1H 2015 INTERIM RESULTS PRESENTATION D I S C L A I M E R This - - PowerPoint PPT Presentation

1H 2015 INTERIM RESULTS PRESENTATION

D I S C L A I M E R

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IN TR OD U C TION MIC H AEL ABR AH AMS C BE D L, C H AIR MAN

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CHRIS MAWE, CFO

1 H 2 0 1 5 R E S U LT S D E M O N S T R AT E T H E Q U A L I T Y O F T H E F E R R E X P O A S S E T & R E S I L I A N C E O F T H E B U S I N E S S M O D E L

– Strong operational performance

• Record 1H production volumes
• Record output of 65% Fe pellets (87% in 1H 2015)
• Marketing continues to deliver benefits (11% better than Platts)
• Lower C1 costs

– EBITDA margin 34% good performance in low iron ore price environment – Major Investment programs completed – Capex at sustaining levels – Balance sheet strengthened – Net debt to EBITDA of 1.9x at 30 June 20151 – Dividend maintained at 3.3 US cents

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SUMMARY FINANCIALS

US$M (unless otherwise stated) 1H 15 1H 14 Change 2014 Total production (kt) 5,817 5,369 8% 11,021 Sales volumes (kt) 5,680 5,498 3% 11,167 Avg CFR 62% fines price (US$/t) 61 111 (46%) 97 Revenue 512 759 (33%) 1,388 C1 cash cost (US$/t) 33.4 47.8 (30%) 45.9 Operating foreign exchange gains 15 47 (69%) 76 EBITDA 176 321 (45%) 496 EBITDA less operating forex gains 161 274 (41%) 420 Net CF from operating activities 88 138 (36%) 288 CAPEX 25 132 (81%) 235 Net debt at period end 653 694 (6%) 678 Gross debt at period end 1,123 1,053 7% 1,305 Cash at period end 471 359 31% 627

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N I C H E P R E M I U M P R O D U C T, C O S T C O N T R O L A N D S T R O N G M A R K E T I N G M AT E R I A L LY O F F S E T L O W E R P R I C E S

REVENUE 1H 2014 VS. 1H 2015 (US$M) EBITDA 1H 2014 VS. 1H 2015 (US$M)

321 176 58 14 5 60 37 280 6 32 50 100 150 200 250 300 350

1H 2014 EBITDA Platts 62% Fe fines index Lower C3 Quality Sales volume UAH cost reduction (net of inflation) C1 cost reduction: lower oil & efficiencies Other Operating forex gains & losses 1H 2015 EBITDA

759 512 58 19 14 280 58 100 200 300 400 500 600 700 800

1H 2014 revenue Platts 62% Fe fines index Lower C3 Quality Sales volume Freight pass through & other 1H 2015 revenue

C1 COST REDUCING IN REAL & CONSTANT CURRENCY TERMS; QUALITY INCREASING C1 COST CONTINUES POSITIVE TREND – Wages & electricity prices reflect local inflation – High CPI absorbed in period – Month on Month CPI reducing significantly 1H 2014 C1 COST VS. 1H 2015

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Q U A L I T Y I N C R E A S I N G & C 1 C O S T R E D U C I N G W H I L S T M O N T H O N M O N T H I N F L AT I O N R E D U C E S

160 100 50 Platts 62% Fe iron ore fines price index (US$/t)

1st FYM ore Avg UAH 8.0 8.0 10.3 13.5 21.4 US$ per tonne 47.8 1.0 33.4 9.0 3.0 3.7 0.3 10 20 30 40 50 60 C1 cost 1H 2014 UAH devaluation (net of inflation) Oil price effect Cost reduction initiatives Quality Other C1 cost 1H 2015 CPI =100 CPI =148 100 105 110 115 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 C1 cash cost (US$/t) Avg output of 65% Fe vs. total production

MONTH ON MONTH INFLATION RATE 1H 2015 (CPI)

Constant currency (UAH8/US$) 61.8 57.8 47.8 44.0 33.4 55.0 56.6 49.6 44% 46% 48% 57% 87% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 10 20 30 40 50 60 70 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015

US$M (unless otherwise stated) 1H 15 1H 14 Change 2014 EBITDA 176 321 (45%) 496 FX non-cash gain (15) (47) (69%) (76) Interest paid (34) (28) 21% (61) Tax paid (8) (45) (82%) (58) Working capital movements & other (31) (63) (51%) (13) Net cash flow from operating activities 88 138 (36%) 288 Capex (25) (132) (81%) (235) Proceeds from sale of investment 42

