RESPONSIBLE BUSINESS REPORT Ferrexpo Is an Iron Ore Pellet Producer with Mines in Ukraine and Sales Operations Around the World
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FERREXPO PLC RESPONSIBLE BUSINESS REPORT Ferrexpo is an iron ore pellet producer with mines in Ukraine and sales operations around the world. Ferrexpo is the largest exporter of iron ore pellets in the Former Soviet Union and currently the third largest supplier of pellets to the global steel industry. As a result of the Group’s large iron ore deposit and significant capital investments, in excess of US$2 billion since its IPO, the Group is an efficient and competitive supplier of high quality iron ore pellets to its premium customer base around the world. ABOUT FERREXPO ECONOMIC INDICATORS AND About our Business 2 BUSINESS ETHICS Our Resources as of 31 December 2016 3 Corporate Level 21 Business Model 4 Ukraine 21 Sustainability Reporting 5 Direct Economic Value Generated 21 Chairman’s Review 6 Payments to Governments 21 Governance and Management Framework 7 Local Suppliers of Goods and Services 21 CSR Committee 8 Anti-Bribery Training 22 Approach to Responsible Business 9 Extractive Industry Transparency 22 Engaging with our Stakeholders 10 Pension Plan Obligations 22 Anti-Competitive Behaviour 22 OUR PEOPLE Safety 14 ENVIRONMENT Behavioural Safety 15 Volumes of Material 25 Energy Consumption 26 OCCUPATIONAL HEALTH Emissions 27 Occupational Health – Performance 16 Water Management 29 12 Biodiversity 29 WORKFORCE Total Workforce 17 COMMUNITY Recruitment 17 Building Strong Communities 31 Employee Turnover 18 Ferrexpo’s Community Priorities 31 Absenteeism 18 Resettlement and Closure Plans 31 Diversity 18 Artisanal Mining 31 Workforce Benefits 19 Government Relations 31 Labour Unions and Collective Bargaining 19 Outreach Initiatives 32 Workforce Disputes 19 Our people Human Rights 19 GRI Index 33 Shareholder Information 35 The well-being of the Company’s workforce is paramount to a successful, well functioning business. The Group’s workforce comprises over 10,000 individuals; to read more about the Company’s efforts to engage with its workforce, see page 12. Economic indicators Community and business ethics Ferrexpo produced almost 2% of Ferrexpo believes that strong, well Ukraine’s export revenue in 2016, and supported local communities are key to employs the equivalent of 30% of the successful and sustainable operations. working age people in the local area. To To read more about the Company’s read more about the value generated by community engagement strategy, see the Company, both direct and indirect, page 30. along with its policies on business ethics, see page 20. 20 30 24 Environment The Company monitors a wide range of environmental factors, such as energy use, water reuse and waste generated, in order to manage and reduce its environmental impact. To read more about the Company’s work with respect to the environment, see page 24. FERREXPO PLC 1 RESPONSIBLE BUSINESS REPORT 2016 ABOUT FERREXPO ABOUT OUR BUSINESS Ferrexpo plc (Ferrexpo or the ‘Company’) has mining and processing operations in the Poltava region of central Ukraine. Ferrexpo’s iron ore pellets are produced from ore mined at its two mines, Ferrexpo Poltava Mining (‘FPM’) and Ferrexpo Yeristovo Mining (‘FYM’), and are processed into pellets at FPM’s processing facilities. The Company has been premium listed on the London Stock Exchange (‘LSE’) since 2007 and it is currently a constituent of the FTSE 250 Index. As a result of the Group’s large iron ore ESTABLISHED LOGISTICS INFRASTRUCTURE deposit and significant capital investments, in excess of US$2 billion since its IPO, the Group is an efficient and competitive supplier of high quality iron ore pellets to its premium customer base around the world. In 2016, Ferrexpo produced 11.2 million LVIV MOS T Y S K A tonnes of iron ore pellets and exported KYIV 11.7 million tonnes, making it the third POLT A V A largest exporter of iron ore pellets globally, U Z H H O R O D F E R REXPO ZOL O TNISHINO behind Vale of Brazil and LKAB of Sweden, CHOP B A T ’ O V O having approximately 10% of the global ZNAMENKA export market. The primary products marketed by the DNIEPER RIV E R Company are three varieties of pellet: POR T Y U ZHNY S EA OF AZOV DANUBE RIVER Ferrexpo Basic Pellets (‘FBP’), Ferrexpo POR T ODESA Premium Pellets (‘FPP’), and Ferrexpo POR T RENI Premium Plus Pellets (‘FPP+’), with FPP POR T IZMAIL C R IMEA 1 0 0 K M and FPP+ pellet varieties having an iron POR T CONST A N T A content of 65%, and FBP an iron content of 62%. In 2016, FPP and FPP+ represented 65% and 29% of production respectively. OUR PRODUCTS The Company has corporate offices in Baar (Switzerland) and London, and IRON CONTENT OF marketing offices in Kiev, Dubai, Singapore, FERREXPO PREMIUM Tokyo and Shanghai, which collectively PELLETS (FPP) & IRON CONTENT OF service the Company’s customer base of FERREXPO PREMIUM FERREXPO BASIC % PLUS PELLETS (FPP+) % PELLETS (FBP) high quality steel mills across the globe. 