Interim Results 2012

RNS Number : 4132K

Ferrexpo PLC

21 August 2012

FERREXPO plc ('Ferrexpo' or the 'Group')

Ferrexpo, the FTSE 250 iron ore pellet producer, today announces its results for the six months to 30 June 2012.

Michael Abrahams, Non-Executive Chairman, commented:

"Ferrexpo made a good start to 2012, in-line with the Group's expectations against a backdrop of moderating iron ore prices. Operationally, the Group continues to perform well, with production from own ore 4% higher than 1H 2011. The Group continued its planned investment in its modernisation and expansion programme in the first half of 2012 and, with the expected additional output of ore from Ferrexpo Yeristovo Mining, is on target to increase annual production in 2014.

"During the period under review, the iron ore market has been volatile with market prices for iron ore down 20%. Ferrexpo, however, has continued to enjoy solid demand for its pellets with the average pellet price for the period down by only 12%. Lower pricing combined with higher raw material costs has reduced profits from the record level of 2011.

The Group continues on track with its growth projects and is well placed to benefit from its significant investment over the past five years. While the market outlook has deteriorated recently and remains variable, medium term iron ore pricing should remain underpinned by growth in developing markets. In line with its stated strategy, Ferrexpo will continue to exploit its substantial reserves to create sustainable value for shareholders."

Highlights

Operational

Production

§ Production at Ferrexpo Poltava Mining at full capacity representing:

- 4.7 million tonnes of pellets (1H 2011: 4.8 million tonnes)

- 2.1 million tonnes of 65% Fe pellets produced, in line with 1H 2011

§ First ore achieved at Ferrexpo Yeristovo Mining, commercial mining due to start at the beginning of 2013

Marketing

§ 50% of Ferrexpo's products were delivered to customers by logistics systems under its own control

§ Lower market prices partially mitigated through reduced freight rates to seaborne markets and improved performance of own transport infrastructure

§ As a result achieved iron ore prices outperformed the international iron ore price index

Financial

§ Revenue of US$731 million (1H 2011 US$855 million), a decrease of 15%

§ EBITDA of US$240 million (1H 2011: US$401 million), a decrease of 40%

§ Diluted EPS decreased by 50% to 24.7 US cents (1H 2011: 49.7 US cents)

§ Dividend of 3.3 US cents maintained (1H 2011: 3.3 US cents)

§ Group capital expenditure of US$222 million (1H 2011: US$121 million)

§ Strong balance sheet with cash balance of US$716 million as at 30 June 2012 (US$890 million as at 31 December 2011)

§ Major debt facilities expire in 2016 with insignificant debt repayments in 2012 and 2013

§ VAT repayments outstanding increased by US$50 million to US$222 million compared to 31 December 2011

§ Net debt position of US$251 million as at 30 June 2012 (US$80 million as at 31 December 2011)

	1H 2012	1H 2011	Change	FY 2011
Revenue (US$ million)	731	855	-15%	1,788
EBITDA¹ (US$ million)	240	401	-40%	801
Profit before Tax (US$ million)	169	352	-52%	691
Diluted EPS (US cents per share)	24.7	49.7	-50%	96.9
Final dividend (US cents per share)	3.3	3.3	-	3.3
Net cash flow from operating activities (US$ million)	70	324	-78%	503
Capital investment (US$ million)	222	121	+84%	378
Net debt / (Net funds position) (US$ million)	251	(25)		80

For further information, please contact: Ferrexpo:
Chris Mawe	+44 207 389 8311
Emma Villiers	+44 207 389 8304
Pelham Bell Pottinger
Charles Vivian	+44 207 861 3126
Lorna Spears	+44 207 861 3883

Notes to Editors:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It is principally involved in the production and export of high quality iron ore pellets, which are used in the manufacture of steel. Ferrexpo's resource base is one of the largest iron ore deposits in the world. Its current producing asset, FPM, produced approximately 10 million tonnes of iron ore pellets in 2011 making it the largest exporter of pellets in the CIS. The Group has a diversified customer base supplying steel mills in Austria, Serbia, Slovakia, Czech Republic, Germany and other European states, as well as in China, India, Japan, and other Asian countries. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com

FERREXPO PLC - INTERIM RESULTS

SIX MONTHS TO 30 JUNE 2012

Introduction

Ferrexpo made a good start to 2012, in-line with the Group's expectations against a backdrop of moderating iron ore prices. Operationally, the Group continues to perform well, with production from own ore 4% higher than 1H 2011. The Group continued its planned investment in its modernisation and expansion programme in the first half of 2012 and, with the expected additional output of ore from Ferrexpo Yeristovo Mining ('FYM'), is on target to increase annual production in 2014.

FYM is in its fourth year of investment and has reached first ore in one area of the pit ahead of the start of commercial ore mining by the beginning of 2013. During 2013, the mine will ramp up output to five million tonnes of ore with an average Fe grade of around 32.2%. Initially, the crude ore will be used to substitute output from the Poltava mine in order to assess the ore's production characteristics and also potentially to enhance pellet production from the existing processing facilities.

Results and Dividend

Iron ore and other commodity prices have declined in 2012 in the face of global market conditions, which are being driven by adverse macro-economic factors. As a consequence, and against the background of a 20% fall in the market price for iron ore in 1H 2012, the average selling price achieved by Ferrexpo for its iron ore pellets decreased by 12%, owing partly to lower freight costs.

In 1H 2012, Ferrexpo sold 4.5 million tonnes of pellets (1H 2011: 4.7 million tonnes), generating revenues of US$731 million. This is 14% lower than the record revenues of US$855 million achieved in 1H 2011 and reflects slightly lower 1H volumes and the lower market prices for iron ore.

In 1H 2012, the Group's average C1 cash costs rose principally as a result of higher Ukraine energy tariffs, oil costs and domestic inflation. These increases continue to be driven by the high price of key inputs which, due to stock holdings, do not yet reflect the trend towards lower market prices. High Ukrainian producer price inflation contrasts with low local CPI figures, and the Ukrainian Hryvnia remained stable against a strengthening US Dollar in the first half of the year. These factors contributed to an increase in C1 cash costs to US$60.4 per tonne compared to US$48.2 per tonne for 1H 2011 and an average annual cost of US$50.7 per tonne for 2011. The recent fall in oil prices is expected to benefit the cost base in the second half of the year, as would any Ukrainian Hryvnia devaluation against the US Dollar.

The combined factors of reduced selling prices and increased C1 cash costs led to lower EBITDA of US$240 million (1H 2011: US$401 million); Group profit after tax decreased by 50% to US$145.6 million (1H 2011: US$294 million). Operating cash flow after interest and tax was US$70 million (1H 2011: US$324 million). Capital expenditure amounted to US$222 million (1H 2011: US$121 million) (see Capital Investment below).

At the period end, Ferrexpo had gross debt and committed undrawn facilities of US$1,038 million, with an average maturity of 3.5 years and cash balances of US$716 million.

The Group's policy is to pay a modest but consistent dividend throughout the economic cycle and return capital to shareholders when appropriate, while maintaining adequate liquidity to develop its significant project pipeline. The key projects, and increased working capital requirements resulting from an increase in the overdue VAT balances, continue to absorb the cash from operations. The Directors recommend an interim dividend of 3.3 US cents per Ordinary Share for payment on 21 September 2012 to shareholders on the register at the close of business on 31 August 2012. The ex-dividend date will be 29 August 2012. The dividend will be paid in UK Pounds Sterling, with an election to receive US Dollars.

Health and Safety

The Group continues to improve its safety standards. In the first six months of the year, there were no fatalities and the lost-time injury rate fell to 0.55 per million man hours from 1.1 in 1H 2011 (FY 2011: 0.77).

