages with communities
through traditional forms of communication
(for example, printed media and local television
channels), and electronic media such as
the Group’s websites, public reports and
dual-language social media channels.

Further details on our engagement with
communities can be found in the section
‘Operating during a time of war’ on pages
6 to 7.

Our response to feedback
The Group regularly provides direct support
to local communities through the Ferrexpo
Humanitarian Fund which has been in place
since the start of the war and the Ferrexpo
Charity Fund, which has been in operation
since 2011. During exceptional times, such as
Russia’s invasion of Ukraine in 2022 and the
global Covid-19 pandemic, the Board has
sought to provide additional support, to
respond to extraordinary situations.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS70

Section 172 continued

Further details on our environmental
approach can be found in the responsible
business sections of this report, including
‘Net Zero pathway’ on page 36, TCFD
disclosures from page 43 and Climate
scenario analysis from page 48. Two case
studies on DR pellet life cycle analysis on
page 42 and double materiality on pages 38
to 40 also provide context on the activities
we concluded in 2023.

Our response to feedback
The Board approved the publication of the
inaugural Climate Change Report in December
2022. This report represented the output of
our collaboration work with environmental
consultants Ricardo Plc (“Ricardo”). Through
this work stream, the Group has developed
a potential pathway to net zero iron ore
pellet production, as well as climate scenario
modelling to determine risks and opportunities
related to Ferrexpo’s business and industry
sector. For more information, please see
the Group’s website (www.ferrexpo.com).

In 2022, the Group also set revised, more
ambitious greenhouse gas emissions
reduction targets. The Group is now
targeting a 50% reduction in its Scope 1
and 2 emissions by 2030 (on a combined
basis per unit of production).

In addition, the Board maintains climate
change as a standing agenda item for all
scheduled Board meetings and HSEC
Committee maintains climate change as a
standing item on the agenda for all meetings,
with meetings held on a quarterly basis.

Executive remuneration is also aligned
to the Group’s climate change goals,
with performance targets relating
to climate-related matters.

Plans for engagement in 2024
The Group continued to maintain reporting
of its environmental footprint in 2023.
This included the completion of the life
cycle analysis of the Group’s DR pellets
to produce steel in an electric arc furnace.
The outcomes of this work are highlighted
in this report. The Group has plans to
undertake a further life cycle analysis of
certain other products during 2024.

6. Government
and its agencies

Ferrexpo engages with governments
in the countries in which the Group
operates through dialogue with
representatives of host governments
and local authorities. In each
jurisdiction, the Group aims to
develop long-term, positive
relationships through regular
and transparent interactions.

Our engagement activities in 2023
The Group has a number of legal permits
and licences required to operate in host
countries, which are administered by the
Group’s internal legal and government
liaison teams, as well as external advisors.

Engagement with the Ukrainian government
agencies is critical due to the ongoing
war in Ukraine. Lines of communication
are necessary to allow the Board and
management to understand the numerous
changes to the operating environment, which
has changed significantly throughout the war.
This includes information sharing to keep
our workforce safe, updates on the supply of
power and access to transport and logistics
infrastructure from port closures, limitations
to rail access and the availability of electricity,
amongst other effects. Additionally, we have
kept in constant contact with the government
to understand the needs of communities
across Ukraine as the war evolves.

Ferrexpo plc Annual Reports & Accounts 2023

Further details on our engagement
with government and its agencies are
discussed in the Executive Chair’s
Review on pages 2 and 3.

Our response to feedback
Through engagement, the Group aims to
establish a constructive line of communication
with host governments, to facilitate further
investment and continued operations in
each country. The Group has operations
and corporate offices across seven different
countries, in addition to marketing offices in
a further three countries, ensuring the Group
has a global presence in a global marketplace.

Plans for engagement in 2024
The Group aims to continue to proactively
engage with government stakeholders in the
jurisdictions where it operates, in line with
previous years.

7. Investors

As a company quoted on the London
Stock Exchange, global investors are
important to Ferrexpo, especially
our international shareholder base.
Through developing close ties with
investors of all sizes, the Group
can promote itself as well as raise
awareness of Ukraine’s potential.

Our engagement activities in 2023
The Group has maintained a premium
listing on the London Stock Exchange
since June 2007 and as a result has a
large investor base, comprising more
than 500 institutions or organisations
and private shareholders as of January

2024, located in more than 30 countries
or jurisdictions. The Group’s independent
shareholders range from international
investment funds managing billions of
dollars, to individual private shareholders.

The Group regularly meets in person with
investors in London, Europe and North
America, and regularly speaks to investors
located around the world. Direct engagement
with investors can take the form of ad hoc
meetings, video calls or telephone calls, as
well as results calls following either the full
year or interim results in March and August,
respectively. Following each set of financial
results, the Group will liaise with the sales
team at its broker Liberum to arrange a
series of investor meetings, referred to as an
investor roadshow. Additionally, the Group
regularly speaks to the analyst community
at a number of investment banks and events
that they host. Through this interaction, the
Group is able to assist its analyst following
to produce accurate and considered
investment research on Ferrexpo.

In addition to the above activities, the Group
also hosts its Annual General Meeting
(“AGM”) usually held in May each year, which
represents an opportunity for all investors to
meet and engage meaningfully with the Board.

Further details on engagement with
investors can be found in our value
proposition on pages 10 and 11.

Our response to feedback
The Group aims to communicate with all
shareholders and uses a range of methods
to do so. In 2023, we have published two
formal reports for our stakeholders – an
Annual Report and Accounts in April and a
Responsible Business Report in December.

Given investors’ increasing reliance on
sustainability data in making investment
decisions, it is evident that there is a need
to ensure the quality of this information is
high. As such, we have sought to undertake
an independent assurance process of our
safety and carbon emissions data for 2023.

Plans for engagement in 2024
The Group has a regular schedule of
engagement activities throughout the calendar
year, including the Group’s annual reporting
suite, investor roadshows associated with
financial results, quarterly production reports
and attendance at investor conferences. In
addition, the Group provides numerous press
releases, presentations and social media
postings, which are produced as required for
company news and events or otherwise.

WE ARE DETERMINED

Nick Bias and Vladyslav Mortikov

Nick and Vladyslav manage the
communications function for the
business. They are responsible
for investor relations, external
and internal communications,
including social media.

As the war has progressed, what
has changed?
We are more focussed on our employees
than ever, aiming to keep them informed
and as positive as possible. We have
broadened our social media activities,
improved frequency and formats,
launched monthly updates so that we can
communicate directly and more frequently.

As the business is right-sized we must
work harder with a smaller budget.
We maintain our regulatory reporting,
focus on select opportunities, and use
social media more. We produce most
of our own content, and are proud of
our video work, especially a series we
produced about veteran rehabilitation.

What has the war taught you?
Being quiet is not an option. We have
learnt that we have plenty to say and
contribute. We know that the realities on
the ground are often different from what
is reported, so our role must be to help
broaden awareness, and share our real-life
perspectives. Everything we do requires
consideration because there are so many
complex issues and sensitivities to balance.

When the war is over, what will be
different for you?
It is currently our responsibility to report
internally and externally about colleagues
killed serving in the Armed Forces of
Ukraine. We look forward to the day
when we do not have to do this and
gladly refocus internal communications
to supporting the rehabilitation of veterans
back into the workforce and the restart
of production capacity.

We recognise that interest in Ferrexpo
will be intense when the war ends. We
are curiously sensitive because interest
has been limited during a time of war,
however, we are already preparing.

Q&A

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS72

Risk Management

Assessing and
managing risk

Ferrexpo identifies and assesses risks based on each
risk’s probability of occurrence and the severity of any
event. The Group aims to mitigate the potential impact of
each risk through its management of day-to-day activities,
taking a prudent approach to risk where possible.

Risk assessment for 2023
The risk matrix opposite depicts the
Principal Risks facing the Group.

Russia’s full-scale invasion of Ukraine in
February 2022, has had a significant impact
on the Group’s ability to operate. Further
details on the conflict risk facing the Group
are provided on page 75 of this report.

In addition to the war in Ukraine, a secondary
effect of the conflict is the increased political
alignment within Ukraine. It is unclear as to
the eventual impact of this change on the
Group, which in turn creates a potential
risk for the Group should the political
landscape shift adversely. Further details
of the risks associated with operating
in Ukraine are provided on page 76.

Climate change is a rising Principal Risk,
and the Group is facing both physical
and transitional risks, which requires
increased reporting requirements. This
topic is covered on pages 36 to 37 and
90 of this report, with particular reference
to climate change related risk reporting
under the Task Force on Climate-related
Financial Disclosures (“TCFD”) framework.

Risk identification
Ferrexpo aims to manage risks across its
business through the early identification
of potential risks before they emerge,
with senior managers and the Group’s
executive management team responsible
for maintaining risk registers for each area
of the Ferrexpo business. Risk registers
are regularly reviewed and updated,
with local risk owners reporting to senior
management teams on a regular basis.

The Group risk register records risks on the
basis of the likelihood of occurrence and
level of potential impact on the Ferrexpo
business. A total of 49 risks were included
on the Group risk register as of December
2023, with risks ranging from the war in
Ukraine (both direct and indirect), risks
relating to operating in Ukraine, operational
risks such as the risk of a pit wall failure,
health and safety-related risks, and risks
relating to information technology and climate
change. Further to the Group risk register,
which records the risks with the most serious
potential impact and likelihood of occurrence,
operating entities maintain their own local
risk registers, which feed into the Group
risk register. In 2023, the Group continued
to develop and operate an enterprise
risk management (“ERM”) tool that was
implemented in 2022 to record and monitor
risks, which is the platform for the reporting
and assessment of risks within the Group.

The Group considers emerging risks to
be risks that are newly developing, or
increasing in potential severity of impact, or
changing risks that are difficult to quantify.

The risks that are assessed by the
Group’s management to be Principal
Risks are presented on pages 74 to 90.

Risk mitigation
Risks are inherent in operating a business
and it is through effective risk identification,
risk management, prudent decision making
and other risk mitigation measures that the
Group can understand and mitigate the
risks that the business faces. The Group’s
management team, however, understands
that it cannot eliminate all risk. The Group’s
approach to risk mitigation for each of the
Group’s Principal Risks is presented opposite.

Risk governance framework
Risks are reported internally on a monthly
basis, as part of the Finance, Risk
Management and Compliance (“FRMC”)
Committee, with the Group’s senior leadership
team reviewing the Group-level risk matrix,
which plots the likelihood of occurrence
against the potential severity of impact, and
identifying material changes in either variable
to all of the risks listed. Risks are reported on
the Group risk register to the FRMC Committee
on a monthly basis, with each risk attributed
a potential monetary impact should an event
occur. The FRMC Committee reports to the
Group’s Executive Committee, which in turn
reports to the Board, which has the ultimate
responsibility for the Group’s approach to
risk management. The Audit Committee, a
sub-committee of the Board, assists the Board
in its regular monitoring of the risks faced by
the Group. The Group’s internal audit function
assists with the process of risk review, and
conducts ad hoc reviews of risk management
controls and procedures. For more information
on the Audit Committee’s monitoring and
assessment of the effectiveness of the risk
management and internal control systems,
see the Audit Committee Report on page 114.

Ferrexpo plc Annual Reports & Accounts 2023

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

– 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.

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

– Oversees corporate social responsibility

related matters and performance.

– Has specific focus on safety and climate

change related risks.

Finance, Risk Management
and Compliance (“FRMC”) Committee

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

–

Internal audit function

–

Supports the Audit Committee in reviewing
the effectiveness of risk management.

– Tests internal control systems and

recommends improvements.

Operational level

–

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

Principal risks materiality matrix

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.

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 Iron ore prices
3.3 Pellet premiums
3.4 Seaborne freight rates
4.1 Risks relating to producing our products
4.2 Risks relating to the delivery of our products
4.3 Risks relating to health and safety
4.4 Risks relating to operating costs
4.5 Risks relating to information technology

and cybersecurity
Risks relating to climate change

T
C
A
P
M
I

F
O

L
E
V
E
L

Please see pages 74 to 90
of this report for a full
summary of Principal Risks

4.5

4.4

1.2

1.1

1.3

3.4

3.2

3.3

3.1

4.1

4.2

4.3

Ferrexpo plc Annual Reports & Accounts 2023

LIKELIHOOD

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

Principal Risks

Understanding
risks and our
business model

Principal Risks are those considered to
have the greatest potential impact on
Ferrexpo’s business, assessed on the
bases of impact and probability.

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

1. Produce high quality pellets.

2. Achieve low cost production.

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

4. Conduct business in a safe
and sustainable manner.

5. Retain a balanced approach

to capital allocation.

Risk currently considered
to be materially increasing
in 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.

Introduction
This section outlines the Principal Risks facing
the Group in 2023, each of which have the
ability to negatively affect the Group, either
in isolation or in combination with other risk
areas. 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. The Principal Risks listed here are
neither exhaustive, nor are they mutually
exclusive, and therefore one risk area may
negatively impact another risk area.

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

Risks are inherently unpredictable, and,
therefore, the risks outlined in this report are
considered the main risks facing the Group.
New risks may emerge during the course of
the coming year, and existing risks may also
increase or decrease in severity of impact
and/or likelihood of occurrence, and this is
why it is important to conduct regular reviews
of the Group’s risk register throughout the
year. The Group maintains a more extensive
list of risks, covering over 40 different risks
at the Group level, with additional risks
considered in local risk registers at each
operating entity. The Group risk register is
reviewed on a monthly basis for completeness
and relevance by the Group’s Finance, Risk
Management and Compliance (“FRMC”)
Committee, which ultimately reports into the
Board for further review and approval of the
risk register. The Group risk register is also

Ferrexpo plc Annual Reports & Accounts 2023

reviewed by the Audit Committee at least four
times a year. The members of the Executive
Committee manage risk within the business
on a day-to-day basis. The Committee
includes the Chief Executive Officer, Chief
Financial Officer, Chief Marketing Officer,
Group Chief Human Resources Officer and
General Director of Ferrexpo Poltava Mining.

The Group’s management team continually
reviews and updates its view on, and approach
to, risks facing the Group. This section of the
Annual Report and Accounts primarily covers
risks facing the Group in 2023, but also early
2024, up until the publication date of this
report. A further update on the Principal Risks
will be provided in the Interim Financial Results,
which is due to be published in August 2024.

Key themes
Ongoing war in Ukraine since the
full-scale invasion in February 2022
On 24 February 2022, Russia launched a
full-scale military invasion of Ukraine, with
the conflict continuing into its third year
as of the date of this report. This event
has significantly changed the operating
environment for businesses in Ukraine on
an unprecedented scale. Please see page
75 for more information on this risk area.

Ukraine country risk
This area has been listed as a Principal Risk
facing the Group since listing in 2007, and
the Group has successfully operated amid
challenging circumstances for more than
16 years. The war in Ukraine has served
to escalate a number of risks relating to
Ukraine, including risks relating to the
political environment and the independence
of the judicial system. Please see page 76
for more information on this risk area.

Climate change
An important topic for any modern business,
with discussions with multiple stakeholder
groups centring on the Group’s efforts to
reduce emissions both in the Ferrexpo
business, but also in the Group’s value chain
(Scope 3 emissions). As a consequence of
rising stakeholder focus on this topic, the
Group published its first standalone report on
climate change in December 2022. Please see
page 90 for more information on this risk area.

Cybersecurity
As a business seeking to modernise, the
Group is increasingly reliant on electronic
software for the management of key
operational and administrative activities.
As a business primarily operating in
Ukraine, the Group has faced heightened
cybersecurity threats from malicious parties
since 2014, coinciding with Russia’s initial
invasion of Ukraine. Please see page 89
for more information on this risk area.

1. Country risk

1.1. Conflict risk (external risk)

Responsibility
Board of Directors including Executive Chair

Risk appetite
Low

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

Due to the war, a proportion of the Group’s
workforce in Ukraine are serving or have
served in the Armed Forces of Ukraine.
Some have relocated to safer locations. As
such, the Group faces potential risks around
being able to adequately skill its operations
and the associated ancillary services.

Additional risks related to the war in
Ukraine include, but are not limited to,
restrictions related to the cost effective and
timely transport of the Group’s products,
restrictions in accessing markets, rising
costs related to reduced output and
alternative supply arrangements and the
impact on employee safety and wellbeing.
A summary of the war’s impacts is
provided on pages 6 to 7 of this report.

Risk mitigation

The health and safety of the workforce
is the Group’s primary concern.

Whilst it is difficult for a company such
as Ferrexpo to defend itself from direct
military activities since Russia’s full-scale
invasion, the Group has taken multiple
measures to keep its workforce, their
families and local communities safe from
the threats posed by Russian aggression.
Measures have included remote working
for those able to do so, timing of shift
patterns to fit with curfew hours, the
provision of on-site childcare facilities to
ensure children are close and employees
are not having to travel unnecessarily,
construction of new and renovation of
older bomb shelters and the provision of
protective equipment such as armoured
vests and helmets for employees serving
in the Armed Forces of Ukraine. The
Group has also engaged in extensive
discussions with local authorities, and has
stepped up to provide financial assistance
through the Ferrexpo Humanitarian
Fund, with oversight by the Board of
Directors of Ferrexpo to ensure good
governance in all support activities. Please
see page 7 for more on this subject.

The Group will continue to take
measures as required to protect its
workforce, and their families and local
communities, for the duration of the
war, and during the post-war period
where continued support is required.

It is over two years since Russia’s full-scale
invasion of Ukraine on 24 February 2022.
Ferrexpo’s main operations are in the Poltava
region of central Ukraine, which has not
seen any direct combat between Russian
and Ukrainian forces. Ukraine has, however,
faced numerous missile and drone strikes,
including the Poltava region. The Group’s
facilities have not been directly targeted
by Russian missile strikes, but a number
of neighbouring third party facilities such
as the Kremenchuk oil refinery and state
owned electricity infrastructure have been
damaged by such attacks. Such damage can
affect the Group’s ability to source various
inputs needed for ongoing production.

The war in Ukraine is placing a strain on
the economy of Ukraine, with a number of
businesses closing, unemployment, and lower
tax revenues. At the same time, spending
on the military and social programmes have
increased. Consequently, the government
of Ukraine has sought to increase revenues
through changes to its fiscal policies, such
as increases to railway tariffs, as well as
implementing measures to stabilise the
economy, such as enacting laws for the
repatriation of funds and currency controls. A
number of these measures have the potential
to either directly or indirectly affect Ferrexpo
negatively through consequences such
as lower revenues and a more restrictive
operating environment. Due to the strain
placed on the Ukrainian economy, the
exchange rate for the Ukrainian hryvnia
depreciated significantly at the start of the
full-scale invasion in 2022. The government
immediately responded with the introduction
a peg for the hryvnia to the US dollar set at
UAH 29.25 per US dollar, however, it was
forced to devalue the currency to was 36.5 per
US dollar in July 2022. In October 2023, the
government announced that it would allow for
limited fluctuations of its currency, scrapping
the peg that had been in place since Russia’s
invasion 20 months earlier, with the central
bank stating a shift to a “managed flexible
exchange rate”. This new policy resulted in
short term volatility. Fluctuation in the Hryvnia
can have a significant impact on the Group’s
costs, assets and shareholders’ equity. For
more information, please see page 28.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS76

Principal Risks continued

1. Country risk (continued)

1.2. Ukraine country risk (external risk)

Responsibility
Board of Directors including Executive Chair

Risk appetite
Low

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

The considerations outlined here are
separate to the risks relating to the
ongoing war in Ukraine, but some or all of
them may be exacerbated by the current
conflict (see page 75 for risks relating
specifically to the conflict in Ukraine).

Ferrexpo’s main operations are in Ukraine,
which is considered to be a lower middle
income economy, under the classifications
provided by the World Bank1. Ukraine is a
country that placed at rank 77 in the United
Nations’ Development Programme’s (“UNDP”)
Human Development Index (as published in
the latest report on 8 September 2022)2, and
is therefore classified as having a “high” level
of human development (based on factors such
as life expectancy and levels of education).
This ranking places it in a similar bracket to
China (79) and Sri Lanka (73), other countries
considered to be developing economies.
As a result of operating in a developing
economy, the Group is subject to a number of
elevated risks, such as the fiscal and political
stability of Ukraine, independence of the
judiciary, access to key inputs and capital,
exposure to monopolies and other influential
businesses (particularly those that are related
parties to the government of Ukraine), in
addition to a range of other factors. As a
result of being a business in a developing
economy, the Group is exposed to heightened
risks around corruption, with Ukraine
placing 116 in Transparency International’s
Corruption Perceptions Index (“CPI”)3.

Through the Group’s exposure to an operating
environment in a developing economy,
Ferrexpo has been subject to a number of
risk areas that are heightened relative to
those expected of a developed economy.
Risks associated with the war in Ukraine are
covered on page 75 of this report, but there
are indirect risks associated with the war, such
as the increasing political unity within Ukraine
and determination to drive political, fiscal or
economic change, the latter often associated
with financial and military agreements struck
with western governments and organisations.

This change can be exhibited in a number
of practical applications, which can
include, but are not limited to, changes
to the regulatory environment, potential
increases to tax and royalty rates, increased
disclosure requirements or operational
restrictions. Changes may be made as a
result of government decision making, a

third party international partner, lender, or
another party within Ukraine, and therefore
the rationale for changes may not correlate
with the official agenda of the government
of Ukraine. As a result of this local instability,
which is amplified by the war in Ukraine,
sources of capital for businesses deriving
their revenues from Ukraine are limited at
the present time, which in turn may reduce
the operational flexibility of the Group.

The independence of the judiciary system
in Ukraine has been frequently referenced
in the Principal Risks section of the Group’s
Annual Report and Accounts, and this is
a consideration that remains particularly
relevant for the Group today. As described
in Note 30 (Commitments, contingencies
and legal disputes) to the Consolidated
Financial Statements, the Group is currently
subject to several legal proceedings in
Ukraine that are similar in part to previously
heard legal proceedings, and it cannot be
guaranteed that the Ukrainian legal system
will always provide a ruling in line with the
laws of Ukraine or international law.

On 7 December 2022, Ferrexpo Poltava
Mining (“FPM”) received a claim in the amount
of UAH4,727 million (US$124 million as at
31 December 2023) in respect of contested
sureties. These contested sureties relate
to Bank Finance & Credit which the Group
previously used as its main transactional
bank in Ukraine. Bank Finance & Credit is
still going through the liquidation process
after having been declared insolvent by the
National Bank of Ukraine and put under
temporary administration on 18 September
2015. The counterparty in this claim alleges
that it acquired rights under certain loan
agreements originally concluded between
the Bank Finance & Credit and various
borrowers by entering into the assignment
agreement with the State Guarantee Fund on
6 November 2020. The counterparty further
claims that FPM provided sureties to Bank
F&C to ensure the performance of obligations
under these loan agreements. On 26 January
2024, the Ukrainian court of appeal has
confirmed a claim against FPM in the amount
of UAH4,727 million (US$124 million as at
31 December 2023). On 30 January 2024,
FPM filed an appeal to the Supreme Court
in Ukraine and the first hearing scheduled
for 20 March 2024 did not take place.
Following the appointment of a new panel of
judges, on 1 April 2024 the Supreme Court

Ferrexpo plc Annual Reports & Accounts 2023

suspended the possible enforcement of the
decision of the court of appeal. A Supreme
Court hearing on 17 April 2024 considered
primarily procedural matters and the next
court hearing is scheduled for 27 May 2024.

Although the Group remains of the view that
FPM has compelling arguments to defend
its positions, the Group has recognised a
full provision totalling US$124 million for
this ongoing legal dispute. As at the date
of approval of these consolidated financial
statements, no enforcement procedures have
commenced and on 1 April 2024 the Supreme
Court suspended the possible enforcement
of the decision of the Ukrainian court of
appeal, so that such enforcement procedures
cannot be initiated by the claimant until a final
decision is made by the Supreme Court, or
the Supreme Court’s suspension order is
otherwise lifted. If the final Supreme Court
ruling is not in favour of FPM, the claimant
may take steps to appoint either a state or a
private bailiff and request the commencement
of the enforcement procedures, which could
have a material negative impact on the Group’s
business activities and its ability to continue
as a going concern, as the assets of FPM
could be seized or subject to a forced sale.
In addition to the afore-mentioned claim, a
supplier and related party to the Group filed an
application to open bankruptcy proceedings
(“creditor protection proceedings”) against
the Group’s major subsidiary in Ukraine. The
possible commencement of the enforcement
of the decision of the Ukrainian court of
appeal, which is currently suspended by
a decision of the Supreme Court, and the
possible opening of creditor protection
proceedings might potentially affect the
Group’s ability to continue as a going concern
and, as a consequence, its viability.

The contested sureties claim and decision
of the court of appeal are other examples
of the risk of operating in a dynamic and
adverse political landscape in Ukraine,
which creates additional challenges
for both the Group’s subsidiaries in
Ukraine and also for the Group itself.

As referenced in the Group’s previous public
reporting, including in the Group’s Interim
Results published in August 2023, there are
outstanding allegations relating to the Group’s
controlling shareholder, Kostyantin Zhevago,
that remain unresolved, and there is a risk
that assets owned or controlled (or alleged
to be owned or controlled) by the Group’s

1. Country risk (continued)

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

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.

As disclosed in 2022 annual report and
accounts, subsequent to the detention of
Mr Zhevago in France on 27 December 2022
at the request of the authorities in Ukraine,
the Supreme Court of France rejected the
appeal in November 2023 and ruled that
Mr Zhevago should not be extradited to
Ukraine. The legal case relates to the potential
extradition of Mr Zhevago, and associated
legal claims being made in Ukraine, and
remains outstanding as of the date of this
report. The risks relating to the Group as
a result of this legal action, and potential
further legal action, cannot be accurately
estimated at the present time, nor can the
potential timeline for resolving any matters.

As a consequence of recent events relating to
the Group’s controlling shareholder, as outlined
above, the Group may experience adverse
effects, such as negative media attention, a
reduced ability to operate within Ukraine and
overseas due to negative perceptions of the
Group, and a restricted operating environment
for aspects of the Group’s business, such
as closure (or suspension) of relationships
with stakeholder groups such as banking
services. The Group’s relationships both
upstream and downstream may also be
negatively impacted by events related to the
Group’s controlling shareholder, such that
the Group is limited or impaired in its ability
to do business overseas in a specific country
or region. In addition, restrictions imposed
on the Group’s controlling shareholder (or
negative perceptions of the Group’s controlling
shareholder) may potentially have an adverse
effects on the Group within Ukraine, with a
restriction on the Group’s ability to successfully
operate its business model. A number of legal
claims or legislative actions within Ukraine
are known as of today – as detailed in this
section, and further actions to restrict the
Group’s ability to operate may arise in the
future. It is difficult for the Group to predict
the scale or nature of such restrictions, and

1. Source: World Bank, link. (Accessed 24 February 2024)
2. Source: UNDP, link. (Accessed 23 February 2024)
3. Source: Transparency International, link. (Accessed

26 February 2024)

therefore the Group is limited in its ability to
pre-empt and mitigate risks in this area.

The Group is subject to a number of
actions by the government of Ukraine that
threaten to destabilise, or have the effect
of destabilising, the operating environment
in which the Group exists. For example, in
previous years, the government of Ukraine
has cancelled exploration licences by
Presidential decree, providing minimal detail
in terms of an explanation or rationale.

As previously referenced in the Group’s
2021 Annual Report and Accounts, in June
2021, the government of Ukraine cancelled a
mining licence for an early-stage exploration
project known as Galeschynske, which is a
licence held by Ferrexpo Belanovo Mining
and located to the north of the Belanovo mine
(without forming part of this mine). This matter
remains outstanding, and there remains a
risk that this dispute may increase in scale
or severity for the Group. The Group has
been informed of other licence disputes by
the government, which are similar in scale
to the licence dispute discussed above. It is
difficult for the Group to predict the outcome
of existing licence disputes, and whether
new claims and/or disputes may arise in
relation to the Group’s operating licences.

In March 2023 restrictions were placed on
shares held by Ferrexpo AG (“FAG”), the
Group’s Swiss subsidiary, in three main
operating subsidiaries of the Group in
Ukraine, covering 50.3% of the shares held
in each subsidiary. The Kyiv Commercial
Court ordered the arrest (freeze) of 50.3%
of FAG’s shareholding in each of Ferrexpo
Poltava Mining (“FPM”), Ferrexpo Yeristovo
Mining (“FYM”) and Ferrexpo Belanovo Mining
(“FBM”). This court order was issued by the
Kyiv Commercial Court during a hearing in
the commercial litigation between the Deposit
Guarantee Fund and Mr. Zhevago, the Group’s
controlling shareholder, in relation to the
liquidation of Bank Finance & Credit in 2015.
The Group’s subsidiaries affected by this court
order, including FAG, filed appeals in Ukraine
to remove the restrictions. The court of appeal
refused on 26 July 2023 to satisfy the appeals
of FAG, FPM, FYM and FBM in relation to the
restriction covering 50.3% of corporate rights in
FPM, FYM and FBM. The Group’s subsidiaries
filed cassation appeals to the Supreme Court
of Ukraine. On 10 January 2024, the Supreme
Court in Ukraine rejected the cassation appeals
and the restrictions in the Deposit Guarantee
Fund case remain effective. For more details of
this case please see Note 30 Commitments,
contingencies and legal disputes.

Ferrexpo plc Annual Reports & Accounts 2023

Also in relation to the commercial litigation
between the National Bank of Ukraine
(the “NBU”) and Mr. Zhevago, the Group’s
controlling shareholder, in relation to the
personal surety of Mr. Zhevago for the loan
provided by the NBU to the Bank Finance &
Credit, the Chief State Bailiff of the Ministry
of Justice of Ukraine issued a resolution
on arrest of debtor’s property as part of
intended enforcement proceedings. The
state bailiff has imposed an arrest on part of
the corporate rights of 50.3% of the issued
share capital of FYM and FBM, assuming
that these rights are owned by Mr. Zhevago.