65 62 A breakdown of the Company’s sales by country is provided in the data supplement to this report. PELLET SALES BY REGION CHINA The Company’s majority shareholder is Fevamotinico S.a.r.l., a wholly-owned 13 % subsidiary of The Minco Trust of which WESTERN EUROPE the Company’s Chief Executive Officer 17% NORTH EAST ASIA Kostyantin Zhevago is a beneficiary. The Company’s shareholder register, showing % shareholders that have notified the 16 Company in accordance with the LSE’s Disclosure and Transparency Rules, is presented in the data supplement. CENTRAL EUROPE A table providing an overview of the scale of the Company is also presented in the 48% supplement. The Company confirms that there were no material changes to the TURKEY, MIDDLE Company’s size, structure or supply chain EAST & INDIA during 2016. 6% 2 FERREXPO PLC RESPONSIBLE BUSINESS REPORT 2016 OUR RESOURCES AS OF 31 DECEMBER 2016 Brovarkovskoye 4.0BT Manuilovskoye 3.4BT Kharchenkovskoye 2.8BT Vasilievskoye 1.4BT Zarudenskoye 1.5BT 13.1BT FORMER SOVIET UNION CLASSIFIED RESOURCES Galeschinskoye 0.3BT Belanovskoye 1.7BT Yeristovskoye 1.1BT Gorishne-Plavninskoye & Lavrikovskoye 3.5BT 6.6BT JORC CLASSIFIED RESOURCES For further details on the Company’s Ore Reserves and Minerals Resources, FERREXPO PLC 3 please see the Company’s Annual Report. RESPONSIBLE BUSINESS REPORT 2016 ABOUT FERREXPO BUSINESS MODEL Inputs: resource A long life asset base with over six billion tonnes of resources in a central geographic location, with a skilled workforce and a low cost, well invested asset base. Expertise: WORKFORCE MINING PROCESSING LOGISTICS MARKETING Competitive advantages: Skilled Efficient and Niche value- Reliable, Diversified, workforce low cost added product controlled high quality and flexible customer Ferrexpo has been producing portfolio iron ore pellets for 40 years Ferrexpo is one of the Ferrexpo produces iron and has a deep knowledge Ferrexpo’s central Ferrexpo has a lowest cost producers in ore pellets, which are a of the skills required to geographic location allows geographically diversified the world of iron ore pellets premium input used in the consistently produce high it to competitively deliver portfolio of long term on a delivered basis. It has steel industry. Ferrexpo’s quality pellets at a competitive product to customers in contracts with steel mills consistently improved its product improves blast cost and service its worldwide Europe and Asia. which are focused on position on the global cost furnace productivity in the producing high value-added customer base. Ferrexpo transports its curve since its IPO in 2007. steel production process steel products in niche The majority of Ferrexpo’s due to its form, substance finished products by rail The cornerstone of the markets. The Group has employees are based in and low level of impurities. to border dispatch points, cost reduction strategy is supplied some of these Ukraine. Mining is part of Pellets also produce less air predominantly using its to increase production, steel mills for a number of Ukraine’s history and culture. emissions during the steel own rail cars. develop its asset base with decades. These contracts The country has a large and making process compared value accretive investments From the border points, follow internationally well educated workforce. The to sinter fines. and continually reduce means of transportation accepted terms for iron Group is committed to further controllable costs through In 2016, 94% of the Group’s include barges and rail ore supplied into Europe developing the skills of its the Business Improvement product contained 65% iron to customers in Eastern and Asia. A small volume employees and to supporting Programme (‘BIP’) to content – this is a premium and Central Europe and of product is allocated the local community. improve mining productivity. benchmark product used capesize vessels through its for the spot market to Ferrexpo applies fair and by the highest quality steel 49% owned port terminal manage: (1) any production consistent employment mills around the world. 65% at Port Yuzhny on the Black variability; (2) development practices that demonstrate Fe pellets command a price Sea. Ferrexpo charters of new customers; and (3) a commitment to human premium to the benchmark ocean-going bulk carriers opportunistic sales into rights, non-discrimination, 62% Fe fines product, up to 210,000 tonnes to market spikes. freedom of association both in terms of quality deliver to customers in and the right to engage and pellet premium. Western Europe, the Middle in collective bargaining. East and Asia. Results in: 1. High quality assets 2. High quality products 3. Crisis resistent customers