Ferrexpo PLC — Annual Report 2022

Apr 14, 2023

Ferrexpo plc Annual Report & Accounts 2022

Strategic Report

Contents & At a Glance

Looking towards a low emissions future and the shift to Green Steel

1 Strategic Report
01 Chair’s Statement
02 War in Ukraine
04 CEO’s Review
06 Market Review
08 Our Business Model
12 Our Stakeholders
14 Strategic Framework
16 Key Performance Indicators
18 Financial Review
22 Operational Review
26 Responsible Business Review
Introduction 30
Chair’s Review 31
Safety and Our People 32
Environmental Stewardship 34
TCFD Disclosures 37
Diversity, Equity and Inclusion 42
Communities 44
Governance 46
Non-Financial Information Statement 47
48 Stakeholder Engagement – Section 172
56 Risk Management
58 Principal Risks
75 Viability Statement

Corporate Governance

77 Corporate Governance

Financial Statements

138 Financial Statements
211 Additional Disclosures
212 Alternative Performance Measures
214 Glossary

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At Ferrexpo, we are focused on the future – both the future of Ukraine and the future of low emissions steelmaking. We are long-term investors in Ukraine, which has demonstrated its resilience throughout Russia’s invasion, and we have demonstrated our resilience as a business in Ukraine. Despite the war, we have maintained supplies to our European customers throughout 2022, and we are committed to provide stability, where possible, for our stakeholders in these difficult times.

References to Ferrexpo plc

References in this report to “Ferrexpo”, the “Company”, the “Group”, “we”, “us” and “our” are all references to Ferrexpo, Ferrexpo subsidiaries and those that work for Ferrexpo, albeit not a singular entity or person. Such terms are provided as a writing style in this report, and are not indicative of how Ferrexpo or its subsidiaries are structured, managed or controlled.

Words with the symbol A are defined in the Alternative Performance Measures section of the Annual Report on pages 212 to 213.

1. “Green Steel” is considered to be the production of crude steel without greenhouse gas emissions. Please see page 15 of the Group’s Climate Change Report for more information.

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High grade production continues

Despite the war in Ukraine, we continued to produce in 2022, demonstrating the resilience of our operational and marketing teams. We remain committed to high grade iron ore, which represented 100% of our production.

Pivoting to direct reduction pellets

Output of higher grade, 67% Fe direct reduction pellets, which represent a low emissions pathway to making steel, rose to 6% of total pellet production in 2022 (2021: 4%).

Net cash position supports balance sheet resilience

Strong balance sheet metrics developed through resilient business model, prudent capital allocation and a focus on quality.

Our values	Metric	Value	Page
Responsibility			See page 26
Make it happen			See page 6
Integrity	Production	6.1 MT
Diversity within one team	Grade	67 % Fe	See page 32
Continuous innovation	Net cash	US$106 M	See page 22
			See page 31
			See page 46
			See page 42
			See page 29

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01 Chair’s Statement

US$3.3 BN Committed to Ukraine with more than 15 years of investment since our IPO in 2007, amounting to over US$3.3 billion.

3 % Generating 3% of Ukraine’s export revenues in 2022 (2021: 4%), despite a decline in production and iron ore prices.

70 + The Ferrexpo Humanitarian Fund has supported more than 70 projects since the outset of the war in Ukraine, providing direct assistance.

Resilience and a commitment to Ukraine

Image on the cover: Championing selected members of our Ukrainian workforce

Thank you to all members of our Ukrainian workforce for their resilience and commitment since the start of the Russian invasion.

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02 War in Ukraine

The year 2022 will long be remembered as a consequence of Russia’s escalation of its invasion of Ukraine. It is a significant moment in the history of our planet, and we remain committed to Ukraine and our people at this difficult time.

At Ferrexpo, we are proudly Ukrainian. Ferrexpo has successfully operated in Ukraine for more than 15 years since our listing, and we have consistently invested in Ukraine, our people and our assets. Over this time, our constructive relationships have helped us build a company that is capable of producing some of the highest quality forms of iron ore that are commercially available.

The world has supported Ukraine as it defends itself from Russia’s invasion. We have remained committed to Ukraine throughout this conflict, through providing vital humanitarian support to those in need, whilst continuing production and our contribution to the Ukrainian economy. We have nearly 10,000 people in our workforce, with 95% normally based in Ukraine, and we have strived to support them, their families and local communities throughout this conflict.

On a national scale, Ferrexpo represents a significant contributor to the Ukrainian economy through taxes and royalties, as well as our consistent use of Ukraine’s infrastructure and serving as a major employer in our region of Ukraine. We are proud that our resilient business model, and focus on high quality products, has enabled us to continue shipments to our European customers throughout 2022.# Resilience and commitment

In reviewing what we have learnt from the past year, two key themes are evident: resilience and commitment. Ukraine’s resilience has been apparent in newspapers around the world for more than 380 days. At our operations, we have seen our workforce come together with local communities. In an effort to streamline our support, we established a dedicated humanitarian fund early in the conflict, as it quickly became apparent that large businesses would need to support communities. Through more than 70 individual projects, I am proud to reflect on the direct support that we have been able to provide, and will continue to offer, with over US$19 million of humanitarian aid provided to date. I am also proud that Ferrexpo has supported 3,500 internally displaced people fleeing the war as they pass through our area. As the war enters its second year, we are mindful of the wellbeing of our workforce and the effects of living in a war zone. As such, we are offering free support services to those at our operations. I am proud of the commitment that we have shown to our stakeholders, and indeed the commitment that they have shown us. In Ukraine, we have worked closely with communities to provide support through our newly formed humanitarian fund and the long-standing Ferrexpo Charity Fund. Resilience is also evident in our operations and marketing teams, with their efforts enabling us to continue shipping throughout 2022. As a modern company, we are increasingly reliant on electronic equipment for managing our operations, and therefore protecting our IT infrastructure from cyberattacks has been critical since the war began – more on our efforts here on page 72. More broadly, we have also continued our decarbonisation strategy in publishing our Climate Change Report as scheduled in 4Q 2022, as well as providing clear and timely communications with stakeholders throughout the war. We are also grateful to our customers, who have shown commitment to our products, and I would like to thank them for their continued support, which is only possible through long-standing positive relationships.

Understanding our role in Ukraine

We are a major business in Ukraine and, as such, we are a significant contributor to the local economy and economy of Ukraine. In 2022, we contributed US$164 million in taxes and royalties, and we have continued supporting our workforce through our continued operations. We are frequent and consistent users of Ukraine’s utilities and infrastructure, helping to contribute to the functioning of Ukraine beyond our own operations. Through our position as one of the world’s largest iron ore pellet producers, we are able to be a significant contributor to Ukraine’s exports, representing 3% of total exports by value in 2022, despite a 46% decline in production and 25% lower iron ore prices in 2022. Our footprint in Ukraine extends beyond our own operations, and we are proud to support local businesses and local communities. Of the people that we employ in Ukraine, almost all are based in local communities, and 79% of our recruitment in 2022 was from local communities.

Board developments

The past year has brought a number of changes to strengthen the Board; we welcomed Fiona MacAulay into the role of Senior Independent Director, Ann- Christin Andersen in the role of Chair of the Health, Safety, Environment and Community (“HSEC”) Committee and Natalie Polischuk joined the Board in December 2021. Furthermore, Jim North was appointed as permanent CEO in February 2022. In addition, Non-executive Director Kostyantin Zhevago stepped down from the Board in December 2022.

Looking to the future

Reflecting on our long-term strategy as a business, we remain committed to Ukraine and its potential. There is a significant challenge ahead, once the war ends, for companies and communities to help with the rebuilding and healing of Ukraine. More broadly, we are pleased to see the global shift in the steel market towards higher grade, higher quality materials as a route to lower emissions across the steel value chain. High grade iron ore has been a strategic priority of Ferrexpo’s since listing in 2007, and we are proud to be able to help facilitate decarbonisation in the steel industry, which accounts for 7% of global greenhouse gas emissions 1 . The coming period will be difficult given the continued war in Ukraine, but if we are to look beyond the war, we continue to be excited by Ukraine’s potential and the future that lies ahead in Green Steel. Through working with our stakeholders, we are proud to have built the business that we have today, and the potential that it has for the future. Finally, I would like to thank all of our stakeholders, particularly those in Ukraine, for their continued commitment to Ferrexpo. I am hopeful that we will soon see an end to the conflict, and then we can look towards a brighter future for Ukraine. Slava Ukraini.

Lucio Genovese
Chair, Ferrexpo plc

1. Source: International Energy Agency (“IEA”), link. (Accessed February 2023.)

04 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT

Case Study: War in Ukraine

As a business operating in Ukraine at the current time, we have been significantly impacted by the ongoing war. Here we explore a selection of these impacts, and the outlook for further consequences.

Our people

Our first priority will always be the safety and wellbeing of our people. Currently, we have more than 1,500 people absent from our workforce, including approximately 650 members of our workforce serving in the Armed Forces of Ukraine 1 , who we have supported with key protective equipment such as bulletproof vests. Certain areas of our business are affected more by absences than others, and the situation is helped by our operations running below capacity. We are increasingly working to assist wellbeing – including a programme to provide counselling to those returning from the armed forces, and a rehabilitation centre for those returning to work after service. Regrettably, we are now aware of 20 members 1 of our team have died whilst serving in Ukraine’s military, and we are supporting their families.

Local communities

It was quickly apparent in the early stages of the conflict that the people of Ukraine would need humanitarian support at this difficult time. The Ferrexpo Humanitarian Fund has helped channel support to more than 70 projects since the start of the war 1 – see page 44 for more details.

Logistics constraints

The closure of Ukraine’s access to the Black Sea has severely restricted our access to seaborne markets and has therefore limited our ability to pivot sales according to regional demand around the world – as seen previously during the global Covid-19 pandemic. Access to the seaborne market is possible today, but at an elevated cost and with additional restrictions.

Power supply

In late 2022, Russian attacks on civilian electrical infrastructure increased, with a significant impact on electricity generation and supply. Following the onset of this phase of the war, the Group was not able to achieve stable production for approximately ten weeks of 4Q 2022. As a means of reducing operational risk around further power shortages, we are replenishing pellet inventories at strategic locations, as well as exploring our options around self-generation of electricity.

Local currency and economy

The Ukrainian hryvnia depreciated by 34% during the course of 2022 2 , and this has impacted operating costs and carrying value of assets – see page 22 for more details. Looking forward, it is expected that, should the war continue, the Ukrainian hryvnia will continue to depreciate further. Furthermore, the Ukrainian economy experienced an inflation rate of 27% in 2022 3 .

Supplier constraints

Throughout 2022, we have continuously adapted to an ever-changing operating environment, including changing suppliers for key inputs as individual suppliers are forced to close their operations or divert logistics paths. We expect to have to continue to adapt and evolve our supply arrangements, to ensure supply and reduce risk, for as long as the war continues.

Effects of operating in conflict

1. Information as of 10 March 2023.
2. Source: National Bank of Ukraine (“NBU”), link. (Accessed 3 March 2023.)
3. Source: Reuters, link. (Accessed 3 March 2023.)

Remembering those we have lost

As of 10 March 2023, we are aware of a total of 20 members of our team that have sadly died whilst serving in the Armed Forces of Ukraine, and we are supporting their families at this difficult time.

Dmytro Belikov Age 32
Oleksiy Bridnya Age 33
Andriy Chernya Age 37
Oleksandr Chugainov Age 54
Maksym Chystyakov Age 24
Andrii Dukanych Age 33
Oleksiy Khanilevych Age 24
Serhiy Kharlamov Age 57
Serhii Kondyk Age 31
Denys Koshovyi Age 30
Rostyslav Ledovskyy Age 25
Dmytro Lysachenko Age 28
Roman Lytvynenko Age 31
Kostyantyn Orchikov Age 30
Oleksandr Scherbakov Age 28
Denys Svyrydov Age 50
Yaroslav Taran Age 50
Oleksandr Terlenko Age 48
Oleksiy Yatskov Age 36
Anatoliy Zakupets Age 37

Slava Ukraini.

05 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Displaced workforce and communities

Currently c.650 members of our workforce are serving in the Armed Forces of Ukraine with additional numbers absent as they seek safety.

Customers

Clear communications have been required with our customers throughout the war.

Health and wellbeing

Mindful of the stress caused by long-term living in a war zone, we are offering a range of support to our workforce.

Supplier constraints

Suppliers’ facilities have been attacked, and business partners have had to shut down.

Closure of Ukraine’s Black Sea ports

Historically, we shipped around half of our output via Ukrainian ports, and closure limits the markets we can serve.# STRATEGIC REPORT

CEO’s Review

The morning of 24 February 2022 will live long in the memory. Russia’s invasion of Ukraine has defined our year, but we are proud of the resilience shown by our workforce in continuing to support Ukraine’s economy. We have a workforce of 10,000 people, with more than 95% of them based in central Ukraine and it is our duty to protect and support them. I am proud to have been a part of Ferrexpo in 2022, as we have sought to engage with our workforce and communities across Ukraine at such a difficult moment in history, to understand what we could do to help.

Supporting Ukraine

Through the creation of the Ferrexpo Humanitarian Fund, we have been in a position to provide direct support to those in need, as well as help our suppliers and customers provide contributions to fight the effects of the humanitarian crisis that is unfolding in Ukraine. Through this fund, and additional support projects provided directly by our subsidiaries, we have provided more than US$19 million of targeted humanitarian assistance to date, supporting over 70 initiatives across eight regions of Ukraine. Each individual project is reviewed and approved by the Health, Safety, Environment and Community (“HSEC”) Committee to ensure good governance practices remain, even in a war zone. For more on our humanitarian efforts, see page 45.

Despite the war in Ukraine and the difficulties our people have experienced in 2022, our safety performance has remained strong. We remain fatality-free for the second year running, and our lost time injury frequency rate continues to be materially below the level recorded by our peers. See page 32 for more on our safety performance.

Drive towards Green Steel

As a constituent of the steel value chain, we understand the importance of climate change and how this point in time represents a pivotal moment for the steel sector, with major investment planned in the coming decades. As a producer of a form of iron ore that helps steelmakers reduce emissions, we are in a position to supply the global steel industry with blast furnace pellets today to reduce emissions by 40%¹ as they switch away from sinter fines. In parallel, we are developing our offering of direct reduction pellets, which represent a potential pathway to low emissions Green Steel, positioning us well for the future. Our progress in decarbonisation, which to date has seen us realise a 31% decrease in emissions since our baseline year, has begun well and we intend to maintain our positive momentum in reducing our emissions. We are excited by our stakeholders’ desire to understand our decarbonisation pathway, and we are looking into ways to collaborate together going forward. Through our work with environmental consultants Ricardo Plc, we were also able to present expanded targets for our emissions reduction programme – please see our Climate Change Report, which was published in December 2022, for more details.

Operating in a time of war

Production volumes fell by 46% in 2022, primarily reflecting the constraints imposed by the war in Ukraine and the deterioration of the economic environment in Europe as energy prices and inflationary risks rose throughout the year. The war’s restrictions on our access to the Black Sea have made logistics routes for sales outside of Europe less cost effective, but this topic is a clear catalyst for 2023 should our Black Sea access resume. Sales volumes in 2022 reflected accessible markets, with sales in the first quarter remaining buoyant as short-term supply disruption led to steelmakers building raw materials inventories. Subsequently, sales declined throughout the year as the complexity of the restrictions on our business increased. We did, however, continue to deliver our products to our European customers throughout the year, which is a testament to the resilience and commitment of our marketing and operations teams.

A committed leadership team

Given the conflict in Ukraine, it is easy to overlook our achievements in bolstering the management and governance of our business. My appointment as permanent Chief Executive Officer was announced in February 2022. In the same month, Fiona MacAulay and Ann-Christin Andersen were appointed as Senior Independent Director and Chair of the HSEC Committee respectively, and on 30 December 2021 we announced the appointment of an additional Independent Non-executive Director, Natalie Polischuk. The appointments of Fiona, Ann-Christin and Natalie bolster our leadership from a diversity perspective, and we are seeing progress in our executive management team – Yaroslavna Blonska was appointed Acting Chief Marketing Officer in October 2022, and in 2022 the proportion of our management positions held by women increased to 20.9% (2021: 20.1%).

It is important to thank all of our stakeholders for their commitment to Ferrexpo in 2022. It is our committed workforce, the communities that grant us our licence to operate, our long-standing customer and supplier relationships, and other key relationships, that have helped to support us throughout this war. Through operating a resilient business model, we aim to come through this difficult time as a stronger company, and this would not be possible without this continued support.

Jim North
Chief Executive Officer, Ferrexpo

Stakeholder support and looking ahead

Local communities
The war has placed significant strain on the ability of local authorities to provide consistent support to communities.

Power supply
Attacks on state-owned electrical infrastructure resulted in ten weeks of intermittent power in 4Q2022.

Local currency
The depreciation of Ukraine’s currency and local inflation have impacted our accounts in a variety of areas.

Impact on infrastructure
Ukraine’s railways have come under constant attack and seen increased demand from displaced trade. Diverting sales via alternative logistics corridors comes at an increased cost.

Humanitarian support
US$19 M

See page 44
See page 69X
See page 32
See page 59
See page 11
See page 44
See page 26
See page 22
See page 11
See page 45

¹ Source: Independent research provided by CRU.

Market Review

Resilient pellet premiums amid lower iron ore price environment

The Group primarily generates its revenues through the sale of iron ore pellets, the pricing of which is governed by a number of quoted market benchmarks, generating a net realised pellet price. The main contributing components to the pricing of Ferrexpo’s pellets are the high grade (65% iron, “Fe”) iron ore fines index, the pellet premium, a rate applicable for the freight component of transporting material to customers, and any applicable additional premiums and discounts. The Group currently only produces high grade products, grading either 65% Fe or above, and therefore the following text focuses on the high grade index for iron ore fines pricing.

Iron ore fines prices

The index for high grade (65% Fe) iron ore fines began the year at US$140 per tonne and rose to more than US$190 per tonne as of early March, before steadily declining to a low of US$91 per tonne in late October. The primary factor behind this initial rise during 1Q 2022 was the rising risk of conflict in Ukraine, ultimately followed by Russia’s invasion commencing in February, which put pressure on global iron ore prices as steelmakers sought to source alternative suppliers to Russian iron ore. This short-term tightness in the iron ore market largely persisted into 2Q 2022, before the impact of elevated energy prices and concerns over the global economic outlook, particularly for the Chinese economy, began to erode confidence in end-user markets. Prices declined by approximately US$40 per tonne between early June and early July, before exhibiting a more gradual decline thereafter, with market commentators citing concerns over steel margins in China and local restrictions within China related to the global Covid-19 pandemic as the reasons for this decline ¹.

Moving into 2H 2022, efforts by steel mills to stockpile material slowed, as they began to secure access to alternative raw material supply channels, and demand for iron ore started to normalise. As such, the drivers behind price movements returned to Chinese supply/demand dynamics for iron ore and steel, with China representing the largest market for seaborne iron ore and the main determinant of iron ore prices globally. The beginning of 2H 2022 coincided with weak demand for iron ore and steel, especially with sentiment dampened by strict Covid-19 restrictions in China. A key effect of these restrictions was the impact on consumer sentiment in local property markets, which is a major user of finished steel in China. This generated a gradual decline in iron ore pricing until early 4Q 2022. Expectations arose in October regarding a potential unlocking of restrictions in China, but these were short-lived after the Chinese government reiterated existing policies, sending prices to the full year low of US$91 per tonne in late October. Iron ore prices did ultimately recover as restrictions in China were eventually eased.

Reduced levels of price volatility were seen in 2022 compared to 2021. Whilst iron ore prices declined by 25%, blast furnace pellet premiums rose by 20%, which reflects shifting demand for high quality products.

Yaroslavna Blonska,
Acting Chief Marketing Officer

Customer sales in 2022
| Metric | Value |
| :---------------------- | :--------- |
| Sales of 6.2 million tonnes | (46% reduction), despite conflict-related restrictions in 2022. |
| Shipments to Europe | remained resilient, declining by a lower degree (23%). |

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FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
STRATEGIC REPORT

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Metric	2022 Value	2021 Value
Revenue generated	US$1.2 BN	US$2.5 BN
Underlying EBITDA A	US$765 M	US$1,439 M
Underlying EBITDA A margin	61 %	57 %

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Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT 08# Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Market Review

Five years of iron ore prices (65% Fe Index) US$ per tonne
US$139/t US$186/t US$122/t US$104/t US$90/t
2022 2020 2021 2019 2018

1. Source: S&P Global Commodity Insights.

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

250
200
150
100
50

S&P Platts’ Iron Ore Fines Index (65%)
Benchmark indices (US$/tonne)
Freight Rate (Baltic Capesize Index C3)
S&P Global Atlantic Blast Furnace Pellet Premium
S&P Global Direct Reduction Pellet Premium

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CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

1. Source: S&P Global Commodity Insights.
2. Source: CME Group, Link (accessed 23 February 2023).
3. Source: Management estimate.
4. Source: CRU.
5. Defined as steelmakers that do not have material volumes of integrated iron ore supply, excluding pellet imports listed without a defined destination (12% of the total pellet market, typically relating to exports from certain producers in the Commonwealth of Independent States (“CIS”) and India).

towards the end of 4Q 2022, ending the year at US$131 per tonne. Overall, the full year iron ore price declined by 25% in 2022, broadly reflecting weaker demand as a consequence of the conflict in Ukraine and concerns over the Chinese economy. It should also be noted that the comparative period (2021) represented a robust year across the commodity space, as governments worldwide continued to supply fiscal stimulus in response to Covid-19, with iron ore pricing in 2019 and 2020 being US$104 and US$122 per tonne respectively – in line with the figure for 2022.