Principal Risks

Given the structure of the business with operating assets in Ukraine, which is an emerging democracy, Ferrexpo considers that its interests may suffer if the domestic situation develops in ways that are unhelpful to business and discourage investment. This risk, however, is one that is commonly faced by all mining companies in emerging markets, and the Board believes that Ferrexpo has the expertise to manage it satisfactorily.

The Group faces an on-going legal claim over a shareholding in Ferrexpo Poltava Mining. The case has been running for more than six years in Ukraine, and the Directors believe it still has some way to run. The Board continues to receive legal advice that the case against Ferrexpo has little legal merit under Ukrainian law for legal, technical and practical reasons.

Market Environment

In 2011, iron ore prices reached near-record levels, driven by strong growth in steel production (especially in China, which saw an increase of 56 million tonnes of steel output) and by the continued delay in new iron ore projects bringing volume to the global market, before steel production fell back later in the year. The iron ore CFR China index price ranged from US$193 per tonne to US$117 per tonne in 2011.

In 1H 2012, iron ore prices recovered from the October 2011 low point with the highest index price for China CFR fines in the first six months reported to be US$151 per tonne and the lowest price US$132 per tonne. Since 30 June 2012, the index price for iron ore has fallen further and was US$118 per tonne at the end of July due to continued negative economic sentiment in Europe and concerns around decelerating Chinese steel production.

There are a number of iron ore expansion projects, including Ferrexpo's own FYM, expected to deliver first ore over the next two to three years. It is Ferrexpo's view that additional lower-cost supply will compete with and gradually replace some of the high-cost Chinese iron ore production. As a low-cost producer of high-quality pellets, Ferrexpo is well positioned to meet this challenge. It has logistical advantages over most other international pellet producers and benefits from existing long-term relationships with its customers.

So far this year there has been a tempering of growth in global steel production, coupled with additional iron ore supply in the market. Even so, Ferrexpo has enjoyed solid demand for pellets at prices that are down only 12% as compared to a 20% fall in market prices in the same period. Although these dynamics will tend towards a moderation of iron ore prices for the remainder of the year, the Group's opinion is that continued growth in developing economies, delays in further new iron ore projects and the relatively high cost of production in China should underpin pricing.

Customers

Ferrexpo continues to develop its customer base to ensure that it has a portfolio of contracts with world-class customers. In 1H 2012 it made further progress towards achieving its primary marketing objectives, which are to:

> consolidate index-linked pricing to long-term customers, in line with the leading iron ore producers;

> capitalise on its geographic proximity to major steel markets by using its logistical advantages; and

> strengthen and diversify its customer base.

In the first half, around 50% of Ferrexpo's products were delivered to customers by logistics systems under its own control, and the Group was able to mitigate the effect of the reduced market prices by achieving lower freight rates for seaborne markets and improving the performance of its own transport infrastructure. As a result it was able to enhance its realised prices compared to the movement in the international iron ore price index.

Production

In 1H 2012 Ferrexpo produced 4.7 million tonnes of pellets, (1H 2011: 4.8 million tonnes), of which 4.6 million tonnes were produced from own ore (1H 2011: 4.4 million tonnes). Of the output from own ore, 2.1 million tonnes of pellets were 65% Fe, in line with 1H 2011.

The Group's objective is to produce 100% of its pellet output with a grade of 65% Fe by 2015, so as to maximise revenue and profitability. The growth projects designed to achieve this are progressing well and should be completed by the end of 2014.

Costs

The mining industry as a whole has faced rising costs as a result of increasing commodity prices, high demand for labour and other resources and strong local currencies, particularly those traditionally linked to commodities. As previously reported, in 1Q 2012 average C1 cash costs increased to US$59.4 per tonne which was 17% higher than the average C1 cash cost of production in 2011. This rate of increase moderated in the second quarter, as a result of which the average C1 cash cost of production for 1H 2012 was US$60.4 per tonne (1H 2011: US$48.2 per tonne). Of this increase, 44% can be attributed to energy costs.

The Ukrainian Hryvnia has remained stable against the US Dollar during the period.

The Group continues to manage its cost base through its Business Improvement Programme, which has been running for six years and has achieved cumulative cost savings of US$6.8 per tonne since implementation.

Capital Investment

The Kremenchug Magnetic Anomaly, across which Ferrexpo holds its exclusive licences, is one of the largest iron ore reserves in the world and comprises approximately 20 billion tonnes of resources with an average iron content of 30%. These are contained in a single 50-kilometre long strike divided into 10 deposits, of which three are currently being exploited: Gorishne-Plavninskoye and Lavrikovskoye ('FPM') and Yeristovskoye ('FYM'). Ferrexpo continues to develop this large resource base to increase output, so as to underpin future profit and earnings growth.

Ferrexpo has four major growth projects under way, all of which are progressing well. These projects will expand production to 12 million tonnes per annum from early 2014. In 1H 2012 sustaining and modernisation capital expenditure at FPM was US$57 million which included US$7 million spent on the capacity upgrade project. A further US$19 million was invested in the quality upgrade and US$21 million in the mine life extension. At FYM US$65 million was spent on the development of the mine.

In addition, during the period the Group invested a further US$33 million in logistics and infrastructure, mainly rail cars to reduce cost and improve reliability of delivery to customers, and US$27 million on developing other deposits. Each of the projects and other capital investments are reviewed in detail in the Review of Operations.

Financial Management

The Group has US$1,038 million of drawn and undrawn committed debt facilities, including a US$500 million Eurobond maturing in April 2016 and a five-year fully drawn US$420 million revolving debt facility expiring in August 2016. The Group has minimal debt repayments of around US$5 million for the remainder of 2012 and US$10 million for 2013.

The Group has also secured financing under various import and export credit guarantees, amounting to US$69 million, to fund the major expansion projects. Of these, US$64 million has been guaranteed by Export Import Bank of the United States and US$5 million by Hermes Kreditversicherungs-AG of Germany. There are currently projects under way which are expected to incorporate guarantees from other European and Asian credit agencies. Overall the Group is well funded and the new export credit guaranteed debt facilities have been obtained at favourable rates.

At 30 June 2012, US$966 million had been drawn down and US$72 million remained undrawn. The Group held US$716 million in cash, compared with US$890 million at 31 December 2011. Of the Group's cash, US$614 million was placed with various international financial institutions with a minimum A credit rating, and US$102 million was held within Ukraine to fund immediate operational needs.

Cash Flow

The Group continues to manage its liquidity, applying cash generated from operations and from debt facilities to invest in projects to expand production. During 1H 2012, before working capital and expansionary capital expenditure, and after interest payments (net operating cash flow), the Group generated US$70 million of cash flow. Total investment in projects amounted to US$222 million.

As at 30 June 2012, total Ukrainian VAT owed to the Group amounted to UAH1,850 million (US$231 million), including overdue VAT of US$103 million. Total Ukrainian VAT owed increased by US$60 million compared to December 2011; against which a provision of US$13 million has been made due to the late repayment and associated cost of finance incurred by the Group. Overall VAT contributed to an increase in net debt of US$171 million to US$251 million in the first half of 2012. The Group continues to work with the relevant authorities to resolve this position.

Strategy

The Group's strategy is to continue to develop its large resource base to increase output and underpin future profit and earnings growth. In its 2011 Annual Report, the Group outlined its priorities for achieving sustained growth and long-term shareholder value and will continue to explore ways to enhance returns on investment.

In the period under review Ferrexpo made good progress towards achieving this, through investment in the existing Poltava mine and in the Yeristovskoye deposit. The continuing fall in the accident rate reflects management's progress as it continues to improve safety across the Group.

Work to increase the quality of production output at the existing operations continues. While external factors put costs under pressure, Ferrexpo is committed to being in the lowest quartile of the global pellet cost curve and to enhancing efficiency through its Business Improvement Programme.