• Dividend

(58) (57)

• (77)

Cash balance at end of period 471 359 31% 627 Net debt (653) (694) (6%) (678) Net debt to LTM EBITDA 1.9x 1.2x 50% 1.4x

– Tax paid lower : VAT / CPT linkage reduced to 10%

• US$54M prepaid CPT balance to recover

– Working capital

• VAT stable
• Higher pellet & ore stocks: marketing & cost optimisation

– Capex at sustaining levels – Sale of Ferrous Resources for US$42M supported liquidity – Stable dividend YoY – Net debt reduction of US$41M (LTM) whilst increasing liquidity by US$111M (LTM) – Prudent credit metrics maintained in lower iron ore price environment

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C A S H G E N E R AT I O N R E M A I N S S T R O N G I N FA C E O F L O W E R P R I C E S

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D E B T R E D U C T I O N C O M B I N E D W I T H S TA B L E D I V I D E N D M AT U R I T I E S N O W C A S H M AT C H E D

FINANCIAL ACTIONS TAKEN IN LIGHT OF IRON ORE OUTLOOK

– US$350M drawn under PXF2 (August 2014) – Capex reduced to sustaining levels – Realised stake in Ferrous Resources for US$42M (June 2015) – Extended US$346M of debt maturities to 2018 & 2019 – Further bank debt maturity extension in progress

GROSS DEBT MATURITY PROFILE AT 30 June 2014 Cash held US$359M debt falling due to 2016 US$992M PRO FORMA GROSS DEBT MATURITY PROFILE AT 30 JUNE 20152 Cash held US$371M debt falling due to 2016 US$315M

100 200 300 400 500 600 700 2H 2015 2016 2017 2018 2019 PXF's ECA Leasing Bond

US$M (unless otherwise stated) Net debt Gross debt Opening net debt – 30 June 2014 (694) (1,053) Net cash flow before financing 41 Debt facilities repaid 2831 Proceeds from borrowings (353) Closing net debt – 30 June 2015 (653) (1,123) July bond exchange (100) Pro forma closing net debt – 30 June 2015 (653) (1,023)

US$M US$M

February 2015 bond exchange

100 200 300 400 500 600 700 2H 2014 1H 2015 2H 2015 2016 2017 2018 2019 PXF's ECA Leasing Bond

315 992

Ferrexpo has a strong business model which is capable of remaining profitable & cash generative through the business

• cycle. We continue to develop the asset
• ver the long term.

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Strong financial performance underpinned by: – Production

• Increased volumes
• Higher quality
• Lower controllable costs
• Currency devaluation & lower oil delivered further benefits

– Marketing

• Outperformance of Platts index

– Finance

• Debt maturities successfully extended & maintained

liquidity on balance sheet Financial priorities in current environment remain to: – Maintain operating margins: costs; volume; quality; marketing – Retain liquidity to manage risks – Further extend debt maturities

300 600 900 2007 2008 2009 2010 2011 2012 2013 2014 1H 2015

EBITDA

US$M

C O N C L U S I O N F I N A N C I A L R E V I E W

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KOSTYANTIN ZHEVAGO, CEO

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Major modernisation & expansion programme completed increasing output by 30% since 2007

35yrs +

• f mining & processing high quality pellets with a

substantial reserve & resource base as well as key skills on site with over 9,000 employees & contractors who are trained and retrained to high international standards

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FYM 1st new open pit in the FSU since Independence provides lower cost ore and additional mining flexibility

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Well invested modern facilities including state of the art infrastructure at FYM

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Established & modern logistics infrastructure in rail, barge & sea provide a high level of control

• ver the product up to the customer’s stock yard

Ferrexpo has a long-life asset, well invested production facilities, a competitive cost base, integrated logistics and a diversified high quality customer portfolio

LONG-TERM FUNDAMENTALS SUPPORT PELLET DEMAND

– steel mills require high quality material to maintain quality of final product – demand for environmentally friendly sources of iron ore – Chinese steel mills to progressively strive for higher value-added steel products

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Largest pellet exporter in the world

4th

Mt exported 2014 Vale (Brazil) 26.8 Samarco (Brazil) 23.2 LKAB (Sweden) 17.0

Ferrexpo (Ukraine) 11.0

Rio Tinto (IOC, Canada) 8.3 Cliffs Natural Resources (USA & Canada) 6.4 Metinvest (Ukraine) 5.4 Metalloinvest (Russia) 3.9 Total pellet export market 140.8 % of top 8 exporters 72%

LOW COST PELLET PRODUCER THE PELLET MARKET HAS HIGH BARRIERS TO ENTRY

Exports of iron ore MT 2000 2014 increase Proportion

• f increase

Pellets 106 141 35 4%

Lump 93 228 136 15% Sinter Fines 265 1,012 747 81% Total 464 1,381 918 Average annual world GDP growth (2000–2014) 3.7%

Source: CRU April 2015 report, export statistics.