Towards the end of 2022, it was widely expected that 2023 would see a contraction in global markets, with economies worldwide already witnessing a slowdown in growth during 2H 2022, as energy prices remained elevated and central banks sought to contain inflationary pressures by raising interest rates. However, recent news and developments in China, such as reports of a potential easing of Covid-19 restrictions, have resulted in iron ore prices rising to US$138 per tonne as at the end of February 2023. Futures contracts reflect the current uncertainty in the market, with contracts for December 2023 deliveries (62% Fe Index) trading at a level US$8 per tonne below today’s spot market.

The supply side of the iron ore fines market is widely expected to remain balanced in 2023, with supply from the major producers in Brazil and Australia expected to remain largely in line with the same level of output seen in 2022.

High grade premiums

The premium for high grade iron ore, being the difference between the 65% Fe Index and the 62% Fe Index, contracted in 2022 in line with the benchmark indices, falling by 28%. This contraction is expected at times of steel market weakness, when steel margins are reduced and steelmakers seek to utilise lower grade inputs to reduce raw material costs, reflecting a more conservative approach. Similar to the fines index, the ferrum premium of US$19 per tonne in 2022 was ahead of levels seen in recent years (2019 and 2020: US$11 and US$13 per tonne respectively) or in line with other recent years (2018: US$21 per tonne). The year-on-year comparison, however, shows a 28% reduction, with 2021 being a relatively high year for commodities pricing (2021: US$26 per tonne). Given the correlation of the grade of iron ores and the degree of emissions produced by steelmakers, with higher grade ores requiring the production of lower emissions to generate steel, it is expected that the ferrum premium will continue to widen over the long term.

Pellet premiums

The pellet premium is a significant factor in the cash flow generation of a pellet producer, with this component of pricing typically representing a significant additional premium over and above the prevailing iron ore fines index. For example, the Atlantic Pellet Premium represented a 60% premium above the 62% Fe iron ore fines index in 2022 (2021: 38%). The high level of the pellet premium (relative to benchmark fines prices) reflects the scarcity of iron ore pellets relative to the global fines export market. In 2022, the global pellet export market represented approximately 111 million tonnes, compared to global fines export trade of 1.1 billion tonnes. In addition, iron ore pellets typically offer steelmakers the opportunity to raise mill productivity and lower emissions due to higher grades and the lack of a requirement for sintering, which is a process that typically utilises coal as its energy source.

Global exports of pellets decreased by approximately 15% in 2022, reflecting a reduction in supply from almost all major iron ore pellet exporters for a variety of reasons. Pellet exports from Russia have seen the largest year-on-year decrease, falling by approximately 7 million tonnes as steelmakers switch suppliers following Russia’s invasion of Ukraine. Additionally, lower pellet demand from Chinese steel mills, with this demand down approximately 60% in 2022, has resulted in lower export volumes for pellet producers that have historically supplied this market – with Brazilian and Indian exporters accounting for approximately half of this decrease.

Regionally, 2022 saw a clear split in the health of global steel markets, with those markets more closely correlated to Russian energy supply (such as Europe) seeing the greatest decline in demand for pellets. European steel mills imported approximately one third lower volumes of iron ore pellets in 2022, with this reduction seen in both Western and Eastern Europe. Outside of China, Asian steel mills saw a lower reduction in buying activity, with a 14% reduction year-on-year. The Middle East and North Africa (“MENA”) region, which is a region less dependent on Russian energy supply, saw a 7% increase in pellet buying activity in 2022. An additional factor helping to promote our exports to the MENA region is that this region typically purchases direct reduction (“DR”) pellets. Since DR pellets have a lower emissions footprint than other forms of iron ore, we are directing our strategy towards this product and actively growing our footprint in this region.

As a result of tightness in pellet markets outside of China in 2022, both the Atlantic pellet premium and DR pellet premium rose materially during the year, and therefore trended in the opposite direction to iron ore fines prices. This divergence is due to iron ore fines and pellets having different key drivers – China accounted for 75% of iron ore fines imports in 2022 (2021: 76%), and is therefore the dominant market for this product. For pellets, the key markets are Europe and markets in North East Asia, where independent steelmakers in these two regions collectively accounted for 60% of defined pellet imports in 2022 (2021: 58%). Factors related to climate change and decarbonisation, with the pace of legislative change faster in Europe than other markets, are expected to have a greater bearing on the pricing of iron ore pellets as a result of this link to European buying.

Within the year, the Atlantic pellet premium rose by 41% in 1H 2022 (in contrast to the iron ore fines price, which remained broadly flat). Stockpiling efforts, which were in response to increased risk of supply disruption following Russia’s invasion of Ukraine in February 2022, resulted in an increase in pellet premiums in 1H 2022. This buying activity was, however, not matched by end-user demand and raw material stockpile inventories increased, particularly in Europe. With high prices for raw materials and energy inputs, steel margins in Europe decreased in the middle of 2022, subsequently prompting several blast furnaces to suspend operations in Europe. By October, a total of ten blast furnace steelmaking facilities in the region idled at least part of their operations. High pellet inventories, coupled with low blast furnace steel output, resulted in a reduction in pellet demand, and Atlantic pellet premiums fell to approximately US$60 per tonne towards the end of 4Q 2022.

Whilst pellet buying in European and Asian regions declined in 2022, a significant proportion of pellet sales are conducted via long-term contract – providing an additional degree of stability (for example, 96% of Ferrexpo’s pellet sales in 2022 were under long-term contract). This therefore provides stability for individual pellet producers, and the overall pellet market, throughout the commodity cycle.

Looking ahead to 2023, it is expected that the overall size of the pellet export market will revert to a similar size as seen in recent years (c.130 million tonnes), with the pace of this recovery dependent on the war in Ukraine and any resulting easing of constraints related to energy supply (particularly energy supply into Europe). China’s expected easing of Covid-19 restrictions boosted iron ore fines pricing in late 2022, albeit with relatively little firm evidence of increased economic output. Should China deliver a recovery in its growth rate, which saw 3% growth in 2022 compared to 8% in 2021, it should be expected that blast furnace pellet premiums will stabilise at current levels. Pellet demand from European steel mills in 2023 is expected to be linked to energy prices, inflation rates and the outlook of the war in Ukraine. To mitigate risks to the Ferrexpo business, it is important for the Group to resume access to ex-European markets in 2023 to provide support for realised pellet premiums.

Freight rates

During the year, the C3 freight rate, which describes the cost of shipping dry bulk materials from Brazil to China, rose from a low of US$17 per tonne in January to a peak of US$38 per tonne in May, with this increase associated with rising energy costs and buoyant commodity markets.

Chart: Market indices 2022

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Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Market Review continued

Europe decreased in the middle of 2022, subsequently prompting several blast furnaces to suspend operations in Europe. By October, a total of ten blast furnace steelmaking facilities in the region idled at least part of their operations. High pellet inventories, coupled with low blast furnace steel output, resulted in a reduction in pellet demand, and Atlantic pellet premiums fell to approximately US$60 per tonne towards the end of 4Q 2022. Whilst pellet buying in European and Asian regions declined in 2022, a significant proportion of pellet sales are conducted via long-term contract – providing an additional degree of stability (for example, 96% of Ferrexpo’s pellet sales in 2022 were under long-term contract). This therefore provides stability for individual pellet producers, and the overall pellet market, throughout the commodity cycle. Looking ahead to 2023, it is expected that the overall size of the pellet export market will revert to a similar size as seen in recent years (c.130 million tonnes), with the pace of this recovery dependent on the war in Ukraine and any resulting easing of constraints related to energy supply (particularly energy supply into Europe). China’s expected easing of Covid-19 restrictions boosted iron ore fines pricing in late 2022, albeit with relatively little firm evidence of increased economic output. Should China deliver a recovery in its growth rate, which saw 3% growth in 2022 compared to 8% in 2021, it should be expected that blast furnace pellet premiums will stabilise at current levels. Pellet demand from European steel mills in 2023 is expected to be linked to energy prices, inflation rates and the outlook of the war in Ukraine. To mitigate risks to the Ferrexpo business, it is important for the Group to resume access to ex-European markets in 2023 to provide support for realised pellet premiums. Freight rates During the year, the C3 freight rate, which describes the cost of shipping dry bulk materials from Brazil to China, rose from a low of US$17 per tonne in January to a peak of US$38 per tonne in May, with this increase associated with rising energy costs and buoyant commodity markets.In 2H 2022, the same freight index declined to US$22 per tonne by the end of 3Q 2022, where it then largely remained for 4Q 2022. This decline in 2H 2022 can be attributed to an economic slowdown in China, partially related to local “zero Covid” rules, lower energy prices and lower commodity pricing driving reduced demand for shipping. At US$24 per tonne, the average C3 freight rate for 2022 represented a level US$3 per tonne below the previous year as global demand for dry bulk cargoes weakened. Looking ahead, freight rates are expected to remain above historical averages seen in years prior to the global Covid-19 pandemic, with elevated levels already seen in 2021 and 2022. This shift reflects higher energy costs and the potential for costs associated with stricter environmental regulation to be passed on to end users.

Steel

Ferrexpo’s iron ore pellets are used by steelmakers to produce steel. Factors such as global steel production, pricing and margins therefore have a direct impact on the benchmark indices used in the pricing of pellets. World steel production in 2022 fell by 4% to 1.8 billion tonnes, with a 2% contraction in China and larger declines in developing economies such as the European Union (11% decrease), Japan (7% decrease) and the United States (6% decrease) 3 . Even before the war in Ukraine started, production rates were slower at the start of the year than in 2021, with global output down 6% as of February 2022. This deficit largely remained intact throughout the remainder of the year.

Pricing for hot rolled coil (“HRC”) in Europe began the year at €960 per tonne, before rising sharply to over €1,400 in late March, as steelmakers were able to transfer the rising cost of raw material inputs to end users. European economies demonstrated slowing growth throughout 2022, as a consequence of Russia’s invasion of Ukraine, elevated energy prices and inflationary pressures, and consequently have shown lower levels of end-user demand for steel. As a result, HRC steel prices declined to below €700 per tonne by the end of the year, representing a level 33% below the start of the year. A similar trend was seen in China throughout 2022, albeit to a less pronounced extent, due in part to a lower exposure to Russian energy. Chinese HRC prices rose in 1Q 2022 to approximately 10% above the start of the year, then declined to 21% below this level as of the end of the year 8 .

Looking ahead to 2023, the World Steel Association’s Short Range Outlook, issued in October 2022, projects a small recovery in steel production, with 1% growth to 1.8 billion tonnes. This growth is attributed to infrastructure demand, despite concerns over high inflation, monetary tightening and China’s slowdown.

Developments in Green Steel

A number of major steel producers announced initiatives to produce Green Steel in 2022, which is the manufacturing of steel without the use of fossil fuels 9 , often announcing agreements with end users (typically with the automotive sector) for the offtake of this material. The cost of Green Steel is estimated to be up to 60% higher than current prices, with this difference primarily related to the expected additional cost of producing and using green hydrogen 10 . Whilst trial quantities of Green Steel were produced in Sweden in 2022, widespread commercial production is not expected to commence until the medium to long term 6 .

1. Source: S&P Global Commodity Insights.
2. Source: Baltic Exchange.
3. Source: World Steel Association.
4. Figures restated compared to 2021 Annual Report.
5. Source: CRU (Iron ore outlook presentation, October 2022).
6. Management estimate.
7. Source: World Bank, link. (Accessed 3 March 2023.)
8. Source: Bloomberg.
9. As defined by the World Economic Forum, link. (Accessed 3 March 2023.)
10. Source: SteelOrbis link. (Accessed 3 March 2023.)

Summary of industry key statistics

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

	2022	2021	YoY change
Iron ore fines price (62% Fe, CFR China) 1	120	160	(25%)
Iron ore fines price (65% Fe, CFR China) 1	139	186	(25%)
Average 65% Fe spread over 62% Fe 1	19	26	(28%)
Atlantic (blast furnace) pellet premium 1	72	60	+20%
Direct reduction pellet premium 1	87	73	+18%
C3 freight (Brazil – China) 2	24	27	(9%)
C2 freight (Brazil – Netherlands) 2	13	14	(11%)
Global steel production (million tonnes) 3	1,832	1,912	(4%)

FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
STRATEGIC REPORT

11
Annual Report & Accounts 2022
Ferrexpo plc

1. Source: PLANCO Consulting GmbH. Verkehrswirtschaftlicher und Ökologischer Vergleich der Verkehrsträger Straße, Bahn und Wasserstraße. 2007.

Case Study: Logistics flexibility in a war

The war in Ukraine has highlighted the importance of having flexibility and diversity within our logistics chain, with Ukraine’s railways and our inland waterway subsidiary providing essential services during the year.

Disruption due to conflict in 2022

As summarised on pages 4 to 5, the war in Ukraine in 2022 has resulted in several disruptive effects on Ukraine’s logistics network, from the closure of Ukraine’s access to the Black Sea, to targeted attacks on the railway network. Indirect effects of the war also included the diversion of Ukraine’s grain shipments to non-Ukrainian ports, putting additional pressure on Ukraine’s railway network.

Owner-operator model

At Ferrexpo, we have long sought to own and operate our logistics network, either through the purchase of our own rail wagons, operating our own inland waterway (barging) subsidiary First-DDSG, or owning a stake in a berth at a port in Ukraine. This practice lowers operating costs (as utilising state-owned railcars has an additional operating cost associated with them), improves product quality control (since we can manage the maintenance of our own railway wagons and vessels), and reduces operational risk. This final point has been key during the war in Ukraine, when accessing European customers has been periodically difficult via Ukraine’s railway network.

Resilience in logistics

Whilst total shipments declined by 46% in 2022, shipments to Europe (being the only practical market for us during the majority of 2022) only declined by 23%, as we managed to maintain vital logistics pathways to European customers. This achievement is in part thanks to our strong relationship with Ukraine’s railway operator, which has maintained its operations under exceptional circumstances, despite numerous attacks.

A key consideration for us to increase our production volumes will be when we will gain additional clarity on our ability to deliver our products to customers. A major development would be the reopening of Ukraine’s ports, or the re-establishment of access to seaborne markets via an alternative port that is both cost effective and capable of handling material volumes. We are in advanced discussions with an alternative port operator and are looking to resume seaborne shipments in the near term.

Logistics flexibility in 2022

3,033
Number of Ferrexpo’s railcars operating on the Ukrainian railway network, providing operating flexibility and helping to maintain product quality. An additional 183 railcars were purchased in 2022, despite the war in Ukraine. Our railcars are purchased from Ukrainian producers, helping to provide investment and jobs in Ukraine.

218
Number of First-DDSG vessels operating on the River Danube, helping transport Ferrexpo’s products to European customers. Independent research shows that transport via inland waterway (barging) has a lower total environmental cost than road or rail transportation 1 .

Image: Ferrexpo railcars loaded with iron ore pellets at our operations in Ukraine.

12
Ferrexpo plc
Annual Report & Accounts 2022
STRATEGIC REPORT

Our Business Model

A clear strategy to help grow stakeholder value

Key stakeholders

Underpinned by our values

Key strategic considerations

Exploration
Mining
Processing
Logistics
High grade iron ore pellets
Core business activities

Responsibility
See page 32

Integrity
See page 46

Make it happen
See page 31

Diversity within one team
See page 42

Continuous innovation
See page 29

Safety
Community support
Climate change
Diversity/inclusion

Value generation for all

Workforce
Communities
Governments
Shareholders
The environment
Suppliers
Customers
Capital providers

Reinvestment for further development

FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
STRATEGIC REPORT

13
Annual Report & Accounts 2022
Ferrexpo plc

Value generation

Ferrexpo’s business model is to work with its stakeholders and their strategic priorities, to generate value for all stakeholders, from its core business activities.

Stakeholder	Value generated (2022)	% of Total (2022)	Value generated (2021)	% of Total (2021)
Environment	US$12 M	35 %	US$19M	35 %
Government	US$164 M	42 %	US$281M	42 %
Investors	US$155 M	75 %	US$619M	75 %
Capital providers	US$49 M	78 %	US$221M	78 %
Employees	US$98 M	13 %	US$113M	13 %
Customers	US$1.2 BN	50 %	US$2.5BN	50 %
Suppliers	US$912 M	22 %	US$1.2BN	22 %
Communities	US$15 M	+125 %	US$6M	25 %

(Notes: Percentages indicate the proportion of revenue generated by the respective stakeholder group, or in the case of the environment, the funding of initiatives. For investors and capital providers, percentages reflect the proportion of shareholder returns and debt repayments/interest, respectively, relative to profits. Community support saw a significant increase in 2022 compared to 2021.)

STRATEGIC REPORT
Annual Report & Accounts 2022
Ferrexpo plc

14

Our Stakeholders

Future Positive

Ferrexpo is part of the global steel value chain, producing the highest grades of iron ore that are commercially available, which help steelmakers to reduce emissions and improve productivity through higher iron ore grades and a lack of requirement for sintering. The steel industry is set to evolve rapidly, with companies adapting to produce low emissions products, and ultimately we see a world based on Green Steel. To succeed, we engage with our stakeholders, to understand the material issues that lie ahead and adapt our business for the future.# STRATEGIC REPORT

Annual Report & Accounts 2022

Ferrexpo plc 15

Read more on our Stakeholder Engagement on page 48

Image: Ferrexpo uses sunflower husks as a biofuel for natural gas substitution in our pelletiser, sourcing 21% of our pelletiser energy needs from husks in 2022 (2021: 18%).

FINANCIAL STATEMENTS CORPORATE GOVERNANCE STRATEGIC REPORT

Injury frequency rate of 0.51 in 2022, continuing below our historic average (0.83)¹

Targeting a 50% reduction in Scope 1 and 2 emissions by 2030 (previously 30%)³

¹ Lost time injury frequency rate (“LTIFR”). Our historic average of 0.83 represents the five year full year average for previous years (2017-2021 inclusive).
² Source: Government of Ukraine.
³ Scope 1 and 2 emissions combined, on a per unit of production basis.

Total funding of assistance provided, including the Ferrexpo Humanitarian Fund.

Ferrexpo represented 3% of Ukraine’s export revenues in 2022 (2021: 4%)²

The environment

The environment represents a key stakeholder, reflecting the interests of future generations. Recent work has enabled us to upgrade and broaden our emissions reduction targets. See page 34

Local communities

Providing direct support to communities and helping accommodate more than 3,500 internally displaced people. See page 44

Ukraine

Through building a resilient business model, Ferrexpo was able to continue selling throughout 2022, maintaining our contribution to Ukraine’s economy. See page 11

Our workforce

Protecting a workforce operating in a war zone, helping their families to remain safe and providing wellbeing initiatives. See page 32

US$19 M
3 %
0.51
2019

Where we are today

0 %
2022
31 %
2030
50 %

Strategic Framework

High quality production
Elevating sustainability
Low cost operations
A world class customer network
Disciplined capital allocation

Strategic goal Goals

Understanding our strategic direction

01 Future facing, high grade iron ore products for a low emissions future.
02 Through sustainable, ethical partnerships, delivering value for all stakeholders.
03 Prioritising support for Ukraine, where possible.
04 Maintaining a competitive cost of production relative to global peer group.
05 Selling our products to best in class steel producers, developing successful partnerships for the future. Managing our business in a prudent and sustainable manner, developing our assets for the future.

FINANCIAL STATEMENTS CORPORATE GOVERNANCE STRATEGIC REPORT

Ferrexpo plc 16

Annual Report & Accounts 2022

STRATEGIC REPORT

Ferrexpo plc 17

Annual Report & Accounts 2022

• Quality improvement: Increasing direct reduction (“DR”) pellets to 6% of pellet production (2021: 4%), helping us to cut our Scope 3 emissions per tonne by 1% in 2022.
• High grade focus: 100% high grade output (65% Fe and above) for the third successive year.
• War in Ukraine: Resilience in operating, despite challenges faced in 2022, producing 6.1 million tonnes.
• Safety: Maintaining high safety standards in 2022, with low injury rates and zero fatalities.
• War in Ukraine: Initiating Ferrexpo Humanitarian Fund, providing direct support.
• Climate change: Lowering Scope 1 and 2 emissions at our operations by 1% (per unit of production basis). Simultaneously lowering Scope 3 emissions by 1%.
• Cost control: C1 costs A rose by 49% amid conflict risks limiting production volumes, and diverting logistics, plus global factors (energy costs and inflation).
• Key driver: 64% decrease in total mining volumes driving 19% cut to productivity of diesel consumption.
• Key driver: 46% decrease in pellet production driving 6% cut to productivity of natural gas consumption.
• Long-term partners: Sales into accessible markets (Europe) only declined by 23% in 2022, despite the war in Ukraine, demonstrating our supportive customer relationships in this region.
• Future focus: Increasing offering of DR pellets to 6% of total pellet production, reflecting pivot to new markets.
• Customer engagement: Maintaining a customer portfolio with a lower carbon footprint¹.
• Balance sheet strength: Net cash position maintained.
• Capital investment continues: US$161 million invested in operations in 2022, with growth projects completed (see page 29 for more information).
• Shareholder returns: 55% of free cash flow in 2022 (2021: 37%), reflecting the timing of distributions made during 2022.
• Product portfolio: Continue to develop DR pellet offering, helping to maintain our portfolio of high quality customers.
• High grade focus: Continue to invest in high grade forms of iron ore.
• War in Ukraine: Resume Wave 1 Expansion once conflict risks subside.
• Health and safety: Continue to deliver strong safety performance.
• War in Ukraine: Continue to work with our workforce and local communities to respond to their needs; focus on wellbeing.
• Climate change: Publish life cycle assessment, representing a study into the environmental impact of steel made from pellets, benchmarked against steel production based on sinter fines.
• Community support: Initiatives via both the Ferrexpo Humanitarian Fund and Ferrexpo Charity Fund.
• War in Ukraine: Working within the confines of the war in Ukraine, adapt to new operating constraints and target strategic sales in a complex operating environment.
• Cost control: Balance supply risks for key consumables with effective cost control, targeting lowest quartile pellet production.
• Modernisation programme: Utilise available technologies to pivot away from hydrocarbon use and lower cost alternatives, helping to also reduce emissions.
• War in Ukraine: Review cost effective solutions for returning to the seaborne market, pending reopening of Ukraine’s Black Sea ports.
• Decarbonisation: Continue to liaise with customers and suppliers on decarbonisation plans and pivot by steel producers towards electric arc furnace technology (relevant for DR pellets).
• Pellet quality: Look to partner with existing and prospective customers to help lower our Scope 3 emissions.
• Capital discipline: Ensure that the needs of all stakeholders are met through a measured approach to capital investment and shareholder returns, whilst maintaining the strong metrics of our balance sheet.
• War in Ukraine: Approach in 2023 to be driven by conflict risks in Ukraine, with the restart of investments in Wave 1 Expansion should conflict risks subside.