Customer service and reliability have been enhanced through the acquisition of 600 rail cars in 1H 2012 as well as further investment in the barge operations on the Danube. The port operation at Yuzhny on the Black Sea is working well and Ferrexpo will soon receive delivery of its own top-off vessel, which will reduce costs and expedite loading of Capesize vessels at Yuzhny. The Group is making good progress in developing its customer base, and in 1H 2012 shipped three trial deliveries to potential new customers in Natural and Growth markets.

Ferrexpo's low balance sheet gearing and cash mean that it has sufficient resources to complete its growth projects, which will ensure long-term value generation for shareholders.

Corporate Governance

The Board is fully compliant with the UK Corporate Governance Code 2010 and remains committed to maintaining high standards of governance throughout the Group.

People

Ferrexpo employs over 9,000 people, the vast majority working at the Group's main operations in Ukraine. It also has logistics operations, marketing and administrative offices around the world, located close to its customer base. It is to the credit of Ferrexpo's employees that they have maintained Ferrexpo's position as a leading exporter of iron ore pellets through attention to operational excellence and dedication to the task at hand, during turbulent times. The Board would like to thank all of them for their personal contribution to Ferrexpo's success.

Outlook

The Group continues on track with its growth projects and is well placed to benefit from its significant investment over the past five years. While the market outlook has deteriorated recently and remains volatile, medium-term iron ore pricing should remain underpinned by growth in developing markets. In line with its stated strategy, Ferrexpo will continue to exploit its substantial reserves to create sustainable value for shareholders.

Michael Abrahams CBE DL Kostyantin Zhevago

Chairman Chief Executive Officer

Review of Operations

Ferrexpo JORC resources:

As of 30 June 2012

	Reserves		Resources¹
	Proved & Probable (mt)	FE Grade %	Measured & Indicated (mt)	FE Grade (total) %	Inferred (mt)	Total %
Gorishne-Plavninskoye & Lavrikovskoye	844	30	2,125	30	1,449	31
Yeristovskoye	632	34	828	34	364	30
Belanovskoye	-	-	1,485	31	217	30
Galeshchinskoye	-	-	268	55	58	55
Total	1,476	32	4,706	32	2,088	31

Note: Five further deposits are estimated to contain resources of over 14.2bt according to the former Soviet Union ('FSU') classification code. Ferrexpo is currently working together with international consultants to convert these resources to the universally accepted Australasian Joint Ore Reserves Committee ('JORC') standards. These deposits are collectively known as the 'Northern Deposits' and are classified under the names Manuilovskoye, Vasilievskoye, Kharchenkovskoye, Zarudenskoye and Brovarkovskoye.
¹Resources include 1,476mt of reserves.

Ferrexpo Poltava Mining (FPM)

FPM (the Group's current operating asset) has been in operation for more than 30 years, producing around 9.2 million tonnes of iron ore pellets from own ore per annum, which is expected to grow to 12 million tonnes per annum once the Group's expansion plans are completed in 2014. The mining and processing division, consisting of crushing, concentrating and pelletising facilities, exploits the Gorishne-Plavninskoye and Lavrikovskoye ('GPL') deposit. This is located immediately adjacent to Ferrexpo's rail and port facilities on the Dnieper River. The FPM mine is open cut. Following completion of the mine life extension project, the mine is expected to operate until around 2038.

FPM produced 4.6 million tonnes of pellets from own ore in the first half of the year (1H 2011: 4.4 million tonnes), an increase of 4%. Production of 65% Fe pellets from own ore remained constant at 2.1 million tonnes.

The FPM mine is operating at full capacity, mining approximately 30 million tonnes of crude ore per annum. This is processed into around 9.2 million tonnes of iron ore pellets, depending on ore grade, with an average iron content of 63.5%. FPM's pelletising facility has an installed production capacity of around 12 million tonnes of pellets per annum. In order to use surplus pelletising capacity the Group will purchase, depending on availability and price, third party concentrate from which FPM produced 0.2 million tonnes of pellets in 1H 2012 (1H 2011: 0.4 million tonnes).

The table below highlights FPM's production statistics.

Production in tonnes '000	6 months to 30.06.12	6 months to 30.06.11	Change
Iron ore mined	14,976.8	14,198.2	5.5%
Concentrate produced ('WMS')	5,739.9	5,574.7	3.0%
Pellets produced from own ore
Higher grade average Fe content 65%	2,133.6	2,139.4	-0.3%
Lower grade average Fe content 62%	2,429.3	2,254.8	7.7%
Total pellets	4,562.9	4,394.1	3.8%
Production/reprocessing from purchased raw materials
Higher grade average Fe content 65%	55.8	301.1	-81.5%
Lower grade average Fe content 62%	106.2	89.7	18.5%
Total pellets	162.0	390.8	-58.5%
Higher grade average Fe content 65%	2,189.4	2,440.5	-10.3%
Lower grade average Fe content 62%	2,535.5	2,344.4	8.2%
Total pellet production	4,724.9	4,784.9	-1.3%
Pellet sales volume	4,485.8	4,739.0	-5.4%
Gravel output	1,462.0	1,376.0	6.3%
Stripping volume	13,645.0	13,830.0	-1.3%

FPM Business Improvement Programme ('BIP')

FPM is reducing costs through its BIP, which has created cumulative savings of US$6.8 per tonne in cash costs since 2005, principally by reducing the input of key raw materials and energy per unit of pellets produced, but also by reducing indirect costs. In 1H 2012, 38 projects were initiated, which will reduce costs by US$5.8 million on an annualised basis, in line with Ferrexpo's goal of 1%-2% cost savings per annum. Projects in progress include:

> modernising the pit dewatering system, which will reduce power consumption;

> improving the truck maintenance programme, which will increase the availability of the fleet;

> modernising the explosives power-driven process which will reduce the consumption of explosives and improve the quality of blasting operations; and

> replacing the gas burner units in the rotary kilns, which will reduce power consumption and optimise the fuel burning process.

FPM Capital Expenditure

Sustaining Capital Expenditure

Ferrexpo continues to invest in maintaining, modernising and upgrading FPM's mining and processing facilities to increase operating efficiency and reduce costs. In addition, there are a number of projects under way to upgrade FPM's facilities so as to establish a processing capability of 35 million tonnes of crude ore per annum. Following the completion of this programme, FPM will be able to process ore from the FYM mine to increase overall pellet output to a targeted 12 million tonnes in 2014.

US$21 million has been spent to date on the upgrade of the processing facilities, including US$7 million so far this year (1H 2011: US$7 million). The engineering work started in 2010 has to date involved the modernisation of certain ore beneficiation sections to increase processing output, reduce energy consumption and significantly improve process control. This is a rolling programme which will be extended to cover the majority of the iron ore beneficiation sections by 2014 when it is planned that the increased capacity will be achieved.

Other sustaining capital expenditure for 1H 2012 was US$50 million (1H 2011: US$56 million), which included new mining equipment and replacement plant.

Development Capital Expenditure

Quality Upgrade Project

This project, which received Board approval at the end of 2010, will increase the iron ore content of all Ferrexpo's pellets to 65% Fe. The project involves the installation of vertical mills for further fine grinding of the ore (to increase the overall iron ore content in the Group's pellet output) as well as upgrades to the beneficiation plant, including the installation of new flotation cells thus recovering more iron ore and improving yield. The vertical mills have been ordered along with the flotation tanks and associated equipment. Eight out of the 10 vertical mills will be delivered in September 2012 with the final two to be delivered in 2013.

The project is on schedule for commissioning by the end of 2014. To date US$22 million has been spent on this project, including US$19 million in 1H 2012 (1H 2011: US$1 million). Total outstanding commitments at the half year end in respect of this project are US$51 million.