FAG filed lawsuits in October 2023 to cancel
the arrest and to block the enforcement
procedure. On 30 November 2023, a court
of first instance suspended the enforcement
proceeding to forcefully sell Ferrexpo AG’s
corporate rights in FYM and FBM. The state
bailiff filed an appeal. For more details of this
case please see Note 30 (Commitments,
contingencies and legal disputes).

As previously referenced in the Group’s 2022
Annual Report and Accounts, a number of the
Group’s subsidiaries in Ukraine received letters
from the Office of the Prosecutor General,
notifying them of an ongoing investigation
into a potential underpayment of royalties
between 2018 and 2021 (the “Investigation”).
On 3 February 2023, one of the Group’s senior
managers in Ukraine received a notice of
suspicion in relation to this Investigation. On
6 February 2023, as part of the Investigation,
a court order was issued in Ukraine freezing
the bank accounts of Ferrexpo Poltava Mining
(“FPM”). These actions by the government
of Ukraine mirror actions taken in similar
investigations into other metals and mining
companies in Ukraine, and therefore represent
a scenario that the Group was aware of and
able to partially mitigate the associated risks. It
is important to note that the Group may not be
able to successfully challenge this court order
to freeze FPM’s bank accounts and may not
be able to successfully challenge the claims
being made as part of the Investigation. The
Group has managed to get certain aspects
of this court order to be repealed, enabling
the Group to pay certain amounts such as
salaries and taxes (but other restrictions
remain in place).On 31 October 2023, a notice
of suspicion was delivered to another top
manager. On 13 November 2023, the court
approved the bail in the amount of close to
UAH 800 million. An appeal was filed, and
after several court dates were postponed, the
next hearing is scheduled for 29 April 2024.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS78

Principal Risks continued

1. Country risk (continued)

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

In addition to the royalties investigation,
on 10 January 2023 the State Bureau of
Investigations (“SBI”) in Ukraine and on
17 January 2023 The National Police of
Ukraine performed several searches in respect
of investigations on alleged illegal extraction
of minerals (“rubble”). FPM’s position is that
the minerals in question are not a separate
mineral resource, but that it is a waste product
resulting from the crushing of iron ore during
the technical process for the production of
iron ore pellets. The sales of the rubble were
subject to inspections by the State Service
for Geology and Subsoil of Ukraine for many
years and were suspended by the Group
in September 2021. The outcome of such
investigations are the notices of suspicion
issued to the management of FPM by the
SBI on 29 June 2023 and by the National
Policy of Ukraine on 22 September 2023 with
subsequent payments of bails totalling UAH122
million (US$3 million at this point of time) and
UAH400 million (US$11 million at this point
in time), respectively, that were approved by
the court. In the pre-trial investigation of the
rubble case and following an application from
the prosecutor to arrest (freeze) all rail wagons
and railway access tracks owned by FPM,
a court of first instance issued the order to
do so. FPM filed an appeal and a hearing of
the court of appeal on 30 October 2023 the
court of appeal confirmed the arrest of assets
(freeze), but refused to provide clarifications
on the exact scope of the order which created
an alleged restriction on the use of one type of
FPM’s rail cars. Since that time FPM has not
been using this type of rail cars (totalling 1,339
units), but continues to use another type of
its rail cars (totalling 1,043 units). The Group
is engaging with the authorities in Ukraine
and intends to appeal the claims issued as
part of these investigations. Stakeholders
should note that the Group may not be able
to successfully challenge the claims being
made as part of these pre-trail investigations.

For more details of these cases see
Note 30 Commitments, contingencies
and legal disputes.

The Group’s exposure to operating in Ukraine
can result in high velocity risks. Risk velocity
relates to how fast a risk may escalate in
scale and affect an organisation, with high
velocity risks considered to be those that move
rapidly from a starting point of having a low
likelihood and scale of impact, to having a high
likelihood and scale of impact. Examples of

high velocity risks would be natural disasters
and armed conflict, both of which could
be difficult to predict in advance and could
have a significant impact on a business.

The risk factors discussed here in this section,
either individually or in combination, have
the ability to materially adversely affect the
Group’s ability to operate its production
and other facilities, ability to export its iron

ore products, access to new debt facilities
and ability to repay debt, ability to reinvest
in the Group’s asset base, either in the form
of sustaining capital investment (to maintain
production or expansion), capital investment
for future growth, or the Group’s ability to
pay dividends, could result in a material
financial loss for the Group and could result
in a loss of control of the Group’s assets.

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

As set out in detail in the risk description, the
Group is involved in a number of ongoing
legal proceedings, some of which may
potentially lead to attempted seizures of the
Group’s funds, movable and immovable
assets and corporate rights in Ukrainian
subsidiaries. In case of the commencement
of enforcement procedures for any ongoing
legal disputes, the Group will challenge
every order and action of claimants or
bailiffs in the court, which is expected to
delay for a reasonably long period of time
and block the seizure of funds and assets

Risk mitigation

Ferrexpo operates in accordance with
relevant laws and utilises internal legal
counsel 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 is
subject to high standards of corporate
governance, including the UK Corporate
Governance Code and UK Market Abuse
Regulation. Ferrexpo has a relationship
agreement in place with Kostyantin
Zhevago, which stipulates that the
majority of the Board of Directors must
be independent of Mr Zhevago and his
associates. For all related party transactions,
appropriate procedures, systems and
controls are in place and adhered to.

Ferrexpo prioritises a strong internal control
framework including high standards of
compliance and ethics. The Group operates
a centralised compliance structure that
is supported and resourced locally at
the Group’s operations. Ferrexpo has
implemented policies and procedures
throughout the Group including regular
training. Ferrexpo prioritises sufficient total
liquidity 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 competitive
wages, taking into account movements
of the Ukrainian hryvnia against the
US dollar and local inflation levels.

Ferrexpo plc Annual Reports & Accounts 2023

1. Country risk (continued)

1.3. Counterparty risk (external risk)

Responsibility
Board of Directors including Executive Chair

Risk appetite
Low

Link to strategy
4

Risk mitigation

In terms of supplier governance, the
Compliance team conducts regular checks
on all suppliers, screening entities for a
number of risks and elevating those deemed
to be higher risk for further consideration by
FRMC Committee as to their eligibility. For
entities that the Group conducts business
with, the Group has developed a Code of
Conduct for Suppliers, which as of 2023
is referenced in 90% of all contracts equal
to approximately 2,000 due diligence
checks completed on potential third parties
(2022: 90% and 1,300 checks).The Group’s
exposure to the failure of a counterparty, or
the failure of a party to provide its contracted
goods and services, is managed through the
Group engaging with a range of suppliers,
where possible, in addition to sufficient
cash reserves to maintain the Group’s
overall liquidity. Where it is not possible or
practical to source goods and services from
multiple providers, the Group considers
alternative goods and services to meet its
needs and to reduce single party risk.

With regard to the structures in place to
monitor and manage counterparty risk, the
Finance, Risk Management and Compliance
(“FRMC”) Committee, is an executive
sub-committee of the Board charged with
ensuring that systems and procedures
are in place for the Group to comply with
laws, regulations and ethical standards.

The FRMC Committee met ten times in 2023
(2022: ten) and 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 FRMC Committee is given
prior warning of regulatory changes and
their implications for the Group. The FRMC
Committee enquires into the ownership of
potential suppliers deemed to be “high risk”,
and oversees the management of 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 Health, Safety,
Environment and Community (“HSEC”)
Committee required to provide approval
for community support expenditures.

As a business operating in a lower middle
income economy, and also as a business
operating in a country that is currently
engaged in an armed conflict, there are
significant risks in respect of the Group’s
business interactions with third party suppliers
of goods and services. Risks may relate to a
number of subject areas, including (but not
limited to) governance and corruption risks,
risk of collapse, risks relating to monopolies
and situations whereby alternative suppliers
may not be available, and counterparty risks
relating to the conflict in Ukraine whereby
counterparties may be exposed to Russia
(with such relationships potentially not
being known to the Group). The full-scale
Russian invasion of Ukraine in 2022 has
imposed a significant strain on the economy
of Ukraine and has therefore heightened
the counterparty risks facing the Group.

A secondary effect of the ongoing war in
Ukraine is that the Group may be affected in
its ability to conduct effective due diligence
on counterparties given the imposition
of martial law in Ukraine, and other war-
related restrictions. The Group has had
to change a number of key suppliers in
since February 2022, and in doing so,
has had to conduct due diligence checks
as part of each new relationship, which
carries inherent risk to the Group.

Counterparty risks may result in direct
consequences for the Group such as
financial harm and operational issues in
sourcing material, and also include indirect
consequences such as damage to the
Group’s reputation either within Ukraine
or with international stakeholders, such
as investors, lenders and customers.

Additionally, as outlined on page 76 (Ukraine
Country Risk), recent events relating to the
controlling shareholder of the Group have
resulted in secondary effects on a number
of business relationships of the Group.
The Group is currently managing these
risks either through existing relationships
or through new relationships, and it should
be noted that any new (or change of
existing) business relationship carries an
inherent counterparty risk to the Group.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS80

Principal Risks continued

2. Market related risks

2. Risks relating to the global demand for steel

Responsibility
Board of Directors
including Executive Chair

Risk appetite
Medium

Link to strategy
3 and 5

Risk mitigation

Under normal circumstances, the Group
has the ability to mitigate risks around
demand for steel through its global
customer base, with the Group having
the ability to geographically arbitrage
its products. During 2023, the Group
had no access to Ukrainian Black Sea
ports, resulting in a shift to European
customers accessible by rail. When the
Group has been able to access alternative
Black Sea ports, the size of shipments
have been lower at higher costs.

Other risk mitigation activities include
the Group’s ability to produce high
quality forms of iron ore, which typically
command higher premiums with
customers and also tend to be more in
demand throughout the economic cycle.

Ferrexpo operates in a country whereby
the local currency, the Ukrainian hryvnia,
is a currency which is correlated 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.

The Group is a part of the global steel
value chain, which is a sector that is
heavily reliant on global connectivity, and
global factors that affect the supply and
demand balance of both steel and the
raw materials required for making steel.

Steel is typically made using processes
that involve iron ore, a portion of scrap steel
(depending on the process method) and
energy (which can include coal, natural gas
and electricity). Prices for these key inputs
can be volatile, and are factors that will move
independently of any single steel producer’s
control, and will therefore have the ability to
significantly affect the profitability of individual
steel producers. Additional factors governing
the input costs, and therefore profitability,
of steelmakers include: the availability and
cost of labour, requirements for capital
investments to sustain or grow output, the
availability of raw materials and energy (in
addition to unit costs), the cost and availability
of logistics routes and the presence of
lower cost competitors in key markets.

Global steel demand varies considerably
and can be significantly influenced by factors
outside of the control of a steel producer,
such as political instability (e.g. the war
in Ukraine), global energy prices, and the
macro outlook for the global economy.
In addition to these macro-economic
environment factors, individual steel producing
facilities and regions may be affected by
national, regional and local factors such
as political instability, political intervention,
weather events, cybersecurity events, and
climate change, amongst other factors.

Given that the factors listed here have the
potential to materially affect the profitability
of steel mills, individual companies and
facilities may respond to cyclically higher
costs or weaker market conditions by
reducing or halting steel production, until
more favourable market conditions resume.
This in turn could have a material effect on
suppliers to such businesses, including
iron ore producers such as Ferrexpo.

A more recent trend has seen a surge in
awareness of climate change related issues,
which is driving increased changes within
various levels of the operating environment
for steel companies – from local and regional
government enacting legislation related to
climate change, to customers and local
communities demanding that steel production
involve lower emissions. Efforts to counter the
effects of climate change in the steel industry,
which typically focus on the reduction of
carbon emissions in the production of steel,
could generate higher operating costs in
the near term, and higher requirements for
capital investment over the medium to long
term. Whilst operating costs for steelmakers
could increase in the near term as a result
of emissions reduction measures, end
users of steel may not agree to higher steel
prices, and therefore profit margins could
decrease until such costs are lowered or
successfully passed through to end users.

The structure of the global steel industry
relies on a consistent supply of materials
to steel mills and a consistent offtake of
finished steel by customers. As a consumer
of bulk commodities, such as iron ore and
coal, the timely and reliable delivery of
these materials is required for stable steel
prices, since any disruption in the delivery
process can create short and medium-term
spikes in steel prices. Equally, a scenario
whereby global markets encounter an
excessive supply of steel, either through an
unforeseen downturn in end-user demand,
or disruptive increases in steel supply, could
have a negative effect on steel prices.

Global steel markets also rely on the consistent
availability of logistics pathways, and events
such as the ongoing attacks on shipping in
the Red Sea since October 2023, serve to
demonstrate the possibility of short-term
pricing fluctuations in shipping freight rates
(both positive and negative) when global
logistics chains are not functioning optimally.

Ferrexpo plc Annual Reports & Accounts 2023

3. Risks related to realised pricing

3.1. Changes in pricing methodology (external risk)

Responsibility
Executive Chair and
Chief Marketing Officer

Risk appetite
Medium

Link to strategy
1, 3 and 5

Risk mitigation

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.

Through strong customer relationships, the
Group aims to ensure that the net realised
prices received for its iron ore products are
in line with the international benchmarks
for pricing of similar products, in addition
to premiums paid for the quality and
specification of the product being sold.

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.

Pricing formulas for iron ore pellets are
governed by multiple factors, including the
iron ore fines prices, a premium for additional
ferrum content, 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 regions. Premiums or
discounts paid for specific characteristics
may change and adversely affect the
Group’s ability to market specific products.

Should the standard industry pricing
methodology change in the future, it could
have a positive or negative impact on
the Group in the form of realised prices
for iron ore pellets and concentrates,
and therefore affect the Group’s financial
performance. Additional potential impacts
of changing perceptions around pricing
methodology could include a restriction in
the Group’s ability to sell its products to
specific customers and geographic regions,
should such stakeholders elect to pursue
a different pricing methodology with an
alternative of iron ore products suppliers.

As a producer of high grade forms of iron
ore (grading 65% Fe and above), over time,
the Group has developed customer pricing
agreements with customers on the basis of
high grade benchmark fines indices (grading
65% Fe). Such agreements enable the Group
to realise the value of the iron content in its
products, with high grade (65% Fe) fines

index trading an average of US$12 per tonne
above the medium grade (62% Fe) in 2023
(2022: US$19 per tonne)1. The premiums
paid for material priced using the high grade
benchmark index reflect the more restricted
supply of higher grade iron ores into the
global market, with the majority of supply
being either low or medium grade iron ores.
Premiums paid for higher grade iron ores
(referred to as the “ferrum premium”) also
reflect the operational benefits to steel mills
through higher blast furnace productivity
and lower emissions profiles associated
with higher grade input materials.

The Group also relies on pricing structures for
its pellets to include a pellet premium, which
reflects the high quality, pelletised nature of
the iron ore delivered to customers. Given
the benefits of pellets to steelmakers (namely
improved furnace productivity and lower
greenhouse gas emissions), it is accepted
practice that steelmakers pay an additional
premium for iron ore pellets (referred to as the
“pellet premium”). Pellet premiums have varied
significantly in recent years, which reflects both
supply and demand-related factors. Given
the scale of the pellet premium relative to
the iron ore fines index and pelletising costs,
significant shifts in pellet premiums would have
a significant impact on profitability and product
differentiation. A number of pellet premiums
are quoted by third parties, which are
computed in a variety of ways. Any switch from
using one specified pellet premium to another
quoted pellet premium, could also result in a
difference in realised pricing for the Group.

1. Bloomberg

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS82

Principal Risks continued

3. Risks related to realised pricing (continued)

3.2. Iron ore prices (external risk)

Responsibility
This risk cannot be controlled
however it is monitored

Risk appetite
Medium

Link to strategy
1, 3 and 5

This factor is one that is connected to risks
related to the global demand for steel (see
page 80), since demand for steel directly
impacts the pricing of raw materials used
to produce steel, such as iron ore.

As a company that derives the majority
of its revenues from iron ore products,
Ferrexpo is inherently exposed to iron ore
prices, either in the form of benchmark
iron ore fines prices, or pellet premiums.
Variations in iron ore prices come in a
number of forms, from the underlying iron
ore price, the ferrum and pellet premium in
addition to discounts and premiums applied
for the naturally occurring trace elements
in ores such as silica and alumina.

The iron ore fines price is the largest
component of pricing for the Group’s
products, which averaged US$132 per
tonne in 2023 (65%Fe1, 2022: US$139 per
tonne). As discussed in the Market Review
section (see page 22, iron ore fines prices are
predominantly affected by Chinese demand,
which is the largest import market globally.

The quoted price for iron ore fines is called
the benchmark index, and is applicable
for forms of iron ore that have a specified
chemistry that is amenable for steelmaking,
such as the percentage of each trace
element contained (e.g. silica, alumina
and phosphorus). The Group’s products
typically conform to the requirements of the
benchmark index, and therefore tend not to
have penalties applied. Iron ores that do not
comply with the benchmark index, however,
will be subject to a range of penalties,
which may vary significantly depending on
a range of market factors and technical
requirements of each steel mill. Any variation
in the quality and chemistry of the Group’s
iron ore that is sold in any given period could
therefore result in penalties being incurred.

A secondary component of the pricing
structure of the Group’s products is the pellet
premium, which is applied to the sale of iron
ore pellets. This premium is significant to the
Group, and historically can represent up to
an additional 50% on top of the benchmark
iron ore fines index. This component of the
pricing structure of the Group’s products
is discussed in detail on page 23.

1. Source: S&P Global Commodity Insights.

Should reputational issues concerning the
Group and its UBO affect existing or potential
relationships in steelmaking regions that
demand Ferrexpo’s high-grade product
offerings, the Group may no longer be
able to realise the same level of product
pricing as previously experienced.

The Group aims to mitigate price risk through
producing high grade, low impurity iron ore
products, which receive premiums when
sold to customers, rather than penalties
or discounts. Through such products, the
Group has been able to build a higher-margin
business, which in turn enables further
investment in the Group’s production facilities.

In addition, the Group aims to be a low
cost producer of iron ore products.
Through operating with a lower cost base
than the Group’s peers, particularly when
the premiums paid for pellet quality and
specification are considered, Ferrexpo aims
to remain competitive on a global basis.

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 has
historically depreciated during periods of
low commodity prices, although movements
of the Ukrainian hryvnia against the US
dollar can also be influenced by short-
term geo-political and other factors.

Ferrexpo regularly reviews its options in
respect of hedging sales. The Group’s
current strategy is to not enter into such
hedging agreements due to the relatively
low liquidity of this market and high
costs involved. The Group will continue
to review this strategy as the market for
hedging iron ore pellets evolves, which may
increase the attractiveness of hedging.

Risk mitigation

The Group aims to mitigate price risk
through producing high grade, low
impurity iron ore products, which receive
premiums when sold to customers,
rather than penalties and/or discounts.
Through such products, the Group has
been able to build a high-margin business,
which in turn enables further investment
in the Group’s production facilities.

In addition, the Group aims to be a low
cost producer of iron ore products.
Through operating with a lower cost base
than the Group’s peers, particularly when
the premiums paid for grade and form
(pellets) are considered, Ferrexpo aims
to remain competitive on a global basis.

Furthermore, Ferrexpo’s operating costs
are partly correlated with commodity
prices. When the commodities cycle is
in a downward phase, Ferrexpo typically
receives a lower selling price, but the
Group’s cost base also tends to decline as
a result of local currency devaluation. The
Ukrainian hryvnia is a commodity-related
currency and historically over the long-term
it has depreciated during periods of low
commodity prices, although movements
of the Ukrainian hryvnia against the US
dollar can also be influenced by short-term
political factors, in addition to other factors.

Ferrexpo regularly reviews its options in
respect of hedging the price of its output.
The Group’s current strategy is to not
enter into such hedging agreements
due to the relatively low liquidity of this
market and high cost of entering into such
arrangements. The Group will continue
to review this strategy as the market for
hedging iron ore pellets develops over
time, which may eventually reduce the
effective cost of such arrangements.

Ferrexpo plc Annual Reports & Accounts 2023

3. Risks related to realised pricing (continued)

3.3. Pellet premiums

Responsibility
Executive Chair and
Chief Marketing Officer

The pricing of the Group’s products includes a
pellet premium. This references the pelletised
nature of Ferrexpo’s products and the benefits
they offer in the steel making process.
Consequently iron ore pellets customers will
pay a premium over and above the prevailing
iron ore fines price. The pellet premium is
one of the principal factors that enables
the Group to generate higher-margins.

Factors governing the pellet premium in
any given year include supply and demand
for iron ore pellets. Demand factors can be
related to the global macro-economy and
steelmakers desire to optimise their production
and productivity, which tends to result in
demand from steelmakers. Pellet demand
can also be affected by emissions reduction
legislation. Iron ore pellets remove the need
for sintering in steel making, a process that
typically uses coal. Steelmakers that utilise a
greater proportion of pellets in a blast furnace
can therefore reduce the overall emissions
footprint of steel production. See the section
on Ferrexpo DR pellets in electric arc furnaces
in this report for an example on pages 42.

The overall supply of iron ore pellets is relatively
constrained, with existing producers typically
producing at their nameplate capacity and
the construction of new pelletiser capacity
usually requiring significant capital investment
to establish production facilities and the
associated infrastructure required to support
the production and transportation of bulk
commodities to customers. Consequently,
there has been limited new pelletising
capacity come on line in the past five years.

Risk appetite
Medium

Link to strategy
1, 3 and 5

Supply-side disruption has been prominent
factor in recent years, with the failure of two
tailings dams in Brazil resulting in significant
volatility in supply from two of the largest
pellets exporters to the global steel industry.
Both of the companies involved in these
incidents have now resumed production
from the affected production facilities, and
therefore the market is absorbing the return
of this production at increasing rates.

Should reputational concerns over the Group
and its UBO affect existing or potential
relationships, the Group may no longer
be able to realise the same level of pellet
premiums as previously experienced.

Risk mitigation

Despite being one of the largest iron
ore pellet exporters, the Group’s market
share is not sufficient to be a price setter.
Consequently, therefore the Group
realised pellet premiums tend to follow the
level set by larger market participants.

To mitigate this, the Group’s strategy is
to be a low cost producer. Historically,
the Group has operated as one of the
lower costs pelletising operators, and
therefore swing producers have tended
to moderate the pellet premium at times
of low pricing by withdrawing from the
market supporting a floor in prices due
to a tightening in supply. The Group
has had to operate below its nameplate
capacity during 2023 due to the ongoing
war in Ukraine. As such, pelletising costs
marginally increased to US$30 per tonne
in 2023 (2022: US$29 per tonne). Despite
this increase, the Group has managed
to keep pelletising costs below the
prevailing pellet premium for the year.

The strategy of targeting low cost
production is enhanced through Ferrexpo’s
location in Ukraine, with the Ukrainian
hryvnia having a close correlation to
commodity pricing, which therefore tends
to devalue at times of low commodity
pricing, reducing the Group’s cost base.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS84

Principal Risks continued

3. Risks related to realised pricing (continued)

3.4. Seaborne freight rates (external risk)

Responsibility
Executive Chair and
Chief Marketing Officer

Risk appetite
Low

Link to strategy
2, 3 and 5

Further freight-related realised effects, or
potential risks, of the war in Ukraine include
an increase in the insurance premiums
required for vessels travelling to Black Sea
ports (Ukrainian ports or otherwise), and the
delayed loading and unloading times which
can result in increased demurrage costs.

The Group is also aware of potential risks
that relate to recent events with the Group’s
UBO (see pages 76 to 78), which may affect
Ferrexpo’s ability to conduct business
relationships with freight providers. Should
third party concerns relating to these
matters prevent Ferrexpo from engaging in
business relationships with specific freight
providers, then the Group may incur higher
freight rates and a smaller pool of ship
owners prepared to work with the Group.

The pricing of a bulk commodity, such
as Ferrexpo’s iron ore products, typically
includes a component of the net realised
pricing that considers the cost of transporting
material to the customer. For Ferrexpo, this
pricing typically refers to either the C3 or
C2 freight indices (published by the Baltic
Exchange), as these are reflective of the
shipping cost for accessing either the Asian
or European market (respectively). Freight
rates are a deduction from the pricing
received from the pellet, and therefore higher
freight rates will result in lower net realised
pricing for the Group, and vice versa.

The factors driving freight rates include the
prevailing fuel cost for ships, the availability of
vessels at a given point in time, and insurance
policies required for ships to service the
required route (the latter being a significant
factor for chartering parties looking to ship
via the Black Sea during the present time).

As a guide, the C3 freight index (representing
a seaborne Brazil-China trade route on
a capesize vessel) was US$24.99 per
tonne at the end of 2023 compared to
US$20.07 per tonne at the end of 20221.

Additionally, the war in Ukraine has had an
impact on the Group’s ability to charter vessels
with ship owners, as the limited availability
of Ukrainian Black Sea ports has reduced
the Group’s access to the seaborne market.
Whilst the increased costs associated with
trading within the Black Sea have been
reflected in Black Sea freight rates since
the outset of the war, the Group has on
occasion chartered vessels from alternative
Black Sea ports due to the Group’s strong
relationships with ship owners. Only recently,
since January 2024, the Group has resumed
shipments from the Port Pivdenniy in Ukraine,
while continuing to closely monitor the risk of
access to the Black Sea ports in Ukraine.

Risk mitigation

The Group has its own in-house freight
specialist, which helps the Group to
receive a competitive rate for freight
cargoes. The Group’s management team
regularly visit and speak with ship owners
around world and it is therefore possible to
maintain a detailed understanding of both
the global freight market and ship owners.

As a result of the Group’s operations
being located in Ukraine, seaborne
freight chartering has been reduced in
2023 (following Russia’s closure of the
Black Sea to Ukrainian ports), and as
such the Group has increasingly relied
on its European customer network for
sales. Despite this, the international
freight rate is still relevant for the
business, as many contracts reference
a quoted freight rate and the Group has
maintained some seaborne sales.

The Group currently does not enter into
hedging arrangements for freight rates,
which is an approach consistent with
the Group’s strategy on other forms of
hedging. This approach is continually
reviewed by the Group’s management
team, and such arrangements may
be entered into if it is deemed to
be beneficial to the Group.

The Group’s freight department
regularly monitors freight-related risks
associated with the war in Ukraine,
or otherwise, with an aim of ensuring
effective decision making in light of
changes to the operating landscape.

1. Source: Baltic Index / S&P Global

Ferrexpo plc Annual Reports & Accounts 2023

4. Operating risks

4.1. Risks relating to producing our products

Responsibility
Executive Chair, Chief Operating Officer
and Chief Marketing Officer

Risk appetite
Medium

Link to strategy
2, 3 and 5

Risk mitigation

The Group employs an experienced
management team and has a management
structure in place to monitor, and where
necessary, manage risks as and when
these risks escalate. The Group’s business
model is in a sector that has inherent risk
in the mining and processing of materials,
with these risks being manageable and,
where possible, mitigation measures
are utilised to ensure the safe operation
of the Group’s facilities to ensure the
efficient production of the Group’s iron
ore products. The Group maintains a
risk register of more than 40 risk areas,
which is monitored on a frequent basis
by the Group’s operational teams and
reported to the relevant management
committees. Where an operational risk
is deemed to be sufficiently significant in
terms of potential impact or likelihood,
appropriate risk mitigation measures
are sought, often with the assistance of
third party specialists, where relevant.

Efforts aimed at maintaining equipment
include ongoing repairs, keeping stocks
of replacement parts and materials, and
supporting contractors. To ensure stable
energy supply, the Group cooperates
with governmental organisations through
joint projects to upgrade of the energy
structure. The Group also has its own
solar power plant capacity to meet
its minimum power requirements.

To manage the availability of skills,
the Group has expanded it’s
recruitment and training programmes
to attract and train more people.

The Group’s operations involve the mining of
iron ore, which requires detailed planning of
blasting, excavation and haulage activities,
to deliver sufficient quantities of iron ore in
a timely manner to the Group’s processing
plant, which crushes, grinds and beneficiates
the material from in-situ iron ore grades
(ranging approximately 25-30% Fe) to high
grade concentrate (either 65% or 67% Fe)
for Ferrexpo’s direct sale or pelletising. In
the pelletising facilities, the concentrate is
converted into pellets via a series of kilns,
operating at approximately 1,300oC. The
above processes are complex and carry
inherent risks as a result. The Group is
able to mitigate such risks through a range
of activities and the collective experience
of the Group’s executive management
and operating teams, but it may not be
possible to eliminate all risk factors.

As a business with its main operating assets
located in Ukraine, the Group has faced
significant risks relating to the ongoing war
in Ukraine, which are summarised in the
Principal Risks shown on page 73 of this
report. The Group has also faced a number
of indirect consequences of the war in its
operations, such as a number of skilled
personnel departing Ferrexpo’s operations
to either serve in the Armed Forces of
Ukraine or relocating away from the conflict,
the Ukrainian authorities requiring the
delivery of specific equipment for military
use (typically light vehicles), interruptions in
the availability of specific materials relevant
for the conflict such as detonators, niter,
fuel and restrictions on operating practices,
such as scheduled blasting in the pits.

Outside of risks that directly relate to the war
in Ukraine, the Group faces material risks
relating to its mining operations that include
(but are not limited to) health and safety-
related risks, the risk of a pit wall failure or
fall of ground incident in the Group’s mines,
equipment failure (either due to operator
oversight, failures in maintenance practices
or failure despite acceptable levels of
maintenance), weather events preventing
access to the Group’s operations, poor
planning processes resulting in a lack of
high grade iron ore for processing, or the
failure of drilling to optimise face availability

or identify the correct location of ore and
waste material. Risks in the processing plant,
covering the beneficiation and pelletisation of
material, also include (but are not limited to)
equipment failure and unscheduled equipment
downtime, a lack of spare parts, a lack of
key input materials, unsuitable equipment for
processing of certain ore types, operating
restrictions and extreme weather events (or
other events potentially related to climate
change) that may impact the ability to produce
or store the Group’s products. As operations
continue to be modernised, the Group also
faces cybersecurity-related risks from cyber
threats and other factors that may impair
the Group’s ability to operate its electronic
equipment – see page 89 for more details.