¹ Source: CRU.
² Natural gas based direct reduction without carbon capture.

Achievements in 2022

Strategy for 2023

18 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Key Performance Indicators (“KPIs”)

Measuring our performance in 2022

	2022	2021	2020	2019	2018
Underlying EBITDA A	US$765M	US$1,439M	US$859M	US$586M	US$503M
Profit after tax	US$220M	US$871M	US$635M	US$403M	US$335M

Underlying EBITDA A

Definition
Underlying EBITDA A represents profit before tax and finance plus depreciation and amortisation, net gains and losses from disposal of investments and property, plant and equipment, share-based payments and write-offs and impairment losses. Underlying EBITDA A measures the Group’s ability to generate cash as well as providing a useful measure of operating performance excluding certain non-cash items. Underlying EBITDA A is an Alternative Performance Measure – please see page 212 for more details.

The remuneration packages of the Group’s executive management team, including the Chief Executive Officer, include references to the Group’s Underlying EBITDA A. Please see page 124 for more details of the Group’s incentive programme.

Our performance in 2022
Underlying EBITDA A declined by 47% to US$765 million, in line with production volumes, which declined by 46% as a result of restrictions related to Russia’s invasion of Ukraine in 2022. Additional factors include the effect of lower production and sales on operating costs, with reduced economies of scale, as well as global factors, such as rising energy prices and inflation. The devaluation of the Ukrainian hryvnia is also reflected in this metric, providing a gain of US$339 million in 2022.

Looking forward to 2023
The Group expects to maintain a similar level of Underlying EBITDA A margin in 2023 as seen in previous years, which was 61% in 2022 and averaged 49% in the three years prior to the war in Ukraine (2019–2021). Production and sales volumes are largely dependent on the easing of conflict risks facing the Ferrexpo business, and therefore a wide range of outcomes are possible in the year ahead. Resumption of cost effective, consistent access to the seaborne market would be a potential trigger for increased production and sales, since it would enable us to deliver material quantities to a broader range of global markets.

Definition
In addition to Alternative Performance Measures, Ferrexpo considers the IFRS results of the Group to be an important measurement of profitability. Profit after tax is depicted in the Group’s Consolidated Income Statement on page 151. Profit after tax is the earnings of a business after all income taxes have been deducted.

Our performance in 2022
Profit after tax fell by 75% to US$220 million in 2022, reflecting the factors discussed above (conflict risks and operational/logistical constraints related to the war in Ukraine, in addition to global factors).

Looking forward to 2023
The Group’s outlook for the year ahead is heavily dependent on the outlook for the war in Ukraine and any easing of constraints imposed by Russia’s invasion. In addition to the factors discussed above in the Underlying EBITDA A section, profit 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 location in Ukraine, the Group does not expect to undertake any new material debt facilities in 2023, but remains in contact with a number of potential capital providers.# Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

US$220 M
Prot after tax

US$301M
Net cash ow from operating activities

US$1,093M
2020

US$687M
2021

US$473M
2019

US$292M
2018

US$83.3/T
C1 cash cost of production A

US$55.8/T
2020

US$41.5/T
2021

US$ 47.8/ T
2019

US $43.3/T
2018

Net cash ow from operating activities

Denition
Net cash ow from operating activities represents the cash ow generation ability of the Group, and is a measure indicative of the funding a company brings in from its ongoing, regular business activities, such as pellet production and sales. It is depicted on the Group’s Consolidated Statement of Cash Flows on page 154. Net cash ow from operating activities indicates the level of cash ow available forinvestments, returns to shareholders anddebt reduction.

Our performance in 2022
The primary factor in the Group’s nancial performance, as discussed under the other nancial metrics presented in this section, is the war in Ukraine and the operational and logistical restrictions related to it. Net cash ow from operating activities declined by 72%to US$301 million in 2022 following the impact of the war in Ukraine – see discussion opposite for Underlying EBITDA A for the key drivers of the Group’s nancial performance.

Looking forward to 2023
The Group’s nancial performance, including net cash ow from operating activities, is expected to be heavily reliant on the conict risks facing the Group in 2023, with a wide range of potential outcomes. Despite the war, the Group has continued its focus on high grade, high quality forms of iron ore, as has been the Group’s strategy since listing in 2007. As a result of producing high margin products, the Group expects to remain competitive throughout the commodities cycle.

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

C1 cash cost of production A

Denition
The C1 cash cost of production A is the cost ofproduction processes to the factory gate, divided by production. This is an industry standard measurement and assesses Ferrexpo’s relative competitiveness compared with other pellet producers. C1 cash cost of production A is an Alternative Performance Measure – please see page 212 for more details. The remuneration packages of the Group’s executive management team, including the Chief Executive Ofcer, include references tothe Group’s C1 cash cost of production A . Please see page 124 for more details of the Group’s incentive programme.

Our performance in 2022
The Group’s C1 cash cost of production A rose by 49% to US$83 per tonne in 2022 (2021: US$56 per tonne), reecting conict risks in 2022 and associated restrictions on the Group’s ability to operate and ship at its nameplate level of capacity. Additional global factors, including rising energy prices and ination, were key factors specic to 2022.

Looking forward to 2023
As discussed under the other nancial metrics presented in this section, the war in Ukraine represents a material factor in the Group’s outlook and a wide range of outcomes are possible depending on how the conict evolves in 2023. Should the conict-related risks and restrictions ease in the coming year, the Group would expect its C1 cash cost of production A to reduce, as the Group would benet from economies of scale through operating at, or close to, its nameplate capacity. Energy costs and ination persist, however, and therefore it is expected that costs will not fully return to historic levels until these global factors, amongst others, return to normal levels.

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

---

Key Performance Indicators (“KPIs”) continued

Lost time injury frequency rate (“LTIFR”)

0.51 LTIFR

Denition
Safety is the Group’s highest priority. We aimto ensure that our workforce operates inasafe environment and is trained in safe working practices. An organisation’s LTIFR is a lagging indicator of safety, and is calculated as the number of lost time injuries incurred by an organisation’s workforce (being employees and contractors) per million hours worked. LTIFR is an industry standard measurement and an important indicator of how safe the work environment is. The remuneration packages of the Group’s executive management team, including the Chief Executive Ofcer, include references to the Group’s LTIFR. Please see page 124 for more details of the Group’s incentive programme.

Our performance in 2022
The Group’s LTIFR has remained at a relatively low level for approximately four years, falling from an average of 1.18 (2016–2018) to an average of 0.57 in subsequent years. The result for 2022 (0.51) was in line with recent performance and ahead of the Group’s historical (ve year) trailing average of 0.83. For context, Ferrexpo’s iron ore producing peers in the Pilbara region of Western Australia operated with a LTIFR of 1.1 in the year to June 2021 1 (most recently published data). Safety performance is also measured via the number of fatalities at the Group’s operations, which have remained fatality-free for more than two years.

Looking forward to 2023
The Group has maintained a low level of injuries and injury incidents in recent years, with an incidence rate materially below its industry peers. The Group aims to continue this progress, through targeting no lost time injuries. In 2022, Ferrexpo introduced a ‘Zero Harm’ policy that aims to ensure all workers return home safely from every shift. Please see page 32 for more on our approach to health and safety.

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

Diversity in management roles

20.9 % female

Denition
Diversity is an important aspect of any modern business, and Ferrexpo has initiatives to promote diversity in many forms – including diversity based on gender, disability, sexual orientation and cultural diversity. Gender diversity is measured through a number of metrics, including total workforce and female representation in management positions, dened as roles that are grade 10 and above (based on the Group’s internal grading system). The Group prefers to focus on female representation in management roles as it isareection of women progressing their careers at Ferrexpo, rather than including entry-level roles. The remuneration packages of the Group’s executive management team, including the Chief Executive Ofcer, include references to the Group’s workforce diversity. Please see page 124 for more details of the Group’s incentive programme.

Our performance in 2022
The Group has seen signicant progress in increasing the level of female representation in managerial positions, rising to 20.9% in 2022. This follows a multi-year trend, whereby this gure has increased from 18% in 2019 to the level seen today, with the Group setting a target of achieving 25% by 2030.

Looking forward to 2023
The Group’s diversity programme is targetingfemale representation in a number of departments, at a range of levels within ourorganisation. Our lead programme for promoting gender diversity in management roles is our “Fe_munity” women in leadership programme, which is now in its third year of selecting and training high potential future female leaders of our business. This programme has trained more than 200 participants since this project’s inception. Please see page 42 for more on our approach to diversity in our workforce.

	2022	2020	2021	2019	2018
Diversity in management roles	20.9%	20.1%	18.2%	17.5%	17.7%

	2022	2020	2021	2019	2018
Lost time injury frequency rate	0.51	0.41	0.79	0.58	1.18

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

---

Greenhouse gas emissions

91kg/t

Denition
The Group understands the importance ofclimate change and we report emissions ofgreenhouse gases (Scope 1, 2 and 3) as ameans of tracking progress in our decarbonisation efforts. Given the short-term volatility in our production due to the war in Ukraine, and our long-term growth ambitions for production, we consider emissions per tonne as the most representative metric for our performance. The remuneration packages of the Group’s executive management team, including the Chief Executive Ofcer, include references tothe Group’s greenhouse gas emissions. Please see page 124 for more details of the Group’s incentive programme.

Our performance in 2022
Scope 1 and 2 emissions per tonne fell by 1% in 2022, reecting a reduction in the ancillary activities as a result of the war. Total emissions (Scopes 1, 2 and 3) fell by 1% in 2022 as a result of the increased output of direct reduction pellets, with downstream useof pellets (steelmaking) representing 89% of total emissions. Please see page 34 for more. To date, we have reduced Scope 1 and 2 emissions 1 by 31% since our baseline year (2019). Scope 3 emissions have been reduced by 3% during the same timeframe.

Looking forward to 2023
The Group expects to continue its decarbonisation pathway, aiming for a 50% reduction in Scope 1 and 2 emissions 1 by 2030. Individual years may vary depending on operational activities and restrictions relating to the war in Ukraine, but the Group retains itsstrategic goal of net zero production by 2050 2 . The Group also announced Scope 3 emissions targets on page 8 of its Climate Change Report, published in December 2022. Given the ongoing war in Ukraine and the wide range of potential production outcomes that could result in 2023, it is difcult to estimate short-term achievements in emissions reduction, but we remain focused on our goals for 2030.

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

Sales volume by region

83 % to Europe

Denition
Ferrexpo believes it is important to have adiversied customer base to be able to withstand periods of volatility in specic regions.

1. Source: Government of Western Australia (link).# Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Financial Review

Investments to create a resilient, high margin business

Through a focus on premium products and effective cost controls, the Group has maintained strong margins on our sales, facilitating a stable net cash position year-on-year.

• Revenue 50% Decline in revenues in line with 46% reduction in sales volumes.
• Underlying EBITDA Margin 61% Growing our Underlying EBITDA Margin by a further 4 percentage points in 2022 (2021: 57%).
• Capital investment US$161 M Continued investments in 2022, with a focus on near-term growth projects (2021: US$361 million).

Summary

The war in Ukraine has shaped the operational and financial performance of our business in 2022, with production and sales volumes 46% lower as a result of the restrictions imposed by the conflict in Ukraine (see pages 4 to 5 for a summary of the impacts felt). Key drivers for the Group’s financial performance in 2022 include a significant impairment of US$254 million and a net foreign exchange gain of US$276 million (operating gain less non-operating loss), both of which are related to the war in Ukraine. The Group’s lower production and sales, combined with escalating energy prices and global inflation, C1 cash cost of production (“C1 costs”) rose by 49%, resulted in a decline in Underlying EBITDA and profit after tax by 47% and 75% respectively. Despite the war, we continued to invest in our assets in 2022, with a further US$161 million of capital investment.

Revenue

Group revenues declined by 50% to US$1.2 billion in 2022 (2021: US$2.5 billion), which principally reflects the restrictions imposed on our business due to the war in Ukraine (see pages 4 to 5 for a summary of effects of the conflict), which reduced pellet production by 46% to 6.1 million tonnes in 2022 (2021: 11.2 million tonnes). Additional factors governing the Group’s revenue in 2022 include a 25% decline in the benchmark iron ore price (65% Fe), a 6% reduction in freight rates, and an increase in pellet premiums. For more information on the market factors governing pricing of the Group’s products, please see pages 8 to 11.

Furthermore, during the course of the year the Group grew stockpiles of finished products during 1H 2022 as the war in Ukraine created instability in logistics pathways. Stockpiles were subsequently reduced in 2H 2022 as the operating environment for production deteriorated, but sales volumes generally continued. This pattern ultimately reflected in total production and sales volumes remaining broadly in line in 2022 (2021: in line).

Seaborne freight revenue arising from cost and freight (“CFR”) sales decreased revenue by US$94 million compared to 2021, reflecting the net effect of lower sales volumes to seaborne markets. Revenues from the Group’s barging and bunker operations, First-DDSG Logistics Holding, increased by US$4 million in 2022 compared with 2021 as a result of higher freight rates and bunker volumes and prices.

C1 cash cost of production

The Group’s average C1 costs for 2022 was US$83.3 per tonne, compared with US$55.8 per tonne in 2021, reflecting a 49% year-on-year increase. Key drivers behind the higher level of C1 costs include the 46% reduction in both iron ore pellet production and sales volumes, with the war resulting in an amended logistics landscape in 2022. The Group’s higher unit C1 costs were impacted to a greater extent by the Group’s fixed cost base in 2022, as a result of 46% lower pellet production volumes.

In addition to the factors discussed earlier in this section, 2022 saw significant cost inflation associated with energy prices and global inflation, driven in part by the war in Ukraine and restricted global energy supply. As an example of the variability of energy costs during the year, the Brent price of crude oil rose from US$87 per barrel in January 2022 to a monthly peak of US$123 per barrel in June 2022 (40% increase), before declining to US$81 per barrel in December 2022¹. This escalation in energy pricing during the course of the year represents a significant factor in the Group’s operating costs given that energy has historically represented more than 40% of the Group’s C1 costs – see page 25 for more information.

In more detail, the energy-related components of the Group’s C1 costs are electricity (primarily used in beneficiation operations), natural gas and biofuels (used in the Group’s pelletiser) and liquid fuels such as diesel (principally used in mining operations). These energy costs represented a combined 49% of the Group’s C1 costs in 2022 (2021: 45%), with natural gas prices in Ukraine increasing by 129% between 3Q 2021 (at a time when prices were in line with the average for 2021), and 1Q 2022, when supply risks relating to Russia’s invasion of Ukraine were realised. Since this initial price spike, natural gas prices declined by 31% between 1Q and 4Q 2022, reflecting lower than expected demand in global markets. Electricity prices in Ukraine followed a similar trend in 2022, rising by 45% between 3Q 2021 and 1Q 2022, before prices subsequently retreated 18% by 4Q 2022².

As detailed in the Group’s 2021 Annual Report and Accounts, Ukraine implemented a new royalty regime for iron ore producers that came into force in January 2022. This regime comprises a royalty payment based on the spot iron ore (62% Fe) fines price, with no reference to pellet premiums or freight rates, which is structured as follows:

(1) at monthly iron ore prices (62% Fe) less than or equal to US$100 per tonne, a royalty rate of 3.5% will apply to iron ore product sales,
(2) at prices less than or equal to US$200 per tonne, a royalty rate of 5% will apply and
(3) at prices above US$200 per tonne, a royalty rate of 10% will apply.

Royalties are not tiered and therefore the rate applied will apply to the full price of the iron ore product being sold. The regime outlined above compares to the previous iron ore royalty calculation, whereby the Group paid a flat royalty rate of approximately US$3.5 per tonne of all tonnes sold.

As shown in the Market Review section (see table on page 10), benchmark iron ore fines prices for material grading 62% Fe averaged US$120 per tonne in 2022 (2021: US$160 per tonne)³. Given the level of monthly iron ore pricing in 2022, the impact of the royalty rate on C1 costs was US$7 per tonne in 2022.

In line with previous years, the Group’s C1 costs represent the cash costs of production of iron pellets from own ore (to the mine gate), divided by production volume from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, as well as the costs of purchased ore, concentrate and gravel. The C1 cash cost of production (US dollars per tonne) is regarded as an Alternative Performance Measure (“APM”). For further information, please see pages 212 to 213.

Selling and distribution costs

Total selling and distribution costs were US$236 million in 2022 (2021: US$340 million), reflecting lower sales to seaborne markets due to the war in Ukraine. As a result, international freight costs from CFR sales decreased by US$120 million compared to 2021.

Ferrexpo has, however, been restricted in its sales portfolio in 2022 due to the war in Ukraine, which has closed Ukraine’s access to the Black Sea. In the past, Ferrexpo has utilised its central geographic location between Europe, the Middle East and Asia, as a natural hedge against risk during periods of market upheaval. The global Covid-19 pandemic in 2020 is a clear example of this, whereby we successfully pivoted our sales portfolio towards China, increasing sales to this market to more than 50% of the total, in response to rising demand in this market.

Over time, this KPI will demonstrate the shift in our product portfolio towards greater quantities of direct reduction (“DR”) pellets, which, as of today, are primarily bought by steelmakers in the Middle East and North Africa (collectively “MENA”) and North America. In the medium to long term, it is expected that buying of DR pellets will increase across global markets as steelmakers seek to lower their emissions of greenhouse gases.

Our performance in 2022

Given the Russian invasion of Ukraine in 2022, and related closure of Ukraine’s access to the Black Sea, our sales portfolio pivoted to customers in Europe as a result. A proportion of our DR pellet production was sold to a European customer, for onward transport to a facility outside of this region.

Looking forward to 2023

The Group is seeking to re-establish a consistent and financially viable link to the seaborne export market via alternatives to Ukraine’s ports. Should the Group be successful in this endeavour, or should the conflict in Ukraine ease in 2023, the Group expects to gradually return to a sales mix similar to previous years. In the event that this does not occur, the Group expects sales to be similarly weighted towards European customers in 2023.

1. Scope 1 and Scope 2 emissions on a combined basis, per tonne of production.
2. Net zero production for Scope 1 and Scope 2 emissions combined. The Group has a Scope 3 target of a 50% reduction by 2050 (per tonne basis).
3. Note ‘Europe’ category includes sales to Turkey.

Region	2022	2021	2020
Europe, incl. Turkey (BF pellet market)	83%	58%	36%
North East Asia (BF pellet market)	4%	8%	5%
China & South East Asia (BF pellet market)	11%	30%	56%
Middle East & North Africa (DR pellet market)	2%	0.4%	0%
North America (DR pellet market)	–	3%	2%

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

	2022	2020	2021	2019	2018
9kg/t	92kg/t	110kg/t	132kg/t	132kg/t

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

	2022	2020	2021
22

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

Nikolay Kladiev, Chief Financial Officer

23# STRATEGIC REPORT

Financial Review continued

General and administrative expenses

General, administrative and other expenses in 2022 were US$64 million (2021: US$72 million), with this decrease mainly due to the net impact of higher inflation and lower production volumes, with the latter a direct consequence of the war in Ukraine.

Currency

Ferrexpo prepares its accounts in US dollars. The functional currency of the Group’s operations in Ukraine is the Ukrainian hryvnia, which has historically represented approximately half of the Group’s operating costs. In 2022, the hryvnia depreciated by 34% from UAH 27 per US dollar as of 31 December 2021 to UAH 37 per US dollar as of 31 December 2022. The National Bank of Ukraine (“NBU”) set the exchange rate at approximately UAH 37 per US dollar as of 21 July 2022, within the framework of the Martial Law entered into force since 24 February 2022. As a result of the introduced Martial Law, the NBU has introduced significant currency and capital control restrictions in Ukraine. These measures limit the possibility to convert local currency into US dollars, and the ability to transfer US dollars between onshore and offshore accounts of the Group. See Note 30 (Commitments, contingencies and legal disputes) for further information.