Mine Life Extension

The FPM open pit mine has been in operation since 1977 and contains ore beyond the original planned pit limits and depths. The mine life extension project involves new mining works to access additional iron-rich ore by 2014 and to extend the mine life to 2038. The project began in 2011 and is scheduled to be completed by the end of 2018. Expenditure to date is US$61 million, including US$21 million in 1H 2012.

In 1H 2012 approximately 7 million cubic metres (1H 2011: 7 million cubic metres) of overburden were removed in line with budget.

Ferrexpo Yeristovo Mining ('FYM')

Development Capital Expenditure

Phase 1 - Crude Ore

In 1H 2012, first ore at FYM was reached and 37 million cubic metres of overburden was removed, some 87% of the total. Commercial production is expected to start in 2013. Under the current plan, the mine will initially deliver primary crushed ore to the FPM processing facilities, enabling FPM to use its free processing capacity and increase production to 12 million tonnes per annum in 2014.

New equipment due to arrive on site at FYM in 2012 include a CAT grader, CAT 944 front end loader, the largest of its kind in Ukraine, and FYM's first large blast drill. In May 2012 a new CAT 6060 shovel and five more CAT 793D haul trucks went into operation. The shovel is the first and largest of its kind to be in operation at the Ferrexpo sites and can excavate 15 million tonnes of material per year. The works on the permanent mine infrastructure are progressing to plan, with the truck wash building complete and further buildings in the course of construction.

Capital expenditure for the period was US$65 million (1H 2011: US$31 million).

Phase 2 - Concentrator Facility

FYM's development plans involve building a new concentrator facility in order to process the additional crude ore from the FYM mine which, once fully operational, is expected to produce approximately 28 million tonnes of ore per annum. FYM is finalising detailed engineering design for the concentrator, following international best practice, in compliance with local design institute requirements. The Board will consider the plans later in the year.

Phase 3 - Pelletising Facility

In line with Ferrexpo's strategy and depending on market conditions, the third phase of the project will be initiated to construct a 10 million tonne per annum pelletiser. This will be built in the most economically favourable location.

Ferrexpo Belanovo Mining ('FBM')

The Belanovskoye deposit has total JORC resources of 1,702 million tonnes. Drilling works and site preparation activities continue. During the period the Group spent US$27 million (1H 2011: US$1 million) for access and infrastructure. A new CAT RH340 hydraulic face shovel and five CAT 793D haul trucks have been ordered and are scheduled for delivery in 2H 2012 in order to begin stripping works. This equipment is similar to that used at FPM and FYM.

Health and Safety

The Board's Corporate Safety and Social Responsibility Committee monitors the management of the Group's health, safety, environmental and community programmes on a regular basis, in line with industry wide best practice for mining companies. Safety is fundamental to Ferrexpo's success and integral to its culture. Ferrexpo is pleased to report that the lost-time injury rate has declined by 50% compared to the first half of 2011, to 0.55 per million man hours worked.

Marketing

Iron Ore Pricing

Following the trend of other mature traded commodities and asset classes, iron ore pricing is evolving as mechanisms are growing more sophisticated. The first iron ore trading platforms are now operational, backed by major Chinese steel makers and the major iron ore producers.

In 1H 2012, Ferrexpo developed its markets, customer relationships and pricing mechanisms moving its contract pricing further towards index-linked and spot pricing. As a result of this, in 1H 2012 only 40% of its sales volumes were priced under the old quarterly negotiated fixed price contracts as compared to 74% in 1H 2011. The Group is working with its customers to move further towards index-linked pricing in line with the international market, but in the interim, periodic negotiations continue with contracts that remain under the old pricing basis using international pricing trends as a guide.

Market Segments

Ferrexpo has identified three core market segments: Traditional¹, Natural² and Growth³ markets. As its production capacity expands, the Group expects that sales to its Traditional markets will remain constant at around five million tonnes per annum. This is despite expectations of lower economic growth and subdued steel output in these markets. In anticipation of such limitations in Traditional markets, in 2011-2012, Ferrexpo increased its sales volumes to Growth markets and substantially reduced its exposure to the Serbian steel market. Volume sold on spot basis has risen during the transition to increase diversification and index pricing, however, this should return to target levels with the signing of new long term contracts over the next 12 months.

Ferrexpo's sales volumes to its Natural and Growth markets remain robust, and it has secured two new long-term contracts in China and Turkey. As production volumes increase, the Group expects to see further growth in these markets.

As a result of this customer diversification, in 1H 2012, some 53% of sales volumes (1H 2011: 61%) were to Traditional, 7% to Natural (1H 2011: 3%) and 40% to Growth (1H 2011: 36%) markets.

¹ Traditional markets: these lie within Central and Eastern Europe and include steel plants that were designed to use Ferrexpo pellets.

Ferrexpo has been supplying some of these customers for more than 20 years. Ferrexpo has well-established logistics routes and
infrastructure to these markets by both river barge and rail. These markets include Austria, Czech Republic, Hungary, Serbia and Slovakia.

² Natural markets: these include Turkey, the Middle East and Western Europe and are those markets where Ferrexpo has a competitive
advantage over more distant producers, but where market share remains relatively low.

³ Growth markets: these are predominantly in Asia and have the potential to deliver new and significant sales volumes to the Group.

Logistics

Ferrexpo is located centrally in Ukraine on both rail and river networks and continues to build its logistics infrastructure, comprising rail cars, river barges and port facilities on the Black Sea. This will enable it to deliver its products reliably throughout the world. It is Ferrexpo's strategy to develop its logistics capabilities where appropriate, either through ownership of assets or through longer-term contracts with reliable counterparties.

A review of the main logistics activities for 1H 2012 is below:

Rail Transportation

Ferrexpo transports the vast majority of its products to the Ukrainian border by rail, and has in recent years extended its own fleet of rail cars with the aim of becoming self-sufficient at times of high demand.

Ferrexpo currently owns 1,645 rail cars and has placed orders to bring its total fleet to 1,933 units. Following shareholder approval obtained at the 2012 Annual General Meeting, Ferrexpo has an option to purchase up to a further 500 rail cars from its historic supplier, an option which has not yet been exercised.

In 1H 2012 Ferrexpo transported a total of 3,107 thousand tonnes of product to various destinations using own rail cars, including 126 thousand tonnes of third party concentrate and supplies for the production process. The number of rail cars ultimately needed to achieve self-sufficiency will depend on the level of peak monthly shipments, the mix of destinations and the amount of other materials transported (such as third party concentrate). Ferrexpo aims to balance these requirements as it increases its rail fleet in order to ensure an optimum balance between the size of the fleet and transport capability and capital employed.

At present, a quarter of the Group's pellets are transported by rail to the western Ukrainian border for customers in Central and Western Europe. The remaining pellets are transported by rail or barge to the Group's port terminal in Yuzhny on the Black Sea, from where the product is shipped to overseas markets around the world.

River Barging

Ferrexpo is able to deliver product to the port of Reni and Izmail by barge along the River Dnieper which is adjacent to the processing facility and in 1H 2012 shipped 150 thousand tonnes of product in this way to the Ukrainian border. Following transhipment these pellets can be transported via the Danube into Central and Western Europe using its wholly-owned barging company. In 1H 2012 this subsidiary transported 477 thousand tonnes of pellets to customers along the Danube either directly from Ukrainian river ports or via Constanza in Romania. It operated profitably in the first half of the year.

Logistics Capital Investment

In 1H 2012, Ferrexpo invested US$33 million in its logistics infrastructure (1H 2011: US$12 million), of which US$25 million was invested in its rail car fleet and US$2 million in its barging operations.