The risks described above are typically
short-term events and the Group also faces
longer-term risks, such as climate change
(see page 90) and country risks related to
Ukraine (see page 76). Potential risks related to
climate change are also detailed on pages 48
to 59 of this report, and have been identified
through the Group’s recent collaboration with
environmental consultants Ricardo Plc.

The Group is also aware of potential risks
that relate to recent events with the Group’s
UBO (see pages 76 to 78), which may affect
Ferrexpo’s ability to source key input materials
and labour either within Ukraine or overseas.
Should third party concerns relating to these
matters prevent Ferrexpo from engaging
in business relationships with specific
providers of materials and labour, then the
Group may have challenges in its ability to
produce, or incur higher costs relating to the
sourcing of the same inputs from a smaller
group of providers or group of people.

Despite the current limitations, the Group
continues to maintain production and retains
the ability to increase production depending
on logistics availability. The availability of
skills however, is becoming more challenging
due to conscription and emigration.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS86

Principal Risks continued

4. Operating risks (continued)

4.2. Risks relating to delivering our products to customers

Responsibility
Executive Chair, Chief Operating Officer
and Chief Marketing Officer

Risk appetite
Medium

Link to strategy
2, 3 and 5

The Group is a producer of a bulk commodity,
meaning that its business model relies on
timely and consistent access to a logistics
network with sufficient capacity to transfer
a large volume of material to the Group’s
customer base around the world. Any
interruption to the scale, availability or reliability
of this logistics network has the potential
to significantly affect the Group’s ability to
operate its business model and generate
cash flow. The nature of being a producer
of a bulk commodity means that should an
interruption of logistics occur, there may be
limited time or sufficient funding available to
efficiently remedy the situation or stockpile
excess material, potentially resulting in
a temporary suspension of the Group’s
production facilities and an associated effect
on the Group’s ability to generate revenues
and maintain a strong balance sheet.

The Group’s logistics network is multi-
nodal, including the Group’s use of the
railway network in Ukraine and further
afield across Europe, a stake in a berth
at a port facility in south west Ukraine
(used for loading vessels for the seaborne
market), and an inland waterway logistics
business along inland waterways.

Examples of risks relating to the Group’s
logistics network, aside from those specifically
relating to the ongoing Russian invasion of
Ukraine (covered on pages 76 to 78), range
from those potentially affecting railway
logistics, which include (but are not limited
to) the unexpected closure or suspension of
sections of the railway network in Ukraine or
Europe required for deliveries, a reduction
in rail capacity related to the phasing out
of outdated equipment and insufficient
investment in replacement equipment,
potential political interference in the Group’s
ability to book railway access and wagons

(including the restriction on the use of one
type of FPM’s rail cars noted in Note 30).
Extreme weather events (either related to
climate change or otherwise) and a lack of
personnel to operate rail locomotives and
infrastructure effectively. The Group faces
similar risks relating to its use of inland
waterway logistics, including on the River
Danube, and in addition includes risks relating
to abnormally high and low water levels,
which may impede passage of vessels. Such
risks are expected to be exacerbated in
the future by the potential impact of climate
change. Similar risks are posed to the Group
and its ability to access seaborne markets
should extreme weather events (either
climate change related or otherwise) affect
operations at the Port of Pivdennyi or other
ports used by the Group, or shipping routes
such as the Suez Canal and Red Sea.

The Group is also aware of potential risks
that relate to recent events with the Group’s
UBO (see page 76 to 78), which may affect
Ferrexpo’s ability to secure bookings on
key logistics routes either within Ukraine or
overseas. Should third party concerns relating
to these matters prevent Ferrexpo from
engaging in business relationships with specific
logistics providers, then the Group may incur
difficulties in its ability to ship products, or
may incur higher costs relating to the sourcing
of logistics options along alternative routes.

It should be noted that during 2023 the
Group benefited from more stable rail
transportation within Ukraine. Also, the Group
operated from its own pellet transshipment
site on the Ukrainian border, in addition
to various warehouses in Ukraine and
in other countries to endure the stable
supply of its goods to its customers.

Risk mitigation

Since listing in 2007, the Group has sought
to invest in its logistics capabilities and
overall capacity, to ensure cost effective
and sufficient access to a logistics
network. This has involved the purchase
of railcars, including a fleet of over 3,000
wagons, which helps ensure availability,
despite the freeze of part of own wagons
(as disclosed in Note 30),, reduce
operating costs and ensure product quality
whilst pellets are in transit to customers.
Similarly, the Group owns a 49.9% stake
in a berth at the Port of Pivdennyi in south
west Ukraine, along with a trans-shipment
vessel (“Iron Destiny”), which permits the
Group to load trans-shipment vessels for
the seaborne market. Iron Destiny was
outside of Ukrainian waters undergoing
routine maintenance at the time of Russia’s
invasion of Ukraine on 24 February 2022,
ensuring safe ownership. The Group also
owns its inland waterway logistics provider
(First-DDSG), which is based in Vienna,
Austria, and has locations along the River
Danube and other inland waterways.

To maintain timely access to its logistics
network, the Group maintains close
working relationships with logistics
providers and related parties that are key
players in the Group’s logistics operations.

Ferrexpo plc Annual Reports & Accounts 2023

4. Operating risks (continued)

4.3. Risks relating to health and safety

Responsibility
Executive Chair, Chief Operating Officer
and Chief Human Resources Officer

Risk appetite
Low

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

Effective management of health and
safety related risks is important due to
the inherent risks involved in the nature
of mining and processing operations.
The processes involved in the mining
and processing of metalliferous rock has
progressed significantly in recent years,
but risks remain if policies and procedures
are not followed correctly, or if equipment
is not maintained and used correctly.

Mining activities involve the use of large
scale heavy equipment, such as haul trucks,
excavators and bulldozers, with each item
of equipment weighing a considerable
number of tonnes and which are expected
to regularly move around to a number of
locations throughout a shift. The operation
of mining equipment is inherently dangerous
if operators are not correctly trained, or
if due care and attention are not applied
when operating each item of equipment.
Activities within a mine include the drilling and
blasting of rock, excavation and transport of
ore to either the processing plant or waste
dumps, watering of surfaces to reduce dust
emissions and the construction of waste
dumps to a specified design. Activities are
typically conducted 24 hours a day, at which
during certain time, poor weather and low
light conditions are a risk for operators,
even though the Group has extensive
lighting on equipment during dark hours.

Risk mitigation

The Group’s approach to mitigating safety
risks is to understand the causal factors
of safety incidents, through creating
risk registers for each activity being
undertaken or area within the Group’s
main operations. The Group also records
leading indicators of safety, with an aim
to monitor and improve these factors, to
reduce the risk of a safety-related incident
occurring. Examples of leading indicators
include the number of training courses
undertaken, high visibility safety tours by
senior managers, safety inspections and
hazard reports completed. In the instance
of a safety-related event occurring, the
Group aims to learn from each event, to
reduce the risk of a repeat occurrence.
Lagging indicators of safety help the
Group’s management team to record
the effectiveness of safety measures
being implemented, and the main
indicators used to track performance are
the Group’s lost time injury frequency
rate (“LTIFR”), total recordable injury
frequency rate and fatalities.

Throughout its operations, the Group
is seeking to implement modern
forms of technology, including
autonomous equipment, which
help to remove operators from
hazardous working environments.

1. Source: Reuters, link. (Accessed 23 February 2024)
2. Source: Reuters, link. (Accessed 23 February 2024)

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS88

Principal Risks continued

4. Operating risks (continued)

4.4. Risks relating to operating costs

Responsibility
Executive Chair and
Chief Financial Officer

Risk appetite
Low

Link to strategy
2 and 5

The use of natural gas is a key component of
the Group’s pelletising operations and its use
is therefore essential for the production of iron
ore pellets.

The Group is also aware of potential risks that
relate to recent events with the Group’s UBO
(see pages 76 to 78), which may affect
Ferrexpo’s ability to source key input materials
and labour either within Ukraine or overseas.
Should third party concerns relating to these
matters prevent Ferrexpo from engaging in
business relationships with specific providers
of materials and skills, then the Group may
incur difficulties in its ability to produce, or
incur higher costs relating to the sourcing of
the same inputs from a smaller group of
providers or people.

The Group benefits open access to the
energy market, allowing it to obtain energy
resources at market prices. Additionally, the
cost of production is supported by the
depreciation of the national currency and
long-term relationships with suppliers of key
standardised materials.

Risk mitigation

The Group has operated through a
number of commodity cycles and the
Group’s operations have been in
production for over 50 years, and through
this experience of operating, the Group’s
management team has developed an
understanding of cost effective production
and the required level of goods and
services to optimise the Group’s
profitability at any given level of
production.

The Group has a number of measures in
place to reduce and minimise operating
costs, where possible, to maintain
profitability throughout any given
commodity cycle. For input goods that
are a requirement of the production of
pellets, the Group aims to minimise use
and develop substitutes for use in the
Group’s operations, which may help
reduce reliance on a single input (or
limited number of inputs), and thereby
reduce risks relating to the cost and
supply of individual inputs. As an
example, a partial substitute would be the
use of sunflower husks in the Group’s
pelletiser, which is used to fuel the
pelletiser. In 2023, the Group successfully
sourced 32% of the pelletiser’s heating
energy from sunflower husks (2022: 21%).
Other examples of substitution of goods
within the Group’s operations include the
use of different manufacturers of mining
equipment, with different suppliers of
spare parts, which reduces operational
risks and can reduce operational costs.

The Group’s business comprises a number of
open-pit mining operations, an iron ore
processing complex and a range of ancillary
activities that support the safe production of
the Company’s products, which requires a
range of input goods and services. The
Group’s costs are subject to a range of
factors, some of which are controlled by the
Group, whilst others are outside of the
Group’s control, meaning that resulting
profitability may fluctuate.

The Group operates in an energy intensive
industry, and therefore requires a range of
commodity-based inputs such as diesel and
natural gas, as well as electricity, which are
subject to market factors outside of
Ferrexpo’s control and can influence the
Group’s overall profitability. Examples include
natural gas prices which increased
significantly during 2022, though have abated
in 2023.

Further to energy costs, inflationary pressures
continued to be absorbed during 2023. Cost
inflation has the potential to affect a wide
range of the Group’s input costs at its
operations, with the Group potentially not able
to effectively counter such pressures due to
the benchmark pricing of the Group’s
products.

A primary cause of cost inflation has been the
Group’s inability to operate at its nameplate
capacity due to the war in Ukraine, resulting
in the absorption of fixed cost on lower
production, i.e. increasing unit costs.
Additionally, inflationary pressures have been
seen on a global basis since 2022, a reflection
in energy prices, though in turn equipment
and maintenance costs, salaries and wages.
Consumer price inflation in Ukraine in 2023 is
estimated to have slowed to 12.9%1 (2022:
26.6%2), reflecting the exceptional
circumstances experienced since 2022 in
Ukraine, but also globally. Given that the
Russian invasion of Ukraine remains ongoing,
it is expected that the negative impacts of the
war will continue to be experienced by the
Group, such as lower production and higher
unit costs.

Ferrexpo plc Annual Reports & Accounts 2023

4. Operating risks (continued)

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

Responsibility
Executive Chair

Risk appetite
Low

Link to strategy
1, 2 and 3

The Group is increasingly adapting to modern
technologies for the safe, efficient and cost
effective production of its products and the
associated ancillary services. With IT systems
becoming increasingly important to the
Group’s business activities, the risks
associated with IT security and the continued
availability of IT systems have increased in
recent years, particularly in light of the
increased complexity of cyberattacks on IT
systems. Cybersecurity threats may take the
form of, but are not limited to malware,
ransomware, phishing, denial-of-service
attacks, and password attacks.

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

A consequence of the war is a shortage of IT
personnel due to conscription. The availability
of skilled IT people is becoming a challenge in
Ukraine and replacing people can take longer
than before the war.

The Group is exposed to heightened risks
related to cybersecurity at the present. The
war takes place in a number of environments,
including attacks on IT systems in Ukraine.
Attacks can be expected on any IT system in
Ukraine as a result of the war, and therefore,
organisations such as Ferrexpo may be the
target of an attack due to its location, or as
part of a hybrid war to damage the economy
of Ukraine. Consequently, it is difficult for the
Group to predict the source, scale or nature
of any cyberattack.

Risk mitigation

The Group’s IT department conducts
regular reviews of the general IT
landscape and provides regular cyber
awareness training for employees as well
as ad hoc notification when new threats
are identified. The Group also regularly
reviews requirements on data protection,
with email security bulletins circulated to
ensure internal IT users are provided with
up-to-date information on cybersecurity.
The Group has also implemented a
dynamic approach to anti-malware
policies, to ensure an adaptive approach
for new threats as they emerge.

In 2023, the Group’s IT infrastructure was
adapted to meet the needs of longer war.
The Group invested resources and efforts
in strengthening cross-backup
infrastructure to meet updated Group
disaster recovery policies.

Following a series of cyberattacks on
different corporate networks this year, the
Group’s IT department initiated a project
to upgrade the Group’s global network
connectivity links and their underlying
technology. As a result of these efforts,
the Group was able to withstand a DoS
attack this year with minimal disruption to
its production and communication
processes. Additionally, the IT department
,together with the executive committee,
constantly assess the need of ISO 2700x
compliance audits on bi-quarterly or
quarterly term. In parallel, the Group must
respond to the possibility of cyberwarfare
and conventional warfare tactics, for
example by commissioning of additional
IT infrastructure in bomb shelters. Other
examples of vigilance include the
deployment of extensive power control
systems, and urgent upgrades and
migrations due to vulnerabilities.

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

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS90

Principal Risks continued

5. Risks relating to climate change

Responsibility
Board of Directors including Executive Chair

Risk appetite
Low

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

With regard to Scope 1 and 2 emissions,
the Group has initiated a number of projects
to reduce these categories of emissions,
including a clean power purchasing strategy.
Further information on the Group’s Scope 1,
2 and 3 emissions can be found on pages
36 to 37. The Group is continuing to study
options to reduce diesel consumption
by installing clean electricity powered
pantograph-trolley-assist technology to
haul trucks out of the open pit mines.

Through these projects, the Group stated
objective was to produce iron ore pellets on
a net zero basis by 2050. For further details
of the net zero pathway identified through
working with Ricardo Plc, as well as the
Group’s carbon emissions reduction targets,
please see the Group’s Climate Change
Report for 2022 on the Group’s website here.

The Board and management team
understand that further reductions in these
emissions are possible in the coming
years, however, due to a protracted war
there is no certainty that these can be fully
achieved. This means that the Board will
need to assess its targets and possibly
restate the Group’s Net Zero pathway.

Climate change represents a challenge for
the modern world, with multiple stakeholders
seeking to adapt to a low-emissions future.

Climate change poses a number of physical
and transition risks as the world seeks
to reduce emissions and its reliance on
technologies and activities that are relatively
intensive for the emission of greenhouse
gases. See Note 2 Basis of preparation for
details on potential impact on the consolidated
financial statements. Physical risks are those
that affect the physical environment – such as
increased heat events, prolonged droughts
and low water levels, dust emissions, and
the increased severity of precipitation
events. Transition risks are those that relate
to society’s shift to a low emissions future,
such as reputational risks and the risk of
technologies becoming redundant in a low-
emissions future.. A review of potential climate
change related risks was conducted as part
of the work carried out with environmental
consultants Ricardo Plc in 2022, with this work
detailed in the Group’s Climate Change Report.
A materiality assessment as part of this work
identified the following as the main risk areas
facing Ferrexpo: (a) demand for low carbon
emissions steelmaking, (b) shipping: targets
and regulations on carbon emissions and (c)
carbon pricing/tax: targets and regulations
on carbon emissions. Further details of
the work completed in collaboration with
Ricardo Plc are available in Ferrexpo’s Climate
Change Report on the Group’s website.

At this stage in the global development
curve on climate change science and
decarbonisation efforts, there is a
heightened degree of stakeholder focus
on decarbonisation efforts. Given this
focus, there is an associated expectation of
progress being made that may not match
the availability of relevant technology and
equipment, or the financial viability of any
technology, and therefore there is a risk of
rising stakeholder concern if a company’s
decarbonisation plans and targets are not
effectively communicated, or are deemed
insufficient. Should stakeholders require
further action or increased efforts for
decarbonisation of a business, this may
create additional financial, operational
and reputational risks for the business.

Risk mitigation

The Group understands the importance of
climate change, both in its impact on the
business, as well as the Group’s potential
impact on climate change. The Group
aims to reduce its emissions over time and
has set a series of reduction targets for
its greenhouse gases (principally carbon
dioxide) for the medium and long term
(2030 and 2050, respectively). In December
2022, the Group published its inaugural
standalone Climate Change Report, which
represents the first phase of work completed
with environmental specialists Ricardo Plc.
This report details a number of measures
that the Group is either utilising today to
reduce emissions, or plans to use in the
future, in order to achieve these emissions
targets. The full report is available on the
Group’s website https://www.ferrexpo.
com/news-media/press-releases/2022/
publication-of-climate-change-report/).

The Group has a streamlined approach to
reducing emissions, focusing where possible
on activities that generate the greatest
emissions, as well as identifying low cost
solutions that may reduce the impacts of the
Group’s activities. The main source of the
Group’s overall emissions (being Scopes
1, 2 and 3 collectively) is the downstream
use of iron ore pellets in steelmaking, which
accounted for 85% of total emissions in the
Group’s baseline year of 2019. In order to
reduce this aspect of emissions, one of the
Group’s objectives is to increase its focus
on production of direct reduction (“DR”)
pellets, which are used in an alternative
method of steelmaking (the direct reduced
iron – electric arc furnace process), which
results in DR pellets generating 37%
lower emissions when converted to steel,
compared to the Group’s blast furnace
pellets, as assessed by Ricardo plc. More on
this can be seen on page 42 in this report.

Ferrexpo plc Annual Reports & Accounts 2023

Viability Statement

Review of planning process and outlook

Assessing the Principal Risks to our business
model and potential financial impact of an event
occurring, protecting the equity value of our
business for the benefit of all our stakeholders.

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 74 to 90.

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 time horizon
of 12 to 18 months, in light of the ongoing
war in Ukraine and the material uncertainties
operating in developing economy that this poses
to the Group in terms of its going concern and
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 to 18 months.

Factors associated with
the war in Ukraine
Due to the significance, scale and unpredictable
nature of the ongoing 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. Since the full-scale Russian invasion
of Ukraine on 24 February 2022, the Group has
demonstrated a resilience that has enabled
it to operate with a high degree of flexibility,
and to adapt its operations to changing
circumstances, albeit at lower capacity.

Emerging and existing risks related to the
ongoing war are reported to the Executive
Committee, available risk mitigation procedures
are discussed, and the results are regularly
reported to the Group’s Board of Directors. Risks
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, including
the availability of logistics capacity required
for the delivery of the Group’s products to
customers and the supply of key input materials
required for the production process. For more
information, please see the Principal Risks
disclosed on pages 74 to 90 of this report.

Factors associated with operating
in a developing economy
In addition to the war-related material uncertainty,
the Group is also exposed to the risks associated
with operating in a developing economy, which
may or may not be exacerbated by the war or
the current circumstances facing the Group’s
controlling shareholder (see Ukraine country
risk on pages 76 to 78). As a result, the Group
is exposed to a number of risk areas that are
heightened compared to those expected in a
developed economy, including political, legal
and fiscal uncertainties, which represent other
material uncertainties at the time of the approval
of the consolidated financial statements.

As disclosed in Note 30 Commitments,
contingencies and legal disputes, several
circumstances facing the Group have led to an
escalation of certain risks, including risks relating
to the political environment and the independence
of the legal system, which could have a material
negative impact on the Group’s business activity
and reputation and as a result its viability. The
main risks relate to a contested sureties claim in
the amount of UAH4,727 million (US$124 million
as at 31 December 2023), which was confirmed
on 26 January 2024 by a Ukrainian court of
appeal, and the application to open bankruptcy
proceedings (“creditor protection proceedings”)
against the Group’s major subsidiary in Ukraine
filed by a supplier and related party to the
Group for an amount of UAH4.6 million (US$117
thousand as at 15 April 2024. The possible
commencement of the enforcement of the
decision of the Ukrainian court of appeal, which
is currently suspended by the decision of the
Supreme Court of Ukraine, and the possible
opening of creditor protection proceedings
might affect the Group’s ability to continue
as a going concern and, as a consequence,
its viability. See Note 2 Basis of preparation
and Note 30 Commitments, contingencies
and legal disputes to the consolidated
financial statements for further information.

Factors associated with
climate change
The Group has considered a range of physical
and transition risks, as outlined on page 45 of
this report and depicted in detail in the Group’s
Climate Change Report. This process has
identified that the transition to a low carbon
economy and demand for low emissions
steelmaking as being the main climate-related
risk facing Ferrexpo and its business model.
A range of additional transition and physical
risks were considered as part of this review.

Previously, the Group has announced a range
of climate-related emissions reduction targets
for the years 2030 and 2050. In achieving these
targets, so far a 32% reduction achieved since
2019 for Scope 1 and 2 emissions (combined
basis, per tonne of production). The Board
understands that further reductions in these
emissions are possible in the coming years,

Ferrexpo plc Annual Reports & Accounts 2023

however, due to a prolonged war there is no
certainty that these can be fully achieved. This
means that the Board will need to consider its
targets and possibly restate the Group’s Net
Zero pathway at some point in the future.

Business planning process
In response to the ongoing war in Ukraine, the
Group has temporarily revised its approach
to its business activities and investments
from its business model shown on pages 8
to 9. This approach has been implemented
to concentrate on the Group’s ability to
continue to generate cash in the challenging
operating environment, which will enable the
Group to employ its workforce, preserve its
assets and sustain its business. As a result,
investments are currently focused on settlement
commitments related to expenditure on growth
capital projects, affordable sustaining capital
expenditure and 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 to maintain
a clear understanding of the risks faced by the
business and how these factors may influence
the business. Following the start of the full-scale
invasion of Ukraine, the Group’s management
team has also focused on constantly assessing
the risks that may directly, or indirectly, impair
the Group’s ability to manage the Ferrexpo
business in light of the impact of the war on the
business and operating environment in Ukraine.

Modelling process
In the normal course of business, the Group
operates a detailed 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. As a result of the continued restricted
access to the logistics network in Ukraine, the
level of the Group’s production remains aligned
to currently possible sales to minimise working
capital outflow and maintain a solid net cash
position. As a result, the production capacity
used for the base-case cash flow projection
is expected to be approximately 45% of the
pre-war level for the financial year 2024, before
an increase to approximately 80% in 2025 and
an expected recovery to pre-war levels in 2026.
In addition to the impact of the available logistics
network, the Group’s management team has also
assessed the risks associated with the potential
disruption of the supply of key consumables, such
as natural gas, electricity and diesel fuel, in addition
to the supply of critical pieces of equipment. The
Group has also considered external and internal
analysis of the short-term and longer-term supply

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS92

Viability Statement continued

and demand dynamics on the international market
for iron ore products as well as more specific
local supply and demand balances affecting its
major customers to assess the expected pricing
of the Group’s iron ore products for the period
covered by the Group’s long term model.

Stress testing
In determining the viability of the business, the
Directors have stress tested the individual risks
and combination of risks that could materially
affect the future viability of the Ferrexpo business.
At the present time, the risk that the Group
is primarily exposed to is the ongoing war in
Ukraine and current circumstances facing the
Group’s controlling shareholder in Ukraine
(see the Principal Risks section, pages 74 to
90). Historically, Ferrexpo’s business model
has also faced risks relating to the volatility
of iron ore fines prices, pellet premiums and
cost inflation in Ukraine, which are factors that
continue to govern the Group’s profitability.

As mentioned above, it is currently expected that
the Group will only produce again at full capacity
in 2026 which will be contingent on the ongoing
war in Ukraine, its effects on the Group’s ability
to operate its assets in Ukraine, and the ability
to deliver its products to the Group’s customers.
For a summary of the various war related impacts
on the Group, please see pages 6 and 7.

The Group’s long-term financial model is adjusted
to primarily reflect below full capacity production
due to limited logistics access. The Group’s sales
volumes in future periods will depend on the
potential to expand seaborne sales to the Group’s
customers beyond Europe. The Group’s financial
model anticipates some optionality for seaborne
sales when it is considered safe to do so.

Assuming no mitigating actions, the
Group’s financial modelling indicates
the following sensitivities:

– A 10% reduction in the received price in 2024
would reduce the Group’s Underlying EBITDA
by US$11.0 per tonne.

– A general 10% increase in the cost of

production would decrease Group Underlying
EBITDA by US$6.1 per tonne,

– A 10% decrease in production volumes and
associated 5% increase in production costs,
would decrease Underlying EBITDA by
US$7.6 per tonne.

Sensitivities beyond 2024 will depend
on the underlying sales and production
volumes, realised prices and production
costs during each period, in addition to
other unknown macro-economic factors.

As a result of the remaining material uncertainty
outside of the Group’s control, the Group has
also prepared stress tests with more severe
adverse changes, such as a combination of
various sensitivities, which is however less
likely to incur due to a natural hedge between
iron prices and prices for key input material,
and a prolonged period of lower production
and sales volumes as seen during the months
December 2022 to February 2023. The stress
test for the most severe adverse changes, such
as a combination of all reasonably possible

or plausible adverse changes, shows that the
Group would deplete its available cash balance
by November 2024, without making use of any
available mitigating actions within its control. It
is however management’s position that such
a combination is unlikely to happen as a result
of the historical natural hedge between iron
ore prices and prices for key input materials.

Following a negative decision from the court
of appeal in respect of a contested sureties
claim received, the Group recognised a full
provision in the amount of UAH4,727 million
(US$124 million as at 31 December 2023) for
this claim. A potential future cash outflow,
which also depends on the details of a possible
enforcement in the event of a negative decision
by the Supreme Court, is likely to have a
significant impact on the Group’s future cash
flow generation and available liquidity and its
viability. See also Note 2 Basis of preparation
and Note 30 Commitments, contingencies
and legal disputes for further details.

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; and
– Operating constraints due to Ukrainian

country risk.

In respect of mitigating actions in response to
the conflict in Ukraine, please see page 75 for
more detail. In more general areas, mitigating
actions implemented by the Group may include,
but are not limited to, a reduction or cancellation
of discretionary expenditure such as dividends,
non-essential capital investment and repairs
and maintenance, or other operating costs,
adjusting capital allocation, reducing working
capital requirements, altering mining schedules
and accessing additional funding. The Directors
take comfort in both the Group’s historical
cash generation ability, particularly in 2015 and
2016 at a time when the iron ore price traded at
historically low prices, and the Group’s ability to
repay its debt facilities, with the early repayment
of the Group’s principal debt facility in June 2021.
This ability to repay debt facilities is derived from
the operational flexibility of the Group and level
of cash generation, as demonstrated through
the Group’s ability to continued shipment of
products in 2022, despite the war in Ukraine.

As a result of the Group’s flexibility and resilience,
the Group’s net cash position increased by a
relatively small amount during 2023. Since the
end of 2020, the Group has moved into a net
cash position, and had a net cash position of
US$108 million as at 31 December 2023 (as of
31 December 2022: US$106 million). As at the
date of the approval of the Group’s Consolidated
Financial Statements, the Group is in a net cash
position of approximately US$91 million and
has an available cash balance of approximately
US$96 million. Based on the assessment
performed, the Directors have a reasonable
expectation that the Group will be able to
continue to operate and meet its liabilities as they

Ferrexpo plc Annual Reports & Accounts 2023

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 continued ability to operate in Ukraine;
the ability to redesign the Group’s mining and
processing plans in order to align them to
changing circumstances;
the continued availability of stable electricity
supply at the required level;
the ability to secure supplies of key
consumables and equipment; and
the ability to use the Group’s currently
available logistics network or make use of
alternative options, if needed.

As disclosed in Note 2 Basis of preparation in
the Group’s Consolidated Financial Statements
on page 176, although the Group has managed
to continue its operations since the beginning
of the war in a volatile and developing economy
in Ukraine, this continues to pose a significant
threat to the Group’s operations. The risks
of operating in a dynamic and adverse legal
system in Ukraine have been increased in 2023
and early 2024 and, as a result, the Group
recognised provisions totalling US$128 million
for ongoing legal disputes that represent another
material uncertainty resulting in its ability to
continue as a going concern (see Note 30
Commitments, contingencies and legal disputes
to the Consolidated Financial Statements
Having assessed the current situation of the
war in Ukraine and increase of certain risks,
including the political environment and the
independence of the legal system 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, such as the duration
and the impact of the war and/or political,
legal and fiscal environment in Ukraine, which
is currently not predictable. An unfavourable
outcome in a contested sureties claim and the
application to open bankruptcy proceedings
(“creditor protection proceedings”) against the
Group’s major subsidiary in Ukraine filed by a
supplier and related party to the Group might
have an adverse impact on the Group’s cash
flow generation, profitability and liquidity.

In performing this assessment, the Directors
have also considered the Group’s resilience
to climate change risks (covering a range
of physical risks and transition risks).

The Strategic Report was approved
by the Board on 17 April 2024 and
signed on behalf of the Board by:

Lucio Genovese
Executive Chair

Corporate Governance

A strong core
helps guide us

Governance
at a Glance

Strategic Report

Corporate Governance

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

Financial Statements

Additional Disclosures
Alternative Performance Measures
Glossary

94
96
98
100
101
103
104
114
121
126
152
157

158

235
236
238

Committee
Reports

114-151

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS94

Executive Chair’s Introduction

Committed to upholding high
standards of corporate governance
during exceptionally challenging times
and delivering on our promises.