Operating foreign exchange losses

Given that the functional currency of the Ukrainian subsidiaries is the hryvnia, a depreciation of the hryvnia against the US dollar results in foreign exchange gain on the Group’s Ukrainian subsidiaries’ US dollar denominated receivable balances (from the sale of pellets). The operating foreign exchange gain in 2022 was US$339 million compared to a loss of US$38 million in 2021, when the hryvnia appreciated.

Key Financial Performance Indicators

US$ million (unless stated otherwise)	2022	2021	YoY change
Total pellet production (kt)	6,053	11,220	(46%)
Sales volumes (kt)	6,183	11,350	(46%)
Iron ore price (65% Fe Index, US$/t) 3	139	186	(25%)
Revenue	1,248	2,518	(50%)
C1 cash cost of production A (US$/t)	83.3	55.8	+49%
Underlying EBITDA A	765	1,439	(47%)
Underlying EBITDA A margin	61%	57%	+4pp
Debt servicing	42	215	(80%)
Capital investment A	161	361	(55%)
Closing net cash	106	117	(9%)

Ukrainian hryvnia vs. US dollar 4

	UAH per USD
Spot 28.02.23	36.5686
Opening rate 01.01.22	27.2782
Closing rate 31.12.22	36.5686
Average 2022	32.3423
Average 2021	27.2862

1. Source: Bloomberg.
2. Movements shown are based on quarterly averages.
3. Source: S&P Global Commodity Insights.
4. Source: National Bank of Ukraine.

24 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT Financial Review continued

Non-operating foreign exchange gains/losses

Non-operating foreign exchange gains are mainly due to the reclassification of US dollar denominated inter-company loans from quasi equity to operating loans. In 2022, the Group recorded a non-operating foreign exchange loss of US$63 million (2021: loss of US$3 million), which was driven by a 34% depreciation of the hryvnia during the year against the US dollar, as well as fluctuations in the euro/US dollar exchange rate. For further information, please see Note 9 (Foreign exchange gains and losses) to the Consolidated Financial Statements.

Underlying EBITDA A

Underlying EBITDA A in 2022 decreased by 47% to US$765 million, with this decrease reflecting a 46% reduction in sales volumes, lower market factors, including a 25% reduction in the benchmark iron ore fines price, and a 49% increase in C1 costs A. The Group’s Underlying EBITDA A for 2022 includes a non-cash operating forex gain of US$339 million (2021: non-cash operating forex loss of US$38 million).

Interest

Interest expense on loans and borrowings declined by 95% to US$0.5 million compared to US$10 million in 2021, due to the repayment of the Group’s pre-export finance (“PXF”) facility in June 2021. Other than trade finance lines (utilised only in Q1 2022 for an average cost of 2.19%), the Group did not have any financial debt in 2022 and, therefore, no related financial expense (2021: average cost of debt of 4.7% driven by the PXF that was fully repaid in June 2021). Further details on finance expense are disclosed in Note 10 (Net finance expense) to the Consolidated Financial Statements. At the same time, interest income increased by 46% to US$0.9 million compared to US$0.6 million in 2021, reflecting the higher global interest rate environment.

Tax

In 2022, the Group’s income tax expense was US$119 million (2021: US$200 million). The effective tax rate for 2022 was 35.0% (2021: 18.7%). The increase in the effective tax rate was predominantly driven by an impairment loss of US$254 million on the Group’s non-current operating assets, which is not tax deductible. In 2022, the Group paid income taxes of US$110 million (2021: US$228 million), of which US$91 million were paid in Ukraine (2021: US$221 million). Further details on taxation are disclosed in Note 11 (Taxation) to the Consolidated Financial Statements.

Items excluded from underlying earnings

The Group has recognised an impairment charge of US$254 million as a result of a reduction in the carrying value of the Group’s assets in Ukraine, and the devaluation of the local currency exchange rate seen in 2022. Please see Note 13 (Plant, property and equipment) to the Consolidated Financial Statements for more information. In the prior period, an impairment charge of US$231 million was recognised as at 31 December 2021, with this relating to stockpiled low grade ore as it cannot be reliably predicted as to when this material will be processed. Please see Note 17 (Inventories) to the Consolidated Financial Statements for more information.

Profit for the period

Profit for the period decreased by 75% to US$220 million compared with US$871 million in 2021, reflecting a 62% decrease in operating profit, as well as a foreign exchange gain of US$339 million compared to a foreign exchange loss of US$38 million in 2021.

Cash flows

Operating cash flow before changes in working capital decreased by 70% to US$434 million, while the working capital outflow in

Despite the Russian invasion into Ukraine on 24 February 2022, the Group continued to operate throughout the majority of 2022, albeit at a much lower capacity. However, the situation in Ukraine continues to represent a significant risk to the Group’s operations and the point of time of the recovery of the production and sales volumes to pre-war levels is currently uncertain. As a result, the Group continuously adjusts its long-term model in order to reflect the latest developments in terms of possible production and sales volumes as well as latest market prices and production costs, which are adversely affected by lower production volumes. These factors, combined with a higher discount rate to be used as a result of an increased Country Risk Premium for Ukraine, had an adverse impact on the value in use of the Group’s non-current operating assets. In accordance with IAS 36 Impairment of assets, the Group recorded an impairment loss of US$254 million as of 30 June 2022 as the carrying value of the assets was exceeding the computed value in use by this amount.

Case Study: Factors leading to the Group recording an impairment loss

Image: Iron ore pellet stockpile located at our assets in Ukraine, where the Ukrainian hryvnia devalued by 34% in 2022.

US$83.3/t (2021: US$55.8/t)

25 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

2022 was US$20 million (compared to an outflow of US$139 million in 2021). The overall decrease in the working capital outflow largely reflects a balance of lower trade accounts receivable and higher inventories and VAT receivable, and a decrease in trade and other payables, which collectively provided a lower net effect in 2022. As a result of lower operating cash flow, the net cash flow from operating activities decreased by 72% to US$301 million in 2022 (2021: US$1,094 million). With respect to capital allocation, investment decreased by 55% to US$161 million (2021: US$361 million), while dividends paid during the 2022 calendar year decreased by 75% to 26.4 US cents compared to 105.6 US cents in 2021.

Capital investment A

Capital expenditure in 2022 was US$161 million compared to US$361 million in 2021. Of this amount for 2022, sustaining and modernisation capex was US$57 million (2021: US$113 million), covering activities at all of Ferrexpo’s major business units. Given operational and logistics constraints relating to Russia’s invasion of Ukraine in 2022, the Group maintained its levels of investment relating to sustaining capital investment, and reduced activities relating to expansion capital investment A , particularly in relation to projects that are expected to deliver returns in the medium to long term. As such, major projects advanced in 2022 include US$25 million spent on stripping activities for future production growth, US$17 million spent on the completion of the Group’s press filtration complex and US$2 million on completion of the MFC-2 project, which will help raise pelletising capacity in the near term once operations return to full capacity. Ferrexpo continued to invest in the primary crushers upgrade project, investing US$4 million. A total of US$37 million was spent on the Group’s concentrator and pelletiser as part of the Wave 1 Expansion Programme, and a further US$4 million was invested in infrastructure facilities. The Group also spent US$11 million in the development and exploration of the Belanovo, Galeschynske and Northern deposits, and US$2 million in a hydrolysis plant for the trial of hydrogen use as a fuel in the Group’s pelletiser. The Group also invested US$3 million in the procurement of new railcars in 2022. For further information on the Group’s activities to grow its business in 2022, please see page 29.

Shareholder returns

Total dividends paid to date in respect of 2022 are 13.2 US cents (2021 total: 52.8 US cents).The Group has a shareholder returns policy outlining the Group’s intention to deliver 30% of free cash flows as dividends in respect of a given year. To date, the Group has announced dividends in respect of the 2022 financial year representing 55% of the Group’s free cash flow in 2022.

Debt and maturity profile

Ferrexpo has maintained a strong balance sheet in 2022, including low levels of gross debt and had a net cash position as of 31 December 2022. As of 31 December 2022, the Group’s net cash position was US$106 million (31 December 2021: US$117 million net cash position). The Group had no debt facilities as of 31 December 2022, compared with US$50 million as of 31 December 2021.

The balance of cash and cash equivalents held in Ukraine amounts to US$45 million as at 31 December 2022 (31 December 2021: US$52 million). Despite the foreign exchange control measures imposed under Martial Law in Ukraine (see Note 30 Commitments, contingencies and legal disputes), this balance is fully available to the Group for its operations in Ukraine and is therefore not considered restricted.

As of 31 December 2022, the credit ratings agency Moody’s had a long-term corporate and debt rating for Ferrexpo of Caa2, with a negative outlook. The credit ratings agency Fitch maintains a CCC+ rating on the Group. While the credit rating of Ferrexpo is capped by the sovereign credit rating of Ukraine, the ceilings for credit ratings ascribed to Ferrexpo by both Moody’s and Fitch are higher (one notch above sovereign, Caa3, for Moody’s and three notches above sovereign, CC, for Fitch).

During the course of 2022, as risks relating to the Russian invasion of Ukraine escalated after 24 February 2022, the credit ratings agencies took a number of steps to update their assessments of Ukrainian issuers. As of 14 February 2023, Moody’s had a long-term corporate and debt rating for Ferrexpo of Caa3, with a negative outlook. Similarly, as of 29 July 2022, Fitch had a long-term corporate and debt rating for Ferrexpo plc of CCC+. Whilst the credit rating of Ferrexpo is capped by the sovereign credit rating of Ukraine, the credit rating ascribed to Ferrexpo by Fitch is higher. The credit ratings agency Standard & Poor’s has temporarily suspended the credit rating for Ferrexpo plc, following an action to suspend coverage of all Ukrainian issuers in March 2022.

Related party transactions

The Group enters into arm’s length transactions with entities under the common control of Kostyantin Zhevago and his associates. For further information, please see Note 34 (Related party disclosures).

Breakdown of C1 costs A

Category	2022
Electricity	22%
Gas + Biofuel	19%
Fuel (including diesel)	8%
Maintenance and repairs	20%
Personnel costs	9%
Royalties and other taxes	9%
Materials	6%
Grinding bodies	6%
Blasting	2%

Note: above numbers are rounded to nearest percentage.

Breakdown of C1 costs A

C1 costs A in 2022 increased by 49% in 2022 to US$83 per tonne, with this increase principally related to the increasing unit cost of energy such as natural gas, fuel (principally diesel) and electricity. This change is demonstrated in the chart above, with energy-related costs comprising 49% of our C1 costs A in 2022 (2021: 45%). In light of the ongoing war in Ukraine, scaling back of production activities and devaluation of the local currency in Ukraine, maintenance and repair costs fell to 20% in 2022 (2021: 22%), and materials costs reduced to 6% in 2022 (2021: 8%). The Group’s decision to continue paying its workforce despite lower production volumes resulted in a small increase in percentage terms to 9% in 2022 (2021: 8%). Royalties increased from 6% in 2021 to 9% in 2022 – please see page 23 for details of the revised royalty regime that was implemented at the start of the year.

26 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT

Operational Review

The Group managed to maintain production throughout the majority of 2022, and continued shipments to customers for the entire year, despite the challenges posed by the ongoing Russian invasion of Ukraine.

Resilient production

6.1 MT

Pellet production continues, despite more than 250 days of Russia’s invasion during the course of 2022.

Focus on quality

100 %

Output continues to be comprised entirely of high grade forms of iron ore.

Shifting to direct reduction pellets

6 %

Increasing proportion of direct reduction pellets to 6% of total pellet production in 2022 (2021: 4%).

As a producer of a bulk commodity, our access to logistics is key in our ability to produce and sell our products. As a consequence of the war in Ukraine, our activities in 2022 were therefore appropriately scaled throughout the year, according to the number of customers that were accessible at any given time. Furthermore, attacks on Ukraine’s state-owned electricity network in 4Q 2022 limited our ability to produce. Shipments were, however, maintained throughout the year, which is testament to the commitment of our operating and marketing teams.

Health and safety

2022 represented our second successive year with no fatalities, and we maintained our strong performance in relation to our key safety metric (lost time injury frequency rate). Please see page 32 for more information on our safety performance in 2022.

Reserves and resources

Ferrexpo controls licences covering a number of deposits located along the Kremenchuk Magnetic Anomaly, which is a magnetite deposit that extends for more than 50 kilometres. The Group has active mines on three deposits and additional licences for deposits immediately to the north of our active operations. Across the Group’s three active mines, we have a JORC-compliant Ore Reserve estimate of 1.6 billion tonnes of iron ore, with an iron (“Fe”) content of 32% Fe (2021: 1.6 billion tonnes grading 32% Fe). Our JORC-compliant Mineral Resource estimate across our three active mines is 5.7 billion tonnes of iron ore, with an iron (“Fe”) content of 32% Fe (2021: 5.8 billion tonnes grading 32% Fe), which is inclusive of Ore Reserves. In addition, at a number of exploration properties immediately north of our active mines, we have exploration stage properties with a combined non-JORC compliant Mineral Resource estimate of 14 billion tonnes of iron ore, grading 34% Fe (collectively referred to as the “Northern Deposits”). A table detailing the Group’s JORC-compliant Ore Reserves and Mineral Resources as at 1 January 2023 is provided on page 28 of this report.

Mining activities

Throughout the year, we have scaled our mining operations according to the ore requirement of the processing plant, which has been set by the degree of accessible customer markets. See pages 4 to 5 for more information on the various impacts imposed by the conflict in 2022. Overall mining volumes across the Group saw a total movement of 55 million tonnes across our three mines in 2022 (2021: 152 million tonnes), with this 64% decline in total

Scaling operations in line with accessible markets

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

27 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

movement reflective of the war in Ukraine and the 46% decrease in sales volumes during the year. Following the outbreak of Russia’s invasion, mining activities initially focused on both the Poltava and Yeristovo mines, with strong European demand for iron ore, and therefore production volumes remained in line in 1Q 2022. Subsequently, production volumes in 2Q 2022 fell by 22% as logistics constraints increased and European steel mills curtailed buying activities having established larger raw inventories to mitigate supply risks. With additional logistics restrictions in 3Q 2022, principally relating to attacks on the railway network and increased demand due to the grain season in Ukraine, the Group further lowered its production and focused its ore mining activities on the Yeristovo mine, to optimise mining costs. Finally, in 4Q 2022, Russian attacks on state-owned electricity infrastructure resulted in a lack of power at our processing plant. In response, mining activities were paused given the lack of ore demand for production. In light of the restrictions described above, mining tonnages at all three mines fell by between 50% and 80% during 2022, with a lower reduction of ore mining activities seen at both Poltava and Yeristovo mines (30–50% reduction).

Processing activities

As referenced above, processing activities were scaled according to accessible markets throughout the year, given the ongoing war in Ukraine. As such, processing volumes decreased by 44% during 2022 to 17 million tonnes, reflecting the above restrictions and reduced demand for iron ore pellets as a result of lower steel margins in Europe (being the main customer market for the Group given restricted access to seaborne markets).

A key area of focus of the Group’s processing operations in 2022 was developing our offering of direct reduction (“DR”) iron ore pellets, which is a product that is typically used in electric arc furnaces (“EAFs”). Since an EAF represents a more energy efficient process than the main alternative method of steelmaking (blast furnace), DR pellets have a materially lower Scope 3 carbon emissions footprint for the Group, whilst also generating higher pellet premiums for us through a higher iron ore grade. In 2020, we produced 353 kilotonnes of DR pellets, which is a decrease of 18% on the previous year, but the proportion of total pellet output increased to 6% (2021: 4%). Through further developing our understanding of this product, as well as using 2022 as an opportunity to establish new relationships with potential customers, we are confident that we will emerge from the conflict in Ukraine with a more developed footprint for global DR pellet markets. The war in Ukraine has created delays and uncertainty over our ability to sell our production at specific points in 2022.# STRATEGIC REPORT

Operational Review continued

To maintain the strength of our balance sheet throughout the conflict, we have sought to avoid the creation of significant stockpiles of finished iron ore pellets, as these capture operating costs, but do not deliver immediate opportunities to realise revenues. However, iron ore pellets do not materially degrade if stockpiled, and therefore it is not detrimental to the Group if material is temporarily stockpiled. Given fluctuations in logistics availability during 2022, the Group accumulated a stockpile inventory of 1.0 million tonnes by the middle of 2Q 2022, with production scaled in 2H 2022 to ensure an effective drawdown of these stockpiles. As a result, the Group ended the year with stockpiles similar in size to the Group’s stockpiles as at 31 December 2021 (approximately 0.1 million tonnes larger as of January 2023). The Group’s stockpiles are located at our operations in Ukraine or at staging points across our logistics network, either within Ukraine or at key rehandling locations overseas.

Growth programme

Our Wave 1 Expansion programme, which would see us increase our production capacity by an additional three million tonnes of iron ore pellets per annum, remains an objective of the Group. Significant investment in this programme remains on hold whilst there are elevated risks associated with the war in Ukraine, but it is our intention to resume activities once the risk profile of the Group normalises.

Operational performance (000’t unless otherwise stated)

	2022	2021	YoY change
Production
Iron ore mined	18,837	33,764	(44%)
Strip ratio	1.9	3.5	(45%)
Iron ore processed	17,375	31,111	(44%)
Concentrate production	8,430	14,655	(42%)
Pellet production	6,053	11,220	(46%)
– Direct reduction pellets (67% Fe)	353	431	(18%)
– Premium blast furnace pellets (65% Fe)	5,700	10,790	(47%)
– Basic blast furnace pellets (62% Fe)	–	–	–
Commercial concentrate production	124	234	(47%)
Iron ore sales
– Pellets	6,055	11,115	(46%)
– Concentrate	128	234	(45%)
– Total products sold	6,183	11,349	(46%)

Iron ore mined volume (44%)

Iron ore mining volumes fell by 44% in 2022, broadly in line with the level of reduction seen in iron ore pellet sales volumes.

Total movement by quarter: gradual impact of conflict in Ukraine

4Q 2022 (Quarterly Average)
2Q 2022 (Quarterly Average)
3Q 2022
1Q 2022
20 21
2020

Read more on our KPIs on page 18

28 Ferrexpo plc Annual Report & Accounts 2022

JORC-Compliant Ore Reserves and Mineral Resources

	Proven	Probable	Total
	Mt Fe total % Fe magnetic %	Mt Fe total % Fe magnetic %	Mt Fe total % Fe magnetic %
Gorishne-Plavninske-Lavrykivske (“GPL”)	303 33 26	823 31 23	1,126 32 24
Yerystivske	211 30 25	290 33 26	501 32 26
Total	514 32 26	1,113 32 24	1,627 32 25

	Measured	Indicated	Inferred	Total
	Mt Fe total % Fe magnetic %	Mt Fe total % Fe magnetic %	Mt Fe total % Fe magnetic %	Mt Fe total % Fe magnetic %
Gorishne-Plavninske-Lavrykivske (“GPL”)	469 35 29	1,621 30 22	744 32 24	2,834 31 24
Yerystivske	260 35 29	571 34 27	382 33 27	1,213 34 27
Bilanivske	336 31 24	1,149 31 23	217 30 21	1,702 31 23
Total	1,065 34 27	3,341 31 23	1,343 32 24	5,749 32 24

1. The Group’s JORC-compliant Ore Reserves and Mineral Resources shown above are based on an independent review completed by Bara Consulting, and are shown on a depleted basis as of 1 January 2023. The Group previously reported a resource estimate of 326Mt for the Galeschynske deposit, which is the subject of a legal dispute and is therefore not shown above; please see page 199 for more information.

Russia. Additional factors affecting the Group’s access to the railway network in Ukraine may relate to demand from other railway users, with shifting demand patterns likely as Ukraine’s economy adapts to a complex operating environment. Furthermore, attacks on Ukraine’s state-owned electricity infrastructure have previously impacted our ability to operate, and this is a factor that should be monitored in 2023, should these attacks continue. It is our intention to maintain our global inventory of finished iron ore pellets at a stockpile level in line with previous years, but this may not be possible given periodic fluctuations in logistics availability. Should changes in the level of available logistics result in an increased inventory of pellets, the Group may elect to moderate production volumes in 2023 to ensure a stockpile drawdown, similar in scale to that seen in 2H 2022. Given the wide range in potential logistics and production outcomes in 2023, it is difficult to provide a clear expectation on overall production volumes for 2023. Should, however, the conflict risks associated with the war in Ukraine subside during 2023, then the Group would expect to return to its nameplate capacity as soon as it is practical to do so. Despite the war in Ukraine, a number of growth projects were completed or continued in 2022. These projects principally relate to projects that were close to completion as of February 2022, or represent low cost, high value projects that were deemed suitable for completion during the year. Please see page 29 for more information on growth projects completed in 2022.

Sustainability programme

We continued to implement our various sustainability initiatives throughout 2022, reducing our Scope 1 and 2 emissions footprint (combined basis) by 1% (now 31% below our baseline year of 2019), and further increasing gender diversity amongst our management team. Please see pages 30 to 47 for more information on our sustainability programme.