Port Activities

Ferrexpo owns 49% of the TIS Ruda port at Yuzhny on the Black Sea and has a guaranteed capacity at this ocean port terminal of five million tonnes per annum. In 1H 2012, the Group loaded eight Capesize vessels compared to nine for the full year 2011. It is benefiting from the low freight rates achieved last year and expects to see further freight cost reductions in the second half of 2012.

Ferrexpo has invested US$6.3 million in the first half of the year in a top-loading vessel, which is expected to come in to operation in the fourth quarter. This will enable Ferrexpo to load Capesize vessels using its own facilities further reducing shipping costs.

In 1H 2012, the proportion of sales controlled by Ferrexpo along the supply chain, including sales on CFR or similar basis and pellets transported using its own barges on the Danube, was 50% of sales (50% in 1H 2011).

Financial Review

Summary Financial Results

US$ million unless otherwise stated	Six months to 30.06.12	Six months to 30.06.11	Change
Revenue	731.3	854.9	-15%
EBITDA¹	240.3	400.8	-40%
As % of revenue	33%	47%	-
Profit before taxation	169.3	352.0	-52%
Income tax	-23.7	-58.1	-59%
Profit for the period	145.6	293.9	-50%
Diluted earnings per share (US cents)	24.73	49.73	-50%
Final dividend per share (US cents)	3.3	3.3	-

¹The Group calculates EBITDA as profit from continuing operations before tax and finance plus depreciation and amortisation and non-recurring exceptional items included in other income and other expenses, and the net of gains and losses from disposal of investments, property, plant and equipment.

Revenue

Total revenue decreased by 15% to US$731.3 million for 1H 2012 (1H 2011: US$854.9 million) as a result of lower prices and marginally lower sales volumes of 4.5 million tonnes compared to 4.7 million tonnes in 1H 2011.

The average realised price achieved by the Group for its pellets fell by 12% during the period, reflecting the 20% decrease in international prices offset partly by lower freight rates to seaborne markets and improved performance of logistics infrastructure.

Revenue from other sales amounted to US$45.7 million (1H 2011: US$43.5 million). This included revenue from third party services, such as bunker fuel sales, at the Group's barging operations (acquired in December 2010) as well as sales of gravel.

Cost of Sales

Total cost of sales for 1H 2012 including purchased third party concentrate increased 7% to US$323.3 million compared to the same period last year (1H 2011: US$302.1 million). Cost of sales includes the C1 cash cost of production from own ore which is analysed in the table below.

C1 Cash Costs	Six months to 30.06.12		Six months to 30.06.11
US$ million unless otherwise stated		% of total		% of total
Electricity	70.2	25	56.6	27
Gas	39.2	14	26.3	12
Fuel	26.9	10	21.2	10
Grinding media	21.7	8	19.8	9
Explosives	8.2	3	5.5	3
Other materials	27.7	10	18.2	9
Spare parts, maintenance and consumables	45.8	16	34.7	16
Personnel costs	31.9	12	25.7	12
Royalties and levies	4.4	2	3.8	2
C1 cost of sales	276.0		211.8
C1 cost per tonne	60.4		48.2

C1 costs increased by 25% to US$60.4 per tonne compared to the same period in 2011, principally as a result of higher Ukraine energy tariffs and domestic inflation. In the first half of 2012, gas and electricity prices were 43% and 21% higher respectively than in 1H 2011. The cost of diesel fuel was 9% higher.

Personnel, repair and maintenance, and costs of other materials were affected by local CPI inflation. These expenses are principally denominated in local currency. On average Ukrainian producer price inflation was approximately 7% in 1H 2012¹.

¹Average of January to June 2012, compared with average January to June 2011.

Over half the C1 cash costs are denominated in Ukrainian Hryvnia, which remained broadly stable in the first half of 2012, compared to 1H 2011, at around UAH8.0 to the US Dollar.

In 1Q 2012 average C1 cash costs increased to US$59.4 per tonne which was 17% higher than the average C1 cash cost of production in 2011. This rate of increase moderated in the second quarter and it is expected that the Group will benefit from the recent fall in oil prices in the second half of the year, as would any Ukrainian Hryvnia devaluation against the US Dollar.

Non C1 Cost of Sales

Other cost of sales amounted to US$47.5 million for the period (1H 2011: US$90.3 million), the reduction resulting from lower tonnages of purchased concentrate.

Gross Margin

As a result of the factors discussed above, the Group's gross margin was 56% in 1H 2012, down from 65%.

Selling and Distribution Expenses

Selling and distribution expenses were US$155.0 million for the first half compared to US$146.2 million in 1H 2011.

Selling and distribution costs to the Ukrainian border increased by US$8.3 million to US$73.9 million in the period (1H 2011: US$65.5 million), equating to US$16.5 per tonne (1H 2011: US$13.8 per tonne). These costs primarily include railway freight to the southern ports at Yuzhny and Izmail and to the western Ukrainian border as well as port charges.

Tariffs for the provision of rail cars increased on average by 35% as compared to 1H 2011, this was partially offset by a discount for volumes transported using the Group's own rail cars which amounted to US$3.9 million.

Beyond the Ukrainian border international freight costs to Growth markets amounted to US$56.0 million (1H 2011: US$53.3 million). These costs relate to the shipping of pellets by ocean vessel to customers in Asia (on a CIF² or CFR³ basis), and by barge to customers in Serbia (on a DAP⁴ basis). During 1H 2012, Ferrexpo loaded eight Capesize vessels compared to nine for the full year 2011, benefiting from lower freight rates as compared to Panamax vessels.

² CIF is defined as delivery including cost, insurance and freight.

³CFR is defined as delivery including cost and freight.

⁴ DAP is defined as delivery at place.

EBITDA

EBITDA decreased by 40% to US$240.3 million for the year compared to US$400.7 million for 1H 2011. The decrease was mainly due to a reduction in the DAP/FOB sales price along with increased costs. The EBITDA margin was 33% (1H 2011: 47%).

Finance Income and Expense

Finance income was US$1.4 million (1H 2011: US$1.4 million). Income from interest earned was US$1.4 million (1H 2011: US$1.1 million). This was due to higher average cash balances in 2012 of US$803.0 million compared to US$632.3 million in 1H 2011.

Finance expenses increased to US$46.1 million (1H 2011: US$35.1 million) due to a provision of US$13.2 million recorded against the outstanding Ukrainian VAT balance. This reflects the estimated time value of money on the outstanding balance, which may not be recovered within one year of the period end. The charges on the Group's finance facilities decreased by US$2.2 million. The average gross debt for the period was US$968.6 million (1H 2011: US$643.3 million).

Foreign Exchange Gains and Losses

During the period, the Ukrainian Hryvnia was broadly stable against the US Dollar, recording an average rate of UAH7.988 (1H 2011: UAH7.958). As a result, minimal operating foreign exchange losses of US$0.5 million were recorded (1H 2011: loss of US$0.6 million).

Non-operating foreign exchange gains for the period were US$0.3 million compared to a US$5.4 million gain in 1H 2011.

Income Tax Expense

Profit before tax was US$169.3 million for 1H 2012 compared with US$352.0 million for 1H 2011. The effective income tax rate for the period was 14% compared with 17% for the equivalent period in 2011. The decrease in the tax rate in 1H 2012 resulted from a change in the mix of profits arising in the various jurisdictions in which the Group operates.

Summary of Group Liquidity and Debt

US$ million	Six months to 30.06.12	Six months to 30.06.11
Cash and cash equivalents	715.9	945.1
Gross debt	966.4	919.8
(Net debt)/Net funds position	(250.5)	25.3
Total equity	1,519.1	1,133.7
Undrawn facilities	72.0	50.0
Total liquidity (facilities plus cash)	787.9	995.1

The Group is securely financed, with gross debt and committed undrawn facilities of US$1,038.4 million, representing 68% of shareholders' equity. Of this amount US$500 million is a five-year Eurobond maturing in 2016 and US$420 million is represented by a revolving pre-export finance facility, available for 60 months including a straight line amortisation over the final 24 months. The maturity date is 31 August 2016.