Lucio Genovese,
Executive Chair

Dear Shareholder
At the time of writing, the war in Ukraine
has been ongoing for more than two years,
and so before reflecting on the progress
made during 2023, it is important to
acknowledge the devastating impacts which
the Russian invasion of Ukraine is having on
Ukraine and the people, local communities,
businesses operating within the country
and the day-to-day lives of Ukrainians.

Now more than ever strong governance is
essential to help see Ferrexpo through these
exceptionally challenging times. As you
would expect, the Board has been meeting
regularly to discuss the ongoing situation
in Ukraine, receiving regular updates from
the management team as to the Group’s
response and scenario planning for different
eventualities that may impact the business.
Protecting the Group’s workforce remains a
key priority, as well as taking steps to protect
the business and thereby the stakeholders of
the business. This will remain a key priority
during 2024 and the Board will continue to
focus on exercising strong governance during
these unprecedented and 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
underpin 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 UK Corporate
Governance Code during the year.

The Board’s role includes managing the
risks facing the business. This includes
taking into account the risks associated with
the country of operation, counterparties,
operational and financial risks including
health, safety, environmental and climate
change risks, together with market volatility
and commodity 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 sustainable success of Ferrexpo plc.

Operation of the Board during the
war in Ukraine and governance
framework
Against the backdrop of the continuing war in
Ukraine, we remained focused on the health,
safety and wellbeing of our people globally,
who have continued to deliver for the Group,
our shareholders and stakeholders through the
testing times over the last couple of years. Our
people have helped ensure business continuity
and have safeguarded our operations, whilst
maintaining good corporate governance
practices and our system of internal control.
During the year, the Board has continued to
operate effectively and without disruption
notwithstanding the ongoing challenges
facing the Group. Some Board members
attended Board meetings virtually due to
travel restrictions. All scheduled Board
meetings were held and the Board continued
to uphold and maintain good corporate
governance, the corporate agenda and the
flow of information across the Group.

We have also ensured Directors’ on-boarding
programmes continued as planned. The
format of hybrid (combination of physical
and virtual) Board meetings provided the
Board with greater opportunities to engage
with each other, management and members
of the workforce. During 2023, the Board
site visit to our operations in Horishni Plavni
was cancelled due to the Russian invasion
of Ukraine as was the case in the previous
three years due to the Russian invasion of

Ferrexpo plc Annual Reports & Accounts 2023

Key highlights in 2023 and
early 2024:
– supporting our workforce and the
operations throughout the Russian
invasion of Ukraine;

– health and safety and employee wellbeing;
– zero fatalities;
– continued with the search for a Director

from an ethnic minority group;

– appointment of interim Executive Chair;
– appointment of Independent Non-

executive Director;

– appointment of Executive Director;
– appointment of Audit Committee Chair;
– appointment of female Independent

Non-executive Director to Chair HSEC
Committee;

– succession planning at Board and

management level;

– strengthened cyber security; and
–

focus on shareholder and key stakeholder
engagement.

Key priorities for 2024:
– supporting our workforce and the

operations through the Russian invasion of
Ukraine;

– health and safety and employee wellbeing;
– prepare for changes to 2024 Corporate

Governance Code;
recruit a Director from an ethnic minority
group;

– aim to improve Board diversity and meet

targets;

– succession planning at Board and diversity

at management level;

– continue focus on shareholder and key

stakeholder engagement; and

– continue to strengthen and broaden 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 2024 Annual
General Meeting 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
Executive Chair
17 April 2024

Ukraine and the global Covid-19 pandemic.
The Board site visit was replaced with a
Board Strategy Day followed by a regulatory
and legal upskilling and training Day.

the Board keeps its balance of skills,
knowledge, experience, independence and
diversity under review, which is beneficial in
bringing new perspectives to the Board.

We continued to enhance our shareholder
and stakeholder engagement and we
place their interests at the centre of our
considerations for key decisions. Our
Section 172 Statement set out on pages
64 to 71 provides further details on how
the Board complied throughout the year.

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

Supporting local communities
during the war in Ukraine
During the year, in addition to our continued
support for communities locally, the Ferrexpo
Humanitarian Fund which was set up as
a dedicated fund, initially in the amount of
US$1.5 million and increased to US$15 million,
continued to support the communities in
Ukraine. This funding enabled the purchase
of personal protective equipment and
equipment for local hospitals amongst other
things (see the Responsible Business section
of the Strategic Report on pages 32 to 63.

In addition to the Ferrexpo Humanitarian
Fund, regular community support activities
took place largely in Ukraine and donations
were made within a Board-approved
framework agreed annually at the time of
setting the budget. All such community
support and donations are subject to internal
control and approval limits applicable
within the individual subsidiaries of the
Group, which are set by the Board.

The Board exercises control of the Ferrexpo
Humanitarian Fund and local charitable
spending via its Health, Safety, Environment
and Community (“HSEC”) Committee,
which oversees and directs these activities
and receives reports detailing the spend.

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

Further to significant Board changes and
commitments made last year, we announced
further changes to the Board and Board
Committee roles during the year. In
accordance with best practice requirements
of the UK Corporate Governance Code,

resigned as an independent Non-executive
Director and Chair of the Audit Committee.

–

– On 25 May 2023, Jim North resigned as an
Executive Director and Nikolay Kladiev was
appointed as an Executive Director.
Ann-Christin Andersen resigned as an
independent Non-executive Director and
Natalie Polischuk was appointed as Chair
of the Group HSEC’s Committee.

– On 30 June 2023, Jim North resigned as
Chief Executive Officer. On behalf of the
Board and everyone at Ferrexpo, I would
like to thank Jim for his significant and
outstanding contribution to the Group to
modernise and optimise operational
efficiency and exemplary leadership while
transforming the entire business and
establishing the foundations for Ferrexpo’s
growth strategy in Ukraine.

– On 1 July 2023, I was appointed to act as
Executive Chair on an interim basis and
assume leadership of the Group.

– On 22 October 2023, Stuart Brown was

appointed as an independent Non-
executive Director and a member of the
Audit Committee.

– On 31 December 2023, Graeme Dacomb

– Since the end of the reporting year, on
1 January 2024, Stuart Brown was
appointed as Chair of the Audit
Committee.

Throughout the year, the Board continued
to search for an Independent Non-executive
Director from an ethnic minority group,
led by the Nominations Committee and
supported by external consultants.

Until May 2023, there were three female
Directors further strengthening Board
independence and diversity. Due to Board
changes, by the end of the year female
representation unfortunately dropped down
to 29% but currently stands at 33%.

Board performance review
In line with the UK Corporate Governance
Code, Board performance was assessed
externally in 2021 and internally in 2022.
Therefore, during the year, an internally
assessed review of the performance and
effectiveness of the Board, its Committees
and each of the Directors was undertaken.
A report on the process, activities, findings
and actions of the evaluation can be found
on pages 110 to 112. An external Board
performance evaluation will take place in 2024.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS96

Governance at a Glance

Group structure

SHAREHOLDERS

BOARD

AUDIT
COMMITTEE

REMUNERATION
COMMITTEE

NOMINATIONS
COMMITTEE

Responsibilities include:

– Monitoring integrity of financial statements.
– Reviewing internal control and risk

management systems.

– Relationship with external auditor.

– 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.

– 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.

–

Read the Audit
Committee Report
on page 114

Read the Directors’
Remuneration Report
on page 126

Read the Nominations
Committee Report
on page 121

COMMITTEE OF INDEPENDENT
DIRECTORS (“CID”)

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

EXECUTIVE CHAIR AND
EXECUTIVE COMMITTEE1

Responsibilities include:

– Ensuring compliance with related party

– Formulating and monitoring the

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.

implementation of the Group’s policy on
issues relating to health and safety,
environment and community as they affect
operations.

– Execution of Board-approved strategies.
– Delegated authority levels for senior

management.

– Development and implementation of Group

policies.

– Specific focus on safety and climate change

– All material matters not reserved for the

impacts.

entire Board.

Find out more
on page 106

Find out more in the
Responsible Business section
on page 32

Find out more
on page 102

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

Ferrexpo plc Annual Reports & Accounts 2023

Board diversity, tenure and balance

Board balance

Board diversity – Gender

Board diversity – Age

2023

Independent:

Non-independent:

Executive Chair:

Executive:

Female:

Male:

40-49:

50-59:

60+:

Board diversity – Ethnic group

Board tenure

2023

White:

Mixed/Multiple
Ethnic Group:

0-5 years:

5-9 years:

9+ years:

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

Ferrexpo plc Annual Reports & Accounts 2023

100%

% of Board
members

63%

71%

67%

71%

92%

88%

67%

71%

75%

79%

92%

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS98

Board of Directors

An experienced Board

Raffaele (Lucio) Genovese
Executive Chair

Date of appointment
1 July 2023 as Acting Executive Chair

24 August 2020 as Chair

13 February 2019 as Non-independent
Non-executive Director

Current external appointments
Currently, he serves as chair of CoTec
Holdings, listed on NEX Board of the TSVX,
since 2021; and chief executive officer of
Nage Capital Management AG, a Swiss based
investment and advisory firm, since 2004.

Previous appointments
Previously, he was non-executive director of
Nevada Copper Inc 2016–2023; non-executive
director of Mantos Copper SA, 2015–2022;
independent non-executive director of Ferrous
Resources Limited, 2014–2019; chair of Firestone
Diamonds Plc, 2012–2020; an Independent Non-
executive Director of Ferrexpo plc, 2007–2014;
senior executive 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 35
years of commercial experience in the metals
and mining industry. He worked at Glencore
International AG where he held several senior
positions including the CEO of the CIS region.

Lucio brings a deep knowledge across the Ferrous
and Non-Ferrous Mining sector, including in iron
ore. He has extensive experience of operating in
emerging markets, specifically in the CIS states.
As a previous Board member (from 2007 to 2014)
and as a Board member of Ferrexpo AG, Lucio
has in-depth knowledge of the Group which is
extremely valuable to the Company at a Board level.

Nikolay Kladiev
Executive Director
Chief Financial Officer

Date of appointment
25 May 2023 as Executive Director

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

Current external appointments
N/A

Previous appointments
Nikolay 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 18 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, expertise and contribution
Nikolay is a Chartered Accountant (UK) and has
a Masters in International Economic Relations
from Kyiv National Economic University.

Fiona MacAulay
Senior Independent
Non-executive Director

Date of appointment
12 August 2019

10 February 2022 as Senior Independent Director

Current external appointments
Non-executive director of Dowlais Group plc
since April 2023; Non-executive director of
Costain Group Plc since April 2022; non-executive
director of Chemring Group plc since 2020.

Previous appointments
Previously, she was non-executive chair of IOG Plc
2019–2023; non-executive director of AIM listed
Coro Energy, 2017–2022; chief executive officer
of Echo Energy plc, 2017–2018; 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. In 2022, she completed a Diligent
Climate Leadership Certification programme.
She has extensive operational experience in
emerging energy which enables her to bring
positive insight on a broad range of issues
to Board and Committee discussions.

Committee membership

N/A

Ferrexpo plc Annual Reports & Accounts 2023

Gender breakdown

Key to committee membership

Male

Female

67%

33%

Audit Committee

Remuneration Committee

Nominations Committee

Committee of Independent
Directors (“CID”)

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

Executive Chair and Executive
Committee

C Committee Chair

Vitalii Lisovenko
Independent
Non-executive Director

Natalie Polischuk
Independent
Non-executive Director

Stuart Brown
Independent
Non-executive Director

Date of appointment
28 November 2016

Date of appointment
29 December 2021

Date of appointment
22 October 2023

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.

Current external appointments
Currently, he serves as Non-executive Chairman of
Lucapa Diamond Company Limited, since 2024.

Previous appointments
Previously, he was president and CEO of Mountain
Province Diamonds Inc 2018–2021; CEO of
Firestone Diamonds Plc 2013–2018; Group CFO
and Acting Joint CEO De Beers Group 2006–2011

Skills, expertise and contribution
Stuart is a seasoned mining executive with
extensive board-level experience. He previously held
both CFO and CEO roles at De Beers and its various
subsidiaries, where he played a central role in
reshaping the group and positioning it for the future.
Most recently, Stuart served as President and CEO
at Mountain Province Diamonds Inc., a company
listed on the Toronto Stock Exchange, and as CEO
of Firestone Diamonds Plc, formerly listed on AIM
where he established a track record of building
teams and leading business transformation to
develop lean, agile, high-performing organisations.

Current external appointments
Currently, he serves as a non-executive advisor
to the Minister of Finance of Ukraine, having
previously served as an executive counsellor
to the Minister of Finance. He also serves as a
non-executive director of the Supervisory Board
of National Depositary of Ukraine since 2014.

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

Skills, expertise and contribution
Vitalii contributes to Ferrexpo plc over 25
years’ experience in government 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

Non-executive Director designate
for workforce engagement.

Natalie was appointed as a member of the
Committee of Independent Directors in
February 2023. She was appointed Chair
of the HSEC Committee in May 2023.

Stuart was appointed Chair of Audit
Committee and a member of the Remuneration
Committee in January 2024. He was
appointed a member of the Committee of
Independent Directors in February 2024.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

100

Executive Committee

An experienced and focused
Management Team

Raffaele (Lucio) Genovese
Executive Chair

Nikolay Kladiev
Chief Financial Officer

For more information see page 98 for details.

Viktor Lotous
FPM General Director and the Chair of
FPM Supervisory Board

Viktor brings to the Executive Committee
more than 35 years of mining and processing
experience as well as deep understanding
of Ferrexpo, its culture and context.

Skills and experience
Viktor began his career with FPM in 1986. In 1997,
he assumed the role of Chief Engineer and in
2007 was appointed General Director and Chair
of the Supervisory Board of FPM. In this role, he
is charged with leading and ensuring safe and
responsible operations, optimising performance,
executing future growth options and delivering
commercial value across the company’s operational
footprint in Ukraine. In 2023, Viktor additionally
assumed the position of Chief Operating Officer, on
an interim basis, with operational oversight of the
Group’s assets in Ukraine. He is a graduate of Kryvyi
Rih Mining and Ore Institute, and of the Kyiv National
Economic University, specialising in Finance.

Greg Nortje
Chief Human Resources Officer

Yaroslavna Blonska
Acting Chief Marketing Officer

Greg joined Ferrexpo in January 2014.

He previously held a variety of international
Human Resources leadership positions with Anglo
American and BHP Billiton before establishing
his own human resources consultancy firm
to a range of clients across the UK. Particular
specialisms include project management and
business change execution, organisational
effectiveness, talent management, governance
and compliance, and leadership development.

Skills and experience
He has Advanced Management 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.

Yaroslavna was appointed the Acting Chief
Marketing Officer on 22 August 2022.

Yaroslavna joined Ferrexpo in 2002.

Since joining Ferrexpo Yaroslavna has held a
number of key roles within the Group’s Marketing
team, including Head of Sales for customers in
Europe and Turkey, management of the Group’s
Asian and European customers, membership
of the representative board for the Group’s port
loading subsidiary, TIS-Ruda. Yaroslavna has been
acting as a focal point for the Group’s government
and public relations within Ukraine. She has also
been managing Ferrexpo’s office in Kyiv since
2006. Yaroslavna has been helping to facilitate
the Group’s Fe_munity Women in Leadership
programme as a speaker and a mentor.

Skills and experience
She holds a Master of Business Administration
degree from Kyiv State Economic University
and a post graduate Diploma in Law from
Taras Shevchenko National University, Kyiv.

Ferrexpo plc Annual Reports & Accounts 2023

Corporate Governance Compliance

101

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 2023 with all the provisions of the 2018 Corporate
Governance Code except as set out below:

– Provision 9: The Chair was not independent on appointment and the role of Chief Executive and Chairman is undertaken by one person –

Lucio Genovese, the Company’s Executive Chair.

– 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,
the role of Chief Executive and Chairman should not be undertaken by the same person 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 2023. 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 2023 except for Provisions 9 and 19. Provision 9 recommends
that the Chair be independent on appointment and the role of the Chair and Chief Executive should not be undertaken by the same person.
Provision 19 recommends that the Chair should not remain in post beyond nine years from the date of first appointment to the Board.

Explanations for non-compliance with Provision 9 and 19:

As explained in previous annual reports the Chair was not independent on appointment, however, the Board was 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 mindset and brings valuable challenge to the Board based on
his in-depth understanding of the key drivers and challenges faced by the Group.

Following the resignation of the Chief Executive Officer, the decision was taken to combine the roles of the Chair and Chief Executive Officer on
an interim basis as with the ongoing war in Ukraine and the need for business continuity it was not considered the right time to commence an
external search process for a new Chief Executive Officer.

Although the role of the Chair and Chief Executive are undertaken by the same person, the Board believes that there is sufficient separation of
responsibilities of the roles usually undertaken by the Chair and the Chief Executive Officer amongst the Executive Chair, the Chief Financial
Officer, the Senior Independent Director, the Committee of Independent Directors, the Group Company Secretary and the Company’s Senior
Management team. The Board, with assistance from the Nomination Committee, keeps this temporary arrangement under review.

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 re-joined
the Board in February 2019 as a non-Independent Non-executive Director. In August 2020 he was appointed as Chair of the Board and most
recently in July 2023 he was appointed interim Executive Chair.

Mr Genovese has led the Board through the continuing Russian invasion of Ukraine, ensuring continuity of the Board agenda and meetings
together with ongoing corporate initiatives whilst operating at a time of war.

The Board believes Mr Genovese is the right person to chair the Board and exercise executive leadership of the Group at this time. To provide
continuity of his sound leadership, the Board requests your support to re-elect Mr Genovese at the 2024 AGM.

Further details on the composition of the Board and its Committees are set out on page 104 and further details of the role of the Senior
Independent Director are set out on page 106.

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:

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS102

Corporate Governance Compliance continued

Board leadership and
Company purpose

Principle A: Executive Chair’s Statement page 2, Stakeholder Engagement – Section 172 Statement pages 64 to 71,

Skills Matrix page 97

Principle B: Executive Chair’s Statement page 2, Our Business Model pages 8 to 10, Understanding our Strategic

Direction pages 12 to 14, Stakeholder Engagement – Section 172 Statement pages 64 to 71
Principle C: Key Performance Indicators pages 14 to 17, Risk Management pages 72 to 73, Principal risks pages 74

to 90, Internal Controls page 119

Principle D: Executive Chair’s Review page 2, Our Stakeholders page 65, Responsible Business: Safety and our
People page 34, Operating during a time of war: Local communities page 6, Responsible Business:
Governance pages 62 to 63, Stakeholder Engagement – Section 172 pages 64 to 71

Principle E: Non-Financial Information Statement page 63, Our engagement activities in 2023 page 64, Stakeholder

and workforce engagement page 108, Whistleblowing Policy page 120

Division of
responsibilities

Principle F: Executive Chair’s Introduction page 2, Statement of Compliance page 101, Role Descriptions page 106,

Board Leadership pages 107 to 109, Board Evaluation pages 110 to 112

Principle G: Group Structure page 96, Board of Directors pages 98 to 99, Role Descriptions page 106
Principle H: Corporate Governance At a Glance page 96, Board of Directors pages 98 to 99, Time Commitment page

Composition,
succession,
evaluation

105, Role Descriptions page 106

Principle I: Skills Matrix page 97, Time commitment and Non-executive Director external appointments during 2023

page 105, Board Leadership pages 107 to 109

Principle J: Diversity page 97, Nominations Committee Report page 121
Principle K: Board Diversity, tenure and balance page 97, Board Composition page 104 Skills Matrix page 97,

Succession Planning and Recruitment page 122

Principle L: Board Evaluation pages 110 to 112

Audit, risk,
internal control

Principle M: External Audit page 120, Internal Audit page 119
Principle N: Audit Committee Report pages 114 to 120, Responsibility statement of the Directors in respect of the

Annual Reports and Accounts page 157

Principle O: Risk Management pages 72 to 73, Principal Risks pages 74 to 90, Internal Control and Risk Management

page 119

Remuneration

Principle P: Remuneration policy pages 126 to 151
Principle Q: Our approach to remuneration page 126, Performance and Reward pages 126 to 127, Implementation of

the remuneration policy in 2024 page 128

Principle R: Remuneration Report pages 126 to 151

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

Ferrexpo plc Annual Reports & Accounts 2023

103

Diversity

We report our Board and executive management diversity data as at 31 December 2023 in accordance with the new UK Listing Rules disclosure
requirements and our progress in meeting the new UK Listing Rules board diversity targets.

As at 31 December 2023, following director changes during the year, women represented 29% of the Board see page 95 and accordingly the
target of 40% females on the Board has not been met. A male director resigned on 31 December 2023 which increased the percentage of
females on the board to 33% as at 1 January 2024. Fiona MacAulay is the Senior Independent Director, see page 98 and therefore one of the
senior Board positions was occupied by a woman; however, so far a Director from an ethnic minority background has not yet been appointed.
The Board remains committed to enhancing its gender and ethnic diversity and during the year, actively continued the search for a further
Independent Non-executive Director from an ethnic minority background, led by the Nominations Committee and supported by external
consultants, see page 124.

The gender diversity of the Board and executive management as at 31 December 2023:

Men

Women

Other categories

Not specified/prefer not to say

Number of Board
members

Percentage of the
Board

Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)*

Number in
executive
management

Percentage of
executive
management

–

71%

29%

–

83%

17%

–

The role of Chair and CEO were combined on 1 July 2023 and counted as one position in order not to double count.

The ethnic diversity of the Board and executive management as at 31 December 2023:

White British or other White (including minority-white groups)

Mixed/Multiple Ethnic Groups

Asian/Asian British

Black/African/Caribbean/Black British

Other ethnic group, including Arab

Not specified/prefer not to say

Number of Board
members

Percentage of the
Board

Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)

Number in
executive
management

Percentage of
executive
management

–

100%

–

100%

–

The role of Chair and CEO were combined on 1 July 2023 and counted as one position in order not to double count.

Notes:
– Executive management for these purposes includes the Group Company Secretary but excludes administrative and support staff (as defined by the UK Listing Rules).
–

The Company confirms that the approach to collecting data forming the basis of the gender and ethnic diversity of the Board and senior management of the Company was consistent
for the purposes of reporting under both LR 9.8.6R(9) and (10) and was consistent across all individuals in relation to whom data was reported. Board members, members of executive
management and the Group Company Secretary were provided with a standard form questionnaire on a strictly confidential and voluntary basis to allow the individual to self-report on
their gender and ethnicity (or to specify that they do not wish to report such data). The questionnaire was fully aligned to the definitions set out in the UK Listing Rules, with individuals
asked to specify:

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

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

African/Caribbean/Black British, (e) Other ethnic group, including Arab and (f) not specified/prefer not to say.

–

The Executive Committee includes the Group Company Secretary. For the purposes of the UK Corporate Governance Code, the gender balance of those in senior management (i.e. the
Executive Committee and their direct reports) was 68.2% male and 31.8% female.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS104

Corporate Governance Report

Controlling shareholder – Relationship Agreement
The Company’s largest shareholder is Fevamotinico S.a.r.l., which as at date of this report holds 49.3% of the voting rights in Ferrexpo plc.
Fevamotinico S.a.r.l. is wholly owned by The Minco Trust. The Minco Trust is a discretionary trust that has three 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. During the year, Mr Zhevago has not exercised this right. 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 2023.
– 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 2023.

– 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 2023.

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 96 to ensure compliance
with the Companies Act 2006, FCA Listing Rules and Disclosure Guidance and Transparency Rules and the UK Corporate Governance Code.
The terms of reference for each of the Audit Committee, Nominations Committee, Remuneration Committee and HSEC Committee are available
on the Company’s website at www.ferrexpo.com/about-ferrexpo/corporate-governance/board-committees.

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

Board composition and independence
As of 31 December 2023, the Board comprised two Executive Directors and five Independent Non-executive Directors who are considered by
the Board to be independent in accordance with the UK Corporate Governance Code. This structure ensures that the Executive Directors are
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 2023 is presented in the table below:

Board member

Role

R L Genovese

Executive Chair

F MacAulay

Senior Independent Non-executive Director

N Kladiev

V Lisovenko

G Dacomb2

N Polischuk

S Brown

Executive Director/Chief Financial Officer

Independent Non-executive Director and
Designate for Employee engagement

Independent Non-executive Director

1. The HSEC Committee also includes some members of senior management.
2. Resigned as a Director on 31 December 2023.
• Committee member.
•• Committee Chair.

Audit Remuneration

Nominations

CID

HSEC1

••

•

••

•

••

•

••

•

Ferrexpo plc Annual Reports & Accounts 2023

105

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 98 and 99.

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 Executive Chair 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 2023.

All of the Non-executive Directors have been able to make themselves available for the majority of the ad hoc Board and Committee meetings
and update calls held during the year, notwithstanding their external commitments. The attendance of the Directors at Board and Committee
meetings during 2023 is shown in the table below.

Non-executive Director external appointments during 2023
During 2023, Ms MacAulay was appointed as non-executive director of Dowlais Group PLC, a company listed on the London Stock Exchange.
This appointment was considered a significant appointment for Ms MacAulay for the purposes of the UK Corporate Governance Code, and, in
advance of the appointment, Ms MacAulay sought the prior approval of the Board. As part of approving this additional appointment, the Board
considered a range of factors, including the existing appointments of Ms MacAulay, the time commitment expected in the role as a Ferrexpo
Director, attendance records at Ferrexpo Board and committee meetings, institutional investor guidance on the number of board roles in respect
of over-boarding and the additional time commitment from the new role. The Board was satisfied having regard to these matters that the
additional role would not adversely impact the ability of Ms MacAulay to perform her existing role on the Ferrexpo Board and its committees.

Board and Committee meeting attendance in 2023

Attended/Eligible to attend

Director

Scheduled

Ad hoc Scheduled

Ad hoc

Board

Audit

Remuneration

Nominations

CID

HSEC4

AC Andersen1

G Dacomb2

R L Genovese

N Kladiev3

V Lisovenko

F MacAulay4

J North5

N Polischuk6

S Brown7

3/3

5/5

2/2

5/5

3/3

5/5

1/1

1/3

5/10

9/10

5/7

7/10

6/10

2/3

6/10

1/1

5/5

4/4

5/5

1/1

2/2

4/4

2/2

4/4

3/2

5/5

1/2

5/5

4/5

5/5

4/4

3/4

2/2

4/4

1. Ms Andersen resigned on 25 May 2023.
2. Mr Dacomb resigned on 31 December 2023.
3. Mr Kaldiev was appointed as an Executive Director on 25 May 2023.
4. Ms MacAulay stepped down as a member of the Audit Committee on 1 August 2023.
5. Mr North resigned as Executive Director on 25 May 2023.
6. Ms Polischuk was appointed as a member of the Committee of Independent Directors 9 February 2023.
7. Mr Brown was appointed as an independent Non-executive Director and a member of the Audit Committee on 22 October 2023.

During the year, there were a number of ad hoc Board and Committee meetings at short notice or update calls which dealt with (amongst other
things) the Russian invasion of Ukraine and other developments in Ukraine involving or impacting the Group.

Ferrexpo plc Annual Reports & Accounts 2023

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106

Corporate Governance Report continued

Role descriptions
A summary of the roles of the Chair, the CEO, the Executive Chair, 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 126.

Role

Chair

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 98. Due to the complexity of the jurisdictions in which the Group
operates and in light of Russia’s current invasion of Ukraine, the time commitment of the role significantly increased during
the reporting period especially with the need to engage proactively with the broad range of stakeholders.

CEO

The role of the CEO is to provide leadership of the executive team, implement Group strategy through executive committees,
chair the Executive Committee, and oversee and implement Board-approved actions.

Executive
Chair

With effect from 1 July 2023 the roles of Chair and Chief Executive Officer as described above have been combined on an
interim basis.

Senior
Independent
Director

The Senior Independent Director, in conjunction with the other Independent Non-executive Directors, assists in
communications and meetings with shareholders and other stakeholders concerning corporate governance matters. At least
once a year, the Senior Independent Director meets the Non-executive Directors, without the Chair present, to evaluate the
Chair’s performance. The Senior Independent Director is also available to discuss with shareholders any issues that the Chair
has been unable to resolve to shareholders’ satisfaction.

Non-executive
Directors

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 126); and monitor
executive succession planning (for Board succession planning, see the Nominations Committee Report on page 122). 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.

Ferrexpo plc Annual Reports & Accounts 2023

107

Legal and other actions against the
Group in Ukraine
Throughout the year the Board had to address
an increasing number of legal and other
actions being taken against the Group in
Ukraine, many of which related to matters not
directly involving the Group. These actions
included a freeze (“arrest”) being placed on
50.3% of the shares which Ferrexpo owns in
three of its Ukrainian operating subsidiaries,
the blocking of bank accounts of Ferrexpo’s
main operating subsidiary in Ukraine, Ferrexpo
Poltava Mining (“FPM”), and the arrest of senior
management personnel in FPM in connection
with the alleged illegal sale of waste products.
This latter action resulted in Ferrexpo
having to make bail payments in Ukraine of
approximately US$15 million. Furthermore, the
Board had to address and assess the risks
related to the contested surities claim in the
amount of UAH4.7 billion (US$124 million as
at 31 December 2023) and the application
to open bankruptcy proceedings (“creditor
protection proceedings”) against the Group’s
major subsidiary in Ukraine filed by a supplier
and a related party of the Group because an
unfavourable outcome in these two cases
would have an adverse impact on the Group’s
cash flow generation, profitability and liquidity.
Further details can be found in Note 2 Basis
of preparation and Note 30 Commitments,
contingencies and legal disputes to the
Consolidated Financial Statements.