Logistics activities

A major impact of the war in Ukraine in 2022 has been on our ability to ship our products. Please see pages 4 to 5 for a summary of the impacts incurred due to the conflict. The Group’s logistics network covers our use of the Ukrainian railway network, and beyond, for accessing European customers by rail. In addition, we have our inland waterway subsidiary First-DDSG for barging material along the River Danube. Our access to the seaborne market is typically via a berth at the Ukrainian port of Pivdennyi (formerly known as Yuzhny), but Russia’s invasion in 2022 has limited Ukraine’s access to the Black Sea. We have established potential routes into the seaborne market via alternative ports, and we are in advanced discussions to increase volumes of material shipped via these routes. The logistics capacity of the Ukrainian railway network has remained under pressure during the year as a result of (a) Russia’s attacks, and (b) the grain season in the summer of 2022, which reduced spare capacity across the network. Furthermore, power cuts across Ukraine in 4Q 2022 placed additional limits on the railway network’s carrying capacity. In terms of barging operations, First-DDSG’s operations provided logistics flexibility at an important time for the business, helping facilitate shipments via an alternative logistics route.

Outlook

The Group expects that production volumes will continue to be linked to the volume of accessible sales in 2023. We are currently operating with two of our four pelletiser lines, with this production predominantly being delivered to European customers. Should Ukraine’s access to the Black Sea be restored, or should we be able to establish a port agreement that is consistent, scalable and economically viable, then returning to the seaborne market could potentially represent a catalyst for increasing output at our operations in the coming year. The Group demonstrated its flexibility in logistics during the global Covid-19 pandemic, when pellet sales to customers in China and South East Asia increased from 30% in 2019 to 56% in 2020, as demand in other regions fell. It would be the Group's intention to utilise this flexibility in global markets in 2023 if regular access to seaborne markets were to resume. An additional factor is the continued availability of the railway network in Ukraine, which is frequently subject to attacks by

29
Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
STRATEGIC REPORT

In light of the ongoing war in Ukraine, we have paused our main expansion project – the Wave 1 Expansion Programme, which amounts to more than US$600 million of total investment, growing our production capacity by approximately 25%. The Wave 1 Expansion continues to represent a significant growth project, and we intend to resume activities once the conflict risks in Ukraine are reduced. The past year, however, did see a number of growth projects completed at our Ukrainian operations. Total investment during 2022 was US$161 million, of which US$104 million was in growth projects, and the majority of this expenditure was on projects either nearing completion as of February 2022 or those which represent low cost, high return opportunities. The main project completed in 2022 is the press filtration project in our beneficiation plant, which will help deliver more efficient removal of moisture from concentrate as it exits the beneficiation plant. The equipment installed includes Metso press filtration technology, which represents a modern alternative to our existing vacuum filter system. Benefits are expected to include:

– Lower moisture levels will result in lower energy costs in the pelletiser, where we heat pellets to cure and harden them. Consequently, natural gas consumption rates are expected to be 3% lower on average across all pellet types, with associated benefits for C1 costs and Scope 1 greenhouse gas emissions.
– Improved product quality, since excess moisture in green (unfired) pellets can lead to cracking as they are heated. The Cold Compression Strength (“CCS”) of our pellets, which is a key metric for pellet quality, is forecast to increase by 8% for our Ferrexpo Premium Pellets (65% Fe).# Ferrexpo plc

Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business Review

– Through more effective moisture removal, we will be able to increase throughput of material throughout our processing plant, resulting in 3% higher throughput rates (on average).
– A more efficient process will also result in lower losses of iron as concentrate is converted to pellets. This will result in a 0.2% Fe uplift in pellet grades (average).

Growth: Continuing to expand and develop in 2022

3% Newly completed press filtration complex expected to deliver a 3% reduction in natural gas consumption.

Case Study: Investment in growth projects

Image: The installation of an automated lathe in our maintenance department – an example of modern equipment – has helped improve safety and performance.

1. Note that figures shown here in this case study are preliminary management estimates.

Responsible Business Review

In reviewing the past year, our engagement with local stakeholders in Ukraine has been key to understanding our role. Companies have been essential to the local response during Russia’s invasion in 2022, supporting workforces, their families and local communities.

Understanding the role of sustainability during a war

• 01 Safety and Our People (See page 32)
• 02 Environmental Stewardship (See page 34)
• 03 TCFD Disclosures (See page 37)
• 04 Diversity, Equity and Inclusion (See page 42)
• 05 Supporting Communities (See page 44)
• 06 Corporate Governance (See page 46)

Scan to read our latest Responsible Business Report

US$19 M
Total humanitarian support provided to date, including the Ferrexpo Humanitarian Fund, assisting more than 70 individual projects.

0.51
Strong safety performance continues with lost time injury frequency rate of 0.51 in 2022 (2021: 0.41).

1%
Reduction
Our greenhouse gas emissions footprint fell by 1% in 2022, despite the war in Ukraine.

As a responsible business, we understand our role in Ukraine today: supporting our people and communities across Ukraine, and providing this support through our experience and in-country presence. We are long-term investors in Ukraine, its people and its economy, which is only possible through positive, long-term partnerships with our Ukrainian stakeholders. Our community engagement and support throughout the conflict in Ukraine has primarily been conducted via our Ferrexpo Humanitarian Fund (see page 44 for more details). We also have our long-standing Ferrexpo Charity Fund, which has been providing direct support to communities for more than 11 years now. In 2022, we were also proud to publish our seventh Responsible Business Report, which was published in both English and Ukrainian for the first time – an important step in us broadening our engagement with our local stakeholders.

Understanding the task ahead

It is clear that the war will have a long-lasting impact on Ukraine. At this point in time, it is important to understand the various impacts of the war on the people and communities of Ukraine, as well as Ferrexpo. Through this understanding, we can begin to tailor our approach to our Responsible Business activities in the future, in particular, our efforts in respect of the health and wellbeing of our people and local communities, as well as targeted humanitarian support. With this in mind, we intend to revisit our materiality assessment of sustainability topics in the coming year, once the risks associated with the conflict have subsided. An assessment today would likely be skewed by a need for near-term humanitarian support, which we are already providing. With time, there will be an opportunity to understand the longer-term needs of local communities, and we will tailor our approach according to the results of this work.

Safety and wellbeing

Health and safety is of paramount importance to us at Ferrexpo, and I am proud that our operations delivered another strong year in safety. We have taken numerous measures to protect our workforce from the threat of the conflict in Ukraine. As the war has progressed, we have also begun providing support for the wellbeing of our workforce, as we are conscious of the impact that living in a war might have on an individual’s mental and physical health (see page 32 for more).

Levelling up our climate reporting

Understanding our environmental footprint and reducing our greenhouse gas emissions are key topics for modern companies. In 2022, despite the war in Ukraine, we continued to reduce our emissions, which fell by a further 1% in 2022, and this now puts us 31% below our baseline year of 2019. We also maintained our focus on developing our climate change strategy in 2022, publishing our inaugural Climate Change Report in December 2022, which serves to summarise our first phase of work with environmental consultants Ricardo Plc. In this report, we highlight a potential net zero pathway for our operations, as well as providing a detailed look at various climate change related risks and opportunities. Through this bespoke work, and our progress in reducing emissions to date, we were also able to upgrade our Scope 1 and 2 target for 2030 to 50% (from 30%) and broaden our suite of targets to include Scope 3 emissions – setting reduction targets of 10% and 50% for 2030 and 2050 respectively. Our Scope 3 emissions are closely linked to our output of direct reduction (“DR”) pellets, and more can be found on this subject in our Climate Change Report.

Building an inclusive culture

We continue to make progress in our approach to diversity. Our gender diversity initiative – the “Fe_munity” women in leadership programme – has recently accepted its third intake of future female leaders of our business, and in 2022 we broadened this initiative to welcome women from across Ukraine. To help drive change, we are also now providing grants to aid career journeys – more on this on page 42. Driving change and transformation is an integral part of being a sustainable business. This can be through embedding a culture of safety at our operations, which is now showing tangible progress, through to our approach to diversity, equity and inclusion (“DEI”), driven by our first diversity and inclusion officer at our operations. Looking forward, we are seeing an emerging phase of cultural change in biodiversity, with baseline studies underway.

I am proud to be a part of Ferrexpo, having seen the good work in sustainability being conducted in Ukraine during my most recent site visit in late 2021. We are proud to support communities across Ukraine at this time and look to a more positive future, when the war is over. It is a pleasure to witness the changes underway in sustainability at Ferrexpo, and I would like to thank everyone involved, from our workforce for their efforts to drive this change, to our customers, investors and suppliers for their engagement on sustainability topics.

Ann-Christin Andersen
Chair, HSEC Committee

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

Ann-Christin Andersen, Chair, Health, Safety, Environment and Community (“HSEC”) Committee

At Ferrexpo, we are proud to support Ukraine. Through our local presence and position as a long-term investor in the country, we have been able to provide targeted support throughout the war. However, our efforts in 2022 have not been limited to humanitarian aid, and we have continued to make good progress in a number of areas.

Responsible Business: Safety and Our People

Case Study: Supporting wellbeing in a war zone

Businesses in Ukraine at the present time are playing a critical role in supporting individuals and communities within Ukraine. As a business located outside of the main conflict zone, Ferrexpo has been able to support more than 3,500 internally displaced people as they relocate themselves and their families away from danger, with accommodation available at our hotels and other properties in the local area. For our workforce, we have provided psychological support, wellbeing classes and on-site yoga. For communities, we have trained local teachers to help extend our wellbeing programme to local schools, and are continuing to provide community support via the Ferrexpo Humanitarian Fund and Ferrexpo Charity Fund (see page 44 for more). We are also supporting Ukrainian culture at this critical time, with initiatives such as marking Ukraine’s first Statehood Day in July, hosting a poetry reading competition and publishing a book of employee poems to celebrate Ukrainian Writing and Language Day in November 2022.

Protecting the safety of our people

Our workforce comprises 10,000 employees and contractors; with more than 95% of our team located in Ukraine, it is critical that we protect our workforce from immediate dangers, but also help support their health and wellbeing at this difficult time.

• Zero Fatality-free for second successive year (2021–2022), targeting a zero harm working environment.
• 0.51 Ferrexpo achieved a lost time injury frequency rate of 0.51 in 2022 (2021: 0.41).
• Four consecutive years of low injury rates, with results materially below our historic average and also below iron ore producing peers in Australia.

Image: Providing accommodation to internally displaced people in Ukraine as they escape the war.

Scan to watch our employees recite a Ukrainian poem, “I want to live without war”.

Protecting our people

At Ferrexpo, we have a global workforce comprising almost 10,000 employees and contractors, with more than 95% based in Ukraine, and their safety is our first priority.Given the scale of our workforce, it was never an option to evacuate our people during the war in Ukraine, and therefore we have had to take extensive measures to protect our workforce with a war unfolding. Measures taken have included remote working for those with suitable roles, to ensure that they were as far from the front line as possible. Measures for our on-site workforce have included the provision of air-raid shelters, adjusting shift patterns to align with night-time curfews and the provision of free meals in light of disruption to supply chains in local communities. In the early phase of the conflict, 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 – in 2H 2022, we focused our efforts on the supply of key equipment such as armoured ambulances and food packages to towns along the front line. We have also moved to provide wellbeing initiatives to help our workforce and community as they adapt to the stress of living in a war zone, with free psychological support. We now have approximately 650 employees who are currently serving in the Armed Forces of Ukraine 1 . We are proud of their efforts to defend Ukraine, and have supported them by providing personal protective equipment and other non-lethal equipment.

Operational safety initiatives maintained

Despite the focus on the war in Ukraine, we are proud that our operations teams managed to record another year of excellent safety performance. In 2022, the Group recorded a second successive year without a fatality, and the Group’s lost time injury frequency rate (“LTIFR”) continues at a level materially below both our historic average 2 and the Group’s iron ore producing peers in Western Australia 3 . As demonstrated in the table above, the Group’s performance in lagging indicators of safety remained largely in line with 2021 on lost time injuries and total injury frequency rates. Near miss events saw a significant decrease, as did significant incidents. In terms of leading indicators, the Group’s adoption of ISO 45001:2019 in 2021 resulted in increased reporting of hazards in 2022 – demonstrating an improving culture for reporting and understanding the safety of the working environment. Health and safety inductions and training hours were both significantly reduced in 2022, reflecting the indirect effects of the war in Ukraine, with a large number of our workforce currently located off-site and lower levels of recruitment during the year.

External recognition for wellbeing programme

In January 2022, the Group learnt that it had passed a Sedex Members Ethical Trade Audit ("SMETA") social responsibility audit, which is a study into a company’s occupational health and safety, environment, working conditions, and suppliers' goodwill, with the Group Chart: Ferrexpo’s five year safety record versus benchmark undertaking this exercise for the first time. In passing this audit, the independent auditor highlighted the quality of medical care, management of social security and medical insurance provided by Ferrexpo to its employees.

1. Information as of 14 February 2023.
2. LTIFR full year average for 2017–2021.
3. Source: Government of Western Australia, link. (Accessed 3 March 2023.)
4. Indicators shown on a Group basis.
5. Indicators shown for Ukrainian operations only.
6. Figure incorrectly provided as TRIFR in prior report.

Health and safety performance (2021/2022)

Safety indicators (lagging)	2022	2021	Change
Fatalities	4	0	0 –
Lost time injuries	4	10	9
Lost time injury frequency rate (“LTIFR”)	4	0.51	0.41
All injuries frequency rate (“AIFR”)	5,6	0.99	0.97
Near miss events	5	1	5
Significant incidents	5	8	12
Restricted work days	5	934	497
Severity rate (average lost days per incident)	5	104	55

Safety indicators (leading)
Health and safety inspections	5	4,313	3,293
Health and safety meetings	1,388	1,165	+19%
Health and safety inductions	5,332	11,602	(54%)
Training hours	6,828	11,786	(42%)
Hazard reports	740	595	+24%
High visibility management tours	157	124	+27%

(Chart: Ferrexpo’s five year safety record versus benchmark)
0.0 0.5 1.0 1.5 2.0
2019 2020 20212018 2022
Ferrexpo Lost time injury rate (per million hours)
Peer Group (Years ended June) 3

34 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT

Responsible Business: Environmental Stewardship

Developing our net zero pathway

Despite the war in Ukraine, we were able to publish an upgraded suite of carbon emissions targets following the publication of our inaugural Climate Change Report in December 2022. Work continues in our collaboration with environmental consultants Ricardo Plc, with a life cycle assessment to be published in 2023.

• 50 % Updated target for Scope 1 and 2 emissions reduction by 2030 1 .
• 10 % Newly published target for Scope 3 (value chain) emissions reduction by 2030 2 .
  See page 36 for more information on Scope 3 emissions.
• 2050 Targeting net zero production for Scope 1 and 2 emissions.

Net zero is defined as operating with minimal avoidable emissions, as far as possible, and offsetting any unavoidable emissions. In October 2021, we announced our collaboration with environmental consultants Ricardo Plc, with work completed to date summarised in our first standalone Climate Change Report, which was published in December 2022. Details of this work are provided in this section, and as part of this bespoke piece of work, we were able to present a potential net zero pathway for us to achieve our carbon emissions goals for 2050 (covering all emissions except Scope 3 emissions from steelmaking). The pathway developed shows a potential route to reduce absolute emissions of carbon dioxide by 92%, despite a projected 100% increase in output of iron ore pellets in the same timeframe. To achieve this pathway, we intend to investigate a number of key modern technologies across our operations, to minimise our consumption in three key areas: diesel (predominantly in mining), electricity (processing) and natural gas (pelletising). These three aspects of our business collectively accounted for 77% of Scope 1 emissions and 100% of Scope 2 emissions in 2022. Shown to the left are a number of the technologies we intend to investigate to help reduce our emissions and achieve our net zero ambitions.

Case Study: Net zero pathway developed in 2022

1. Scope 1 and Scope 2 emissions are presented on a per tonne of production basis.
2. Scope 3 emissions savings are presented on a per tonne of production basis.

35 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Climate Change Report published

Following the Group’s announcement of our collaboration with environmental consultants Ricardo Plc, and work throughout 2022, the Group was able to publish its inaugural standalone Climate Change Report in December 2022. In this report, we cover climate change related legislation that is being enacted in the various jurisdictions into which we sell our products, and the risks and opportunities that these changes may present to our business model. Through this work, it is clear that legislative change is fastest in the European Union (“EU”), with an established emissions trading scheme setting €98 per tonne of CO 2 as the price of carbon emissions within the region as of early 2023 1 . The EU’s Carbon Border Adjustment Mechanism, due to begin its implementation phase in 2025, will result in significant, far-reaching effects, well beyond the borders of the EU. Further details of this legislation are provided on page 17 of our Climate Change Report (available at www.ferrexpo.com). A second area of focus in the Climate Change Report looks at the risks and opportunities relating to climate change that are specific to Ferrexpo, and these are summarised in the Task Force on Climate-related Financial Disclosures (“TCFD”) on page 37 of this report. Our Climate Change Report also presents a potential net zero pathway for decarbonisation, highlighting the technologies required and timing of investments, to achieve net zero iron ore pellet production by 2050. Through this work, we have established an estimated capital cost of US$3.3 billion and a carbon abatement cost of US$145 per tonne. The Group is able to have a relatively low carbon abatement cost due to the timing of capital expenditures for decarbonisation at its operations. Since more than 80% of the estimated capital cost of decarbonisation relates to the implementation of green hydrogen in our pelletiser and our own renewables power, both of which are projects that are predominantly implemented after 2030, and therefore the net present value of this capital investment A is reduced due to its timing. In the meantime, we are fortunate to be able to rely on clean power sourced directly from the Ukrainian grid, as we have been able to selectively purchase low carbon forms of electricity since 2019.

Carbon targets upgraded

Through the work to develop our decarbonisation pathway that was completed as part of our Climate Change Report, we were able to announce updated and expanded carbon emissions reduction targets in December 2022. Following the success seen across 2019 and 2020, with Ferrexpo reducing its Scope 1 and 2 emissions footprint by 30% over this period, we were able to announce an increase to our 2030 goal, and we are now targeting a 50% reduction in this timeframe. Through greater understanding of our Scope 3 emissions, we have also been able to introduce targets for this category, and are now targeting a 10% reduction by 2030 3 .# Responsible Business: Environmental Stewardship

A list of definitions for each Scope of carbon emissions is provided on page 40 of the Climate Change Report.

Scope 1 emissions

Our Scope 1 (direct) emissions principally relate to three activities at our operations – diesel consumption (primarily used in mining activities), natural gas (primarily used in pelletising activities) and gasoil (primarily used in inland waterway logistics activities). Collectively, these three sources of emissions represented 97% of Scope 1 emissions in 2022 (2021: 98%). In addition, we track a further 15 sources of Scope 1 emissions across our operations, ensuring that multiple aspects of our operations are covered in our emissions estimates.

Absolute Scope 1 emissions fell by 48% in 2022, reflecting the reduced level of production as a result of the war. Despite the conflict, we managed to reduce our emissions on a per unit of production basis by 3%, which reflects a reduction of stripping activities in the Group’s mines and increased biofuel consumption in the pelletiser.

In line with data for 2021, our calculations of our Scope 1 and Scope 2 emissions have been independently assured for a second successive year, with this work aimed at providing additional confidence in our climate change reporting. Please see page 36 for more information.

Scope 2 emissions

Our Scope 2 (indirect) emissions relate exclusively to our purchasing of electricity from third parties, with electricity predominantly used in our concentrator. On an absolute basis, this category of emissions fell by 45%, in line with the lower level of production seen in 2022 due to the war in Ukraine.

On a unit basis, Scope 2 emissions rose by 2%, reflecting the impact of the war in Ukraine and associated power outages in 4Q 2022, in addition to the increased output of direct reduction pellets, which require additional processing compared to blast furnace pellets.

Scope 3 emissions

For Ferrexpo, this category of emissions primarily relates to the type of iron ore pellet produced, since the downstream processing of iron ore accounted for 95% of Scope 3 emissions in 2022. Through increasing the output of direct reduction (“DR”) pellets to 6% of total pellet production (2021: 4%), we have seen a reduction in Scope 3 emissions on a unit basis by 3% since 2019, with DR pellets carrying a 49% lower carbon footprint than blast furnace pellets.

Independent assurance

In line with the process completed for 2021, the Group has completed an independent assurance process for its Scope 1 and Scope 2 carbon emissions for 2022 (in addition to key safety metrics). For more information, please see the Limited Assurance Report, which is provided alongside the Group’s full year financial results.

Our Scope 3 emissions are not yet independently assured, with an expansion of the remit of the independent assurance process to include this category expected to represent the next phase of this process.

Methodology

Ferrexpo’s methodology for calculating its GHG emissions footprint utilises, where possible, emissions factors provided by the Greenhouse Gas Protocol, which is in line with reporting requirements under the Global Reporting Initiative’s (“GRI”) framework for reporting sustainability topics. Through using carbon factors provided by the Greenhouse Gas Protocol, the Group is able to provide carbon dioxide-equivalent emissions figures (“CO2e”) that also account for emissions of both methane (CH4) and nitrogen oxide (N2O).

Water

We operate in an environment where we have multiple interactions with the water cycle, from the water ingress into our mines, to recycling water in our processing operations, to the River Dnipro, which is located next to our operations.

Testing of water quality has continued throughout 2022, despite the war in Ukraine, with any discharged water quality tested across more than 12 different chemical elements or attributes.

In our processing plant, where water is utilised in the processing of iron ore, we once again recycled 98% of process water (2021: 98%). We are currently reviewing the possibility of removing water prior to pumping material to our tailings dam, which would have the advantage of reducing water consumption as well as energy use, with operations needing to pump a significantly lower mass of material to our tailings dam if tailings are dry stacked. It is estimated that water consumption in the processing plant would decline by up to 20% through the use of this technology.