Tied financing has become an increasingly important part of the funding structure of the Group, and Ferrexpo is working together with Export Credit Agencies around the world to fund its development projects. These facilities are typically at competitive rates and of long tenor. This allows the funding which is already in place to be preserved adding financial flexibility. As at 30 June 2012, a total of US$82.5 million had been raised under these government-backed schemes with more in progress. This has proved a successful way to raise finance while preserving Group headroom, and will continue to be used by the Group in future.

As at 30 June 2012, gross facilities of US$1,038.4 million included US$966.4 million that had been drawn and cash in hand amounting to US$715.9 million. The net debt of the Group was US$250.5 million.

Cash Flows

Net cash flow from operating activities was US$63.1 million (1H 2011: US$324.2 million)

Working capital increased by US$69.7 million, reflecting a higher VAT receivable balance in Ukraine. Total capital investment for 1H 2012 was US$222.0 million compared to US$120.6 million for 1H 2011.

Sustaining and modernisation capital investment was US$59.6 million (1H 2011: US$59.9 million) for the Group, of which US$57.4 million was invested at FPM (1H 2011: US$56.6 million). The remaining was US$2.1 million invested in the Group's barge fleet. A further US$39.7 million (1H 2011: US$20.4 million) was invested in FPM's development projects and capital expenditure at FYM was US$65.1 million (1H 2011: US$31.0 million).

In 1H 2012 US$26.6 million was spent on the Belanovoskoye and other deposits (H1 2011: US$1.2 million). This was for new mining equipment, drilling works and site preparation activities.

Capital investment in logistics was US$31.0 million in 1H 2012 (1H 2011: US$8.1 million), which was primarily related to the acquisition of rail cars.

VAT

In 1H 2012, the amount of VAT, net of provision, owed to the Group increased by US$49.8 million mainly due to a delay in repayment by the Ukraine tax authorities of outstanding amounts from 2010, 2011 and 2012. As a result, although the majority of this VAT is immediately due, it is expected that a large proportion will only be recovered after a significant delay. Therefore, in accordance with accounting standards, a provision of US$13.2 million has been made to reflect the financing costs associated with recovery after one year. Costs associated with late recovery within the year have not been provided for. Overall, it is estimated that US$79.8 million of the Ukrainian VAT owed, net of this provision, will remain outstanding more than one year after the reporting date. Management expects the full gross balance in local currency to be recovered in due course. Full details on Ukrainian VAT receivable are disclosed in note 12 to the accounts.

Directors' Responsibility Statement

The Interim Report complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce a half-yearly financial report. The Interim Report is the responsibility of, and has been approved by, the Directors.

We confirm that to the best of our knowledge:

> the condensed set of financial statements has been prepared in accordance with IAS 34;

> the Interim Management Report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR4.2.7R; and

> the Interim Management Report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R.

The Directors are also responsible for the maintenance and integrity of the Ferrexpo plc website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

For and on behalf of the Board

Michael Abrahams CBE DL

Chairman

Chris Mawe

Chief Financial Officer

Interim Consolidated Income Statement

		6 months	6 months	Year
		ended	ended	ended
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Revenue	4	731,255	854,864	1,788,012
Cost of sales	3/5	(323,277)	(302,115)	(649,544)
Gross profit		407,978	552,749	1,138,468
Selling and distribution expenses	6	(154,967)	(146,176)	(317,951)
General and administrative expenses	7	(29,301)	(25,479)	(51,969)
Other income		5,231	735	6,943
Other expenses		(13,551)	(2,358)	(17,091)
Operating foreign exchange losses	8	(465)	(567)	(1,360)
Operating profit from continuing operations before adjusted items		214,925	378,904	757,040
Write-offs and impairment losses	9	(518)	(198)	(478)
Share of profit from associates		424	1,700	2,012
Losses on disposal of property, plant and equipment		(1,166)	(150)	(46)
Profit before tax and finance		213,665	380,256	758,528
Finance income		1,465	1,401	2,511
Finance expense		(46,089)	(35,073)	(68,205)
Non-operating foreign exchange gains/(losses)	8	306	5,427	(1,934)
Profit before tax		169,347	352,011	690,900
Income tax expense		(23,709)	(58,082)	(115,964)
Profit for the period/year		145,638	293,929	574,936
Attributable to:
Equity shareholders of Ferrexpo plc		144,808	291,122	567,822
Non-controlling interests		830	2,807	7,114
		145,638	293,929	574,936
Earnings per share:
Basic (US cents)	10	24.76	49.80	97.09
Diluted (US cents)	10	24.73	49.73	96.67

Interim Consolidated Statement of Comprehensive Income

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Profit for the period/year	145,638	293,929	574,936
Exchange differences on translating foreign operations	(404)	(1,373)	(3,024)
Income tax effect	-	-	-
Exchange differences on hedging of foreign operations	(406)	(212)	(894)
Income tax effect	61	35	153
Net gains/(losses) on available-for-sale investments	(120)	(794)	(1,868)
Income tax effect	25	85	437
Other comprehensive income for the period/year, net of tax	(844)	(2,259)	(5,196)
Total comprehensive income for the period/year, net of tax	144,794	291,670	569,740
Total comprehensive income attributable to:
Equity shareholders of Ferrexpo plc	143,983	288,905	562,883
Non-controlling interests	811	2,765	6,857
	144,794	291,670	569,740

Interim Consolidated Statement of Financial Position

		As at	As at	As at
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Assets
Property, plant and equipment	11	1,125,854	754,520	924,690
Goodwill and other intangible assets	18	104,048	102,260	103,240
Investments in associates		19,609	20,623	19,186
Available-for-sale financial assets	17	759	2,336	1,290
Other non-current assets		83,468	25,490	93,358
Other taxes recoverable and prepaid	12	79,813	-	-
Deferred tax assets	18	21,645	14,973	23,426
Total non-current assets		1,435,196	920,202	1,165,190
Inventories		145,384	109,352	117,046
Trade and other receivables		103,772	120,679	128,905
Prepayments and other current assets	18	30,511	25,673	22,720
Income taxes recoverable and prepaid		29,294	294	384
Other taxes recoverable and prepaid	12	142,960	108,207	172,951
Cash and cash equivalents	13	715,871	945,146	890,154
		1,167,792	1,309,351	1,332,160
Assets classified as held for sale		1,663	3,026	1,845
Total current assets		1,169,455	1,312,377	1,334,005
Total assets		2,604,651	2,232,579	2,499,195
Equity and liabilities
Share capital		121,628	121,628	121,628
Share premium		185,112	185,112	185,112
Other reserves		(348,556)	(346,357)	(348,603)
Retained earnings		1,539,980	1,157,113	1,414,512
Equity attributable to equity shareholders of the parent		1,498,164	1,117,496	1,372,649
Non-controlling interests		20,955	16,244	20,480
Total equity		1,519,119	1,133,740	1,393,129
Interest-bearing loans and borrowings	3/14	947,679	531,855	951,430
Defined benefit pension liability		17,714	22,096	13,329
Provision for site restoration		3,134	2,803	3,015
Deferred tax liability		1,221	2,140	2,232
Total non-current liabilities		969,748	558,894	970,006
Interest-bearing loans and borrowings	3/14	18,735	387,901	18,948
Trade and other payables		47,042	53,575	42,648
Accrued liabilities and deferred income	18	33,318	21,332	29,713
Income taxes payable		8,424	64,817	36,674
Other taxes payable		8,265	12,320	8,077
Total current liabilities		115,784	539,945	136,060
Total liabilities		1,085,532	1,098,839	1,106,066
Total equity and liabilities		2,604,651	2,232,579	2,499,195

The financial statements were approved by the Board of Directors on 20 August 2012.

