FERREXPO PLC RESPONSIBLE BUSINESS REPORT 2017 INTRODUCTION/OVERVIEW Ferrexpo has 40 years of experience supplying iron ore pellets to the global steel industry, and has developed a strong network of high quality customers through continued investment in its assets. Ferrexpo operates two long-life iron ore in 2017. Ferrexpo’s iron ore pellets are workforce, comprising employees and mines in central Ukraine, near the town used in the steelmaking process, with contractors, comprises over 10,600 of Horishni Plavni. The Group is the third pellets considered a more environmentally people and the Company is a major largest exporter of iron ore pellets in the friendly feedstock for steel mills than contributor to the Ukrainian economy. world, behind Vale of Brazil and LKAB alternative forms of iron ore that are of Sweden, with a market share of 8.5% used by blast furnaces. Ferrexpo’s This report is the Company’s third stand- alone Responsible Business Report. Ferrexpo recognises the need for modern companies to demonstrate a social conscience, both for stakeholders in direct contact with Ferrexpo’s operations, and for the Company’s investors and bondholders around the world. Major investment funds are increasingly taking Environmental, Social and Governance (“ESG”) standards into account and there is growing evidence that funds observing ESG standards tend to outperform those that do not1. The Company confirms that there were no material changes to the Company’s size, structure or supply chain during 2017. OUR WORKFORCE GOVERNANCE One of Ferrexpo’s core strengths AND INTEGRITY is in its talented and engaged 2 workforce. Ferrexpo’s employees Ferrexpo accounted for 1.9% of total and contractors are key stakeholders Ukrainian exports in 2017. The Company in the Company’s continued is an important business on both a local success, with health and safety, and a national level. Good corporate corporate culture and diversity all governance and ethical practices important factors in attracting and are therefore key to maintaining the retaining a motivated workforce. Group’s social licence to operate. 12 18 1 https://www.ft.com/content/9254dfd2-8e4e-11e7-a352-e46f43c5825d 2 Source: www.ukrstat.gov.ua 1 IN THIS REPORT ABOUT FERREXPO OUR PEOPLE ECONOMIC INDICATORS ENVIRONMENT About our Business 2 Safety 13 AND BUSINESS ETHICS Volumes of Waste Material Moved 23 Ferrexpo’s Resources as of Behavioural Safety 14 Corporate Level 19 Energy Consumption 23 31 December 2017 3 Occupational Health 14 Ukraine 19 Emissions 24 Business Model 4 Workforce 15 Payments to Governments 19 Water Management 26 Sustainability Reporting 6 Recruitment 15 Local Suppliers of Goods Biodiversity 27 Chairman’s Review 7 Employee Turnover 15 and Services 19 Governance and Management Absenteeism 15 Tax Responsibility 19 COMMUNITY Framework 8 Compliance Training 20 Workforce Composition 15 Community Priorities 29 CSR Committee 9 Extractive Industry Transparency Training and Development 16 Ferrexpo Charity Fund 29 Approach to Being a Responsible Initiative 20 Workforce Benefits 16 Employee Volunteering 30 Business 10 Pension Plan Obligations 21 Labour Unions, Collective Bargaining Resettlement and Closure Plans 30 UN Sustainable Development Goals 11 Anti-Competitive Behaviour, Anti-Trust and Workforce Disputes 16 Artisanal Mining 30 and Monopoly Practices 21 Human Rights 17 Government Relations 30 GRI Index 32 Data Supplement (separate document) PROTECTING NATURAL STRONG COMMUNITY ENVIRONMENTS RELATIONSHIPS Ferrexpo’s operations cover over 5,000 Ferrexpo is an integral part of the hectares, and the Company carefully local community, employing over monitors its environmental footprint 30% of the local working population; to manage and mitigate its impact on it is therefore important that the the natural environment. Examples of Group is an active participant monitoring include energy and water in the community, supporting usage, emissions and waste generation. key institutions such as medical and educational facilities, and acting to foster local culture. 22 28 Ferrexpo plc 2017 Responsible Business Report 2 ABOUT FERREXPO ABOUT FERREXPO’S BUSINESS A LONG LIFE RESOURCE Ferrexpo plc has mining and processing operations in the Poltava region of central Ukraine. The Company’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. ESTABLISHED LOGISTICS INFRASTRUCTURE LVIV MOS T Y S K A KYIV POLT A V A U Z H H O R O D F E R REXPO ZOL O TNISHINO CHOP B A T ’ O V O ZNAMENKA DNIEPER RIV E R POR T Y U ZHNY S EA OF AZOV DANUBE RIVER POR T ODESA POR T IZMAIL C R IMEA POR T CONST A N T A DIVERSIFIED CUSTOMER BASE CENTRAL EUROPE CHINA & SOUTH EAST ASIA 49 % WESTERN EUROPE TURKEY, MIDDLE 12% EAST & INDIA NORTH EAST ASIA 15% 8% 16% Ferrexpo plc 2017 Responsible Business Report 3 A SIGNIFICANT RESOURCE BASE Ferrexpo’s significant resource base is situated along a single ore body, which allows for efficient expansion through both greenfield and brownfield developments. 