Waste generation

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

Waste removal in our mines declined by 70% in 2022, which is as a result of the war in Ukraine and lower production volumes (see pages 4 and 5 for more details of the war’s impact on our business in 2022). Overburden and waste removed from our mining operations is non-hazardous and is stored in on-site waste dumps designed by our mine planning department.

Aside from greenhouse gases, gaseous emissions include those emitted from our processing operations (NO2, SO2, and CO), with emissions from such sources declining by 50–60% during the year, in line with mining volumes.

A range of projects related to dust suppression in our processing complex were completed in 2022, resulting in dust emissions falling by 62%, which represents a level ahead of the production decrease seen in 2022 (46% decrease).

Elsewhere in our operations, we expanded our domestic waste recycling programme to include additional operating subsidiaries in Ukraine (FYM, FBM and Ferrostroy), with collection bins and sorting facilities launched in 2022. All four of our main operating subsidiaries in Ukraine now have active recycling programmes, and the focus for 2023 will be encouraging cultural change to increase recycling rates throughout our business.

ISO-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.

Biodiversity baseline expanded

Despite the pressures imposed due to the war in Ukraine, our Environmental Department in Ukraine continues to make good progress on a range of initiatives at our operations, including an update to the Zoo-biota interactive map identifying species of animals in the vicinity of our operations, including 58 of more than 500 species listed in the Red Book of Ukraine. Furthermore, work was completed in 2022 on a second interactive map, covering species of plants located in the vicinity of our operations (including 24 out of 410 species in the Red Book of Ukraine).

Climate change: reporting journey

The Transition Pathway Initiative Global Climate Transition Centre (“TPI Centre”, www.transitionpathwayinitiative.org/) is an independent, authoritative source of research and data on the progress of the financial and corporate world in transitioning to a low carbon economy. The TPI Centre publishes a “Management Quality Staircase” that allows companies and stakeholders to map their progress in terms of climate governance maturity against five levels, as shown in the chart opposite.

Following the publication of our Climate Change Report and Scope 3 targets in December 2022, in addition to independent assurance work completed in July 2022, we have assessed our progress to have reached Level 4 of reporting. The TPI Centre’s Staircase is particularly helpful for understanding the forward-looking component of our reporting journey that lies ahead, and highlights a need for us to develop our understanding of the impact of climate change on our business costs as an area of focus for future work.

	SCOPE 1 (“S1”) EMISSIONS	SCOPE 2 (“S2”) EMISSIONS	SUBTOTAL (S1+S2)	SCOPE 3 (“S3”) EMISSIONS
Our performance in 2022	(3 %)	+2 %	(1 % )	(1 % )
Our performance since benchmark year (2019–2022 inclusive)	(1 % )	(52 % )	(31 % )	(3 % )
Our medium-term goals (2030)	(50 % )	(10 % )
Our long-term goals (2050)	Net zero			(50 % )

1. Source: European Union Emissions Trading System, link. (Accessed 3 March 2023.)
2. Scope 1 and Scope 2 emissions are presented on a per tonne of production basis.
3. Scope 3 emissions savings are presented on a per tonne of production basis.
4. Prior to the 2021 Annual Report and Account, Scope 2 calculations included the purchase of steam for heating purposes, which have subsequently been excluded following the independent assurance process completed in 2022. For more information, please see the Reporting Criteria document provided alongside the 2021 Annual Report and Accounts on the Group’s website.
   36 Ferrexpo plc Annual Report & Accounts 2022 STRATEGIC REPORT Responsible Business: Environmental Stewardship continued
5. Source: CRU. Natural gas based direct reduction without carbon capture. See page 10 of the 2021 Annual Report for more information.
6. Source: TPI Centre, link.# Responsible Business: TCFD Disclosures

(Accessed 3 March 2023.)

Greenhouse gas emissions footprint and energy consumption (2021/2022)

	2022 Data (% change to 2021)		2021 Data
	Absolute basis (kilotonnes CO 2 e)	Unit basis (kg CO 2 e per tonne)	Absolute basis (kilotonnes CO 2 e)	Unit basis (kg CO 2 e per tonne)
Scope 1 emissions	341 (-48%)	55 (-3%)	649	57
Scope 2 emissions	223 (-45%)	36 (+2%)	404	35
Subtotal (S1+S2) emissions	564 (-46%)	91 (-1%)	1,053	92
Scope 3 emissions	7,642 (-47%)	1,237 (-1%)	14,362	1,254
Total emissions	8,206 (-47%)	1,329 (-1%)	15,415	1,346
Biofuels emissions (reported separately)	6 (-37%)	1 (+18%)	10	1
Energy consumption (kWh)	3,052,942,993 (-44%)	–	5,489,232,550	–

37

Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

Responsible Business: TCFD Disclosures

Recognising the need to provide reliable information on climate-related risks, opportunities and issues, and preparing disclosures throughout the year, including reporting informed by the recommendations and recommended disclosures produced by the TCFD.

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

For the purposes of Listing Rule 9.8.6R(8), Ferrexpo considers that it has made climate- related financial disclosures consistent with the four TCFD recommendations and 11 TCFD recommended disclosures save in relation to the following areas, where full compliance remains a work in progress:

• Strategy Recommended Disclosure c) (strategic and organisational resilience). In developing the Group’s approach to climate-related risks, we intend to perform in-depth financial analysis of our operations’ exposure to such risks to determine operational and strategic resilience once baseline studies have been completed. It is expected that future phases of work, which will lead into this financial modelling, will require site visits to our operations in Ukraine, which are not possible at the current time. We will provide further updates on this workstream in due course.

In determining this, we have taken into account the TCFD’s Guidance for All Sectors and Supplemental Guidance for Non-Financial Groups, as well as other relevant materials. This assessment reflects the progress that Ferrexpo has made on its climate-related reporting over the course of the year, as well as those areas where full compliance with the TCFD’s recommended disclosures (and some aspects of the related guidance) forms part of our ongoing work streams.

The following recommended disclosures are set out in our Climate Change Report 2022 (published in December 2022), which is available on the Group’s website at www.ferrexpo.com/investors/results-reports-and-presentations:

• Governance Recommended Disclosure a) (Board oversight of climate-related risks and opportunities) – see page 11.
• Governance Recommended Disclosure b) (management’s role in assessing and managing climate-related risks and opportunities) – see pages 11 and 12.
• Strategy Recommended Disclosure a) (description of climate-related risks and opportunities identified over the short, medium and long term) – see pages 14 to 37.
• Strategy Recommended Disclosure b) (impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning) – see pages 20 to 21 and 28 to 37.
• Risk Management Recommended Disclosure a) (processes for identifying and assessing climate-related risks) – see pages 14 to 37.
• Risk Management Recommended Disclosure b) (processes for managing climate-related risks) – see pages 20 to 21 and 28 to 37.
• Metrics and Targets Recommended Disclosure a) (metrics used by the organisation to assess climate-related risks and opportunities) – see pages 8 and 42.
• Metrics and Targets Recommended Disclosure b) (Scope 1, 2 and 3 emissions disclosures) – see pages 8 to 10.

We have set out these recommended disclosures in this separate report to enable us to provide information for interested stakeholders in the context of our wider work on mapping the Group’s carbon footprint and exposure to climate-related risks and opportunities, alongside details of the next steps we are taking.

The following recommended disclosures are set out in our Responsible Business Report 2021 (published August 2022), which is available on the Group’s website at www.ferrexpo.com/investors/results-reports-and-presentations:

• Governance Recommended Disclosure b) (management’s role in assessing and managing climate-related risks and opportunities) – see pages 77 to 81.
• Strategy Recommended Disclosure a) (description of climate-related risks and opportunities identified over the short, medium and long term) – see pages 77 to 81.
• Strategy Recommended Disclosure b) (impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning) – see pages 77 to 81.
• Risk Management Recommended Disclosure a) (processes for identifying and assessing climate-related risks) – see pages 77 to 81.
• Risk Management Recommended Disclosure b) (processes for managing climate-related risks) – see pages 77 to 81.
• Risk Management Recommended Disclosure c) (identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management) – see page 48.
• Metrics and Targets Recommended Disclosure a) (metrics used by the organisation to assess climate-related risks and opportunities) – page 43.
• Metrics and Targets Recommended Disclosure b) (Scope 1, 2 and 3 emissions disclosures) – page 43.

We have set out these recommended disclosures in this separate report to enable us to provide in more granular detail an overview of the various physical and transition risks the Group is facing, the time horizons over which these may emerge, their financial implications and our risk mitigation efforts.

Broadening our reporting

Chart: TPI Centre’s Management Quality Staircase

INCREASING CLIMATE GOVERNANCE MATURITY
Level 0	Unaware	Does not recognise climate change as a significant issue for the business
Level 1	Awareness	Explicitly recognises climate change as a significant issue for the business
Level 2	Building capacity	Has a policy commitment to action on climate change
Level 3	Integrated into operational decision-making	Has set energy efficiency (relative or absolute) GHG emissions reduction targets	Has published information on its Scope 1 & 2 GHG emissions	Company has nominated a board member or committee with explicit responsibility for oversight of the climate change policy	Has set quantitative targets for reducing Scope 1 & 2 GHG emissions (relative or absolute)	Company reports on its Scope 3 emissions	Has had its Scope 1 & 2 GHG emissions data verified	Company supports domestic and international efforts to mitigate climate change	Company has reduced its Scope 1 & 2 GHG emissions over the past 3 years	Company provides information on its business costs associated with climate change	Has set long-term quantitative targets (>5 years) for reducing its GHG emissions	Company has incorporated ESG issues into executive remuneration
Level 4	Strategic assessment

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STRATEGIC REPORT

Responsible Business: TCFD Disclosures continued

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

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

   • 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.

2. IEA Stated Policies Scenario (“STEPS”)

   • 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.

3. 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.

   • 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).

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

   • 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.
5. Summary: Inequality (A Road Divided). Highly unequal investments in human capital, combined with increasing disparities in economic opportunity and political power, lead to increasing inequalities and stratification both across and within countries.
   • Characteristics:
     • (No specific characteristics listed for SSP4 in this excerpt)# STRATEGIC REPORT

Scenario analysis selection

We have selected the following scenarios to assess potential climate-related risks:

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.

2. IEA Stated Policies Scenario (“STEPS” or “Stated Policies Scenario”)

   • 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.

3. 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.

   • 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).

4. IPCC SSP4 (Shared Socioeconomic Pathway 4)

   • 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.
5. Summary: Inequality (A Road Divided). Highly unequal investments in human capital, combined with increasing disparities in economic opportunity and political power, lead to increasing inequalities and stratification both across and within countries.
   • Characteristics:
6. 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.

Scenario metric	IEA SDS (Sustainable Development Scenario)	IEA STEPS (Stated Policies Scenario)	IPCC SSP4 (Shared Socioeconomic Pathway 4)
Average global temperature increase (°C) by 2050	1.7°C	2.0°C	2.2°C
Average global temperature increase (°C) by 2100	1.6°C	2.6°C	3.7°C
Policy intervention	Increased policy beyond what has already been committed to, from 2021	Only policies that are active in 2021, including what has been committed to and what has been proposed	Increased policy after 2030, demonstrating a rapid transition to decarbonisation
Time horizon	Present day to 2100	Present day to 2100	Present day to 2100
Transition risks (as a function of carbon price, with pricing correct as of studies completed in June 2022)	HIGH (US$95/t) in 2050 Global carbon price	MEDIUM (US$90/t) in 2050 Global carbon price	MEDIUM Regional carbon price in the short term, global carbon price in the long term
Transition risks (as a function of carbon intensity of steel production)	HIGH (0.6tCO₂/t) by 2050	MEDIUM (1.1tCO₂/t) by 2050	N/A
Orderly or disorderly transition	Orderly	Potential for orderly or disorderly	Disorderly
Potential overall impact on Ferrexpo (determined via stakeholder interviews and desktop studies, categorised on basis of occurrence and likelihood, see risk matrix on page 40 for more).	“Well below” 2.0°C scenario (Paris Agreement aligned)	Worst case, “business as usual” scenarios	Worst case, “business as usual” scenarios

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CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

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

Material topics (Note: denotes key focus area for Ferrexpo.)

External factor	Key focus area?
Market and technology shift
Increasing demand for low carbon emissions steelmaking
Movement towards circular economy principles
Mineral commodity shift: From iron ore to other minerals
Policy and legal
Shipping: Targets and regulations on carbon emissions
Carbon pricing/tax: Targets and regulations on carbon emissions
Energy crisis in Ukraine
Reporting: Targets and regulations on carbon emissions
Increase in insurance costs
Reputation
Increased consumer and investor climate consciousness
Climate action transparency: Increased demand from consumer and investors
Physical risks
Water stress (chronic)
Sea level rise (chronic)
Increase in storm intensity (acute)
Climate-induced conflict

Risk matrix

LIKELIHOOD	Code	Issue area	Matrix score	Top risk areas identified
Low
Low/Medium	CC	Climate-induced conflict
Medium/High	CEP	Movement towards circular economy principles
	CP	Carbon pricing/tax: Targets and regulations on carbon emissions		#3
	CPU	Energy crisis in Ukraine
	IIC	Increase in consumer and investor climate consciousness
	LCS	Demand for low carbon emissions steelmaking		#1
	SCE	Shipping: Targets and regulations on carbon emissions		#2
	SI	Increase in storm intensity (acute)
	SR	Sea level rise (chronic)
High
SIGNIFICANCE

In respect of efforts to understand potential climate change related risks for the other key risk areas (shipping targets and regulations and carbon pricing), please see pages 31 and 32 of our Climate Change Report. In terms of next steps with regard to climate change reporting, we are currently finalising a life cycle assessment of iron ore pellets, which will be a peer-reviewed study into the environmental emissions footprint of iron ore pellets during their entire life cycle, benchmarked against the most commonly traded form of iron ore (sinter fines). In order to capture the emissions generated through converting iron ore to steel, which account for more than 89% of our total emissions in 2022 (2021: 89%), this study will look at the footprint of iron ore from mining through to steel production, and will therefore cover the different emissions footprints of blast furnace and electric arc furnace steelmaking. This report is expected to be available in the first half of 2023.

The information above is taken from the work completed in our collaboration with environmental consultants Ricardo Plc, with a full summary provided in our inaugural Climate Change Report, which was published in December 2022 and is available on the Group’s website (www.ferrexpo.com). The results presented above emerged from the scenario analysis described on pages 22 to 37 of this report. As shown above, the top three risk areas identified are (1) low carbon steel (risk relating to market and technology shift), (2) shipping targets and regulations (policy and legal risk), and (3) carbon pricing and tax (also a policy and legal risk). In respect of low carbon steel, we have commenced a process to produce greater volumes of direct reduction (“DR”) pellets, which are a higher grade form of iron ore and are a known technological pathway to low emissions Green Steel (via the electric arc furnace method of steelmaking). Independent research shows that Ferrexpo’s DR pellets have a 49% lower greenhouse gas emissions footprint than our blast furnace pellets, and therefore offer us a substantial Scope 3 emissions saving ¹ .

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Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT# Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

CORPORATE GOVERNANCE

Summary disclosure against TCFD recommendations

Strategy

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

Climate change is considered to be a Principal Risk to the Group, and this risk is detailed on page 73 of this report, alongside risk mitigation actions. A description of the specific climate-related issues potentially arising in the short, medium and long term that could have a material financial impact on the Group is included on pages 22-37 of the Group’s Climate Change Report, available at www.ferrexpo.com. These include transition risks and physical risks associated with the transition to a lower carbon economy.

The time horizons for these risks and opportunities to emerge are also described being short-term (less than two years), medium-term (more than two but less than ten years) or long-term (greater than ten years). The definition of each time horizon is broadly aligned to the Group’s medium-term climate change targets for 2030, with a ten-year window for action following the Group’s baseline year, with short-term and long-term horizons set at either side of this definition.

The Group’s risk identification process is described on pages 38 to 40 of this report.

Impact on the Ferrexpo business, strategy and financial planning

Consideration of topics relating to climate change is a fundamental aspect of Ferrexpo’s business model (shown on page 12), with the Group releasing a standalone report on climate change in December 2022. Through the recent work completed with environmental consultants Ricardo Plc, the Group was able to upgrade and broaden its suite of carbon emissions reduction targets. The Group has a clear understanding of the likely technologies to help meet these targets, and these are shown on page 35 of this report.

Climate-related risks and opportunities have directed the Group to increase its focus on direct reduction pellets, which have a lower emissions footprint and represent a pathway to low emissions steelmaking. In producing the Group’s products, Ferrexpo is seeking to research and implement new technologies that will lower the Scope 1 and 2 emissions footprint of the Group’s products, with the Group’s solar power pilot plant to trial renewable power generation, and plans to build a hydrolysis plant to trial the use of hydrogen as a fuel in the Group’s pelletiser as examples of such activities. A summary of potential technological pathways to lower emissions pellet production is provided on page 34 of this report.

Climate-related issues input into financial planning processes through the consideration of the potential carbon emissions footprint of existing and proposed operating projects and capital investment A projects. Given the current war in Ukraine and reduced level of operating activities in Ukraine, the Group is currently not assessing new operational or capital investment A projects. Following a reduction in the risks associated with the war in Ukraine, it is expected that new investments will be assessed using a price of carbon that is reflective of the prevailing carbon price within the EU Emissions Trading System, as was the case prior to the war in Ukraine.

Climate-related factors are expected to negatively impact financial performance in the short to medium term (operating costs and increased capital investment A ), but present opportunities in the long term through the expected rise in demand for iron ore products that are relevant for low emissions steelmaking (Green Steel).

Resilience based on climate change scenarios

The Group has included an analysis of climate change scenarios, which was conducted by environmental consultants Ricardo Plc as part of the work completed for the Group’s Climate Change Report described in further detail on pages 38 to 40. The Group intends to perform in-depth financial analysis of our operations’ exposure to such risks to determine operational and strategic resilience once baseline studies have been completed. It is expected that future phases of work will require site visits to our operations in Ukraine, which are not possible at the current time. The Group will provide further updates on this work stream in due course.

Governance

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

The Board of Directors has ultimate oversight of the Group’s strategy, including its approach to the effect of climate change on the Group’s business model. Climate change was a standing agenda item at all five scheduled Board meetings throughout the year. Further details of the Board’s consideration of climate change and its oversight of the Group’s goals and targets for addressing climate-related issues are on page 35.

The Health, Safety, Environment and Community (“HSEC”) Committee has been delegated management of climate-related issues, which includes three members of the executive management team, and reports the Group’s progress on climate change related matters to the Board of Directors. Independent Non-executive Director Ann-Christin Andersen is the Director primarily responsible for climate-related matters and Chair of the HSEC Committee, which met four times during the year (2021: four) and climate change has been a standing agenda item at all scheduled HSEC Committee meetings throughout the year.

Management’s role in assessing risks and opportunities

In addition to the role of the HSEC Committee described above, the Group’s executive management team monitors and assesses climate-related risks through its risk monitoring activities as part of the Group’s Finance, Risk Management and Compliance Committee, which met ten times in 2022 (2021: ten). The Group’s process for risk monitoring is described on page 56. The HSEC Committee receives information about climate-related issues through activities such as internal briefings by members of the executive management team and briefings from external advisors. Feedback from this Committee is provided to the Board on a regular basis.

Risk management

Processes for identifying and assessing climate-related risks

The Group regularly assesses risks applicable to the Group through its Finance, Risk Management and Compliance Committee, which assesses risks based on the probability of occurrence and severity of impact should an event occur. An overview of the Principal Risks facing the Group, and the risk mitigation measures that the Group has put in place in relation to these, is provided on pages 58 to 74, with climate change identified as a Principal Risk and detailed on page 73 of this report.

Within the topic of climate change, the Group’s management has identified specific risks and opportunities relating to climate change, ranging from policy and legal topics, physical effects, emerging technologies, market factors and reputational differentiators.

Managing climate-related risks

The Group’s approach to managing and mitigating risks, including climate- related risks, is provided in the Principal Risks section, on page 73 of this report. Risks, including climate-related risks, are prioritised according to their assessment under the Group’s materiality matrix set out on page 40.

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

Ferrexpo’s governance relating to climate change risks has been designed to ensure that the management of the financial risks from climate change are integrated across the whole governance system and embedded into the existing risk management framework. The Group’s approach to assessing and managing risk, including climate-related risks, is described on page 56. Risks relating to climate change are determined in the same way as other principal and emerging risks, and the relative significance of climate risks is assessed based on monetary impact, probability, maximum foreseeable loss, trend and mitigating actions. A summary of the Group’s approach to risk identification and risk mitigation activities is provided on pages 58 to 74 of this report.

Metrics and targets

Metrics used to assess climate-related risks and opportunities

The Group uses a wide range of climate-related metrics including GHG emissions (Scopes 1, 2 and 3 and emissions intensity), as well as consumption of diesel, electricity and natural gas – see further on pages 35 and 36. Metrics relating to carbon reduction progress are incorporated into remuneration policies, as described on page 124 of this report.

Greenhouse gas emissions

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

Targets

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

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Responsible Business: Diversity, Equity and Inclusion

Fostering diversity and inclusion

Ferrexpo has initiated a number of diversity, equity and inclusion (“DEI”) initiatives, which help us to form a baseline understanding of our workforce composition and to shape DEI efforts. Ferrexpo’s diversity initiatives are focused on helping us to develop a modern business with a diverse workforce and an inclusive working environment.