Interim Consolidated Statement of Cash Flows

		6 months	6 months	Year
		ended	ended	ended
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Profit before tax		169,347	352,011	690,900
Adjustments for:
Depreciation of property, plant and equipment and amortisation of intangible assets		24,045	19,733	41,003
Interest expense		42,760	32,127	62,321
Interest income		(1,465)	(1,401)	(2,511)
Share of income of associates		(424)	(1,700)	(2,012)
Movement in allowance for doubtful receivables		(651)	(2,681)	(2,406)
Loss on disposal of property, plant and equipment		1,166	150	46
Write-offs and impairment losses	9	518	198	478
Site restoration provision		117	58	269
Employee benefits		6,808	7,042	1,069
Share-based payments		872	416	891
Operating foreign exchange losses	8	465	567	1,360
Non-operating foreign exchange (gains)/losses	8	(306)	(5,427)	1,934
Operating cash flow before working capital changes		243,252	401,093	793,342
Changes in working capital:
Decrease/(increase) in trade and other receivables		17,706	(15,553)	(17,391)
Increase in inventories		(28,337)	(4,526)	(12,220)
Increase/(decrease) in trade and other accounts payable		10,427	1,139	(9,788)
Increase in VAT recoverable and other taxes prepaid		(62,859)	(6,163)	(72,051)
Cash generated from operating activities		180,189	375,990	681,892
Interest paid		(27,095)	(13,081)	(43,266)
Income tax paid		(81,140)	(36,887)	(132,176)
Post-employment benefits paid		(2,224)	(1,870)	(3,741)
Net cash flows from operating activities		69,730	324,152	502,709
Cash flows from investing activities
Purchase of property, plant and equipment		(220,823)	(120,183)	(378,302)
Purchase of intangible assets		(1,207)	(394)	(2,092)
Proceeds from disposal of property, plant and equipment		408	-	-
Interest received		1,589	1,038	2,067
Dividends from associates		1,749	-	2,207
Proceeds from loans to associates		-	1,000	1,000
Acquisition of subsidiaries, net of cash acquired		-	-	(390)
Cash payment for acquisition made in 2010		-	(38,045)	(38,045)
Net cash flows used in investing activities		(218,284)	(156,584)	(413,555)
Cash flows from financing activities
Proceeds from borrowings and finance		-	506,819	952,269
Repayment of borrowings and finance		(5,433)	(16,657)	(410,027)
Arrangement fees paid		-	(12,223)	(21,021)
Dividends paid to equity shareholders of Ferrexpo plc		(19,340)	(19,362)	(38,663)
Dividends paid to non-controlling shareholders		(634)	(322)	(880)
Net cash flows from financing activities		(25,407)	458,255	481,678
Net (decrease)/increase in cash and cash equivalents		(173,961)	625,823	570,832
Cash and cash equivalents at the beginning of the period/year		890,154	319,471	319,471
Currency translation differences		(322)	(148)	(149)
Cash and cash equivalents at the end of the period/year	13	715,871	945,146	890,154

Interim Consolidated Statement of Changes in Equity

For the financial year 2011 and the six months ended 30 June 2012

	Attributable to equity shareholders of the parent
					Employee	Net
			Uniting of	Treasury	benefit	unrealised				Non-
	Issued	Share	interest	share	trust	gains	Translation	Retained	Total capital	controlling
US$000	capital	premium	reserve	reserve	reserve	reserve	reserve	earnings	and reserves	interests	Total equity
At 1 January 2011	121,628	185,112	31,780	(77,260)	(10,172)	2,515	(291,283)	885,353	847,673	13,801	861,474
Profit for the period	-	-	-	-	-	-	-	567,822	567,822	7,114	574,936
Other comprehensive income	-	-	-	-	-	(1,431)	(3,508)	-	(4,939)	(257)	(5,196)
Total comprehensive
income for the period	-	-	-	-	-	(1,431)	(3,508)	567,822	562,883	6,857	569,740
Equity dividends paid
to shareholders of
Ferrexpo plc	-	-	-	-	-	-	-	(38,663)	(38,663)	(322)	(38,985)
Share-based payments	-	-	-	-	756	-	-	-	756	-	756
Adjustments relating to the
increase in non-controlling
interests	-	-	-	-	-	-	-	-	-	144	144
At 31 December
2011 (audited)	121,628	185,112	31,780	(77,260)	(9,416)	1,084	(294,791)	1,414,512	1,372,649	20,480	1,393,129
Profit for the period	-	-	-	-	-	-	-	144,808	144,808	830	145,638
Other comprehensive income	-	-	-	-	-	(95)	(730)	-	(825)	(19)	(844)
Total comprehensive
income for the period	-	-	-	-	-	(95)	(730)	144,808	143,983	811	144,794
Equity dividends paid
to shareholders of
Ferrexpo plc	-	-	-	-	-	-	-	(19,340)	(19,340)	(336)	(19,676)
Share-based payments	-	-	-	-	872	-	-	-	872	-	872
At 30 June 2012 (unaudited)	121,628	185,112	31,780	(77,260)	(8,544)	989	(295,521)	1,539,980	1,498,164	20,955	1,519,119

For the six months ended 30 June 2011

	Attributable to equity shareholders of the parent
					Employee	Net
			Uniting of	Treasury	benefit	unrealised			Total	Non-
	Issued	Share	interest	share	trust	gains	Translation	Retained	capital and	controlling
US$000	capital	premium	reserve	reserve	reserve	reserve	reserve	earnings	reserves	interests	Total equity
At 1 January 2011	121,628	185,112	31,780	(77,260)	(10,172)	2,515	(291,283)	885,353	847,673	13,801	861,474
Profit for the period	-	-	-	-	-	-	-	291,122	291,122	2,807	293,929
Other comprehensive income	-	-	-	-	-	(708)	(1,509)	-	(2,217)	(42)	(2,259)
Total comprehensive
income for the period	-	-	-	-	-	(708)	(1,509)	291,122	288,905	2,765	291,670
Equity dividends paid
to shareholders of
Ferrexpo plc	-	-	-	-	-	-	-	(19,362)	(19,362)	(322)	(19,684)
Share-based payments	-	-	-	-	280	-	-	-	280	-	280
At 30 June 2011 (unaudited)	121,628	185,112	31,780	(77,260)	(9,892)	1,807	(292,792)	1,157,113	1,117,496	16,244	1,133,740

Notes to the Interim Condensed Consolidated Financial Statements

Note 1: Corporate information

Organisation and operation

Ferrexpo plc (the 'Company') is incorporated in the United Kingdom with registered office at 2-4 King Street, London, SW1Y 6QL, UK. Ferrexpo plc and its subsidiaries (the 'Group') operate a mine and processing plant near Kremenchuk in Ukraine, an interest in a port in Odessa and sales and marketing activities in Switzerland, Dubai and Kiev. The Group also owns a logistic group located in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways. The Group's operations are vertically integrated from iron ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group's mineral properties lie within the Kremenchuk Magnetic Anomaly and are currently being exploited at the Gorishne-Plavninsky and Lavrikovsky deposits. These deposits are being jointly mined as one mining complex.