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I R O N O R E P E L L E T S C O N T I N U E T O T R A D E AT A P R I C E P R E M I U M

– Ferrexpo’s realised net FOB price outperformed the Platts 62% Fe fines index by 11% in 1H 2015 – Pellet premium has been relatively stable in 1H 2015 compared to underlying iron ore fines price – Mild decline in pellet premiums in 1H 2015 vs. 1H 2014 reflect new supply from Brazil, which is now being absorbed by the market – No new seaborne pellet capacity expected in 2H 2015 & 2016 – But pellet premiums remain a high proportion of the fines price … dependent on steel mill profitability

30 50 70 90 110 130 150

62% Fe fines FOB 65% Fe pellets FOB

US$ per tonne Source: Chinese spot market - Platts, Metal Bulletin

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M A R K E T I N G C O N T I N U E S T O P E R F O R M W E L L S E RV I C I N G T H E W O R L D ’ S T O P S T E E L M I L L S

– Ferrexpo has a geographically diversified, high quality customer portfolio

• First shipment to South Korea during period
• Sales to Europe increased on higher output & strong demand

– All Ferrexpo’s long term sales contracts priced with reference to transparent freight indices such as Baltic Exchange C3 – Freight to Far East in line with C3, average US$11 per tonne 1H 2015 vs. US$21 per tonne 1H 2014 – 53% of Group sales in 1H 2015 on DAP/FOB basis

SALES BREAKDOWN BY PRICING TERMS SALES VOLUME BY COUNTRY

0% 10% 20% 30% 40% 50% 60% Central Europe China North East Asia Western Europe Tukey, Middle East & India

1H 2015 1H 2014

82% 7% 5% 6% Monthly spot index Spot sales fixed on day Current quarter spot index Lagging three month spot index

FERREXPO IS DELIVERING CONSISTENTLY HIGHER VOLUME, FE CONTENT & LOWER COSTS; UNAFFECTED BY THE SITUATION IN UKRAINE

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 80 90 100 110 120 130 140 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 % of 65% Fe production Total Fe output Linear (Total Fe output) Total Fe output rebased to 100

THE GROUP IS WELL PLACED TO BENEFIT FROM HIGHER IRON ORE PRICES FOLLOWING CLOSURE OF HIGH COST MINES

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F E R R E X P O H A S I N C R E A S E D P R O D U C T Q U A L I T Y W I T H O U T I N C R E A S I N G K E Y C O N S U M A B L E S P E R T O N N E

ELECTRICITY CONSUMPTION (KWH/T) GAS (M3/T) DIESEL (T/TH.T) – Continuously improving efficiency of key inputs – BIP has saved US$5/t since 2006 (at current prices) – Investments saved US$4/t since 2011

• Cheaper FYM ore
• Improved yield recovery due to quality upgrade (flotation 3)
• Modernised mining & processing equipment contributing to improved

performance

• Despite higher processing costs to produce a higher proportion of 65% Fe

pellets

140 150 160 170 180 190 1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015 0.0 1.0 2.0 3.0 4.0 5.0 6.0 1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015 14.5 15.0 15.5 16.0 16.5 17.0 17.5 18.0 1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015

Ferrexpo has a modern well invested asset base which is capable of generating returns through the business cycle

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US$2BN CAPITAL INVESTMENT SINCE IPO

200 400 600 2007 2008 2009 2010 2011 2012 2013 2014 1H 2015 US$M

– Performance in 1H 2015 demonstrates strength of the business model

• Competitive position on cost curve
• Niche pellet producer well located between Asia & Europe
• Long reserve life
• World class diversified customer base
• Skilled people
• Well invested asset

– Ferrexpo positioned to benefit from iron ore price recovery once high cost supply has exited – Proactive balance sheet actions taken (Eurobond exchange, disposal of Ferrous stake, lower capex, dividend restriction) – To date, operations have not been directly impacted by conflict in the East but economy remains fragile

SU MMA RY

U K R A I N E

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