The Board has taken or overseen a number
of actions intended to protect the interests
and assets of the Group and all of its
shareholders, including commencing legal
actions in Ukraine where possible and making
appropriate representations to Government
officials both in Ukraine and elsewhere
about the need to protect Ferrexpo’s
interests and ensure that any private
matters relating to the Group’s controlling
shareholder do not adversely impact the
Group. This has included emphasising
that as a Company with a premium listing
on the London Stock Exchange the
Company is required to, and does, operate
independently of its controlling shareholder.

Board Leadership

Before setting out the Board’s activities in
2023, it is important to note that since the
Russian invasion of Ukraine, the Board has
continued to meet regularly to discuss the
ongoing situation in Ukraine, the execution
of the Group’s business continuity plans,
planning for different eventualities and
adjustments to the corporate calendar.
The Board receives regular updates from
the management team as to the Group’s
response and scenario planning for different
eventualities. Protecting the Group’s workforce
is a key priority, as well as taking steps
to protect the business and thereby the
stakeholders of the business. This will remain
a key priority for the Board during 2024.

Board activity in 2023
Five scheduled Board meetings were held
in 2023 (supplemented by other ad hoc
meetings, telephone or video conferences
and written resolutions as required from
time to time). Although all scheduled Board
meetings were held in person, some ad
hoc meetings and Board calls were held
via video conference with management
team members and other Group personnel
joining to discuss matters as appropriate.
The Board intends to continue to hold its
scheduled meetings in person during 2024.

The Board’s programme of meetings allows
key areas of focus to be established and
reviewed on a regular basis. A review of the
Board forward agenda was undertaken early in
the year to align key focus areas with strategy.
Rolling agendas have been developed within
the Board forward agenda for the Board, Audit,
Nominations and Remuneration Committees
to ensure the necessary standing items
are covered during the course of the year,
and sufficient time is allocated to strategic
discussions, with extra time factored in for ad
hoc and additional items. Agendas are agreed
with the Chair (or with the Chair of the relevant
Committee) and timeframes set in advance for
the various meetings, thereby ensuring that the
full agenda can be covered in the time allotted.

Board and Committee meeting packs are
prepared by management following input
on the agendas formulated by the Company
Secretary and the respective Chairs, and
made available electronically prior to the
meeting via a secure online Board portal,
thereby allowing the Directors adequate
time to consider the variety of issues
to be presented and discussed. In the
minutes of the meetings, issues identified
for follow-up are set out, ensuring that
matters raised by the Directors are actioned
and reported back in a timely manner.

At each scheduled Board meeting, the
Directors receive a report from each of the
Executive Chair 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 Executive Chair’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, with a particular focus during
2023 on the going concern assessment
given the situation in Ukraine. The Executive
Chair will report on developments relating
to investor and stakeholder engagement
(including shareholder feedback), relevant
corporate governance matters and Board
refreshment and succession planning.

In addition to formal Board and Committee
meetings, the Senior Independent Director
holds meetings with the Independent
Non-executive Directors as required,
enabling open discussions without
the Executives Director present.

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

Russian invasion of Ukraine
The impact of the Russian invasion of Ukraine
remained the key area of focus during the
year, with the Board undertaking regular
reviews of the Group’s response to the
invasion. The Board received regular updates
from the management team on the Group’s
response to the invasion, including the safety,
protection and wellbeing of the workforce and
details of the support provided to those
affected by the invasion and their families.
Updates on safety measures put in place at
the mine sites and other locations to protect
the Group’s workforce and assets were also
provided. The Board also continued the
Ferrexpo Humanitarian Fund to support
communities across Ukraine. For further
details see page 32.

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

Ferrexpo plc Annual Reports & Accounts 2023

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Corporate Governance Report continued

Board Leadership (continued)

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

During the year, the Board approved a
second phase of work to be undertaken by
Riccardo Plc. This work involved a double-
materiality assessment of the Company’s
impact on climate change and the impact
of climate change on the Company.

The risks and opportunities relating to climate
change that are specific to Ferrexpo are
summarised in the Task Force for Climate-
related Financial Disclosures (“TCFD”) on
pages 43 to 59 of the Strategic Report.

Financial position and liquidity
The Board continuously reviews the
financial position of the Group, including
performance against targets, balance
sheet strength and liquidity.

During the year, the Group has maintained
a strong balance sheet, including low levels
of gross debt and had a positive net cash
position of US$108 million as at 31 December
2023 (2022: US$106 million). The Group has
no debt facilities as at 31 December 2023.

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

Cyber security strategy
In light of heightened cyber security risks
facing the business due to the ongoing war in
Ukraine and the rise in cyber security attacks
globally, maximum protection against cyber
security attack is a top priority for the Group.

Stakeholders and workforce
engagement
Stakeholder considerations and culture
are an important part of the Board’s
discussions and decision making. The
information on pages 64 to 71 provides a
review of stakeholder engagement activities
during the year and explains how the Board
considers stakeholders in decision making.

In December 2023, over two days,
Mr Lisovenko, Non-executive Director
Designate for workforce engagement,
visited our operations in Ukraine and hosted
a number of engagement sessions with
a cross section representing a range of
stakeholder groups within our workforce,
including operations personnel, a selection
of middle managers from all three business
units, senior female leaders, alumni of
our “Fe_munity” women in leadership
programmes and people with disabilities.

The Group also engages with its workforce
through the biennial employee engagement
survey, which was last conducted in 2021. The
survey unfortunately could not be carried out
in 2023 due to variable staffing of operations
imposed by constraints brought about
by the ongoing war, where approximately
one third of all employees who manually
complete the survey using tablets are on
furlough. The Group has employed other
ways of listening to the workforce, such as
holding discussions in crib rooms prior to
shift and including questions and answers
functionally on the Company’s intranet site and
eliciting employee feedback via the Rakuten
Viber social media app. These workforce
listening channels are an integral aspect of
understanding the priorities and concerns
of our people, and help to set priorities for
the coming period. The Board considers the
results of the employee listening programme
and discusses feedback with the Executive
Chair and the Chief Human Resources Officer,
including plans for further engagement by
functional heads with their teams to better
understand the feedback and to develop joint
action points focusing on areas of strength
and areas for improvement. Investigations are
underway to find a way to conduct a global
Employee Engagement Survey in 2024.

Board balance and independence
Ensuring the appropriate balance of skills,
independence and diversity on the Board
remains a key priority of the Group.

In line with best practice requirements of the
UK Corporate Governance Code, during the
year, the Board reviewed the balance of skills,
knowledge, experience, independence and
diversity and focused on improving and
rebalancing Independent Non-executive
Director Board and Board Committee roles.

To that end:

– Stuart Brown was appointed as an

independent Non-executive Director and
a member of the Audit Committee on
22 October 2023.

– Natalie Polischuk was appointed as Chair
of the Group’s Health, Safety, Environment
and Community (“HSEC”) Committee on
25 May 2023.

For further details see pages 121 to 124 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
a review of the Articals of Association.
Proposed updates to relfect current best
practice will be put to a shareholder
vote at the Annual General Meeting.

At each of its scheduled meetings the Board
considered any updates to the principal
and emerging risks of the Group, and in
particular during 2023 considered the new
risks facing the Group as a result of the
ongoing Russian invasion and also changes
to country-related risks. For further details,
see pages 74 to 90 of the Strategic Report.

The Board is supported by the Executive
Committee, which meets approximately
monthly. All information submitted to the Board
by management is reviewed and approved by
the Executive Committee prior to submission.

Modern Slavery Act Statement
During the year, the Board reviewed and
approved the Group’s Modern Slavery
Act Statement for the year ended
31 December 2022 (a copy of which
is available at www.ferrexpo.com).

Executive appointments and
succession planning
Nikolay Kladiev was appointed as an
Executive Director on 25 May 2023.

Lucio Genovese was appointed as Executive
Chair on an interim basis on 1 July 2023.

For further details see page 123 of the
Nominations Committee Report.

Other matters discussed were:

– oral reports from the Chair of Board
Committee meetings held before the
Board meeting;

– diversity and inclusion;
–

internal succession planning – talent
review;

– succession planning for Non-executive
Director recruitment and appointments;

Ferrexpo plc Annual Reports & Accounts 2023

–

review of agenda and approval of minutes
from previous Board meeting and note
Board Committee minutes;
interactions with auditors;

–
– Executive Chair’s report including

production and operations, iron ore market
conditions, and updates on the Russian
invasion of Ukraine and the position in
Ukraine;
logistics update;

–
– update on DR growth markets;
– 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.

Matters reviewed as required included:

–

the Group’s continued response to the
Russian invasion of Ukraine and actions
taken to protect the Group and its
workforce;
review of half-year or annual results, going
concern and viability, dividend policy and
recommendations, investor presentation;

– geopolitical matters;
–

internal evaluation of the performance of
the Board, Executive 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 2022 Modern Slavery

Statement; and
the CSR budget.

–

During 2023, 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,
investor relations and communications.

109

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 were following
significant votes against Resolutions 7, 11
and 12 at the 2023 AGM (re-election of Vitalii
Lisovenko, to authorise the directors to allot
shares and to empower the directors to
disapply pre-emption rights). Based on the
feedback received, the Board understands
that the votes against Vitalii Lisovenko arose
as a result of concerns regarding certain
historic corporate governance issues and
the votes against resolutions 11 and 12 were
primarily as a result of the Company’s largest
shareholder not wanting to incur further
dilution to its voting interest in the Company.
The Company has since the AGM continued
to engage with its largest shareholder in the
ordinary course on a range of issues and
will consult with the largest shareholder
ahead of the 2024 AGM as to its position
on the share allotment and disapplication
of pre-emption rights resolutions.

Board virtual site visit and
Strategy Day
Due to travel restrictions resulting from the
Russian invasion of Ukraine, the Board
was unable to conduct the planned visit of
the Group’s operations in Horishni Plavni,
Ukraine. The alternative arrangement was
a Board virtual site visit and Strategy Day.

The Board received a progress update on
actions taken from 2022 and noted the
achievements and completion of all 2022
actions during the year.

The Board received presentations from
executive management on:

Day 1
– expected results and plan for 2024;
– scenario planning for extended war and

post-war preparation for Plant and Mining
operations;

– marketing scenario planning and

alternative logistics;

– organisational structure and Base Erosion
and Profit Sharing requirements for 2024;

– ESG – Decarbonisation projects and
Green Mining Electrification project
update; and
Investor Relations – market engagement
plans for 2023/24 given context of
extended war.

–

Day 2
–

legal training for Directors from Legal
advisers Herbert Smith Freehills.

The Board had a dedicated training session
with its legal adviser Herbert Smith Freehills.
This training session was held on Day 2
of the Board Strategy Days in September
2023 and covered key areas relevant to the
Directors in responding to events facing
the Group in Ukraine, including the seven
statutory directors’ duties and actions which
the Board may be able to take to protect the
Group’s interest in Ukraine. Case studies
of other mining and non-mining entities
operating in a country at war or during a
time of war were examined in detail.

All matters discussed aligned with the Ferrexpo
strategic pillars: Health and Safety, Financial
Strength, Technology and Innovation, Product
Quality, Growth and Licence to Operate.

The actions from the Strategy Day were
collated and disseminated to the relevant
executives for execution during the year.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
110

Corporate Governance Report continued

Board Evaluation

Board performance evaluation
Under the UK Corporate Governance Code, the Board is required to undertake annually a formal
and rigorous evaluation of its own performance and that of its Committees and individual Directors.
This evaluation should be externally facilitated every three years.

Review of 2022 internal Board performance
The Board and its Committees consider their effectiveness regularly and the outcome and findings
from the 2022 internal review were progressed throughout the year with the following actions taken:

Board evaluation cycle

2021: External

2022: Internal

2023: Internal

Action to be taken

Actions taken

Board composition

The Board, with support from the Nominations Committee, continued its search for a Director
from an ethnic minority background. Search agents were appointed and a number of candidates
were selected for interview. The search continues.

Appointment of female Chair of HSEC Committee.

Due to Board changes, unfortunately female representation on the Board reduced from 43% in
2022 to 29% as at 31 December 2023, although increased to 33% on 1 January 2024 following
the resignation of a male director.

Succession planning within
the business and senior management
including diversity

More females have been promoted during the year. To that end, the number of females in
management roles (defined as roles that are grade 10 and above based on the Group’s internal
grading system) increased by 1.4%, from 20.9% in 2022 to 22.3% in 2023.

Balanced skill set

Ensure Non-executive Directors
continue to bring the right skill set
and to balance the workload of the
Board Committees

Explore ways to enhance workforce
engagement and bring findings to the
Boardroom

Overall, the number of females employed increased by 2.2%, from 28.7% in 2022 to 30.9% in
2023.

The above outcomes are a result of the Group’s diversity programme targeting female
representation and the lead programme for promoting gender diversity in management known
as “Fe_munity” and the development of specific programmes designed to retain and promote
females within the business, all of which are fully supported by the Board and senior
management.

Following on from a wholesale refresh of the Board skills matrix in 2022, during the year the
Board undertook a thorough review of the refreshed Board skills matrix and agreed that for the
time being it is satisfactory and fit for purpose. A further review of the Board skills matrix will be
undertaken in early 2024 to re-assess and address the skills matrix required particularly in light
of the ongoing Board succession planning and the search for a director from an ethnic minority
background.

During the year, the workload of the Board Committees was rebalanced with Ms MacAulay
stepping down as a member of the Audit Committee on 1 August 2023 and the appointment of
Ms Polischuk as Chair of the Health, Safety, Environment and Community Committee. Therefore,
of the five Board Committees, 40% are chaired by females.

The Board reviewed and changed the format of workforce engagement from large town hall
sessions into smaller more intimate groups where individuals felt more comfortable to open up
and raise matters. Members of the workforce welcomed the change in format which was
reflected in their feedback of the event. Mr Lisovenko, Non-executive Director designate for
workforce engagement, being resident in Ukraine, visited the workforce in December 2023 and
provided feedback at the following scheduled Board meeting.

Continue to improve Board reporting,
particularly management report
writing

Board reporting has improved significantly with some key management reports streamlined.

Externally facilitated training among all report writers was not carried out due to other priorities
arising from the Russian invasion of Ukraine, but will be carried out in 2024, if possible.

Corporate resourcing

Increased resourcing in Secretariat needs to be completed.

Ferrexpo plc Annual Reports & Accounts 2023

111

2023 Internal Board performance
During 2023, the annual performance evaluation of the Board and its Committees was carried out internally using a questionnaire led by the
Group Company Secretary with external input from Clare Chalmers Ltd. The purpose was to build on the recommendations and areas identified
from the externally facilitated evaluation in 2021.

The evaluation process involved the completion of questionnaires by Board and Committee members, with responses collated anonymously
and analysed by Clare Chalmers Ltd together with the Group Company Secretary.

The thematic evaluation focus areas included:

– Board composition, including Executive Chair transition, succession, development, leadership and dynamics;
– Board oversight: Strategy, performance, risk, people and culture;
– stakeholders and decision making;
– Board efficiency including secretarial support;
leadership and succession decision making;
–
– Board planning; and
–

the effectiveness of Board Committees.

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

– Executive Chair and Group Company Secretary reviewed the 2022 recommendations and outcomes to set the

scene for 2023.

PREPARATION

– Executive Chair and Group Company Secretary held a scoping meeting to understand context and priorities.
– Review of Board and Board Committee papers and other relevant documentation, including Strategy papers and

the Board and Board Committee Forward Agenda Planner to identify key areas of focus.
Individual interviews were scheduled with the Senior Independent Director and all the Non-executive Directors.

–

A comprehensive questionnaire was designed covering:

QUESTIONNAIRE
DESIGN AND
CONTENT

– Board: Constitution and Commitment, Leadership, Efficiency of Board Process, Board’s role, Development,

Stakeholders, of which there were 40 questions.

– Audit Committee: Constitution and Commitment, Leadership, Efficiency of Committee Process, Committee’s role,

Relationships, Development, of which there were 21 questions.

– Remuneration Committee: Constitution and Commitment, Leadership, Efficiency of Committee Process,

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

– Progress/Achievement of 2022 internal evaluation recommendations, of which there were six questions.

FORMAL
INTERVIEWS

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

evaluate the Executive Chair’s performance and, separately, the Senior Independent Director also evaluated the
performance of the Directors.

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

with the Group Company Secretary.

REPORTING

– Key findings and recommendations were shared with the Executive Chair, Senior Independent Director and Group

Company Secretary, and a draft report was prepared for review.

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

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

The review also included feedback on individual performance. This informed the annual process of individual Director evaluation, led by the
Senior Independent Director in place of the Executive 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 Executive 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 Executive Chair, led by the Senior Independent Director. The Senior Independent Director also engaged the Chief Financial Officer
and Group Company Secretary to obtain their views on the Executive Chair’s performance.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
112

Corporate Governance Report continued

Board Evaluation (continued)

Feedback and report findings
The report was circulated to the Board and the feedback and comments from the questionnaires were discussed at a Board meeting, before
deciding which recommendations to take forward. Led by the Senior Independent Director, the other Directors also met without the Executive
Chair present to evaluate the Executive Chair’s performance and Senior Independent Director evaluated the performance of the Directors.

The questionnaire results demonstrated, despite the challenges associated with the war in Ukraine, progress has been made. Board members
agreed that the transition from Chair to Executive Chair was well managed, the Board is working effectively with the correct skills and experience
to support and to deal with challenges faced by the business; and that there is an open culture which responds well to constructive challenge.

The Board has made progress over the past year, and there are some ideas on areas for development to ensure the Board works even more
effectively. The evaluation process identified these development areas for focus in 2024. The Board will continue to consider and reflect on its
composition and what may be required for a future Non-executive Director hire to include future roles, skills and Board diversity including gender
and ethnicity. Issues are discussed and debated with full and frank discussions encouraged, and as the Board continues to develop, even further
input to Board discussions would be welcome. More one-to-one meetings with the Executive Chair, Senior Independent Director and Board
members could be used to discuss tailored individual development plans. The Executive Chair and Group Company Secretary will ensure
appropriate time is allocated to all agenda topics.

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 but a further independent Non-executive Director would improve Board diversity. The Board is well led by a proactive and fully
engaged Executive 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, except for the Nominations Committee which is run by the Executive Chair, 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 2024:

Key areas for focus in 2024
Area

Board composition

Succession planning

Actions to be taken

– Continue to improve Board diversity in terms of ethnicity and gender.

– Embed sound succession planning within the business and senior management including

diversity requirements.

Balanced skill set

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

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

Enhance workforce engagement

– Continue to explore different ways to further enhance workforce engagement and bring

Board efficiency and processes

findings into the Boardroom and to monitor culture and values in the organisation.

– Continue to plan the agenda allowing appropriate time for the most important topics.
– Consider an agenda slot at the end of some Board meetings for a wash-up session

focusing on what went well and what could have gone better.

– Consider a lessons learned exercise for the Board as well as a deep dive.

Corporate resourcing

– Ensure bolstered resourcing for Secretariat.

Long-term Incentive Plans

– Continue to work on the LTIP measures and appropriateness.

Ferrexpo plc Annual Reports & Accounts 2023

113

Board Training and Development

Training and professional
development
The Executive Chair is responsible for agreeing
training and development requirements
with each Director to ensure they have the
necessary skills and knowledge to continue
to contribute effectively to the Board’s
discussions. All Directors receive updates
given to the Board as a whole on changes and
proposed changes in laws and regulations
affecting the Group, as and when necessary.

During 2023, the Board had a dedicated
training session with its legal adviser Herbert
Smith Freehills. This training session was
held on Day 2 of the Board Strategy Days
in September 2023 and covered key areas
relevant to the Directors in responding to
events facing the Group in Ukraine, including
the seven statutory directors’ duties and
actions which the Board may be able to take
to protect the Group’s interest in Ukraine.
Case studies of other mining and non-mining
entities operating in a country at war or during
a time of war were examined in detail.

Usually, site visits are held for the whole Board
annually, so as to ensure that all Directors
are familiar with the Group’s operations, and
Directors may also visit the operations of
the Group independently to the extent they
feel this is necessary. Due to the ongoing
conflict in Ukraine, the physical Board site
visit was cancelled and replaced with a
virtual site visit, as set out on page 109.

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 ongoing conflict in
Ukraine), meeting the Company Secretary,
necessary training on corporate governance
aspects, and receiving various key
Company documentation and reports.

Mr Brown, who was appointed on 22 October
2023, received director induction training
in October 2023 and followed a tailored
induction programme covering a range of
key areas of the business. He 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 in
which the Board operates, Group policies
and procedures, constitutional documents
and regulatory codes and guidelines. He
also met with the Group’s external auditors,
MHA, and with the Group’s legal advisers,
Herbert Smith Freehills (HSF), to apprise him
of some of the risks and legal challenges
currently facing the Company. Mr Brown was
also briefed by the Chief Financial Officer
and Chief Human Resources Officer on the
financial position of the Company and the
Group’s risk management framework, as well
as key issues related to the management
of people and remuneration schemes.

In 2021, Ferrexpo 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.
During the year, Mr Dacomb completed
his Buddy duties for Mr Brown.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS114

Audit Committee Report

Focused on management’s going concern
assessment while continuing to monitor the
integrity of the financial results.

Stuart Brown
Chair of the Audit Committee

Membership and
meeting attendance

Scheduled meetings

Eligible

Committee member

to attend

Attended

Graeme Dacomb

Vitalii Lisovenko

Fiona MacAulay

Natalie Polischuk

Stuart Brown

Dear Shareholder,
On behalf of the Board, I am pleased to
present the Audit Committee Report for
the financial year ending 31 December
2023. The aim of this report is to provide
shareholders with insight into key areas that
have been considered, how the Committee
has discharged its responsibilities and lastly
provide assurance on the integrity of the
2023 Annual Report and Accounts.

The situation for the Group during the
financial year 2023 continued to be strongly
influenced by the ongoing war in Ukraine,
which also led to a significantly increased
involvement of the Committee to timely
identify and analyse the additional risks in
this unprecedented period for the Group.

The matters requiring increased involvement of
the Committee were primarily the assessment
of the Group’s going concern and viability
in light of the material uncertainties, but
also the considerations required when
preparing the Group’s impairment test for
its non-current operating assets as well as
the escalation of a number of legal matters
to be considered as a result of the change
of the political environment in Ukraine.

The Committee agenda focuses on audit,
compliance and risk management within the
Group, working closely with 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.

As already disclosed for the Group Annual
Report and Accounts for the financial years
2022 and 2021, a critical area of focus for
the Committee has been the going concern
assessment itself and consequently the
consideration of the preparation of the
consolidated accounts on a going concern
basis, considering the ongoing war in Ukraine
and the circumstances under which the
Group has to operate, including the political
environment and the independence of the legal
system in Ukraine. As at the date of the approval
of these Consolidated Financial Statements,
the war in Ukraine is still ongoing. Although the
Group continued to demonstrate a high level
of commitment and resilience enabling it to
operate at a steady, but much lower capacity,
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.

Key activities of the Committee in 2023

Key activities of the Audit Committee during 2023 are set out below.

February
– Considered assumptions used for the going

March
– Received the Report of the auditors to the

concern and viability assessments and
impairment testing, including sensitivities and
reverse stress tests.

– Received an update on the progress of the

2022 audit and analysed further work required.

Committee.

– Reviewed letters of representation.
– Reviewed the Audit opinion.
– Reviewed the auditor’s Letter of Independence.
– Reviewed the 2022 Annual Report and Financial

– Considered the draft Annual Report and

Statements.

May
– Received an update on 2022 audit follow up

matters – Management letter points

– Reviewed the auditors 2022 performance
(Statutory Audit Service Order) – analysis
of final detailed scores.

– Reviewed 2023 audit planning, key dates and

preliminary audit plan.

Accounts for 2022.

– Reviewed the going concern assessment and

– Reviewed an update on 2022 recommendations

– Reviewed the questionnaire to be used to

impairment test.

from Internal Audit.

assess the external auditor’s performance.

– Considered the going concern and viability

– Received an update on Cyber Security trends

– Reviewed Compliance Report including

statements.

whistleblowing cases.

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

list and transactions with Related Parties.

– Reviewed the Audit Committee 2023

Forward Planner.

– Received an update on Audit Reform.
– Received an update on the FRC’s

Audit Committee Minimum Standard
consultation.

– Held a private meeting with the auditors.

– Discussed identified material uncertainties

and assessment of mitigating actions.
– Reviewed the Audit Committee Report.
– Reviewed the auditors 2022 performance
(Statutory Audit Service Order) – analysis
of scores.

– Reviewed the Compliance Report including

whistleblowing cases.

– Reviewed the Group’s risk matrix and register.
– Held a private meeting with the auditors.

and proposed actions approved.
– Received an update on Audit Reform.
– Discussed the risk assurance map and new

risk assurance platform

– Reviewed a Compliance Report including

whistleblowing cases.

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

and transactions with Related Parties.
– Reviewed the Audit Committee 2023

Forward Planner.

– A private meeting with the auditors was held.

Ferrexpo plc Annual Reports & Accounts 2023

115

In addition to the war-related material
uncertainty, the Group is also exposed
to the risks associated with operating in a
developing economy, which may or may not
be exacerbated by the war and/or the current
circumstances facing the Group’s controlling
shareholder (see Ukraine country risk on pages
76 to 78). As a result, the Group is exposed
to a number of risk areas that are heightened
compared to those expected in a developed
economy, such as an environment of political,
fiscal and legal uncertainties, which represents
another material uncertainty as at the date of
the approval of these consolidated financial
statements. The Committee had to address
and assess also the risks related to a contested
sureties claim in the amount of UAH4,727 million
(US$124 million as at 31 December 2023) and
the application to open bankruptcy proceedings
(“creditor protection proceedings”) against the
Group’s major subsidiary in Ukraine filed by
a supplier and related party to the Group as
an unfavourable outcome in these two cases
might affect the Group’s ability to continue as a
going concern. See Note 2 Basis of preparation
and Note 30 Commitments, contingencies
and legal disputes for further information.

As a result of the war, the local audit team in
Ukraine could not be on-site and the required
audit procedures have been performed
remotely as it was done already for the 2022
year-end audit. In terms of the audits on
Group level, our external auditor MHA was
on-site at our office in Baar and was able to
complete its annual audit procedures for the
preliminary and year-end audits as planned.
Likewise, the Committee has been able to
physically meet with both management and
the auditors. The current situation in Ukraine

required additional work from our external
auditors, primarily in terms of the material
uncertainty surrounding the Group’s going
concern and viability assessment in light of
the ongoing war, but also in relation to the
escalation of the number of legal proceedings
and disputes mainly as a result of the change
of the political environment in Ukraine.

During the year, the Committee continued
to consider the status of the proposed
regulatory change of the UK Government
Consultation on ‘Restoring trust in audit
and corporate governance: proposals on
reforms’. The Committee reviewed the future
potential impacts this could have on the
Group as well as on the Committee in order
to understand the latest developments and
plan potential implications in a timely manner.

Increased TCFD disclosure requirements
were also a focus for the Committee and
environmental consultants Ricardo plc were
involved to assist in enhancing the Group’s
existing climate change reporting, scenario
analysis and potential pathways to net zero
iron ore pellet production. Through this
work, Ricardo plc’s analysis has helped
to enhance the Group’s carbon reduction

targets, as announced in the Group’s
Climate Change Report in December
2023. However, considering the current
situation in Ukraine and the challenging
circumstances that are both outside of our
control, we may also need to adjust our net
zero targets and the way we report them.

During 2023 a life cycle analysis was completed
on Ferrexpo DR pellets. The results show that
the Ferrexpo DR pellet route (EAF) can reduce
37% of embodied carbon emissions compared
to the ‘traditional fossil based’ sinter-BF route
for producing SAE 1006 grade steel. We are
using this baseline result as a starting point
to build on and address impact hotspots
and further minimise our overall impact on
climate change. This assessment was largely
theoretical, so in 2024 the intention is to use this
initial work for a more real scenario, namely, to
model the emissions for blast furnace pellets
sold to and processed to a large German
customer. The Group was not required to do
a follow up Climate Change Report in 2023,
though the intention is to do one towards the
end of 2024. This report will need to consider
any changes in decarbonisation targets
due to the ongoing war and in the inability
to plan longer term at the current time.

Detailed below is further information on the role,
structure and key activities of the Committee
and significant judgements it has considered in
2023. I hope this additional information about
the Committee and its activities is useful.

Stuart Brown
Chair of the Audit Committee

Key activities of the Committee in 2023

Key activities of the Audit Committee during 2023 are set out below.

July
– Presentation and review of half-year accounts.
– Reviewed the going concern assessment and

impairment test.

– Considered the going concern statement.
– Received auditor’s Review Report to the Audit

Committee.

December
– Received an update on TCFD and ESG double

– Received an update on proposed Audit Reform.
– Reviewed a Compliance Report including

materiality reporting.

– Received a report on the outcome of the

2022 Internal Audit plan and progress update
on 2023.

– Reviewed the preliminary Internal Audit plan

whistleblowing cases.

– Reviewed the Directors’ Interests list and

transactions with Related Parties.

– Reviewed the Group’s risk matrix and register.
– Reviewed the Audit Committee 2024 Forward

Planner.

– Received an update on Cyber Security and IT

for 2024.

Security audit.

– Considered the Group’s work plan for the

– Received an update on the ESG Disclosure

2023 year end.

Audit.

– Received an update on proposed Audit Reform.
– Reviewed the Group’s risk matrix and register.
– Reviewed the Director’s Interests list and

transactions with Related Parties.
Reviewed a Compliance Report, including
whistleblowing cases.

– Considered a report from the external auditors
on progress of the preliminary audit for 2023.

– Reviewed an external audit planning report.
– Received an update on the 2024 internal

audit plan.

– Received a progress update on the 2023 internal

audit matters.