4.0BT 3.4BT 1.4BT 1.7BT 3.4BT BROVARKIVSKE MANUILIVSKE VASYLIVSKE BILANIVSKE GORISHNE-PLAVNINSKE- LAVRYKIVSKE (“GPL”) 0.3BT GALESCHYNSKE JORC CLASSIFIED RESOURCES CLASSIFIED RESOURCES 2.8BT 1.5BT 1.1BT KHARCHENKIVSKE ZARUDENSKE YERYSTIVSKE WELL INVESTED PRODUCTION PROCESS ORE EXTRACTION CRUSHING BENEFICIATION PELLETISING Open cut, hard rock iron The ore is crushed and The ore is ground to produce Four kiln grate units heat ore mining, using truck screened before entering concentrate which is then and form the pellet feed into and shovel. Average Fe one of two crushing plants. upgraded to 67% Fe content. pellets of around 16mm. content of raw ore is 28%. Waste material is removed to the tailings storage area. DRILLING COARSE CRUSHING GRINDING THICKENING BLASTING MEDIUM CRUSHING CLASSIFICATION FILTRATION EXCAVATION SCREENING HYDRO SEPARATION BALLING HAULAGE FINE CRUSHING MAGNETIC SEPARATION INDURATION ORE TO CRUSHER DRY MAGNETIC SEPARATION FLOTATION UPGRADE TAILINGS Ferrexpo plc 2017 Responsible Business Report 4 ABOUT FERREXPO FERREXPO’S BUSINESS MODEL HOW WE ADD VALUE LONG LIFE IRON ORE MAGNETITE DEPOSIT IN UKRAINE c.28% Fe content MAGNETITE IRON ORE CAN BE UPGRADED AND ENRICHED THROUGH A CAPITAL INTENSIVE PROCESS OTHER KEY INPUTS FOR ESTABLISHMENT OF: PRODUCTION PROCESS: – MINE – SKILLED LABOUR FORCE – PROCESSING PLANT – RELIABLE SUPPLY OF – PELLETISING PLANT WATER, ELECTRICITY AND GAS FERREXPO HAS INVESTED OVER $2.15BN SINCE 2007 HIGH QUALITY 65% FE IRON ORE PRODUCT (IN THE FORM OF PELLETS) – CENTRAL EUROPE – GLOBAL LOGISTICS – WESTERN EUROPE CAPABILITY – NORTH EAST ASIA – REGIONAL MARKETING – CHINA & SOUTH EAST ASIA OFFICES – TURKEY, MIDDLE EAST, INDIA FERREXPO SELLS PELLETS TO A DIVERSIFIED GLOBAL CUSTOMER BASE CONSISTING OF HIGH QUALITY, CRISIS-RESISTANT STEEL MILLS Ferrexpo plc 2017 Responsible Business Report 5 WELL INVESTED PRODUCTION PROCESS LOW COST COMPETITIVE PRODUCER CASH GENERATIVE THROUGHOUT THE COMMODITIES CYCLE CASH UTILISED TO ENSURE: SUSTAINABLE STAKEHOLDER RELATIONSHIPS 1 STRONG BALANCE SHEET TO – LONG-TERM CUSTOMER RELATIONSHIPS WITHSTAND INHERENT RISK, – STABLE EMPLOYER THROUGHOUT THE OPERATING IN AN EMERGING COMMODITIES CYCLE MARKET AND A VOLATILE COMMODITIES INDUSTRY – REGULAR PAYMENT OF TAXES TO LOCAL AND CENTRAL GOVERNMENT AUTHORITIES 2 CONTINUED DEVELOPMENT OF OPERATIONS AND – RELIABLE PARTNER AND CONSUMER OF NATIONAL IMPROVEMENT TO PRODUCT LOGISTICS AND ENERGY INFRASTRUCTURE – ENCOURAGE AND SUPPORT LOCAL SUPPLIERS 3 CONSISTENT DIVIDENDS TO SHAREHOLDERS – KEY FINANCIAL CONTRIBUTOR TOWARDS COMMUNITY PROJECTS – POSITIVE CONTRIBUTION TO UKRAINE’S TRADE BALANCE – GROUP EXPORTS REPRESENT C.2% OF THE COUNTRY’S EXPORT REVENUE – LONG-TERM SHARE PRICE APPRECIATION TO SHAREHOLDERS AND CONSISTENT DIVIDENDS Ferrexpo plc 2017 Responsible Business Report 6 ABOUT FERREXPO SUSTAINABILITY REPORTING HOW RESPONSIBILITY IS MEASURED The Company’s Corporate Social Responsibility (“CSR”) activities focus on four key areas: people, the environment, economic and corporate governance and communities. This is the third standalone report on the Peer Benchmarking designed to build upon the success of Company’s Corporate Social Responsibility This report contains data that covers a the UN’s Millennium Development Goals, (“CSR”) activities, with reports for 2015 variety of areas, including gender diversity, published in 2000. The Company presents and 2016 available on the Company’s emissions and donations to community its data here in the context of the specific website (www.ferrexpo.com). This report projects. Whilst this report presents goals that apply to Ferrexpo’s operations, covers the calendar year 2017, with 2016 changes in the Company’s performance alongside any commitments made by used as a comparative period for each year on year, it is also important to publish it in order to further the Company’s data field, unless otherwise stated. Any Ferrexpo’s position relative to its peers, progress towards these goals. instances of restatement of data are noted so as to provide a broader context to in the section where that data appears. the Company’s performance in 2017. To FTSE4Good The report boundaries and reporting achieve this goal, peer benchmark graphs In 2017 Ferrexpo was included in the standards for this report are unchanged, are provided on a no-names basis in each FTSE4Good Index following a review of its with data included for subsidiaries section, showing Ferrexpo’s performance