Our efforts in DEI have increased significantly in recent years, with increased stakeholder focus and a greater focus on companies having a sustainable, inclusive culture. Our DEI efforts have continued in 2022, despite the war in Ukraine, as DEI helps to generate a positive working environment that supports people’s mental health and wellbeing, regardless of age, gender or other characteristics. Progress continues to accelerate following the appointment of our first DEI officer in Ukraine in 2021, and we are continuing to gain a better understanding of our workforce and corporate culture.# DEI progress in 2022

In 2022, we made significant progress in advancing our strategy to implement a 360-degree approach to DEI. Further to the Group’s Diversity, Equity and Inclusion Policy that was established in 2019, our local operating entities adopted a policy to further define and understand definitions and behavioural patterns for fostering a more inclusive working environment. This policy is designed to prohibit all forms of discrimination (on the basis of disability, pregnancy and parenthood, race, national or ethnic origin, age, gender, sexual orientation, political opinion, and social origin). As part of this policy, we now have an internal mechanism for addressing DEI-related concerns and resolving potential incidents of discrimination.

In February 2022, Ferrexpo hosted an event as part of the United Nations’ “HeForShe” movement, which is aimed at providing solidarity amongst the male population for gender diversity initiatives. More than three million men around the world signed declarations of support, with 135 Ferrexpo employees taking part at a mass-participation event. Through their participation, Ferrexpo aims to raise awareness of gender diversity topics and help to fight discrimination.

Our Inclusion School, which is a training programme for our employees in Ukraine, began in 2021, and restarted in late 2022. Topics covered in this programme are aimed at fostering inclusiveness and diversity, and how this can help Ferrexpo’s business model. More than 200 of Ferrexpo’s employees completed this course in 4Q 2022. Online learning covers topics such as identifying different forms of discrimination, why it is important to eliminate prejudice and how tolerance can help Ukraine to tackle its wartime challenges.

Similarly, the expansion of our “Fe_munity” programme in 2022 (see Case Study opposite), our Inclusion School was also extended during 2022 to include local authority employees who are keen to learn more about challenging prejudice and discrimination.

Diversity Statistics

• 28.7 % Positions held by women accounted for 28.7% of our total employee workforce in 2022 (2021: 29.2%) 1.
• 20.9 % Women in management roles across the Group increased to 20.9% in 2022 (2021: 20.1%) 2.

• 25 % Target of 25% of management positions to be held by women by 2030. Progress to date has seen an increase from 18% in 2019 to 21% in 2022.

• Of the total employee workforce in 2022 (7,978), 2,290 positions were held by women and 5,688 held by men.

• Of the total number of management roles workforce in 2022 (388), 81 positions were held by women and 307 were held by men.

Greg Nortje, Group Chief Human Resources Officer

Our “Fe_munity” women in leadership programme

Our “Fe_munity” women in leadership programme expanded in 2022 to include women from across Ukraine. The “Fe_munity” programme commenced in 2020 and over the course of three intakes of participants, has helped to form an integral aspect of our efforts to meet our goal of reaching 25% of managerial positions held by women by 2030.

Given the events of 2022, the Group was made aware of a need to support the careers of women across Ukraine, and we decided to open up enrolment into our “Fe_munity” programme to all participants, irrespective of the sector in which they work. In September 2022, the FEMUNITY.UA project hosted 50 female participants from all over Ukraine, with lectures over three months, led by eight guest speakers and 32 mentors. In addition, "Progression Grants" are now being offered to participants to help accelerate their learning and career development.

Case Study: DEI initiative expands in 2022

Image: Olena Sitarchuk, participant in 2022 intake of FEMUNITY.UA programme.

Additionally, through the Ukrainian translation of the Group’s 2021 Responsible Business Report, we have been able to communicate our recent progress in DEI to a broader audience within Ukraine – this report is available on our website at: www.ferrexpo.com/investors/results-reports-and-presentations/.

Gender diversity targets for 2030

At Ferrexpo, we have a gender diversity target of ensuring 25% of managerial roles are 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 21% in 2022, which has been possible through a range of diversity initiatives in Ukraine and across the Group, as well as sustainability-linked incentives within the Group’s remuneration policy (see page 124 for more details).

We are 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 (2022: 29%) than our mining-sector peers that operate in the developing world 1.

Women’s Empowerment Principles

As part of our DEI implementation plan, Ferrexpo became a signatory to the Women’s Empowerment Principles (“WEPs”) in October 2022, which is a United Nations-supported initiative for business leaders to express support for advancing gender equality. In undertaking WEPs’ Gender Gap Analysis Tool in 2022, Ferrexpo achieved a rank of “Leader” within this framework, with this assessment made on the basis of existing policies and our approach to 18 different aspects of DEI, including: addressing the gender pay gap, parental leave and initiatives to create a working environment free from violence, harassment and sexual exploitation.

External recognition in 2022

Our DEI efforts are not going unnoticed, with external recognition of the forward thinking that Ferrexpo is introducing to its business. In October 2022, the Group was ranked in the top ten of employers in Ukraine for diversity, equity and inclusion by the Ukrainian Corporate Equality Index, which is a national survey of corporate policies, rules and practices of private companies to prohibit discrimination in the workplace.

Diversity inclusion

As a large company operating within Ukraine, we are subject to a local requirement for the employment of our people to include a minimum of 4% as those with a registered disability, which is a requirement that continues to be met through our employment of 321 individuals with disabilities in 2022 (4% of employee workforce). The majority of these individuals are located at our operations in central Ukraine, working at FPM and FYM.

Recently, we have published case studies celebrating the contribution of those with disabilities at our operations on our social media channels, including individuals working in our social services department, mining department and in the local museum, which we support through our Charity Fund. We also sponsor disabled athletes to help promote healthy lifestyles, and have previously sponsored individuals to attend World Championship canoeing events.

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

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

Responsible Business: Communities

Ferrexpo’s assets have a long association with local communities, and this connection has been important in 2022, enabling us to provide direct assistance to communities during Russia’s invasion of Ukraine.

Ferrexpo Humanitarian Fund

In the early stages of the war, it quickly became apparent that large organisations within Ukraine would play an important part in supporting the people of Ukraine, particularly as the government of Ukraine focused on fighting a full scale invasion. As a result, the Board of Directors approved the formation of the Ferrexpo Humanitarian Fund early in the conict, with the goal of providing direct assistance to communities affected by Russia’s invasion in 2022.

Each project is individually approved by the Health, Safety, Environment and Community (“HSEC”) Committee members to ensure good governance in the approval process. To date, more than 70 projects have been implemented, and details of this work are provided in the Case Study opposite.

Additional support has been provided throughout the war, with our help in funding the "Unbreakable Mother" programme, which offers residential stays and psychological support for women and children who have been affected by the war in Ukraine.

Ferrexpo Charity Fund

Our Ferrexpo Charity Fund has operated in Ukraine for more than 11 years, and aims to provide direct support to local communities situated close to our operations in central Ukraine. Funding for the Ferrexpo Charity Fund, which is in addition to the Ferrexpo Humanitarian Fund (see above), was UAH 77 million in 2022 (2021: UAH 87 million). Work by the Ferrexpo Charity Fund focused on providing budgetary support for local authorities, support for educational and medical institutions and direct aid to individuals in the form of food and support packages.

Sustainability reporting for all stakeholders

In August 2022, we published our latest standalone Responsible Business Report, with this timing in line with previous years despite the impact of the war in Ukraine. This is a credit to our communications team in Ukraine, who managed to achieve this timing despite spending many days in air-raid shelters and in remote locations, sheltering from the conflict.

We also achieved a significant milestone in our sustainability reporting in 2022 – in November, we managed to publish our first official sustainability report in Ukrainian, helping our local stakeholders to understand the efforts being undertaken to support Ukraine and develop our business at the current time. We value all of our stakeholder groups, and are proud to reach a broader spectrum of stakeholders through reporting in Ukrainian.

Direct support for communities across Ukraine

• US$19 M Total funding of humanitarian support, including support provided via Ferrexpo Humanitarian Fund.
• 70 + projects Over 70 individual projects supported.# Ferrexpo plc

Annual Report & Accounts 2022

Eight regions Humanitarian support across eight regions of Ukraine during 2022. FINANCIAL STATEMENTS CORPORATE GOVERNANCE STRATEGIC REPORT

Across all initiatives, including direct donations provided by Ferrexpo subsidiaries, we have provided the equivalent of approximately US$19 million of support for Ukrainian humanitarian causes since the outset of Russia’s invasion in 2022. Examples of projects supported include:

• Housing refugees: More than 3,500 internally displaced people have been housed at our accommodation facilities.
• Providing free meals: Initially we dedicated our catering facilities to providing three free meals a day to employees. More recently, these efforts have been re-diverted to feeding local communities. In total, we have donated 528 tonnes of food to local communities.
• Vehicle donations: Equivalent of over US$5 million of vehicles donated to the Ukrainian authorities (armed forces and local territorial defence units). Donations also include six armoured ambulances donated in November 2022.
• Medical support: Through liaison with local medical facilities, we have provided PPE for local hospitals, the equivalent of US$600,000 of helmets and body armour for emergency response workers in the Poltava region and a total of nine ambulances.
• On-site children’s centre: Throughout the early phase of the war, schools remained closed and children’s learning was put on hold. In response, Ferrexpo facilitated an on-site childcare facility to keep employees' children close and allow children to continue their studies, with up to 120 children attending daily.
• IT support: We provided the equivalent of 6,000 items of modern technology, such as laptops, monitors, printers, mobile phones and modems, to help to support local authorities’ efforts to coordinate the registration and housing of internally displaced people.

Direct support for Ukraine

In addition, to support Ukrainian culture, we recently asked employees to express their personal experiences of the war in poetry, and we collated their words to form a collective tribute: "I want to live without war". In honour of Defenders Day in Ukraine, we brought five of our colleagues together to recite the poem, spreading a message of hope for a peaceful future for Ukraine in these difficult times. Please see the link below for a video of this project. We have also sought to preserve a record of this point in Ukraine’s history, understanding the need for documenting the experiences of those suffering during Russia’s invasion. We have invited displaced people to voluntarily record details of the war with our in-house communications team, with a goal of preserving a record of the acts of bravery and resilience in defending Ukraine for future generations. This project has to date recorded 45 hours of footage from 59 contributors, and we will continue to record people's reflections as the war continues.

Case Study: Humanitarian efforts

Image: Ferrexpo volunteers coordinating humanitarian aid to vulnerable families in local communities.
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STRATEGIC REPORT

Responsible Business: Governance

Governance: Building trust

20 % Female representation on the Group’s Executive Committee (one out of five members).
43 % Female representation on the Group’s Board of Directors (three out of seven Directors).
33 % Target for gender diversity at Board level, as set by the Hampton-Alexander Review.
5 Five of the Group's seven Directors appointed in the past four years.

With good corporate governance, companies are able to build trust with their stakeholders. Through trust, companies can enjoy the 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 seven Directors – including one Executive Director (Jim North) and five Independent Non-executive Directors. For more details of the Board composition and activities during the year, please see the Corporate Governance section of this report (page 88).

Board changes

In December 2022, Non-executive Director Kostyantin Zhevago resigned from the Board. Mr Zhevago is the ultimate beneficial owner of the Group’s largest shareholder – Fevamotinico S.a.r.l (“Fevamotinico”). Due to the proportion of the Group’s issued shares held by Fevamotinico, a relationship agreement exists between Ferrexpo and Fevamotinico, under which Mr Zhevago has the right to appoint a nominee to the Board. Further details are available on page 79 of this report.

Board position appointments

During the year, Independent Non-executive Director Fiona MacAulay was appointed as Senior Independent Director (“SID”), which is an important role that helps facilitate dialogue between fellow Directors and the Chair, and enables shareholders to speak directly with the Board. In early 2022, following the appointment of Fiona MacAulay as SID, the Board underwent a number of changes. Independent Non- executive Director Ann-Christin Andersen moved to take up the role of Chair on the Health, Safety, Environment and Community (“HSEC”) Committee. Independent Non- executive Director Natalie Polischuk, who joined the Board in December 2021, was appointed as a member of the HSEC and Audit Committees in February 2022. Finally, in February 2022, Jim North was appointed as Chief Executive Officer on a permanent basis, reflecting Mr North’s successful period as Interim CEO, with Mr North already appointed as an Executive Director.

FTSE Women Leaders Review

The FTSE Women Leaders Review is an independent, business-led framework supported by the Government, which sets recommendations for Britain’s largest companies to improve the representation of Women on Boards and in Leadership positions. As a result of this work, the FTSE Women Leaders Review recommends that companies listed within the FTSE 350 have at least 40% female representation at Board level by the end of 2025, as well as at least one woman appointed as chair, senior independent director (“SID”), CEO or CFO by the end of 2025. As of the date of this report, Ferrexpo’s Board is 43% female (31 December 2021: 38%), meaning that Ferrexpo satisfies the recommendation for Board gender diversity set by the FTSE Women Leaders Review, as well as the requirement for a female in one of the stated roles, with Fiona MacAulay as the Group’s SID. The Group is also focusing on increasing diversity further down its organisational structure; details of this work can be found on pages 42 to 43, and in the Corporate Governance Report on page 87.

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, Responsible Business Report and Climate Change Report), to our corporate website and social media channels. We also endeavour to engage with stakeholders located within Ukraine and overseas, with this made possible through communications in both Ukrainian and English. In 2022, we communicated in both languages across the majority of our social media channels and the 2021 Responsible Business Report, as well as selected press releases. Please see page 48 for more details of how we engage with each of our stakeholder groups.

Related party matters

The Group has a controlling shareholder that also has a number of different businesses with which the Group has a commercial relationship. In order to maintain strong levels of corporate governance, and to ensure that these business relationships are conducted on an arm’s length basis, the Group has both the Committee of Independent Directors at the Board level and the Executive Related Party Matters Committee at the management level. As discussed in previous Annual Report and Accounts, the Committee of Independent Directors (“CID”) conducted a review in connection with the Group’s sponsorship arrangements with FC Vorskla and concluded its enquiry in March 2021. Arrangements were put in place by Kostyantin Zhevago and his associated entities, which were executed by 31 July 2022, and the CID can confirm that, as of the date of this Annual Report and Accounts, these arrangements have now been completed.# STRATEGIC REPORT

Non-financial information statement

The Ferrexpo Group complies with the non-financial reporting requirements contained in Sections 414CA and 414CB of the Companies Act 2006. The table below, and information it refers to, is intended to help stakeholders understand the Company’s position on key non-financial matters. This builds on existing reporting that the Company already does under the following frameworks: Global Reporting Initiative, Guidance on the Strategic Report (UK Financial Reporting Council), UN Global Compact, UN Sustainable Development Goals and UN Guiding Principles. In addition to its Annual Reports, Ferrexpo also publishes a standalone report covering its Responsible Business activities, with the report for 2021 available on the Group’s website and the report for 2022 expected to be released during the course of 2023.

Stakeholder Engagement – Section 172

Our stakeholders
Employees and contractors	More than 95% of our workforce is based in central Ukraine.	Image: Our workforce at our operations marking Ukraine’s national Unity Day on 22 January 2023.
Environment	Ferrexpo’s inaugural Climate Change Report, published in December 2022, announced a 50% emissions reduction target by 2030 (previously 30%).	50%
Customers	Despite the war in Ukraine, we maintained a diverse number of customers in 2022, selling to a similar number of customers as seen in 2021.	10 +
Government	Ferrexpo continues to represent a significant proportion of Ukraine’s export revenues, accounting for 3% in 2022 (2021: 4%).	3 %
Suppliers	Total paid to suppliers of US$912 million in 2022 (2021: US$1.2 billion), reflecting value generation through our production processes.	US$912 M
Investors	Shareholder returns in 2022 representing 55% of the Group’s free cash flow, meeting the target set under the Group’s Shareholder Returns Policy.	55 %
Communities	The Ferrexpo Humanitarian Fund has approved support for more than 70 initiatives across Ukraine, with approved funding of US$15 million.	70 +
Capital providers	Ferrexpo continues to remain in a net cash position, with US$106 million as of 31 December 2022 (31 December 2021: US$117 million).	US$106 M

Through stakeholder engagement and an understanding of materiality for each stakeholder, the Group can focus on generating value for everyone as well as limiting its environmental impact.

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

• the likely consequences of any decision in the long term;
• the interests of the Company’s employees;
• the need to foster the Company’s business relationships with suppliers, customers and others;
• the impact of the Company’s operations on the community and the environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the Company.

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

The following section outlines the Group’s different stakeholder groups, engagement activities conducted in 2022 and feedback that was received as part of this work. Each section provides an overview of the work completed to date in response to this feedback, and any further plans that the Board has for the year ahead.

How considering stakeholders in decision-making works in practice

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

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

Those stakeholder groups the Board considers to be fundamental to the Group and their respective interests are set out on pages 14 to 15, together with an explanation of engagement activities undertaken during the past year and the impact this has had on Board-level decision-making. On page 55, there is a more detailed case study of the principal decisions taken by the Board during the year in the context of the war in Ukraine and how stakeholder interests were taken into account.

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

Section 172 factor	Key examples	Page
Employees and wider workforce	– Case Study: War in Ukraine – Responsible Business: Safety & Our People – Responsible Business: DEI – Case Study: DEI programme expands across Ukraine in 2022	04 32 42 43
Suppliers and customers	– Market Review – Strategic Framework	08 16
Local communities	– Responsible Business: Communities – Case Study: Humanitarian efforts	44 45
Environment	– Responsible Business: Environmental Stewardship – Case Studies: Net zero pathway developed in 2022 – Scenario analysis selection and TCFD disclosures	34 34 37
High standards of business	– Responsible Business Review – Responsible Business: Governance – Risk Management – Our Business Model	30 46 54 12
Investors	– Chair’s Statement – CEO’s Review – Our Business Model	02 06 12

Employees and wider workforce

Ferrexpo’s talented and engaged workforce is a key strength of Ferrexpo’s business, which we continue to rely upon following Russia’s invasion of Ukraine in 2022. Through a close working relationship between employer and employees, company and contractor, we are able to address the needs of our workforce.

Our engagement activities in 2022

Ferrexpo aims to communicate with its workforce, which is based in a number of geographic locations and a range of settings, in a variety of ways in order to communicate effectively with different individuals and groups in multiple languages. Traditional methods of communication, such as printed media and formal meetings may be effective in one setting, but may not be effective at reaching another stakeholder group particularly where lines of communication have been disrupted by the ongoing conflict.

We use a range of methods – from electronic communications (email, online learning, electronic bulletins, corporate websites and social media channels) to printed newspapers at our operations in Ukraine, social media channels and national media in both Ukraine and international locations where we have corporate offices, including the United Kingdom and Switzerland. We aim to engage throughout the calendar year.

Given that more than 95% of our workforce is located in Ukraine, it is important that the Board maintains a strong presence in the country, both in Kyiv and in the region in which we operate. In September 2022, Independent Non-executive Director Vitalii Lisovenko visited our operations and hosted a number of engagement sessions with a range of stakeholder groups within our workforce – including alumni of our “Fe_munity” women in leadership programme, employees at the Yeristovo mine, middle managers and people with disabilities. Over the course of two days, Mr Lisovenko met with more than 150 members from a cross-section of the workforce.

In addition to direct engagement, such as face-to-face meetings in the workplace, the Group utilises its website, public reports and social media channels.As of February 2023, the Group had approximately 25,000 followers across Facebook, LinkedIn and Instagram, with the majority of subscribers being located in Ukraine. The Group typically issues two to three posts on social media a week, with each post representing an opportunity to convey a key message to stakeholders, including messages from Board members – for example, an interview with Independent Non-executive Director Ann-Christin Andersen, which was posted on LinkedIn in December 2022. Workforce engagement occurs across multiple languages, to ensure that the Group communicates with both its Ukrainian and international stakeholders. The Group has communicated on social media platforms in both English and Ukrainian for several years, and in 2022 published its Responsible Business Report in Ukrainian for the first time, helping to keep local stakeholders informed of the Group’s sustainability initiatives.

Our response to feedback

The Board understands the importance of Ferrexpo having a strong presence within Ukraine, where more than 95% of our employees and contractors are based, in order to ensure effective engagement. As such, the Board includes two Independent Non-executive Directors who are Ukrainian. This has been of paramount importance during Russia’s invasion of Ukraine in 2022, for maintaining engagement despite travel restrictions imposed as a consequence of the war. Through this presence, Vitalii Lisovenko, the Board’s nominated representative for employee engagement, was able to visit our operations in September 2022. The Board regularly interacts with the Group’s executive management team through its various committees, and the Health, Safety, Environment and Community (“HSEC”) Committee comprises three Directors of the Group and two members of the executive management team.

Plans for engagement in 2023

Engagement activities will continue into 2023 to understand the evolving concerns and requirements of our workforce. The Group typically conducts an employee engagement survey every year and intends to complete such an exercise during 2023.

Customers

Our customers are key to the Ferrexpo business model, with investments in high grade and high quality forms of iron ore designed to meet their needs. Through constructive, long-term customer relationships, the Group is able to succeed in generating value for all stakeholder groups.