– Received an update on the planned process

for the viability and going concern assessment.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS116

Audit Committee Report continued

Role of the Committee
The Committee’s objectives and
responsibilities are set out in its terms of
reference which are available to view on the
Company’s website at ferrexpo.com. 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 as well as in terms of the
disclosures on the Group’s Principal Risks
as contained on pages 74 to 90.

– 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 2023,
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
On 1 August 2023 Fiona MacAulay stepped
down as a member of the Committee.

As at the year end, the Committee comprised
four Independent Non-executive Directors:

– Graeme Dacomb (Chair of the Committee);
– Vitalii Lisovenko;
– Natalie Polischuk; and
– Stuart Brown

Stuart Brown joined the Committee in
October 2023 and was appointed Chair of the
Committee with effect from 1 January 2024.
In addition to the five meetings held in 2023,
the Audit Committee has met twice to date
in 2024. All members of the Committee are
considered to possess appropriate knowledge
and skills relevant to the activities of the
Group, and Stuart Brown has recent and
relevant financial experience. See page 99 of
the Corporate Governance section regarding
his skills, expertise and contributions.

In addition to its members, other individuals
and external advisers, and the Executive
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,
Group Company Secretary and audit
partners of our external auditor MHA. The
Committee has an opportunity to meet
with the external auditors at the end of its
scheduled meetings, without the Executive
Director or management being present.

Significant issues and judgements
The significant issues and judgements considered by the Committee in respect of the 2023 Annual Report and Accounts are set out below:

Judgements/actions taken

The ongoing war in Ukraine continues to pose a significant threat to the Group’s mining, processing and logistics operations, despite the fact that continued
to demonstrate a high level of commitment and resilience enabling it to operate at a steady, but at a much lower capacity

The war related material uncertainty is predominantly related to the provision and availability of logistics capacity required for the production and delivery of the
Group’s products to customers in its key markets, subject to the availability of Black Sea ports in Ukraine. As in the previous financial year, the Group had to
adjust during the financial year 2023 its production level to the sales currently possible, which continues to have an impact on the Group’s cash flow generation
and profitability.

Despite the unprecedented and challenging situation, the Group’s net cash position has remained stable at US$108 million, compared to US$106 million
as at 31 December 2022. As at the date of the approval of these Consolidated Financial Statements, the Group is in a net cash position of approximately
US$91 million with an available cash balance of approximately US$96 million. In addition to the available cash balance, the Group has an outstanding trade
receivable balance of approximately US$49 million from its pellet and concentrate sales in January and February 2024, which are expected to be collected
in the next few months.

As mentioned above, the Group is exposed to a number of risk areas that are heightened compared to those expected in a developed economy, such as
an environment of political, fiscal and legal uncertainties, which require a significant portion of critical judgements to be made by the management, mainly in
respect of a contested sureties claim in the amount of UAH4,727 million (US$124 million as at 31 December 2023, which required specific consideration also
from a going concern perspective. See Note 30 Commitments, contingencies and legal disputes for further details, also in respect of the high degree of
management judgement required, in respect of the potential impact of seizure of assets in respect of the contested sureties claim.

The Audit Committee has reviewed the key assumptions used for the Group’ long-term model, which forms the basis for the management’s going concern
assessment. The key assumptions have been adjusted to reflect the latest developments in terms of currently possible sales volumes as well as latest market
prices and production costs, which are adversely affected by lower production volumes. As in the previous long-term model in 2022, the production volume is
currently aligned to the possible sales volume in order to maintain a solid net cash position. The latest base case of the long-term model shows that the Group
has sufficient liquidity to continue its operations at a reduced level for the entire period of the management’s going concern assessment, even allowing for
reasonably possible or plausible adverse changes in respect of realised prices, lower production and sales volumes as well as higher production costs.

However, as mentioned above, the production and sales volumes are heavily dependent on the logistics network available to the Group and the determination
of the key assumptions requires a significant level of management estimation.

The Audit Committee has also reviewed the Group’s reverse stress tests reflecting more severe adverse changes, such as a combination of all reasonably
possible or plausible adverse changes in respect of realised prices, lower production and sales volumes as well as higher production costs, which is unlikely to
happen in combination as a result of the natural hedge of iron ore prices and prices for key input materials. Based on the stress tests performed, it is expected
that the Group would have sufficient liquidity for up to 12 months before making use of any available mitigating actions within its control, such as further
reductions of uncommitted development capital expenditures and operating costs.

Ferrexpo plc Annual Reports & Accounts 2023

117

Judgements/actions taken

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

–
–

its available cash and cash equivalents;
its cash flow projections, adjusted for the effects caused by the war in Ukraine, for the period of the management’s going concern assessment covering
a period of 18 months from the date of the approval of these Consolidated Financial Statements;
the feasibility and effectiveness of all available mitigating actions within the Group management’s control for identified uncertainties; and
the legal merits in terms of the ongoing legal disputes mentioned above and potential future actions available to protect the interests of the Group in case
of a negative decision from the Supreme Court of Ukraine and other courts in Ukraine;

there is a material uncertainty in respect of the ongoing war and the legal disputes, as some of the uncertainties remain outside of the Group management’s
control, with the duration and the impact of the war still unable to be predicted, and the uncertainty remains in relation to independence of the judicial system
and its immunity from economic and political influences in Ukraine.

In respect of the contested sureties claim mentioned above, no enforcement procedures have commenced as at the date of the approval of these consolidated
financial statements, however the commencement of such procedures may be initiated by the claimant anytime between this approval and the date of the
expected hearing by the Supreme Court. The commencement of the enforcement procedures could have a material negative impact on the Group’s business
activities and its ability to continue as a going concern.

The Group’s Principal Risks section on pages 74 to 90 provided further information on the Ukrainian country risk to which the Group is seriously exposed,
including the conflict risk and the risks related to operating in a developing economy.

Considering the current situation of the war in Ukraine, the Group’s ability to swiftly adapt to the changing circumstances caused by the war, as demonstrated
during the financial years 2023 and 2022, and the results of the management’s going concern assessment, the Group continues to prepare its consolidated
financial statements on a going concern basis. However, many of the identified uncertainties are outside of the Group management’s control, such as the
duration and severity of potential threats, and are unpredictable, 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 176 for further information.

The Committee also considered management’s analysis of the impact of the war in Ukraine on the Group’s viability. 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 pages 91 to 92 for further information.

Impairment considerations of the Group’s non-current operating assets as a result of the war (Note 13 to the Consolidated
Financial Statements)
The ongoing war continues to have an adverse impact on the Group’s production and cash flow generation and it is expected that this will continue to be the
case until the war comes to an end. Throughout 2023, the continued unavailability of the Port of Pivdennyi in Ukraine had a significant adverse impact on the
Group’s seaborne sales and consequently on its cash flow generation.

A number of significant judgements and estimates are used when preparing the Group’s financial long-term model, which are, together with the key
assumptions used, reviewed by the Audit Committee. The Group’s long-term model is based on management’s best estimate of reasonably conservative key
assumptions, taking also into account the current circumstances the Group has to operate in. Due to the continued restriction of the logistics network in
Ukraine, the production volume is aligned to the possible sales volume. Further information on the key assumptions used are disclosed in Note 13 Property,
plant and equipment.

Based on the base case of the Group’s impairment test prepared for the 2023 year-end accounts, there is no additional impairment loss on the Group’s single
cash generating unit’s operating non-current assets, including property, plant and equipment as well as other intangibles assets and other non-current assets,
to be recognised as at 31 December 2023.

The Committee is aware that the level of judgement significantly increased, compared to the years before the war commenced. Beside the normal judgement
in terms of production and sales volumes, anticipated prices for iron ore products and costs for input material, the outcome of the impairment test is also
heavily dependent on when the war is expected to end. The production capacity used for the base-case cash flow projection is expected to be approximately
45% of the pre-war level for the financial year 2024, before an increase to approximately 80% in 2025 and an expected recovery to pre-war levels in 2026.

As mentioned above, the preparation of the long-term model and the impairment testing in these unprecedented times involves a high degree of judgement
and any adverse changes in key assumptions would further reduce the value in use of the Group’s operating non-current assets. Based on the sensitivities
prepared, a delay of the recovery of the production and sales volumes to a pre-war level by another year, with all other assumptions remaining unchanged,
would reduce the value in use of the Group’s non-current operating assets by approximately another US$326 million A reduction of the realised price by
US$5 per tonne for each year until 2048 would increase the impairment loss by approximately US$171.6 million and a decrease of the production and sales
volume by 10%, combined with an increase of the production costs by 5%, again for the entire period, would increase the impairment loss by approximately
US$196.8 million whereas every 1.0% increase of the nominal pre-tax discount rate would increase the impairment loss by approximately US$52.6 million, with
all other assumptions remaining unchanged. The recorded impairment during the financial year 2022 is to be reassessed at the end of any future reporting
periods. If there are positive developments in the Group’s future cash flow generation and the relevant macro-economic data, a portion of the impairment loss
might reverse in future periods. As at 31 December 2023, there is no partial or full reversal of the impairment loss recognised during the financial year 2022 to
be recorded.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS118

Audit Committee Report continued

Judgements/actions taken

Taxation in general and tax legislation in Ukraine (Note 11 to the Consolidated Financial Statements)
The Group operates across a number of jurisdictions through its value chain and prices its sales between its subsidiaries using international benchmark
prices for comparable products covering product quality and applicable freight costs. The Group judges these to be on terms which comply with applicable
legislation in the jurisdictions in which the Group operates. The pricing of cross-border transactions is an inherent risk for any multinational group and regular
audits are to be expected. On 18 February 2020, the State Tax Service of Ukraine (“STS”), formerly known as SFS, commenced two tax audits for cross-border
transactions between the Group’s major subsidiary in Ukraine and two subsidiaries of the Group outside of Ukraine in relation to the sale of iron ore products
during the financial years 2015 to 2017. Further to that, on 14 June 2021, the STS commenced another tax audit for the financial years 2015 to 2017 for
cross-border transactions of another Ukrainian subsidiary with the same two subsidiaries of the Group outside of Ukraine.

The tax audits have been completed in the second half of the financial year 2023 and the Group’s two major subsidiaries in Ukraine received the tax audit
reports on stating potential claims for underpayment of corporate profit taxes in Ukraine of UAH2,162 million (US$56.9 million as at 31 December 2023),
including fines and penalties, and UAH259 million (US$6.8 million as at 31 December 2023), including fines and penalties, respectively. Both subsidiaries
filed the objections against the potential claims stated in the tax audit reports received.

Despite the two claims received, it is still management’s view that the Group has complied with the applicable legal provisions in all its cross-border
transactions based on the relevant technical grounds, including those during the financial years 2015 to 2017 for which substantial claims have been received.

Having considered the background of the claims the Committee shares management’s view that the Group has complied with applicable legislation for its
cross-border transactions based on the relevant technical grounds. As a consequence, no provision has been recognised as at 31 December 2023 for the
two specific claims received as these claims will have to be heard by the courts in Ukraine. However, the Committee is aware that there is a risk that the
independence of the judicial system and its immunity from economic and political influences in Ukraine is not upheld and if so the Group could be subject to
material financial exposures relating to the tax audits.

Completeness of contingencies and legal disputes (Note 30 to the Consolidated Financial Statements)
The Committee is aware that the Group is, in addition to the war-related uncertainties described under Assessment of the Group’s going concern and viability
statements on page 91, also exposed to the risks associated with operating in a developing economy, which may or may not be exacerbated by the war and/or
the current circumstances facing the Group’s controlling shareholder. As a result, the Group is exposed to a number of risk areas that are heightened
compared to those expected in a developed economy, including an environment of political, fiscal and legal uncertainties.

As disclosed in the 2022 Annual Report and Accounts and 2023 Interim Results, one of the Group’s major subsidiaries in Ukraine, Ferrexpo Poltava Mining
(“FPM”), received in December 2022 a claim in the amount of UAH4,727 million (US$124 million as at 31 December 2023) in respected of contested sureties.
In respect of this claim, the Group announced on 29 January 2024 that a Ukrainian court of appeal has confirmed the afore-mentioned claim against FPM in
full (see Note 30 Commitments, contingencies and legal disputes for further details). The claim and court decision received is another example of operating in
a dynamic and adverse political landscape in Ukraine, which creates additional challenges for the Group’s subsidiaries in Ukraine, but also for the Group itself.

In accordance with the requirements of IAS 37 Provisions, contingent liabilities and contingent assets, the management proposed to record a full provision for
the contested sureties claim in the amount of US$124 million. The Committee reviewed the position paper of management addressing possible accounting
implications, such as the recognition of a provision under the relevant accounting standard, but also on the Group’s going concern assessment. Considering
the magnitude of this specific claim, the Committee concurred with management that a full provision for this ongoing legal dispute is to be recognised as at
31 December 2023 and that this dispute represents another material uncertainty in terms of the Group’s ability to continue as a going concern.

A provision for the full amount is to be recognised as at 31 December 2023 as the decision of the court of appeal constitutes a legal obligation in accordance
with the relevant accounting standard, despite the fact that FPM filed on 30 January 2024 a cassation appeal to the Supreme Court of Ukraine, and that the
probability of a potential future outflow of resources is outside of the Group’s control. It is still management’s view that FPM has compelling arguments to
defend its position in the Supreme Court of Ukraine as this claim is without substance and legal merits, but there is a risk that the independence of the judicial
system and its immunity from economic and political influences in Ukraine is not upheld. See Note 30 Commitments, contingencies and legal disputes for
further details, also in respect of the high degree of management judgement required, in respect of the potential impact of seizure of assets in respect of the
contested sureties claim.

In addition to the contested sureties claim, the Group recognised also a provision over UAH136 million (US$4 million) for a challenge from two minority
shareholders of FPM in respect of a challenge of squeeze-out procedures of minority shareholders commenced and completed during the financial year 2019.

The Group is currently involved in the following other ongoing legal proceedings and disputes, which are disclosed in full detail in Note 30 Commitments,
contingencies and legal disputes to the Consolidated Financial Statements:

royalty-related investigation and claim;
investigations on use of waste product;

– share dispute related to the Group’s major subsidiary in Ukraine;
–
–
– currency control measures imposed in Ukraine;
– ecological claims; and
– cancellation of licence for Galeschynske deposit.

As mentioned above, the Group is operating in a developing economy and most of the matters to be considered by the Committee are seen to be a result
of operating in such an environment. As at the date of the approval of these consolidated financial statements, no enforcement procedures have been
commenced and on 1 April 2024 the Supreme Court of Ukraine suspended the possible enforcement of the decision of the Ukrainian court of appeal, so
that such enforcement procedures cannot be initiated by the claimant until a final decision is made by the Supreme Court of Ukraine, or the Supreme Court’s
suspension order is otherwise lifted. If the final ruling of the Supreme Court is not in favour of the FPM, the claimant may take steps to appoint either a state
or a private bailiff and request the commencement of the enforcement procedures, which could have a material negative impact on the Group’s business
activities and its ability to continue as a going concern, as the assets of FPM could be seized or subject to a forced sale.

Following the thorough review of management’s position and legal advice received for the matters listed above, the Committee concluded that the disclosures
made in Note 30 Commitments, contingencies and legal disputes to the Consolidated Financial Statements provide an adequate level of detail to allow the
reader of the accounts to understand the potential consequences and the related exposure. The Committee also concurs with management’s view that no
additional provisions have to be recognised for other ongoing legal proceedings and disputes in the consolidated statement of financial position as at
31 December 2023.

Events after the reporting period (Note 35 to the Consolidated Financial Statements)
The following two events after the reporting period are summarised below.

As disclosed in Note 30 Commitments, contingencies and legal disputes, the Group received two negative decisions from courts of appeal
in Ukraine in respect of ongoing legal proceedings and disputes that commenced already during the financial year 2023. As a result of these
negative court decisions, the Group recognised provisions in the amount of US$124 million for a contested sureties claim and US$3.7 million in
relation to a claim from two former shareholders of one of the Group’s Ukrainian subsidiaries in respect of a squeeze-out of minority shareholders.

Ferrexpo plc Annual Reports & Accounts 2023

119

Internal control and risk
management

Internal controls – general
The Board, with assistance from the
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
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 Committee. In making its assessment,
the 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
processes, 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 and Accounts.

– Regular review of risk and identification
of key risks at the Executive Committee
which are reviewed by the Committee and
by the Board.

– The FRMCC, an executive sub-committee,
is charged, on behalf of the Executive
Committee or 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, the risk
register and third party risks. The FRMCC
met ten times in 2023.

– 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 Committee of
Independent Directors and the Executive
Related Party Matters Committee
(“ERPMC”). Additional procedures are in
place locally to ensure the completeness
and the arm’s length nature of related
party transactions, such as background
checks and tender processes. The
ERPMC met nine times in 2023.

– 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 did not meet in
2023 as no investment decisions were
required since the onset of the war.
– A budgetary process and authorisation
levels to regulate capital expenditure.
For expenditure beyond 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 211 and 212), 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 Committee, and to the Group 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.

Ferrexpo plc Annual Reports & Accounts 2023

– Anti-fraud measures through an internal
security department operating in the
Company’s key operating subsidiaries.
– A whistleblowing policy is in place under
which staff may in confidence, via an
independent, secure website, raise
concerns about financial or other
impropriety, which are followed up
by Internal Audit and reported on to
the Board.

The Committee and the Board continued
to review ongoing litigation affecting the
Group throughout the year (see Note 30
Commitments, contingencies and legal
disputes to the Consolidated Financial
Statements on pages 217 to 223),
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 211 to 215. See also the
Principal Risks section of the Strategic Report
on page 72.

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 Committee and to the Group 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 2023 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 2024 was approved
by the Committee in December 2023.

The Internal Audit plan for 2023 was approved
by the Audit Committee. The full scope
audits focused on the operations cycle,
Griding bodies for FPM, procurement cycle
for FYM, operational risks relating to Group
sales for FAG, FME and FBM, Treasury cycle
(financial controls) for FAG, FME and FBM,
FPM Purchasing and Inventory Management
– RM and MRO, DP Ferrotrans and First
DDSG Logistics Holding GmbH. A limited
scope review of the Ferrexpo Humanitarian
Fund in Ukraine. 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.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSThe Committee has also conducted its own
detailed review of the disclosures in the Annual
Report and Accounts, taking into account
its own knowledge of Group’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 2023 Annual Report
and Accounts is fair, balanced and
understandable and that it provides the
information necessary for shareholders
to assess the Company’s position,
performance, business model and strategy,
and has advised the Board accordingly.

The Committee has also advised the Board
on the process which has been undertaken
in the year to support the longer-term
Viability Statement required under the UK
Corporate Governance Code. The Viability
Statement is set out in the Strategic Report
on page 91 and a statement setting out
the Board’s assessment of the Company
as a going concern is contained in the
Directors’ Report on page 155 and Note 2
Basis of preparation to the Consolidated
Financial Statements on page 176.

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

Stuart Brown
Chair of the Audit Committee
17 April 2024

120

Audit Committee Report continued

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 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
with significant improvement in the scores
from respondees in Ukraine. A couple of
areas for improvement were noted but none
impacted on the effectiveness of the audit.
The outcome of the 2023 review in respect of
the 2022 Annual Report and Accounts was
discussed with the relevant partners of MHA.

The auditors also provide to the Committee
information about policies and processes for
maintaining independence and monitoring
compliance with relevant current requirements,
including those regarding the rotation of
audit partners and staff, and the level of
fees that the Company pays in proportion
to the overall fee income of the 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 Committee has recommended
to the Board the reappointment of MHA.
Resolutions reappointing MHA as external
auditor and authorising the Directors to set
the auditor’s remuneration will be proposed
at the 2024 AGM. The Company notes that
as of the end of the financial year 2023, the
Company has engaged MHA as external
auditor for five consecutive financial years. In
light of the material uncertainty related to the
ongoing war in Ukraine, the Committee does
not consider it to be the right time, or in the
best interests of the Company’s shareholders,
to conduct a competitive tender process for
the external audit. The Company proposes
that it will next complete a competitive
tender process during financial year 2027,
subject to the situation in Ukraine having
stabilised by that time. The Committee will
continue to keep this position under review.

The Company has complied with the
Statutory Audit Services Order issued by
the UK Competition and Markets Authority
Authority and with the Audit Committees
and the External Audit: Minimum Standard
published by the FRC in May 2023 for the
financial year ended 31 December 2023.

There is regular open communication
between the Committee and the external
auditor, and the Committee met five times
during the year. The Committee meets
at least once a year with the external
auditors without any representation
from management being present.

Non-audit services
The 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 Committee (and the Committee is
routinely notified of all non-audit services).

Fees for audit-related and non-audit-related
services performed by the external auditors
during 2022 are shown in Note 7 Operating
expenses to the Consolidated Financial
Statements on page 184. For 2023, no material
non-audit services were performed by MHA.

Audit-related assurance services as at
31 December 2023 include US$63 thousand
regarding ESG-related disclosures in
the Annual Report and Accounts under
International Standard on Assurance
Engagements ISAE (UK) 3000 (Revised)
in respect of the process for reporting of
selected safety and emissions data.

Financial reporting
The Board has asked the Committee to
advise whether it considers the 2023 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.

Ferrexpo plc Annual Reports & Accounts 2023

Nominations Committee Report

121

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 Human Resources Officer.

Dear Shareholder,
I am pleased to present the Nominations
Committee Report for 2023 and provide a
summary of the work that the Committee
completed in the reporting year. The role of
the Nominations Committee is to assist the
Board in regularly reviewing its composition
and those of its Committees, to lead the
process for Board appointments, and ensure
effective succession planning for the Board
and senior management. The key activities
undertaken in the year are described in more
detail in this report. The Committee’s terms of
reference are available to view online on the
Company’s website (www.ferrexpo.com).

In 2023, the Committee was formally
convened four times (2022: three) where the
following was considered:

–

the composition and refreshment of the
Board;
training and developing needs to ensure
Board effectiveness;
reviewing and making recommendations
as to the composition of the Board and its
Committees in order to maintain a diverse
Board with the appropriate mix of skills,
experience, independence and
knowledge;
the criteria for Non-executive and
Executive Director appointments;
reviewing and making recommendations
as to the composition and diversity of the
Board, Executive Committee and direct
reports to Executive Committee members;
the engagement of executive search
agencies to assist with Board
appointments;
reviewing candidates and making
recommendations to the Board for the
appointment of Nikolay Kladiev as an
Executive Director, and the appointment of
Stuart Brown as independent Non-
executive Director;

– approving actions to be taken in 2023 in

–

support of the achievement of the Group’s
diversity and inclusion goals; and
reviewing the results of the Group’s annual
talent review and succession plans for
business critical roles.

The Committee also agreed to undertake an
internal performance evaluation for the year to
31 December 2023 (for further information
see the Board’s Performance Evaluation on
pages 110 to 112). The Company will conduct
an external performance evaluation in 2024.

On 25 May 2023, Ann-Christin Andersen
stood down from the Board as an independent
Non-executive Director and as a member
of the Committee. I would like to take this
opportunity to acknowledge and thank her
for the contribution she made to the work
of the Board and the Committee while she
served on both. Following her departure,
a decision was taken to not replace her
on the Committee in view of the workload
already being undertaken by other Board
members. The composition of the Committee
will be revisited in the course of 2024.

The leadership of the Company was also
restructured during 2023. Jim North, the
Chief Executive Officer, resigned and left the
Company at the end of June 2023. As a result
of Mr North’s departure, Lucio Genovese
assumed the role of Interim Executive Chair
from 1 July 2023 and Nikolay Kladiev was
promoted to the Board in the role of Chief
Financial Officer with effect from the 2023
AGM. These leadership changes ensured
business continuity within an operating
structure that enables timely decision making
in what is a dynamic operating environment.

The Board places great importance on
creating a workplace culture in which
all contributions are valued, different
perspectives are embraced, and so far as
possible biases are acknowledged and
mitigated. This commitment is set out in the
Company’s Diversity, Equity and Inclusion
policy, which was adopted by the Board in
2019. The Committee therefore continued
to make recommendations to the Board
on appointments to the Board and the
Executive Committee as well as monitor
senior appointments below the Executive
Committee. The execution of these plans will
remain a focus for the Committee to eliminate
gender imbalances below the Board.

Ferrexpo plc Annual Reports & Accounts 2023

Lucio Genevese
Chair of the Nominations Committee

Membership and
meeting attendance

Scheduled meetings

Eligible

Committee member

to attend Attended

Lucio Genovese

Ann-Christin Andersen

Graeme Dacomb

Vitalii Lisovenko

Fiona MacAulay

Read the Committee’s full objectives
and responsibilities online: www.
ferrexpo.com/about-ferrexpo/corporate-
governance/board-committees/

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS122

Nominations Committee Report continued

Since the inception of the “Fe_munity”
programme three years ago, more than 200
women have been through the programme
and the Committee was pleased to note that
in 2023, progress continued to be made
towards achieving gender balance across
the Group. The proportion of managerial
roles held by women has risen from 17.5%
in 2019 (62 female managers) to 22.3% in
2023 (87 female managers), with this upward
trend expected to continue into 2024, despite
the war in Ukraine. This trend means that
the Group is tracking well to achieve its
published target of at least 25% of managerial
roles to be held by women by 2030.

The Committee was also pleased to note
that below the managerial level, the overall
percentage of women in the workforce
improved from 28.7% in 2022 to 30.9% in
2023. However, it was noted that the overall
number of employees had declined as a
result of the war in Ukraine. In 2022, the
number of females in the workforce stood
at 2,290 but had declined to 2,130 females
in the workforce in 2023. This decline is due
to some employees leaving the Group due
to the current circumstances in Ukraine.

As at 31 December 2023, the Committee
was composed of three Independent
Non-executive Directors, Graeme Dacomb,
Vitalii Lisovenko and Fiona MacAulay.
Graeme Dacomb stepped down from the
Committee at the year end. I would like
to thank the members of the Committee
for all their work during the year.

Lucio Genovese
Chair of the Nominations Committee
17 April 2024

As a result of Ms Andersen stepping down
from the Board in May 2023, the composition
of the Board dropped below the gender
diversity target of 40% set by the FTSE
Women Leaders Review. The Board remains
committed to ensuring that the composition of
the Board meets this ratio but considering the
challenges faced by the Group arising from the
war in Ukraine, it was decided to not increase
the number of Board Directors in 2023. This
decision will be revisited in 2024 with a view
to also meeting the ethnic minority target
set by the Parker Review at the same time.

Aligned with the goals of the Parker Review,
the Committee is committed to ensuring that
the Board’s composition reflects the Group’s
workforce and the communities where the
Group operates. At the end of 2022, the
Committee commissioned external search
consultancy, Wilbury Stratton, to conduct
research into how comparable organisations
are responding to the Parker Review. The
outcome of this study enabled the Board
to chart a course to ensure a sustainable,
diverse and ethnically representative Board.
The Committee therefore progressed
recruitment in 2023 but has not yet identified
a suitable candidate for appointment given
the challenges faced by the Company and
constraints imposed on it by the war in
Ukraine. The Board is nevertheless committed
to making an appointment from an ethnic
minority group to the Board ahead of the
Parker Review deadline of December 2024.

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. The Group also operates a
Fe_munity programme which aims to
enhance and accelerate the development of
our senior female managers and to support
them as they navigate the challenges and
gender biases that might hinder their career
progression in the workplace and within
broader society. The Group also hosts regular
talks by senior female leaders from inside and
outside our business, along with a mentoring
scheme as part of this same programme.

Membership and meetings
The Committee is chaired by Lucio
Genovese and as at 31 December 2023
its other members were Vitalii Lisovenko,
Fiona MacAulay and Graeme Dacomb.
Ms Ann-Christin Andersen stepped down
from the Board on 25 May 2023, having
also served as a member of the Committee
until this date. Following a review of the
workload of the others directors, a decision
was taken not to replace Ms Andersen on
the Committee at that time. Mr Dacomb
stepped down from the Board and the
Committee on 31 December 2023. A
further review of Committee membership
will be conducted in the course of 2024.

The Committee is required by its terms of
reference to meet at least once a year and
met on four scheduled occasions in 2023.
All meetings were held face-to-face. All
Non-executive Directors have a standing
invitation to attend all Committee meetings,
with the consent of the Committee Chair.
In practice, most Directors generally attend
all meetings. Discussions at the meetings
covered the responsibilities outlined
earlier, with particular focus on Board skills
development and Non-executive and Executive
succession planning and recruitment.

Succession planning
and recruitment
The 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 the Group continues 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 Group’s strategy and ensure its long-term
success. The Committee plans ahead for
future recruitment to make sure that the
Board continues to have the diversity, skills
and experience it needs. The roles of all
Directors are summarised on page 106.

Ferrexpo plc Annual Reports & Accounts 2023

123

In 2023, the Committee revisited the training
and development needs of the Board. As a
result one director attended formal training
with the UK Governance Institute and the
full Board received briefings on ESG and
corporate governance topics. The Committee
also asked the Chief Human Resources
Officer to refresh the Board’s Skills matrix to
ensure that the matrix remains up to date to
inform the recruitment and development of
Board directors (for further information see the
Board’s skills matrix on page 97). This work
will be progressed in the course of 2024.

The Committee also participated in the
process to appoint Lucio Genovese as
Executive Chair, following the resignation
of the Chief Executive Officer (“CEO”), Jim
North. The Committee considered that
attracting suitable external candidates for
the CEO role would be impacted by the
ongoing war in Ukraine, and therefore took
a decision to postpone conducting a formal
search until the war ends. As an interim
measure, the Committee recommended
that Mr Genovese assume leadership of the
Group, on an interim basis, until a formal
market search can be undertaken.

In 2023, the Committee also recommended
the appointment of the CFO, Mr Nikolay
Kladiev as an Executive Director of the
Company. 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.

Ms Ann-Christen Andersen stepped down
as an independent Non-executive Director
in May 2023. As a consequence, a search
was progressed to find a replacement and
Stonehaven International, a global search firm,
was retained by the Committee to assist with
the search. Stonehaven is accredited under the
UK Government’s Enhanced Code of Conduct
for Executive Search Firms and the Voluntary
Code of Conduct on diversity best practice.
The firm has no other connection with the
Company. Prior to the search commencing,
the Committee agreed the skills and
experience it considered necessary for the role
and also stipulated that candidates needed
audit experience in order to provide further
bench strength in relation to financial and risk
management oversight of the Board. Lists of
potential candidates were then identified by
Stonehaven and discussed with Committee
members to agree shortlists to be interviewed.
Shortlisted candidates were interviewed
by members of the Committee and, where
practical, other Directors. Following these
interviews, the Committee recommended
the appointment of Mr Stuart Brown who
joined the Board on 22 October 2023.

When progressing recruitment, the Board
seeks to ensure that a broad range of diverse
candidates are taken into account including
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 is, however, made on merit against
objective criteria, so as to ensure that the
strongest possible candidate for the role
is recruited. However, the Committee will
continue to ensure that the Diversity, Equity
and Inclusion policy is considered when
conducting all searches for Board positions,
and will take account of the recommendations.

Election and re-election
In accordance with the UK Corporate
Governance Code, Stuart Brown and Nikolay
Kladiev will stand for election and all other
Directors for re-election by shareholders at the
Company’s AGM scheduled for May 2024. The
range of skills and experience offered by the
current Board is mentioned in this report and
is set out on pages 98 to 99. The Committee
and the Board consider the performance of
each of the Directors standing for election or
re-election to be fully satisfactory and have
demonstrated 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 AGM.

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 so far as possible biases are
acknowledged and mitigated. In support of this
goal, the Board adopted a Diversity, Equity and
Inclusion policy (“DEI Policy”) in 2019 which is
kept under review by the Committee. The DEI
Policy aims to promote equality of opportunity
across the whole organisation, regardless of
gender, ethnicity, religion, disability, age or
sexual orientation as well as address gender
diversity imbalances in the workforce while
also delivering sustainable talent pipelines for
succession to senior leadership roles. The
Board shares ownership with the Executive
Committee of the DEI Policy and progress
updates are presented to the Board for
review every six months to assess progress
against the targets and enable adjustments
to be made to the programme where
necessary. A summary of the Board’s diversity
information can be found on page 103.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS124

Nominations Committee Report continued

In support of its DEI goals, 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. The
Group also operates a Fe_munity programme
which aims to enhance and accelerate the
development of our senior female talent 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. In 2023, running this
programme for a fourth time was disrupted
and postponed as external facilitators involved
in the delivery of the programme were unable
to travel to Ukraine because of the war. Instead
a mentorship programme was initiated using
alumni from previous programmes to mentor
women within the workforce identified to
attend the fourth Fe_munity programme.
This mentorship programme will continue
alongside the Fe_munity programme and
other DEI related activities in 2024.

In 2023, the Group was able to hold
regular talks by senior female leaders from
inside and outside the business and host
a Fe_teens programme which followed a
similar format to the full-scale Fe_munity
programme. This programme is aimed at
young women in the surrounding community
and is part of the Group’s broader corporate
social responsibility initiative to support
the overall development of Ukrainian
society as well as interest young people to
consider a career in the mining industry.

In 2023, the Committee was pleased to
note that the proportion of managerial roles
held by women rose from 20.9% in 2022 (81
female managers) to 22.3% in 2023 (87 female
managers), with this upward trend expected
to continue into 2024, despite the war in
Ukraine. This trend means that the Group is
tracking well to achieve its stated target of at
least 25% of managerial roles to be held by
women by 2030. The Committee was also
pleased to note that the overall number of
women in the workforce for 2023 improved
from 28.7% in 2022 to 30.9% in 2023.

The Committee places high importance
on having a diverse, inclusive and
sustainable Board and workforce and,
to this end, the Committee reviews and
approves succession plans each year for
business critical roles, including reviewing
succession plans for the Board.

Following the resignations of Ms Ann-Christin
Andersen and Mr Graeme Dacomb in the
year, and the appointment of Mr Stuart
Brown, the Committee is satisfied that the
present composition of the Board provides an
appropriate mix of skills, experience, diversity
and perspectives on the Board. However,
the Committee has noted that following
Ms Andersen’s departure that the Board’s
composition no longer meets the gender
ratio set by the Hampton Alexander Review
of 33% women on boards nor the increased
target of 40% by the FTSE Women Leaders
Review. The Board takes account of this
ratio and expects to meet this target again
through an appointment to the Board in 2024.

During the course of the year, the Committee
also reviewed the talent pipeline and
succession plans for business-critical roles
at the Group and at Operational levels and
confirmed development plans for identified
high potentials which included actions to
mitigate identified knowledge and skills gaps
over the short to medium term. The Committee
noted that specific focus and attention was
needed to ensure adequate succession
coverage for the Group Chief Financial
Officer, Group Chief Marketing Officer, Group
Treasurer at the corporate level and Production
Director, Capital Construction Director and IT
Director at the operations level. The Committee
requested the Chief Human Resources
Officer to develop strategies in the first half
of 2024 for execution in the second half of
2024 that will enhance succession coverage
of these business critical roles and assure
business continuity in 2024 and beyond.

The Board is committed to ensuring that
the Board is not only composed of an
appropriate mix of skills and experience but
that it is also representative of the broader
society within which the Group operates
and reflects a sustainable, diverse and
ethnically representative Board. In support
of this objective, the Company retained
Wilbury Stratton, an external search and
research consultancy, to conduct recruitment
in 2023 for a minority ethnic director as
defined by the Parker Review. Arising from
this search, the Committee interviewed a
number of candidates presented but did
not find an appropriate candidate with
the necessary experience profile and skill
set to augment the existing skills of the
Board. The search will continue in 2024
and despite the added complexity imposed
by the war in Ukraine, the Board remains
committed to making an appointment
ahead of the Parker Review deadline for
FTSE 250 companies of December 2024.

Ferrexpo plc Annual Reports & Accounts 2023

125

Board diversity policy update
Board objective

Progress in 2023

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

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

– Upgrading of facilities and access points continued at operations to enable accommodation of people with

disabilities.

– Fe_munity teens programme was run in the local community to foster the recruitment of women into the

workforce.

– Assessment of workforce technical skills in the plant continued and training conducted to ensure workforce

capability supports business requirements.

– Unconscious bias training implemented for junior and middle managers at operations to enhance diversity

awareness at leadership levels.

– An update of the Board’s skills matrix was initiated which will be further progressed in 2024.
– Formal search launched for an additional Non-executive Director from a minority ethnic group to meet the

–

requirements of the Parker Review.
Initiatives in 2023 advanced women in leadership to 22.3% (87 female managers) (2022: 20.9% (81 female
managers)); target for 2024 (towards target of 25% by 2030) set at 22.8% by the end of 2024.

– Total female representation as percentage of the workforce currently at 30.9% (2,130 female employees)

(2022: 28.7% (2,290 female employees)).

– 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 continued in 2023.

New and repeat activities planned for 2024, subject to any restrictions imposed by the war in Ukraine, will include:

– Workforce Diversity and Inclusion education.
– Unconscious bias training for senior management.
– Science, technology, engineering and mathematics (“STEM”) ambassador visits to local schools and colleges.
– STEM streamers competition run online with students from local schools.
– Fe_munity programme for potential women leaders at operations.
– Selection of bursary award school leavers.

Workforce diversity
Ferrexpo’s policy is to employ a diverse
workforce and thought is given to recruit
as widely as possible, taking into account,
amongst other things, gender, race, social
background, education and disability. In
2019, the Board set a diversity target of 25%
women in leadership to be achieved by 2030.
Achieving this target remains a challenge in
view of there being historically a very limited
number of female applicants for technical
jobs in the natural resources sector.

During the year, the Committee reviewed the
progress made towards the Group’s target
and although the overall number of women
in the workforce increased to 30.9% (2,130
female employees) (2022: 28.7% (2,290
female employees)), the number of women in
leadership positions advanced to 22.3% (87
female managers (2021: 20.9% (81 female
managers)). The Committee was gratified with
this result and in order to sustain this upward
trend, the Committee approved diversity and
inclusion actions for execution in 2024.

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
2024 of 23.3%. This target represents the
appointment of an additional four women in
senior leadership positions by the end of 2024.

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 17 April 2024.

Lucio Genovese
Chair of the Nominations Committee
17 April 2024

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS126

Remuneration Report

The Committee is chaired by Fiona MacAulay. The
Committee consists of three independent Non-executive
Directors as required by the UK Corporate Governance
Code and is also attended by the Chair of the Board
and, by invitation, the Executive Chair, the Chief Human
Resources Officer, and a representative from Korn Ferry,
the Committee’s independent advisor.

Fiona MacAulay
Chair of the Remuneration Committee

Membership and
meeting attendance

Main objective
To establish and maintain on behalf of the
Board a policy on executive remuneration
to deliver the Company’s strategy and
value for shareholders; to agree, monitor
and report on the remuneration of
Directors and senior executives; and to
review wider workforce remuneration and
other policies in accordance with the UK
Corporate Governance Code.

A statement to shareholders
from the Chair of the
Remuneration Committee
As Chair of the Remuneration Committee,
I am pleased to present the Directors’
Remuneration Report1 for the year ended
31 December 2023.

This report is split into the following sections:

1. this Statement to shareholders from the
Chair of the Remuneration Committee
– summarising the decisions taken by the
Committee;

Scheduled
meetings

Ad hoc meetings

2. an “At a glance” overview of

Committee
member

Fiona
MacAulay

Graeme
Dacomb

Vitalii
Lisovenko

Ann-
Christin
Andersen

Eligible

to attend Attended

Read the Committee’s
full objectives and
responsibilities online:
https://www.ferrexpo.com/
about-ferrexpo/corporate-
governance/board-
committees/

remuneration;

3. the proposed new Directors’

Remuneration Policy for which
shareholder approval is being sought at
the 2024 AGM;

4. the Annual Report on Remuneration,

setting out how we have paid Directors in
2023 and how we intend to operate the
policy in 2024.

Our approach to remuneration
The Committee strives to align the interests
of the executives with shareholders, and the
Board keeps under review the structure and
level of remuneration afforded through short
and long-term incentive schemes. It is the
policy of the Board to align executive and
shareholder interests by linking a substantial
proportion of executive remuneration to
performance, basing short-term rewards on
a balanced portfolio of financial, operational,
ESG and strategic performance targets with
long-term alignment with shareholders through
the operation of multi-year share-based plans.

Our policy is purposefully weighted
towards short-term performance targets
given the Company’s focus on operational
excellence and the fact that Ferrexpo does
not control the price of iron ore, which is
dictated by market conditions. As a result,
setting performance targets that align to
the factors directly within the control of the
executive team is considered appropriate.

We ensure that remuneration packages are
competitive through assessing remuneration
packages against the relevant market
comparables to ensure that Ferrexpo
can attract, motivate and retain talented
executives. We align remuneration with
shareholders through the performance
conditions we set, share-based pay delivered
through partial deferral of annual bonus into
shares and the operation of annual awards
under a share plan and through market
consistent share ownership guidelines.
This approach applies across the executive
leadership team and has resulted in a robust
link between pay and performance to date.

Board changes during 2023
On 25 May 2023, Ann-Christin Andersen
stood down from the Board as a Non-
executive Director and as a member of the
Remuneration Committee. She has served on
the Committee since July 2021. I would like
to thank her for her contribution to the work
of the Committee while she was a member.

The leadership of the Company was
restructured during the 2023 financial
year following our former Chief Executive
Officer, Jim North, leaving at the end of
June 2023. The treatment of the former
CEO’s remuneration on cessation was in
line with the Policy and applicable legal
requirements with full details, including in
respect of the exercise of discretion by the
Committee, provided on pages 149 to 150.

As part of the leadership changes, Lucio
Genovese assumed the role of Interim
Executive Chair (“Executive Chair”) from 1 July
2023 and Nikolay Kladiev was promoted
to the Board in the role of Chief Financial
Officer with effect from the 2023 AGM.

1. This report has been prepared by the Remuneration Committee (the “Committee”) on behalf of the Board in accordance

with the requirements of the Listing Rules of the UK Listing Authority, Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended in 2013, 2018 and 2019) and the UK
Corporate Governance Code. The elements subject to audit are highlighted throughout.

Ferrexpo plc Annual Reports & Accounts 2023

127

These leadership changes ensured business
continuity within an operating structure
that enables timely decision taking in what
is a dynamic operating environment.

On assuming the role of Executive Chair in
July 2023, it was agreed Lucio Genovese
would receive an additional fixed fee on an
interim basis whilst he serves in the role.
The total fixed fee was set at US$1,000,000,
split between the rate in his former role as
Non-executive Chair of US$525,000 and an
additional interim fee of US$475,000. This
additional fee reflects his increased time
commitment in role and non-participation
in the Company’s incentive plans.

Mr Kladiev, the Chief Financial Officer
(“CFO”), was appointed to the Board with
effect from the 2023 AGM. His salary was
set at CHF450,000 and, in line with the
Policy, he continues to participate in the
annual bonus scheme and remain eligible
for annual awards under the LTIP. Full details
of his pay are included within this report.

Business context and 2023
employee remuneration
The second year of war in Ukraine continued
to impact the Group’s operations in
Ukraine, creating a high level of operational
variability which impacted the Company’s
remuneration schemes. This necessitated
the Company to adopt an agile approach
to remuneration in 2023 to ensure that the
Group’s remuneration practices fulfilled
their original intent. The Committee spent
time overseeing Group-wide pay decisions
in our exceptional circumstances.

Despite the rigours of war, management
worked tirelessly to protect the Group’s
workforce and preserve the integrity of
our assets to enable us to continue to
produce and sell our high-grade pellets.
The strategy to right-size our business
quickly, to enable us to be more responsive
to unpredictable circumstances has proved
successful. The workforce likewise showed
incredible resilience and commitment in very
challenging circumstances. The Group also
made unprecedented contributions from
its Humanitarian Fund, focusing its efforts
on the support for employees called up to
serve in the military, a variety of humanitarian
initiatives, including providing food and
accommodation for internally displaced
people and assistance to surrounding
communities and healthcare aid, including the
provision of medicines, medical equipment
and vehicles throughout the country.

Employees remain the bedrock of Ferrexpo’s
operations and we are unwavering in our
determination to support our people and
to safeguard them and their families. Amid
the prevailing circumstances, the Group
implemented a rehabilitation programme
for employees returning from serving in the

military to support their reintegration into
the workplace. The programme includes
medical care and physical rehabilitation,
the provision of prosthetics, as well as
psychological counselling and support
for employees and their families.

As was the case in 2022, the lack of access to
Black Sea export routes in 2023 constrained
our export capacity, sharply reducing
opportunities to export product volumes to
some customers in the Middle East and Asia.
This forced us to curb production levels and
only operate one, and sometimes two, of our
four pellet lines to match the reduced export
capacity available. As a result of the Group’s
variable production profile, it was necessary
to adjust the Group’s remuneration schemes.
The variable rate of production throughout the
year meant that the deployment of operational
employees had to be constantly scaled up or
down to align with the required production
profile each week. While the majority of
production-related personnel remained on
full pay, their production-related variable
monthly pay was impacted. Production staff
in excess of requirements were placed on
furlough on two-thirds pay, and administrative
staff and some support staff were placed
on a shorter shift roster of seven instead of
eight hours per day and paid commensurately
to align with the lower production profile.

Although the Group’s operations only
operated at around half capacity, a decision
was taken to maintain employment levels
and not to lay off excess staff to reciprocate
the unwavering commitment shown by
employees to work despite the perilous
environment within which the Company was
forced to operate in 2023. To minimise the
impact on earnings and alleviate some of the
effects of the cost of living crisis, the Group
took a decision to pay a special bonus at
the end of the year, to staff at operations, of
between 10% and 50% of salary dependent
on organisational level and to award a general
salary increase of 10% from April 2024.

The Group’s collective agreements include
provisions designed to provide equal
remuneration for men and women performing
the same job. This approach helps to ensure
that salaries, incentives, benefits and other
forms of compensation – both monetary
and non-monetary – remain free from
discrimination based on gender, race, religion
or trade union membership. These principles
are also enshrined in the Group’s Code of
Conduct, and approach to remuneration,
which ensures an equitable approach to
salary adjustments for employees returning
from extended absences, such as paternity
and maternity leaves or military service.

The economic consequences of the war and
the general downturn in the global economy
were also felt by employees in other Group
office locations as soaring energy prices

Ferrexpo plc Annual Reports & Accounts 2023

and higher inflation impacted households
worldwide. Given these inflationary pressures,
the Committee agreed adjustments in
base salaries for all employees aligned with
prevailing CPI in the Group’s various locations.

2023 Executive remuneration
As detailed above, the ongoing impact of
the Russian invasion of Ukraine resulted in
a number of operational challenges which
contributed to lower production volumes
and profitability than was the case in 2022.
This meant our financial and operational
performance was generally below the
threshold targets set in our annual bonus
for 2023 albeit we continued production
throughout the year and delivered a Group
cash EBITDA of US$63 million. Outside of
the financial and operational targets set for
2023, due to the dedication of our colleagues
in challenging circumcentres, we delivered
strongly against our safety, diversity and
carbon reduction targets in addition to
efficiently managing our pellet stockpiles. We
also made progress against a number of key
strategic objectives set for the bonus at the
start of 2023, including in the areas of business
optimisation and compliance. Outside of the
strategic targets set at the start of 2023, we
also responded to the dynamic environment
that we were operating in, including opening
new shipping routes to market to enable
continued supply to our customers. In this
context based on performance against the
targets set at the start of the year, the CFO
achieved a bonus at 49.6% of the maximum
(74.4% of salary) for the year under review. This
payment was consistent with the wider bonus
awards in the Company and the Committee
was comfortable that this bonus award
reflected the challenging year for the Group
and the wider stakeholder experience, and
therefore did not apply discretion. Full details
of the performance assessment are set out
on page 144. The former CEO and Executive
Chair were not eligible for the 2023 STIP.

With regard to the 2021 LTIP, vesting was
based on the TSR outperformance of a
tailored comparator group (75% weighting),
Production of 67% Fe pellets (12.5% weighting)
and carbon emissions reductions (12.5%
weighting) over a three-year vesting period
to 31 December 2023. The Committee
assessed the performance of the Company
over the full three-year performance period
and noted that the Russian invasion of Ukraine
on 24 February 2022 had weighed heavily on
the Company’s share price, resulting in TSR
being below the bespoke Index of comparable
Iron Ore and Composite Miners and therefore
there was no vesting under this element.
However, with regards to the proportion of
67% Fe pellets produced as a percentage of
total pellet production, we delivered 3.71%
which exceeded the lower end of the target
range set for the 2021 award of 3% and so

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS128

Remuneration Report continued

achieved vesting at 4.28% of the possible
12.5% for this part of award. Over the same
period, our carbon emissions intensity,
which takes into account emissions relative
to the production delivered reduced by 6.1%
which was above the maximum target set
for the 2021 award of 5% and so the 12.5%
of the total award available for this part of
the award vested in full. Taken as a whole,
the Committee therefore determined that the
2021 LTIP vested at 16.78% of maximum.

being retained so that in the event that the
Russian invasion of Ukraine comes to an
end, the Committee has the option to return
to Performance Shares if the operating
environment is sufficiently robust to enable
the Company to do so. Any move to grant
Performance Shares would only take place
following appropriate dialogue with the
Company’s shareholders and the Company
does not intend to grant Restricted Shares
and Performance Shares in combination.

– Performance underpin: the Committee

will consider the Company’s performance
relative to its mid to long-term financial,
operational and sustainability plans as well
as individual performance and may reduce
the vesting level, including to zero, if
performance is not considered consistent
with the Board’s plans. This assessment
will take into account the dynamic
operating environment that currently
prevails as a result of the Russian invasion
of Ukraine.

– FY2024 Proposed Award to the CFO:

– Restricted Share Awards: 25% of salary.
– The proposed award level has been
set in relation to Nikolay Kladiev’s
appointment to the PLC Board having
had regard to (i) his importance to the
Company (ii) historic awards to the
Executive Directors at Ferrexpo (iii)
our current share price and (iv) wider
market practice where grants of
Performance Share Awards are typically
in the region of 150% of salary to 200%
of salary for a FTSE 250 company CFO.

The use of Restricted Share Awards will
provide alignment with the Company and
shareholders, whilst the simplicity and greater
certainty provides a key retention tool for the
senior management in these difficult and
uncertain operating conditions.

The CFO, Nikolay Kladiev, will be the only
Director receiving Restricted Share Awards,
however, the Policy will also be applied to the
wider Executive Committee on the same
terms albeit at different award levels. Lucio
Genovese, as Interim Executive Chair, will not
participate in this or any incentive plans.

For the purposes of consistency between
the short and long-term incentive plans, the
revised Policy has also been updated with
some modest changes to the wording such
that the discretions afforded to the Committee
in the annual bonus an long-term incentive
plans have been aligned and this is consistent
with the updated long-term incentive plan
rules being presented at the 2024 AGM.

2024 Remuneration Policy change:
Introduction of Restricted Shares
In designing our revised Policy, we took into
consideration the Investment Association’s
guidance in moving from Performance to
Restricted Share Awards. The key features of
our proposed long-term incentive provision
are as follows:

– Annual Award Limit: a 50% discount in
moving from Performance to Restricted
Share Awards;
– Restricted Share Awards: 100% of

salary;

– Performance Share Awards: 200% of
salary (as above, current Policy limit
and not expected to be used during the
ongoing Russian invasion of Ukraine).
– Vesting: three years after grant, subject
to continued service, with any shares
vesting subject to a two-year holding
period;

Key activities of the Committee in 2023

The Committee’s key activities during the 2023 financial year were:

February
– Consulting on FY 2022 remuneration outcomes
with both shareholders and advisory bodies.
– Planning stakeholder engagement for 2023.
– Determining the 2022 bonus outturn.
– Determining vesting of the 2020 Long-term

Incentive Plan awards.

– Setting 2023 annual bonus targets.
– Reviewing 2023 Long-term Incentive Plan TSR

March
– Considering the impact of the war in Ukraine on

2023 remuneration.

– Approving the application of the Remuneration

Policy for 2023.

– Determining the size of 2023 Long-term

Incentive Plan awards and the performance
conditions.

– Approving awards under the Company’s share

peer group constituents.

plans.

– Signing off the 2022 Remuneration Report.

May
– Approving exit payments for the CEO.

Ferrexpo plc Annual Reports & Accounts 2023

With remuneration outcomes aligned across
the executive leadership of the Group
and after considering wider stakeholder
experience through the year, and the additional
achievements that were delivered outside of
the bonus plan targets, the Committee was
comfortable with remuneration outcomes and
that the policy was operating as intended.

Remuneration Policy review and
2024 implementation
With our current Directors’ Remuneration
Policy due to expire at the 2024 AGM, the
Committee undertook a review of the operation
of the Policy during 2023. The conclusion of
the review was that all aspects of the Policy
remained appropriate with the exception of the
long-term incentive plan given the challenges
noted above in terms of long-term target
setting and the operation of the shareholding
requirements given the effect of the Russian
invasion of Ukraine on the Company’s
share price and the modest level of awards
made under the long-term incentive plan.

For completeness, our pay model to date has
been to provide a market competitive total
remuneration opportunity through a market
consistent base salary, an annual bonus
(using a balanced scorecard of financial,
operational, ESG and non-financial targets),
pension and benefits all provided at the same
time as operating a minimum share ownership
expectation. Our long-term incentive has
been modest grants of Performance Shares
Awards linked to relative total shareholder
return and sustainability targets.

The Russian invasion has caused volatility in
our share price as well as constraining our
production and so the continued use of our
current long-term incentive performance
metrics (relative TSR versus industry peers
and production of more efficient DR pellets
at 67%+ Fe) is no longer appropriate as our
ability to achieve the targets, specifically the
total shareholder return target, is likely to be
as much impacted by external factors as
management actions. As a result, while we
intend to return to Performance Shares over
the longer term, we are to seek approval
to grant Restricted Shares to facilitate the
retention and motivation of the leadership
team in the most challenging of external
circumstances. However, our up-dated Policy
will retain the ability to grant Performance
Share awards within it. This flexibility is only

129

2024 Remuneration Policy application
Subject to the approval of the Policy at the
2024 AGM, it is our intention to apply the
Policy as set out below:

– The CFO’s salary, consistent with other
members of the Executive Committee in
the UK and Switzerland, was increased
by 4% with effect from 1 January 2024.
The Committee was comfortable with
increasing his salary at 4% as part of a
process of moving his salary, and total
remuneration package, into line with market
practice for the role of a FTSE 250 CFO.
Across the Company, salary budgets
were set taking into account the rates of
inflation in the locations in which Ferrexpo
operates and ranged from 1.5% to 10%.

– The annual bonus opportunity for the

CFO will be 150% of salary. Performance
will be measured against a balanced
scorecard of financial, operational and
ESG targets as summarised on page 146.
In the current circumstances, reflecting
the Committee’s objective of incentivising
and rewarding on a collective basis given
the challenges presented by the Russian
invasion of Ukraine, there will be no tailored
strategic targets set at Group executive
level in the annual bonus plan for 2024
(previously strategic targets accounted for
40% of the total bonus). The performance
targets set for the 2024 STIP have been
agreed to reflect the current operating
environment, and the Committee adopted
a revised framework under which it will
determine bonuses for 2024. This revised
framework continues to include targets
set with reference to the Company’s
budget each year but provides greater
flexibility to take account of the dynamic
external environment caused by the
ongoing Russian invasion of Ukraine. Full

details are included on page 145. One
quarter of any bonus earned after tax
is deferred into shares for two years.

– The Committee intends to grant the CFO a
Restricted Share award with a face value of
25% of his salary, i.e. at the lower end of the
award possible under the Policy. The award
will vest three years after grant, subject
to continued service, with any shares
vesting subject to a two-year holding
period. The award will also be subject to
a performance underpin detailed above.

Consideration of shareholders
and employees
We consulted with shareholders in 2023
in relation to the renewal of the Directors’
Remuneration Policy and shareholders
were understanding of the rationale for the
proposed changes and so were supportive
of the proposal. The Committee welcomes
feedback provided by shareholders and
considers it in full prior to taking final decisions.

The Committee was also grateful for the
shareholder and advisory body input into
the treatment of our 2020 LTIP award on
vesting in light of the Russian invasion of
Ukraine. Full details of the treatment of this
award were set out in the 2022 Directors’
Remuneration Report following a short
consultation in late 2022 and early 2023.
The 2022 Directors’ Remuneration Report
received over 97% support at the 2023 AGM.

The Committee also noted feedback on
remuneration provided by the Employee
Engagement Non-executive Director, Vitalii
Lisovenko, which was elicited directly from
employees during a series of employee
engagement sessions held with all levels of
employees in late 2023. These sessions 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.

Understandably, employees raised concerns
about the impact on pay resulting from
the decrease in the level of production.
The reasons for the current situation were
explained with more frequent communication
sessions planned throughout 2024 with the
timing dependent on market developments.
The announcement of a general salary
increase of 10% planned for April 2024
was welcomed and employees were
appreciative that there had been no layoffs
as has been the case at other companies
in Ukraine that are operating within the
same challenging business environment.

It was also noted that, while the approach to
remuneration is understood and is generally
considered to be working effectively, work
remains ongoing to improve the alignment
between remuneration with individual
performance to ensure differentiated
outcomes. The progress made to date will
be progressed further in 2024 by the Chief
Human Resources Officer (“CHRO”). The
CHRO will also work with the designated
Employee Engagement Non-executive
Director, Vitalii Lisovenko, to further
develop two-way feedback in relation to
remuneration policies and practices.

I hope you are able to support the rationale for
the decisions we have taken during the year
and support the resolution for the approval
of the Policy and Remuneration Report at
the 2024 AGM. If you have any questions
or comments, please feel free to reach
out through the Chief Human Resources
Officer (email: g.nortje@ferrexpo.ch).

Fiona MacAulay
Chair of the Remuneration Committee
17 April 2024

July
– Consideration of 2023 AGM feedback.
– Reviewing market developments and institutional

investor issues raised during the 2023 AGM
season.

– Considering the treatment of share awards for

departing executives.

– Reviewing Remuneration Policy.
– Approving supplementary fee for the interim

Executive Chair.

November
– Reviewing shareholder and advisory body

feedback in relation to the 2024 Remuneration
Policy.

– Reviewing market pay benchmarking data and
approving any proposed salary increases for
members of the Executive Committee.

– Considering performance to date against 2023

annual bonus targets.

– Reviewing shareholder advisory body guideline

updates for 2024 AGM season.

– Approving amendments to the Long-term
Incentive Plan rules ahead of 2024 AGM.

– Approving the 2024 Remuneration Committee

Planner.

Anticipated key activities of the
Committee in 2024
– Consider 2024 AGM feedback.
– Confirm the application of the new 2024

Remuneration Policy supports the Company’s
strategy.

– Implementing the new 2024 Remuneration

Policy.

– Consider the evolution of performance targets in
line with the implementation of the business
strategy through the current challenging
operating environment.

– Monitor senior management remuneration.
– Ensure remuneration decisions are taken in the
context of the wider stakeholder experience
through the period.