Our engagement activities in 2022

The past year has seen material disruption to the Group’s logistics network and sales portfolio, with Russia’s invasion of Ukraine in February 2022 resulting in restrictions in the Group’s use of seaborne vessels, the Ukrainian railway network, our own railway wagons and our own inland waterway barging subsidiary (First-DDSG). Further details of the restrictions imposed as a consequence of the conflict are provided on pages 4 to 5. As a result of the aforementioned operational and logistics constraints, our ability to deliver our products to customers was impaired in 2022, with 6.2 million tonnes sold during the year (2021: 11.2 million tonnes). In the early stage of the war, our marketing team held extensive discussions with customers, and through strong, long-standing relationships the Group was able to navigate continued sales to customers, which are typically located in Europe (given logistical constraints in accessing non-European markets). Despite the war and its constraints, the Group has been able to continue discussions with prospective customers, particularly with buyers of direct reduction (“DR”) pellets, with the Group seeking to increase its presence in this particular market. Through engagement, we are developing our offering of DR pellets, meeting the quality demands of this market. In the early stages of the conflict, the Group was forced to serve force majeure notices to a number of customers that are only accessible via seaborne markets. See page 8 for further information. Such activity requires significant engagement for customers to understand the nature of the situation and potential outlook (which may be updated on a frequent basis). The Group hopes to continue or renew these valued customer relationships in future when circumstances permit.

51
Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS

Through engagement, the Group was proud to raise awareness for humanitarian support caused by the invasion and encouraged customers to make donations directly to various relief funds. We are grateful for these acts of kindness. The Group is thankful for the strong and supportive relationships that it has with its customers.

Our response to feedback

Customers are increasingly focused on the topic of climate change and sustainability, which is particularly relevant in light of the advent of Green Steel (being the production of steel with low or zero associated emissions of greenhouse gases). In order to provide sufficient clarity to customers, the Board was proud to issue the Group’s first standalone Climate Change Report in December 2022, and as part of this report, the Group was able to upgrade and expand its existing suite of carbon reduction targets. Changes included an increase to the medium-term (2030) emissions reduction target to 50% (from 30%) and inclusion of Scope 3 emissions targets within the Group’s suite of forward-facing targets. For more information, please see page 34 of this report. For more information on the marketing team’s efforts during the year, please see pages 8 to 11 of this report.

Plans for engagement in 2023

The Group is in regular contact with its customer network, both in terms of existing customers in relation to existing or future orders, as well as potential new customers. One specific area of focus for the Group is the DR pellet market, which is a market typically relevant for steel mills in the Middle East and North Africa region (“MENA”) and North America, but demand for DR pellets is also growing in other regions of the world due to the low emissions footprint associated with this form of iron ore. As such, the Group has recently hired a Regional Marketing Manager for its office located in Dubai, with a purpose of engaging with potential DR pellet customers in the MENA region and beyond.

Suppliers

The Group’s suppliers are key to operating a successful, long-term sustainable business. Suppliers represent a principal aspect of the local and global footprint that the Group creates through its day-to-day business activities, which helps develop a positive local presence and a well-known international brand that is 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 2022

The Group’s operations paid a total of US$912 million to suppliers in 2022 (2021: US$1.2 billion). Given our the location of our operations and the nature of events in Ukraine, the Group has sought to engage extensively with its suppliers in 2022 – seeking clarification on the status of their operations during the conflict and identifying alternative suppliers where disruptions have occurred or the risk of disruption is perceived to be high. Through engagement, the Group was proud to raise awareness for humanitarian support caused by the invasion and encouraged customers to make donations directly to various relief funds. We are grateful for these acts of kindness. The Group is proud to have long-standing relationships with a number of local and international suppliers, which have helped to support the Group during the ongoing war in Ukraine.

Our response to feedback

The Group is an integral part of the local economy in the region of Ukraine where the Group operates, and therefore it is important that it aims to develop constructive relationships with suppliers, for example by paying suppliers promptly. By imposing a Code of Conduct and engaging with suppliers, the Group aims to reduce the risks associated to it through issues in the supply chain such as environmental concerns and modern slavery. The Group’s Statement on the Modern Slavery Act is available at www.ferrexpo.com. Furthermore, engagement helps suppliers improve their services, as well as gaining a better perception of the Ferrexpo business, in turn facilitating the Group’s ability to operate.

Plans for engagement in 2023

Supplier engagement is expected to continue into 2023 with a similar focus as in previous years – seeking local goods and services where possible, to support the Ukrainian economy, and engaging to ensure supplier governance throughout Ferrexpo’s supply chain. In addition, the Group is increasingly engaging to understand the greenhouse gas emissions footprint of suppliers, as this is directly relevant to Ferrexpo’s Scope 3 emissions.

Communities

Without a social licence to operate, granted by host communities, no business can succeed. Ferrexpo has sought to develop close ties to local communities over many years.

Our engagement activities in 2022

Over several years, the Group has developed strong ties with local communities, since Ferrexpo is the main employer in the local area and a major employer and source of revenue in the region of Ukraine where our operations are located. We also understand the connection between our workforce in Ukraine and their families in local areas, meaning that many more people rely on Ferrexpo for the stability offered and value generated by the Group. This close relationship and historic engagement was of paramount importance in 2022, enabling us to quickly connect with local communities and community leaders from the outset of Russia’s invasion, to understand the material issues and risks facing communities during the conflict.# STRATEGIC REPORT

Section 172 continued

Our response to feedback

The Group regularly provides direct support to local communities through the Ferrexpo Charity Fund, which has been in operation since 2011. During exceptional times, such as Russia’s invasion of Ukraine in 2022 and the global Covid-19 pandemic, the Board has sought to provide additional support, specific to the needs of a situation. In the early stages of Russia’s invasion of Ukraine, the Board established the Ferrexpo Humanitarian Fund, which has been a dedicated platform for reviewing and approving funding and/or support of various humanitarian projects in local communities and across Ukraine. As the war in Ukraine has evolved during 2022, the Board has approved increasing levels of funding for the Ferrexpo Humanitarian Fund, and as of the date of this report, the Group has provided humanitarian support amounting to US$19 million, either via the Ferrexpo Humanitarian Fund (with US$15 million of approved funding) or via support provided directly by our subsidiaries. Projects are individually reviewed and approved by members of the HSEC Committee, to ensure that governance standards are maintained, with over 70 humanitarian projects approved in 2022. Many projects are raised by local community leaders and groups. The Group will continue to support Ukraine and communities throughout the country through the Ferrexpo Humanitarian Fund and the Ferrexpo Charity Fund during this difficult time.

Plans for engagement in 2023

The Board approved the 2023 Ferrexpo Charity Fund budget at UAH 77 million (approximately US$1.8 million). This support is provided in parallel to the Ferrexpo Humanitarian Fund, which is specific to relief efforts associated with the war in Ukraine. To date, this fund has an approved expenditure limit of US$15 million, with a total of US$19 million of humanitarian support provided to date by the Group.

The Environment

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

Our engagement activities in 2022

Climate change is a key focus area for a number of stakeholder groups, with rising pressure to act to limit the effects of climate change. Engagement on the natural environment occurs with local and national government bodies to ensure compliance with local legislation and best practice. Engagement with local communities is conducted through regular meetings with community leaders and representatives. The Group interacts with its workforce via regular staff meetings and internal communications, which includes feedback mechanisms to ensure local voices are heard.

Our response to feedback

In response, the Board approved the publication of the inaugural Climate Change Report in December 2022. This report represents the culmination of our collaboration to date with environmental consultants Ricardo Plc (“Ricardo”), which was a project announced in October 2021. Through this work stream, the Group has developed a potential pathway to net zero iron ore pellet production, as well as climate scenario modelling to determine risks and opportunities related to Ferrexpo’s business and industry sector. For more information, please see the Group’s website (www.ferrexpo.com). The Group has also set revised, more ambitious greenhouse gas emissions reduction targets. The Group is now targeting a 50% reduction in its Scope 1 and 2 emissions by 2030 (on a combined basis per unit of production). For more details of the Group’s emissions reduction targets, please see page 35 of this report. In addition, the HSEC Committee maintains climate change as a standing item on the agenda for all meetings, with meetings held on a quarterly basis. Executive remuneration is also aligned to the Group’s climate change goals, with the introduction of performance targets relating to climate-related matters, please see page 124 of this report.

Plans for engagement in 2023

The Group is continuing to expand its reporting of its environmental footprint in 2023 with the completion of the life cycle analysis that is currently being finalised. This work will serve to provide a peer-reviewed study of the environmental footprint of iron ore pellets, benchmarked against the most commonly traded form of iron ore (sinter fines).

Government

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

Our engagement activities in 2022

The Group has a number of legal permits and licences required to operate in host countries, which are administered by the Group’s internal legal and government liaison teams, as well as external advisors. Engagement with the Ukrainian government has been particularly important in 2022 given the ongoing war in Ukraine. Well-developed lines of communication have been necessary to allow the Board and management to understand the numerous changes to the operating environment, which has changed significantly throughout the war, from port closures, limitations to rail access and the availability of electricity, amongst other effects. Additionally, we have needed to keep in constant contact with the government to understand the needs of communities across Ukraine as the war has evolved, helping to meet humanitarian requests wherever we are able to assist.

Our response to feedback

Through engagement, the Group aims to establish a constructive line of communication with host governments, to facilitate further investment and continued operations in each country. The Group has operations and corporate 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. As part of the effort to raise awareness of Ukraine’s needs during the Russian invasion of Ukraine, the Group has sponsored two policy papers, published in March and July 2022 “Global Britain and the Black Sea” and “Deepening British-Ukrainian relations in a more competitive era”. Both are available to read at www.geostrategy.org.uk.

Plans for engagement in 2023

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

Investors

The investment community is a key pillar of the Group’s corporate brand, and investment in Ferrexpo reflects both the financial performance and reputation of the Ferrexpo business. Through developing close ties with investors of all sizes, the Group can promote itself as well as raise awareness of Ukraine’s potential.

Our engagement activities in 2022

The Group has maintained a premium listing on the London Stock Exchange since June 2007 and as a result has a large investor base, comprising more than 500 institutions or organisations representing retail shareholders as of January 2023, located in more than 30 countries or jurisdictions. The Group’s independent shareholders range from international investment funds managing billions of dollars, to individual retail shareholders. The Group regularly meets in person with investors in London and Europe, and regularly speaks to investors located around the world. Direct engagement with investors can take the form of ad hoc meetings, video calls or telephone calls, as well as results calls following either the full year or interim results in March and August respectively. Following each set of 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, which for Ferrexpo, are typically located in London or Kyiv. Through this interaction, the Group is able to assist its analyst following to produce accurate and considered investment research on Ferrexpo. In addition to the above activities, the Group also hosts its Annual General Meeting (“AGM”) usually held in May each year, which represents an opportunity for all investors to meet and engage with the Board.

Our response to feedback received

The Group aims to communicate with all shareholders and uses a range of methods to do so. In 2022, we have published three formal reports for our stakeholders – an Annual Report and Accounts in April, a Responsible Business Report in August and a Climate Change Report in December. The Responsible Business Report was also published in Ukrainian to help engagement with a wider audience on sustainability topics, which are particularly relevant for local stakeholders. In January 2022, we unveiled a revamped corporate website (www.ferrexpo.com), which incorporates much of the content and commentary produced for the Group’s social media channels, which are available in both English and Ukrainian (on Facebook and Instagram).# STRATEGIC REPORT

Section 172 continued

Given investors’ increasing reliance on sustainability data in making investment decisions, it is evident that there is a need to ensure the quality of this information is high. As such, we have sought to undertake an independent assurance process of our safety and carbon emissions data for 2022, which mirrors a similar process on data for 2021 that was completed in July 2022. Throughout the war in Ukraine, we have regularly updated our investors with clear and consistent press releases, aiming to keep them informed of the war’s impact on our business. During 2022, we published 34 press releases, representing a 42% increase on the prior year. In addition, we provide corporate presentations for all stakeholders on our website, which also cross-references material produced for our social media channels. At the AGM in June 2022, more than 20% of shareholders voted against two Board-proposed resolutions. Although both resolutions were passed, following the AGM, the Group has engaged with shareholders to understand the reasons for the voting patterns seen and address any concerns. For more information on this process, please see page 93.

Plans for engagement in 2023

The Group has a regular schedule of engagement activities throughout the calendar year, including (but not limited to) the Group’s annual reporting suite, investor roadshows associated with financial results, quarterly production reports and a number of investor conferences. In addition, the Group provides numerous press releases, presentations and social media output on an ad hoc basis, which are produced as required for company news events or otherwise.

Capital providers

Since listing in 2007, the Group has consistently relied upon the banking community and providers of capital to help operate its business model on a day-to-day basis and to help finance our investments for future growth projects. Over this period of time, we have sourced multiple sources of funding, including the issuance of corporate bonds and engaging with lenders for pre-export finance (“PXF”) facilities.

Our engagement activities in 2022

The Group’s treasury department manages our liquidity position, which includes our various relationships within the landscape of banks, providers of capital and other relevant third parties. Relationships are also maintained with the main credit ratings agencies, with the Group’s corporate ratings detailed on page 25 of this report. Regular meetings and calls are held with the above lenders and ratings agencies, to maintain existing relationships, or develop relationships for future lending or banking arrangements. The above interactions involve the provision of the Group’s press releases and corporate presentations, in addition to standalone presentations where required.

In addition to the normal course of business activities and meetings held with capital providers, additional engagement has been required in 2022 in light of Russia’s ongoing invasion of Ukraine, and the resulting restrictions imposed on both Ukraine and the Group (see pages 4 to 5 for a summary of these effects). As of 31 December 2022, the Group had a net cash position of US$106 million with no debt facilities and minimal lease obligations (31 December 2021: net cash position of US$117 million).

Our response to feedback

Key considerations for capital providers are the Group’s liquidity position and strength of its balance sheet, as well as additional factors relating to corporate governance, growth plans and ESG practices, amongst other aspects of our business. Providers of capital and ratings agencies are increasingly focused on ESG related topics, which is driving a requirement for broader and more detailed disclosures across a range of topics. Whilst we have provided detailed summaries of this work under the Global Reporting Initiative (“GRI”) in our Responsible Business Reports since 2016, the Board determined that further action was required to remain in line with expectations. As such, in October 2021, we announced our collaboration with environmental consultants Ricardo Plc and our inaugural carbon emissions reduction targets. Following the completion of the first phase of this collaboration, we published our findings in our Climate Change Report. In addition, good corporate governance is a matter of paramount importance for providers of capital and ratings agencies, and the Group’s treasury department regularly engages with these parties on the various initiatives and frameworks that the Group has developed to bolster its governance practices. In certain instances, members of the Board have engaged directly capital providers to enable a greater degree of understanding on these topics.

Plans for engagement in 2023

It is expected the existing level of engagement, which is at an elevated level compared to previous periods, will continue as long as the war in Ukraine continues to restrict the Group’s ability to operate, and factors specific to the Group and Ukraine, as detailed on page 60 (Principal Risks: Ukraine Country Risk), continue. Typical engagement activities range from formal face-to-face meetings and video calls, to informal discussions on an ad hoc basis, which are conducted as part of the day-to-day operating of Ferrexpo’s business. Additionally, in the past, the Group’s treasury department has facilitated discussions with other functions within the Group (for example, Board members, CEO or CFO) and representatives of capital providers or ratings agencies, depending on the nature of topics being discussed.

Given the focus of capital providers on the Group’s balance sheet, market factors represent an additional consideration given the direct impact of iron ore benchmark prices, pellet premiums and freight rates on our ability to remain profitable. Therefore, the Board is mindful of the need to ensure that capital providers and ratings agencies are suitably informed of such market factors, as well as expectations around production and sales volumes and the Group will continue to provide these updates in the coming year.

Case Study: Protecting stakeholder interests

The Board’s agenda during 2022 has been primarily focused on dealing with the effects of the Russian invasion of Ukraine on the Group. This has required the Board to make many challenging, time-pressured decisions while considering multiple stakeholder interests. Following the outbreak of the war, the management team and the Board acted swiftly to put in place appropriate measures to protect the Group’s workforce based in Ukraine – with the safety of people being of the utmost importance, as well as ensuring clear and regular lines of communication with the workforce. The Group also needed to take steps quickly to protect the business. The Board took the difficult decision to postpone performance of various contractual obligations, including suspending deliveries to seaborne customers who could no longer be serviced due to the closure of logistics routes. The Board and the management team were aware of the negative impacts this would have on the Group’s customers, but sought to communicate clearly with customers so that they understood the steps being taken and to preserve (often long-standing) relationships where possible with a view to maintaining the Group’s reputation for high standards of business conduct, even in exceptionally difficult circumstances.

The Board acted quickly to set up a dedicated Humanitarian Fund to support both the local communities surrounding the Group’s operations and country-wide initiatives. With input from the HSEC Committee, the Board approved terms of reference for the Fund to ensure there was clarity regarding the humanitarian projects which the Fund will support, and appropriate governance arrangements to approve any funding requests. Members of the workforce were also given the opportunity to put forward any proposals on how funds should be allocated and suggestions were taken into account by the Board and HSEC Committee. For further details see page 44.

Given the uncertainties surrounding the war, the Group has taken action to protect its financial position and preserve liquidity. This has involved suspending non-essential capital expenditure and minimising sustaining capex. The Board recognised the impact these decisions would have on the Group’s suppliers, and their potential to impact the Group’s operations in the future, but ultimately needed to prioritise the Group’s financial stability. The Group also engaged with its customers to reduce existing payment terms where possible, to assist with cash flow management. Engaging with customers and suppliers has been key to maintaining existing relationships during these unprecedented times, and the Board has exercised oversight of these matters throughout the year.

Board decision making during the Russian invasion of Ukraine

The Board also carefully considered stakeholder factors at the time of declaring the dividends made to shareholders in 2022. In addition to their legal obligations concerning distributions, the Board also considered the Group’s overall financial position at that time, forecast revenues and projected future expenditures (including payroll obligations, fixed overheads and supplier payments) over a defined period, as well as applying an additional buffer amount, to ensure that the likely consequences of the dividends over the long term had been assessed. The Group and the Board continue to have stakeholder considerations front of mind when making decisions and recognise that many of the difficult decisions being taken by the Group during these unprecedented times will inevitably have an adverse impact on stakeholders, and that some stakeholder groups will be impacted more than others.# Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

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 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 44 risks were included on the Group risk register as of December 2022, with risks ranging from the war in Ukraine (both direct and indirect), risks relating to operating in Ukraine, operational risks such as the risk of a pit wall failure, health and safety-related risks, and risks relating to information technology and climate change. Further to the Group risk register, which records the risks with the most serious potential impact and likelihood of occurrence, operating entities maintain their own local risk registers, which feed into the Group risk register. In late 2022, the Group implemented an enterprise risk management (“ERM”) tool to help record and monitor risks, which is the platform for the reporting and assessment of risks within the Group. The Group considers emerging risks to be risks that are newly developing, or increasing in potential severity of impact, or changing risks that are difficult to quantify. The risks that are assessed by the Group’s management to be Principal Risks are presented on pages 58 to 74.

Risk mitigation

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

Risk governance framework

Risks are reported internally on a monthly basis, as part of the Finance, Risk Management and Compliance (“FRMC”) Committee, with the Group’s senior leadership team reviewing the Group-level risk matrix, which plots the likelihood of occurrence against the potential severity of impact, and identifying material changes in either variable to all of the risks listed. Over 40 risks are reported on the Group risk register to the FRMC Committee on a monthly basis, with each risk attributed a potential monetary impact should an event occur. The FRMC Committee reports to the Group’s Executive Committee, which in turn reports to the Board, which has the ultimate responsibility for the Group’s approach to risk management. The Audit Committee, a sub-committee of the Board, assists the Board in its regular monitoring of the risks faced by the Group. The Group’s internal audit function assists with the process of risk review, and conducts ad hoc reviews of risk management controls and procedures. For more information on the Audit Committee’s monitoring and assessment of the effectiveness of the risk management and internal control systems, see the Audit Committee Report on page 98.

Risk assessment for 2023

The risk matrix opposite depicts the Principal Risks facing the Group. Page 54 of the 2021 Annual Report and Accounts highlighted a rising risk profile facing the Group in 2022, with significant uncertainty relating to rising tensions between Russia and Ukraine. Through the course of 2022, a number of these potential risks have eventuated, following Russia’s invasion of Ukraine in February 2022, which has had a significant impact on the Group’s ability to operate. Further details on the conflict risk facing the Group are provided on page 59 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 59. The ongoing global Covid-19 pandemic remains a Principal Risk facing the Group, despite the gradual unwinding of government restrictions around the world relating to containing infection rates and treating those infected. Given the lower impact of more recent strains of Covid-19, the direct impact of this risk is seen as reduced compared to previous years. For further details on this risk, please see page 74. Climate change is a rising Principal Risk, and the Group is facing both physical and transitional risks, with increased reporting requirements likely in the near term. This topic is covered on pages 34 and 73 of this report, with particular reference to climate change related risk reporting under the Task Force on Climate-related Financial Disclosures (“TCFD”) framework.

Risk management process

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Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

Key

Category	Risks
1.	1.1 Conflict risk 1.2 Ukraine country risk 1.3 Counterparty risk
2.	Global demand for steel
3.	3.1 Changes in pricing methodology 3.2 Lower iron ore prices 3.3 Pellet premiums 3.4 Seaborne freight rates
4.	4.1 Risks relating to producing our products 4.2 Risks relating to the delivery of our products 4.3 Risks relating to health and safety 4.4 Risks relating to operating costs 4.5 Risks relating to information technology and cybersecurity
5.	Risks relating to climate change
6.	Risks relating to the Covid-19 pandemic

Materiality matrix