Ferrexpo plc Annual Reports & Accounts 2023

Key activities of the Committee in 2023

The Committee’s key activities during the 2023 financial year were:

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS130

Remuneration Report continued

At a glance (not subject to audit)

Element

Operation

Salary:
To attract and retain
talent by ensuring
base salaries are
competitive in the
market in which the
individual is employed

Pension and
benefits:
To provide market
competitive benefits

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

– Annual review by the Committee
–

Increases typically in line with wider workforce

– Aligned with pension and benefits offered to local workforce

– Maximum opportunity of 150% of salary
– Target opportunity of 75% of salary
– Performance conditions based on a scorecard of financial,

operational and ESG targets

– Targets set to reflect the Company’s 2024 budget with Committee

judgement to be used to assess the extent of under or over
performance so that there is flexibility to take into account the
dynamic environment caused by the ongoing war in Ukraine

– Safety underpin
– 25% of bonus deferred into shares for two years

Time-horizon

2024

2025

2026

2027

2028

Summary of 2023 STIP Business scorecard outcomes
(60% of bonus)

Total Shareholder Return

90%

80%

70%

60%

50%

40%

30%

20%

10%

)
y
r
a
a
s

o
%

(

t
n
e
m
y
a
p
s
u
n
o
B

Group
EBITDA

Safety –
LTIFR

Diversity
ratio

Carbon
spend

Production
volume

Full cash
costs
reported

FYM Total
Movement

Pellet
stockpile

Total

150

100

)

(

e
u
a
V

31 Dec
2020

31 Dec
2021

31 Dec
2022

31 Dec
2023

Ferrexpo
— Ferrexpo — 2023 LTIP Index — FTSE 250 Index — FTSE All-Share Index

FTSE All-Share Index

2023 LTIP Index

FTSE 250 Index

Ferrexpo plc Annual Reports & Accounts 2023

131

Element

Operation

Time-horizon

2024

2025

2026

2027

2028

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

To reflect the current exceptional circumstances of the Company (and
in particular the challenge of setting long-term performance
conditions), it is expected that the LTIP will be used to grant
Restricted Share awards from 2024 that will normally be eligible to
vest subject to continued employment on the following basis:

– Policy maximum: 100% of salary (150% in exceptional

circumstances)

– Vesting period of three years with a two-year post-vesting holding

period

– Performance underpin: the Committee will consider the

Company’s performance relative to its mid to long-term financial,
operational and sustainability plans as well as individual
performance and may reduce the vesting level, including to zero, if
performance is not considered consistent with the Board’s plans.
This assessment will take into account the dynamic operating
environment that currently prevails as a result of the Russian
invasion of Ukraine.

The current LTIP also enables performance-related share awards to
be made on the following basis:

– Policy maximum: 200% of salary (300% in exceptional

circumstances)

– Performance based typically on relative TSR (75% weighting) in
conjunction with, for example, production (12.5% weighting) and
carbon emissions (12.5% weighting)

– Performance measured over three years with two-year post

vesting holding period

It is not expected that performance-related share awards will be
made to Executive Directors during the 2024 to 2026 financial years
unless the current Russian invasion of Ukraine ends. A return to
performance-related share awards would follow appropriate dialogue
with shareholders. The limits set out above for restricted share
awards are set at 50% of the equivalent limits for performance-related
share awards, in line with Investment Association guidance although
awards in practice are expected to be materially below the maximum
levels included in the Policy.

Share ownership
guideline:
To provide alignment
of interests between
Executive Directors
and shareholders

– Executive Directors are required to build and maintain a

shareholding of 200% of salary.

– Applies for two years post-cessation of employment.

200% of salary

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
132

Remuneration Report continued

Part A: policy section (not subject to audit)

This part of the Directors’ Remuneration Report sets out the Remuneration Policy for the Directors of the Company, which will be put
to a binding shareholder vote and become formally effective from the 2024 Annual General Meeting, 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 2020 to comply with changes made to the UK Corporate Governance Code. The
revised terms of reference were approved by the Board and its duties include the determination of the policy for the remuneration of the Chair of
the Board, Executive Directors, the members of the Executive Committee, and the Company Secretary as well as their 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 UK Corporate Governance Code and are
available for inspection on the Group’s website at www.ferrexpo.com.

Key principles of the remuneration policy
Ferrexpo’s remuneration policy is designed to help attract, motivate and retain talented executives to help drive the future growth and
performance of the business. The policy aims to:

– align executive and shareholder interests;
–
–

link an appropriate proportion of remuneration to performance;
reward based on a balanced portfolio of performance conditions, where appropriate (e.g. annual business priorities, financial and operational
targets and individual performance); and

– provide rewards that are competitive in the relevant markets to help attract, motivate and retain talented executives.

In determining the Company’s Remuneration Policy, the Committee takes into account the particular business context of the Group, the industry
segment, the geography of its operations, the relevant talent market for each executive, the location of the executive and remuneration in that
local market and best practice guidelines set by institutional shareholder bodies. The Committee will continue to give full consideration to the
principles set out in the UK Corporate Governance Code in relation to Directors’ remuneration and to the guidance of investor relations bodies.

From the policy review undertaken, the Committee is satisfied that the remuneration policy and its application take 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 – For Executive Directors, 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 via our LTIP (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. For the Executive
Chair, given the interim nature of the role, our remuneration policy is designed to ensure that inappropriate risk-taking is not encouraged and
will not be rewarded by making the Executive Chair ineligible to receive variable remuneration.

– 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 138 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, incentives may also include climate-related performance targets (as primary targets or as underpins) linked to the
Company’s strategic climate goals.

Ferrexpo plc Annual Reports & Accounts 2023

133

Changes from the previous Remuneration Policy
The key changes to this Remuneration Policy, from the previous policy approved by shareholders at the 2020 AGM, and as described in the
Chair’s introductory statement, are as follows:

the introduction of non-performance related restricted share awards under the LTIP to better support the Company’s strategy;

–
– aligning the wording in relation to the Committee’s potential use of discretion so that the provisions in the LTIP are consistent with the short-term
incentive plan. As detailed above, while it is not expected that performance-related LTIP awards will be granted to Executive Directors during the
operation of the 2024 Remuneration Policy, the policy and LTIP rules will be updated so the discretion provisions are consistent with the
short-term incentive plan in the event that future performance-related awards are granted. Within the LTIP this would enable the Committee to
adjust formulaic outcomes (upwards and downwards) as appropriate, taking into account such factors as it determines to be relevant, including
the broader performance of the Group, individual performance and/or the operating environment of the Group; and

– a change to the share ownership guidelines so that Executive Directors are only required to retain 50% of the net of tax shares vesting under the

LTIP (from both performance share awards and restricted share awards) or received under their deferred bonus until the share ownership
guidelines are met (rather than, as at present, 100% of the net of tax shares vesting).

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 typically 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 (taking
account of the location of the executive); 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 a maximum of
5% of salary with pension for Swiss-based
employees is differentiated by age and is also
set at up to 5% of salary.

Statutory lump sums and/or end of service
gratuities may be accrued each year and may be
payable on termination in line with the relevant
legislation where this exists.

Business and, where
relevant for current
Executive Directors,
individual performance
are considerations in
setting base salary.

Not performance
related.

Base salary increases are applied
in line with the outcome of
reviews, 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
(including following appointment
to the Board on a on a below
market base salary).

Executive Directors will receive a
pension that is aligned with the
typical (i.e. most common)
practice for employees in the
location that the executive is
based.

The employer contribution will
normally be limited to a
percentage of base salary.
Associated benefits and variable
pay will only be included where
there is a statutory requirement to
do so.

The employer contribution will be
limited to 10% of salary or higher
subject to compliance with local
statutory requirements to reflect
actual practice in the Company.

Benefits
Competitive in the market
in which the individual is
employed.

Benefits are paid to comply with local statutory
requirements and as applicable to attract or
retain executives of a suitable calibre. They
include life insurance, personal accident, travel
and medical insurance. Where appropriate,
additional benefits may be offered, including, but
not limited to, accommodation allowances,
travel, enhanced sick pay, relocation/expatriate
relocation benefits, tax and legal advice.

Benefits’ values vary by role and
eligibility and costs are reviewed
periodically. Increases to the
existing benefits will not normally
exceed applicable inflation.
Increases above this level may be
applied, where appropriate, to
reflect changes in role, scope,
location and responsibility.

Not performance
related.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS134

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 judgment
in determining an appropriate outcome at
performance levels both below and above the
target level of performance for each performance
measure. The Committee also has the ability to
adjust bonus outcomes based on its assessment
of individual contribution. Furthermore, the
Committee can exercise discretion to adjust the
formulaic outcome or amount of bonus payable
(upwards and downwards), 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.

Maximum opportunity of 150% of
salary.

Performance related.

The target opportunity is 50% of
maximum and the threshold
opportunity is up to one-third of
maximum.

Performance targets
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.

Normally paid as a mixture of cash and deferred
shares with the cash portion paid following the
publication of the audited results. The deferred
share portion will normally be a minimum of 25%
of the total bonus (with after tax bonus used to
acquire shares or the deferral taking place
through a deferred share award) with the shares
eligible for release after a period of two years.
Dividend equivalents may accrue on deferred
bonus shares.

Malus and clawback provisions will apply in the
case of individual gross misconduct, an error in
assessing performance against the condition,
corporate failure (for which the individual was
partly or wholly responsible) and/or in the event
that the individual is found legally responsible
for:
– a material misstatement of the Annual

Accounts; or

– a failure of risk management or reputational

damage to the Company.

Ferrexpo plc Annual Reports & Accounts 2023

135

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 originally approved by
shareholders at the 2018 AGM to enable the
grant of performance share awards
(“Performance Share Awards”) and will be
amended at the 2024 AGM to enable the grant of
restricted share awards (“Restricted Share
Awards”). It is not expected that Performance
Share Awards will be granted to Executive
Directors during the 2024 to 2026 policy period
but the Committee reserves the right to revisit
this position should the Russian invasion of
Ukraine end.

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 Restricted Share awards is normally
subject to a three-year continued employment
requirement and consideration of a performance
underpin.

Vesting of Performance Share Awards is subject
to performance measured over a period of at
least three years. The Committee can exercise
discretion to adjust the extent of vesting
(upwards and downwards), taking into account
such factors as it determines to be relevant,
including the broader performance of the Group,
individual performance and/or the operating
environment of the Group.

A two-year holding period applies to shares
vesting under the LTIP.

Malus and clawback provisions will apply in the
case of individual gross misconduct, an error in
assessing performance against the condition or
underpin, corporate failure (for which the
individual was partly or wholly responsible) and/
or in the event that the individual is found legally
responsible for:
– a material misstatement of the Annual

Accounts; or

– a failure of risk management or reputational

damage to the Company.

The LTIP provides for:
– annual Restricted Share

Awards up to an aggregate
limit of 100% of salary in
normal circumstances. This
limit may be exceeded in
exceptional circumstances but
will not exceed 150% of salary;
and

– annual Performance Share
Awards 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 above LTIP limits are
cumulative, with value of shares
subject to Restricted Share
Awards counting double vis-à-vis
the Performance Share Award
limits. It that it is not envisaged
that an Executive Director would
receive both types of an award in
the same financial year.

– Restricted Share

Awards are subject
to a performance
underpin. The
Committee will
consider the
Company’s
performance relative
to its mid to
long-term financial,
operational and
sustainability plans
as well as individual
performance and
may reduce the
vesting level,
including to zero, if
performance is not
considered
consistent with the
Board’s plans. This
assessment will take
into account the
dynamic operating
environment that
currently prevails as
a result of the
Russian invasion of
Ukraine.

Should Performance
Share Awards be
granted, the Committee
would determine
appropriate performance
conditions, in advance
of granting each award.

It is expected that
relative TSR would
remain the primary
performance condition
for Performance Share
Awards. Other
performance conditions
may, however, be used
in combination with
relative TSR.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS136

Remuneration Report continued

Purpose and link to strategy

Operation

Opportunity

Performance metrics

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 50% of the post-tax shares vesting
under the LTIP and shares deferred under the
annual bonus (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.

Executive Directors are required
to build and maintain a
shareholding to the value of at
least 200% of salary.

Executive Directors are required
to hold the lower of 200% of
salary and the value of shares
held on cessation for two years
post cessation.

The share ownership guideline
does not apply to the Executive
Chair.

Not performance related.

The Committee maintains discretion to disapply
the policy as it considers appropriate in
exceptional circumstances (e.g. death). The
post-cessation guideline will apply to shares
deferred under the annual bonus (on an after tax
basis) and shares which vest under existing and
future LTIP awards (after tax) during the
Executive Director’s tenure.

Rationale for performance targets
The STIP is based on performance categories that are key to delivering on our long-term strategy. Performance targets are set at the beginning
of the 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 and the
Committee uses its judgement to determine appropriate stretch in targets from threshold to maximum performance levels. The Committee
believes that using multiple targets for the purposes of the STIP provides for a balanced assessment of performance over the year.

For Restricted Share Awards granted under the LTIP, while the Committee intends to return to the grant of Performance Share Awards over the
longer term (e.g. subject to relative TSR and sustainability targets), the grant of non-performance related Restricted Share Awards will facilitate
the retention and motivation of the leadership team in the most challenging of external circumstances. However, Restricted Share Awards for
Executive Directors will be subject to an underpin whereby the Committee will consider the Company’s performance relative to its mid to
long-term financial, operation and sustainability plans as well as individual performance and may reduce the vesting level, including to zero, if
performance is not considered consistent with the Board’s plans. This assessment will take into account the dynamic operating environment that
currently prevails as a result of the Russian invasion of Ukraine and will consider the extent to which the value delivered on vesting is as a result
of windfall gains.

Rationale for Executive Chair not receiving variable pay
Given the interim nature of the Executive Chair role, and the expectation that the Executive Chair will return to his position as Non-executive
Chair following the end of his tenure, the Committee has determined that it would not currently be appropriate for the Executive Chair to receive
variable remuneration.

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.

Payments resulting from existing awards
Executive Directors are eligible to receive payment resulting from the vesting of any award made prior to the approval and implementation of the
remuneration policy detailed in this report.

Ferrexpo plc Annual Reports & Accounts 2023

137

Non-executive Director policy table
This section of our report summarises the policy for each component of Non-executive Director remuneration.

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Fees

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 for additional
responsibilities including 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.

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.

Not performance related.

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 million.

For the avoidance of doubt,
additional remuneration received
by the Chair by way of salary
under his service contract while
he serves as Executive Chair shall
not count towards these limits.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS138

Remuneration Report continued

Pay-for-performance: scenario analysis
The graph below illustrates estimates of the potential future reward opportunity and the potential split between the different elements of
remuneration under four different performance scenarios: “Below threshold”, “On-target” and “Maximum” and “Maximum assuming 50% share
price growth”. The Executive Chair only receives a fixed fee in respect of his duties and therefore receives the same remuneration in all scenarios.
The assumptions for the CFO are summarised in the table below.

Scenario

Fixed pay

STIP

LTIP

Below threshold

On-target

Maximum

Maximum, assuming 50%
share price growth

Base salary, pension
and benefits as
applicable for 2024
financial year1

No STIP (0% of salary)

On-target STIP (75% of salary)

Maximum STIP (150% of salary)

Full vesting of the RSP Award – assumed
normal maximum policy of 100% of salary,
although in practice awards to Executive
Directors are significantly lower

As above, but modelling the impact of a 50%
increase to share price

1. Benefits have been included at US$19,534 based on the annualised 2023 benefit provision to the CFO.

Executive Chair US$ (' 000)

Minimum

100%

Target

100%

Maximum

100%

Maximum
with 50%
share price
growth

1,000

500

1,000

1,500

2,000

2,500

Fixed Pay

STIP

LTIP

LTIP value with 50% share price growth

CFO US$ ('000)

Minimum

51%

Target

37%

Maximum

28%

26%

Maximum
with 50%
share price
growth

49%

27%

42.4%

37%

1,063

36%

1,454

28.2%

25%

1,845

12%

2,106

500

1,000

1,500

2,000

2,500

Fixed Pay

STIP

LTIP

LTIP value with 50% share price growth

Ferrexpo plc Annual Reports & Accounts 2023

139

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 targets and conditions may be set initially for incentives in the first year of appointment to recognise the timing of their
appointment during the year. The rationale will be clearly explained in each case.

In addition, the Committee may make an award in respect of a new appointment to “buy out” existing incentive awards forfeited on leaving a
previous employer. In such cases, the compensatory award would typically be on a like-for-like basis with similar time to vesting, performance
conditions and likelihood of the targets being met. The fair value of the buy-out award would not be greater than the awards being replaced.
To facilitate such a buy-out, the Committee may grant a bespoke award under the Listing Rules exemption available for this purpose.

In cases of appointing a new Executive Director by way of internal promotion, the Group will honour any contractual commitments made prior
to his or her promotion to Executive Director.

In every case, the Board will pay both the appropriate, but also the necessary, rate of pay to attract an executive who in the view of the Board will
contribute to shareholder value.

The approach to setting Non-executive Director fees on appointment is in line with the approach taken for the fee review set out in the Non-
executive Director policy table earlier in this report and will also take into account fee levels for existing Non-executive Directors.

Details of Executive Directors service contracts
The Chief Financial Officer, Nikolay Kladiev is employed under a contract of employment with Ferrexpo AG, a Group company (the “employer”),
as is Lucio Genovese in respect of the executive function of his role. The principal terms of their service contracts not otherwise set out in this
report are as follows: save in circumstances justifying summary termination, Mr Kladiev’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 Kladiev. Given the interim nature of
Mr Genovese’s role, these periods are three months respectively and the contract is for a fixed-term of twelve months, which can be extended by
mutual agreement. Neither contract has any special provisions in the event of a change of control.

Executive Director

Position

Date of contract

Length of current contract

From employer

From employee

Lucio Genovese

Executive Chair

1 July 2023

Nikolay Kladiev

CFO

7 July 2021

12 months

Indefinite

3 months

6 months

3 months

6 months

Notice period

Under their service contracts, Mr Genovese and Mr Kladiev are 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 contracts contain 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 Directors will be entitled under their contracts to receive all components of their base salaries, 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.

Policy for loss of office payments
The following principles apply when determining payments for loss of office for the Executive Directors 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); 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 appropriate:

– 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, confidentiality, restrictive covenants and/or consultancy

arrangements).

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS140

Remuneration Report continued

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 any performance conditions will be measured (in the case of Performance
Share Awards) and any performance underpins considered (in the case of Restricted Share Awards). 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 with any amended conditions to be similarly challenging having had regard to the relevant circumstances.
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 or her tenure as
Director, performance of the Company as a whole and perception of the payment amongst the shareholders, general public and employee
base. The Committee has discretion to determine that an annual bonus should remain payable under the STIP notwithstanding termination of
office or employment.

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 attaching to Performance Share Awards and any conditions under any performance underpin attaching to Restricted
Share Awards 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 contracts are 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 (i.e. the Executive Chair only while he remains in post) 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 subject to their election and annual re-election by shareholders. Their appointments may be terminated by either party giving not less
than three months’ notice. The key terms of current letters of appointment are as follows:

Date of first appointment

Date of election/re-election

Non-executive Director

L Genovese1

S Brown

V Lisovenko

F MacAulay

N Polischuk

Position

Chair

Non-executive Director

12 February 2019

22 October 2023

Non-executive Director

28 November 2016

Non-executive Director

12 August 2019

Non-executive Director

29 December 2021

2024 AGM

1. Details of the service contract which governs the additional services which Mr Genovese has agreed to provide while he serves as Executive Chair are set out in the section headed

‘Details of Executive Directors service contracts’ above.

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, or Executive Chair, setting out the circumstances
surrounding, and potential changes to, broader employee pay. The CEO, or Executive Chair, 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 and their proxy advisers 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 and their
proxy adviser’s 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 Reports & Accounts 2023

141

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 2023
The Committee currently comprises three Independent Non-executive Directors. Fiona MacAulay is Chair of the Remuneration Committee, with
the other members of the Committee being Stuart Brown and Vitalii Lisovenko. During the year, Ann-Christin Andersen and Graeme Dacomb
stepped down from the Board and Committee in May and December 2023 respectively, with Stuart Brown being appointed to the Committee in
February 2024.

The Committee met on four scheduled occasions and on two ad hoc occasions in 2023. Attendance at meetings by individual members,
together with a summary of the topics discussed at meetings in 2023 is set out in the Chair’s Introductory Statement on pages 126 to 129.

The Executive Chair, Jim North (while CEO) and the Chief Human Resources Officer (the “CHRO”) attended meetings of the Committee at the
invitation of the Chair of the Committee, and the Company Secretary acts as secretary to the Committee. The other Non-executive Directors and
other members of management may also attend meetings by invitation where appropriate. No Director is present when their own remuneration is
being discussed.

Advisors
Following a competitive tender, the Committee appointed Korn Ferry in October 2019 to provide advice to the Committee. Korn Ferry is a
member of the Remuneration Consultants Group and adheres to its code of conduct.

Korn Ferry’s fees for services provided to the Committee in 2023 totalled £90,366 which were charged based on the time spent advising the
Committee. Korn Ferry also provides general remuneration advice to management in respect of remuneration elsewhere in the Group. The
Committee evaluates the support provided by its advisors periodically and is satisfied that the advice received is independent and objective and
that the advisors did not have any connections with Ferrexpo which may impair their independence.

The CEO, or the Executive Chair, and the CHRO provide guidance to the Committee on remuneration packages of senior executives employed
by the Group (but not in respect of their own remuneration).

Single total figure of remuneration – audited
The table below sets out in a single figure for each currency of payment the total remuneration received by each Executive Director during the
year ending 31 December 2023 and the prior year. Mr North was the CEO in the period from 1 January to 30 June 2023 at which point he
stepped down from the role and the Board. Mr Genovese assumed the role of Executive Chair from 1 July 2023. Mr Kladiev, the CFO, was
appointed to the Board with effect from the 2023 AGM on 25 May 2023.

Salary / fee1

Benefits2

STIP3

LTIP4

Pension5

Total
(single figure)6

Total fixed
remuneration
(single figure)6

Total variable
remuneration
(single figure)6

Executive Directors

N Kladiev (2023)7

CHF283,862

– CHF335,000

CHF4,648

CHF11,354 CHF634,864 CHF295,216 CHF339,648

N Kladiev (2022)

–

J North (2023)8

US$489,120

US$18,657

–

US$32,520

– US$540,297 US$507,777

US$32,520

J North (2022)

US$959,050 US$221,183 US$720,000 US$246,618

– US$2,146,851 US$1,180,233 US$966,618

Executive Chair

L Genovese (2023)9

US$237,500

–

US$11,819 US$249,319 US$249,319

–

L Genovese (2022)

See Non-executive Director table below

The figures have been calculated as follows:
1. Base salary: amount earned for the year. Mr Kladiev salary is from 25 May 2023 when he joined the Board.
2. Benefits: the taxable value of benefits received in the year (accommodation allowance/provision and healthcare).
3. STIP: the total bonus earned based on performance during the year. Further details are provided on pages 143 to 145.
4. LTIP: the market value of shares that vested based on performance to 31 December of the relevant year (2023: 16.78% vested and 2022: 71.6% vested). For 2021, LTIP value for J North

includes dividends of US$17,331, and for N Kladiev CHF2,477 over the performance period from 1 January 2021 to 31 December 2023 (2022: J North – US$89,845).

5. Pension: N Kladiev receives an employer pension contribution of 4% of salary which is in line with the Swiss employee pension arrangement which is differentiated by age in Switzerland.

Mr North did not participate in a pension scheme in line with normal practice in Dubai. Whilst working in Dubai, under local legislation he accrued 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$68,208 (2022: US$80,088) was accrued towards
the statutory gratuity. Following J North’s cessation of employment this amount has been paid to him. Mr Genovese receives an employer pension contribution of 5% of his salary as
Executive Chair which is in line with the Swiss employee pension arrangement in Switzerland.

6. Average exchange rates: 2023 – £1=US$1.2440 and £1=CHF1.1169; 2022 – £1=US$1.2105.
7. Mr Kladiev was appointed to the Board with effect from the 2023 AGM on 25 May 2023. The remuneration included in the table reflects the period 25 May to 31 December 2023.
8. Mr North assumed the role of Acting CEO from the 2020 AGM on 28 May 2020 and was appointed CEO on 14 February 2022. Mr North was appointed to the Board on 5 July 2020.

Remuneration for 2022 is in respect of the period as Acting CEO from 1 January to 13 February 2022 and as CEO from 14 February 2022 to 31 December 2023. Remuneration for 2023 is
in respect of the period as CEO from 1 January 2023 to 30 June 2023, when Mr North stepped down as CEO and remained on garden leave, leaving the Company on 31 October 2023.
Full details of his leaving arrangements are set out on pages 149 to 150.

9. Mr Genovese assumed the role of Executive Chair on 1 July 2023 following Mr North stepping down as CEO. The remuneration included in the table above reflects the amounts paid in

respect of this role. Remuneration earned prior to this date and currently in respect of his role as Non-executive Chair of the Company is detailed in the table below.

Ferrexpo plc Annual Reports & Accounts 2023

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS142

Remuneration Report continued

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 2023 and the prior year.

Non-executive Directors

L Genovese (Chair)1

V Lisovenko2

F MacAulay (Senior Independent Director)2,3

AC Andersen3

S Brown

G Dacomb4

N Polischuk

K Zhevago5

All figures shown in currency of payment, US$000

2023

2022

Fees

Benefits

Pension

Total

Fees

Benefits

Pension

Total

578

196

200

176

153

–

578

196

200

176

153

–

500

190

188

153

–

161

136

135

–

500

190

188

153

–

161

136

135

1. Mr Genovese retired from the Ferrexpo plc Board on 1 August 2014 and was subsequently reappointed on 12 February 2019. He was appointed Chair of Ferrexpo plc on 25 August 2020
and assumed the role of Executive Chair from 1 July 2023. The above table reflects his fee as Board Chair. The portion of remuneration earned for his role as Executive Chair is disclosed
in the Executive Director table above. In addition to his base fee, Mr Genovese received a one-off payment of US$57,292 for additional time spent on Board matters in the first quarter of
2023. This payment was in relation to the exceptional time commitment required as a result of the ongoing impact of the Russian invasion of Ukraine. Mr Genovese also serves as a
Non-executive Director of Ferrexpo AG and, in 2023, received a fee of US$80,000 p.a. (2022: US$80,000).

2. Mr Lisovenko served as the SID until 10 February 2022, and the post was then assumed by Ms MacAulay with effect from 10 February 2022.
3. Ms MacAulay served as Chair of the HSEC Committee until 9 February 2022, the post was then assumed by Ms Andersen with effect from 9 February 2022 and subsequently, assumed

by Ms Polischuk on 25 May 2023.
In addition to his base fee, as disclosed in last year’s Directors’ Remuneration Repot, Mr Dacomb received a one off payment in 2022 of US$30,000 for additional time spent overseeing
the preparation of the Group’s financial accounts and dealing with the Group’s external auditors.

5. Mr Zhevago received a fee in 2022 in line with other Non-executive Directors (i.e. US$135,000). He resigned from his role of Non-executive Director with effect from 29 December 2022.
Mr Zhevago maintains a consultancy arrangement with the company to provide strategic advice and manage relationships with key stakeholders. This consultancy arrangement was
suspended in January 2023 following his resignation as a Non-executive Director and stepping down from the Board on 29 December 2022. He did not receive any payments in 2023 under
this consultancy arrangement.

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.

Lucio Genovese receives a fixed fee for his role as Executive Chair set on appointment at US$1,000,000 made up of his current fee of
US$525,000 as Board Chair and an additional US$475,000 on an interim basis while he serves as Executive Chair. This fee reflects his increased
time commitment in role and non participation in the Company’s incentive plans.

On his being appointed to the Board in May 2023, Mr Kladiev’s base salary was CHF450,000. Following the Company’s annual pay review, with
budgets varying between 1.5% and 10% of payroll, the CFO’s salary was increased by 4% with effect from 1 January 2024 after having regard to
his location and increase awarded to the wider workforce.

Mr North’s salary as CEO for 2023 was US$978,240 prior to his departure.

Executive Director

N Kladiev

1. From appointment to the Board on 25 May 2023.
2. Based on average exchange rates: 2023 – US$1=CHF0.8979; 2022 – CHF1=US$0.9244.

Base salary at:

Position

1 January 2024

25 May 20231

CFO

CHF468,000

CHF450,000

Pensions and other benefits – audited
The Group does not operate a separate pension scheme for Executive Directors. In line with other employees, under the rules of the Zurich
pension scheme that is mandatory as a condition of service for employees in Switzerland, Mr Kladiev receives a Company pension contribution
of 4% of salary and Mr Genovese receives a 5% pension contribution in respect of the salary he receives in relation to the executive function of
his role.

In line with standard company practice in Dubai, Mr North did not participate in a pension scheme. Whilst working in Dubai, under local
legislation he accrued 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 2023 reporting period, an amount of US$68,208 was accrued towards the statutory gratuity
(2022: US$80,089).

Mr North was also eligible for other benefits whilst he was an Executive Director as set out in the Executive Director Remuneration Policy earlier
in the report. This included an allowance toward the cost of accommodation, schooling for his dependent children and use of a car in Dubai up
to a maximum of US$225,000 p.a. In 2023, Mr North did not make use of this allowance (2022: US$204,687).

Ferrexpo plc Annual Reports & Accounts 2023

143

2023 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 2023 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 2023 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 ESG, 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.

In 2023, the threshold performance equated to a bonus potential of 50% of salary, on-target performance to a bonus potential of 75% of salary
and stretch performance to a bonus potential of 150% of salary.

The level of achievement against each of the targets for 2023, as determined by the Committee for Mr Kladiev as CFO, is summarised below. The
Executive Chair is not eligible to participate in the STIP and the former CEO, J North, became ineligible to receive a payment under the STIP for
2023 as a result of his cessation of employment.

Business scorecard (60% of STIP)

KPI

Measure/target

Weighting
%

Threshold
50%

Financial

Group EBITDA (US$, million)

15.0%

138

Target
75%

151

Stretch
150%

Scorecard
outcome

Assessment

Max
as a %
of salary

Bonus
awarded
as a %
of salary

163

Below threshold

22.5%

0.0%

ESG

LTIFR