The majority shareholder of the Group is Fevamotinico S.a.r.l. ('Fevamotinico'), a company ultimately owned by The Minco Trust, of which Kostyantin Zhevago, the Group's Chief Executive Officer, is a beneficiary. At the time this report was published, Fevamotinico held 51.0% (30 June 2011: 51.0%; 31 December 2011: 51.0%) of Ferrexpo plc's issued share capital. The Group's operations are largely conducted through Ferrexpo plc's principal subsidiary, OJSC Ferrexpo Poltava Mining and logistics for Western Europe are managed through the Helogistics subsidiaries. The Group comprises of Ferrexpo plc and its consolidated subsidiaries as set out below:

			Equity interest owned at
	Country of		30.06.12	30.06.11	31.12.11
Name	incorporation	Principal activity	%	%	%
OJSC Ferrexpo Poltava Mining¹	Ukraine	Iron ore mining	97.3	97.3	97.3
Ferrexpo AG²	Switzerland	Sale of iron ore pellets	100.0	100.0	100.0
DP Ferrotrans²	Ukraine	Trade, transportation services	97.3	97.3	97.3
United Energy Company LLC³	Ukraine	Holding company	97.3	97.3	97.3
Ferrexpo Finance plc¹	England	Finance	100.0	100.0	100.0
Ferrexpo Services Limited¹	Ukraine	Management services & procurement	100.0	100.0	100.0
Ferrexpo Hong Kong Limited¹	China	Marketing services	100.0	100.0	100.0
LLC Ferrexpo Yeristovo GOK⁴	Ukraine	Iron ore mining	100.0	100.0	100.0
LLC Ferrexpo Belanovo GOK⁴	Ukraine	Iron ore mining	100.0	100.0	100.0
Nova Logistics Limited³	Ukraine	Service company (dormant)	51.0	51.0	51.0
Ferrexpo Middle East FZE⁶	U.A.E.	Sale of iron ore pellets	100.0	100.0	100.0
Ferrexpo Singapore PTE Ltd⁶	Singapore	Marketing services	100.0	100.0	100.0
Helogistics Holding GmbH⁵	Austria	Holding company	100.0	100.0	100.0
EDDSG GmbH⁵	Austria	Barging company	100.0	100.0	100.0
DDSG Tankschiffahrt GmbH⁵	Austria	Barging company	100.0	100.0	100.0
Helogistics Transport GmbH⁵	Austria	Barging company	100.0	100.0	100.0
Mahart Duna Cargo Kft.⁵	Hungary	Barging company	100.0	100.0	100.0
Pancar Kft.⁵	Hungary	Barging company	100.0	100.0	100.0
Ferrexpo Port Services GmbH⁷	Austria	Port Services	100.0	100.0	100.0
Helogistics Asset Leasing Kft.⁷	Hungary	Asset holding company	100.0	-	100.0
Ferrexpo Shipping International Limited⁸	Marshall Islands	Holding company	100.0	-	100.0
Iron Destiny Limited⁸	Marshall Islands	Shipping company	100.0	-	100.0
Transcanal SRL⁹	Romania	Port services	77.6	-	77.6

1 The Group's interest in these entities is held through Ferrexpo AG.

2 Ferrexpo AG was the holding company of the Group until, as a result of the pre-IPO restructuring, Ferrexpo plc became the holding company on 24 May 2007.

3 The Group's interest in these entities is held through OJSC Ferrexpo Poltava Mining.

4 The Group's interest in this entity is held through both Ferrexpo AG and Ferrexpo Service Limited.

5 The Group's interest in these entities is held through Ferrexpo AG. The Helogistics Holding GmbH and its subsidiaries were acquired in December 2010.

6 Both subsidiaries were incorporated in March 2011. The Group's interest in Ferrexpo Middle East FZE is held by Ferrexpo AG whereas Ferrexpo Singapore PTE Ltd is a subsidiary of Ferrexpo Middle East FZE.

7 The subsidiaries were incorporated in April 2011 and December 2011. The Group's interest is held through Helogistics Holding GmbH.

8 The subsidiaries were incorporated on 14 July 2011.

9 The company was acquired on 1 October 2011.

At 30 June 2012, the Group also holds through OJSC Ferrexpo Poltava Mining an interest of 48.6% (30 June 2011: 48.6%; 31 December 2011: 48.6%) in TIS Ruda, a Ukrainian port located on the Black Sea. As this is an associate, it is accounted for using the equity method of accounting.

Note 2: Summary of significant accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2012 have been prepared in accordance with International Accounting Standard ('IAS') 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2011.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial year ended 31 December 2011. A copy of the statutory accounts for that year, which were prepared in accordance with International Financial Reporting Standards ('IFRS') issued by the International Accounting Standard Board ('IASB'), as adopted by the European Union as they apply to financial statements of the Group for the year ended 31 December 2011, has been delivered to the Register of Companies. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Financing and going concern

At the period end, the Group's main debt facilities comprised a US$500 million Eurobond which is due for repayment on 7 April 2016 and a US$420 million revolving pre-export finance facility including a commitment amortisation over a 24 month period from September 2014 to August 2016. The Group is of the view that it can generate sufficient cash flows to fully repay the borrowings as they fall due in compliance with the terms and conditions of the loan facility and Eurobond terms and conditions.

The Group faces several risks to its business and strategy, which are included in the Principle Risks section of the Annual Report and Accounts 2011.

The Directors are of the view that the Group is a going concern and the interim consolidated financial statements have been drawn up on this basis.

Changes in accounting policies

The accounting policies and methods of computation adopted in the preparation of the interim condensed consolidated financial statements are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011 except for the adoption of new amendments to IFRSs as of 1 January 2012, noted below:

IAS 12 Income taxes - recovery of underlying assets

The amendment to the standard was issued in December 2010 and became effective for financial years beginning on or after 1 January 2012. The amendment provides an exception to the general principle of measuring deferred taxes for investment properties measured at fair value and introduces a rebuttable presumption that the carrying amount of such assets will be recovered entirely through sale. The adoption of this amended standard did not have an impact on the financial position or performance of the Group.

IFRS 1 First-time adoption of IFRS - severe hyperinflation and removal of fixed dates for first time adopters

The amendments were issued in December 2010 and became effective for annual periods beginning on or after 1 July 2011. The amendments to IFRS 1 provide guidance for entities emerging from severe hyperinflation and replace the date of prospective application of the derecognition of financial assets and liabilities of '1 January 2004' with 'the date of transition to IFRS'. Both amendments did not have an impact on the financial position or performance of the Group.

IFRS 7 Financial instruments: disclosures - transfer of financial assets

The amendment to IFRS became effective for financial years beginning on or after 1 July 2011. The amendment requires the disclosure of information that enables the users of the financial statements to understand the relationship between transferred financial assets that are not derecognised in their entirety and the associated liabilities as well as, in the case of fully derecognised financial assets in which the entity retains continuing involvement, information to evaluate the nature of, and associated risks with continuing involvement in the derecognised financial assets. The application of this amendment did not have impact on the financial statements of the Group.

Seasonality

The Group's operations are not affected by seasonality.

Note 3: Segment information

The Group is managed as a single entity which produces, develops and markets its principal product, iron ore pellets, for sale to the metallurgical industry. While the revenue generated by the Group is analysed, there are no separate measures of profit reported to the Group's Chief Operating Decision-Maker ('CODM'). In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment which are disclosed in the income statement for the Group.

The management monitors the operating result of the Group based on a number of measures including EBITDA, 'C1' costs and the net financial indebtedness.

EBITDA

The Group presents EBITDA¹ because it believes that EBITDA is a useful measure for evaluating its ability to generate cash and its operating performance.

		6 months	6 months	Year
		ended	ended	ended
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Profit before tax and finance		213,665	380,256	758,528
Write-offs and impairment losses	9	518	198	478
Share-based payments		872	416	891
Losses on disposal of property, plant and equipment		1,166	150	46
Depreciation and amortisation		24,045	19,733	41,003
EBITDA		240,266	400,753	800,946

¹ EBITDA - the Group calculates EBITDA as profit from continuing operations before tax and finance plus depreciation and amortisation and non-recurring exceptional items included in other income and other expenses, and the net of gains and losses from disposal of investments, property, plant and equipment.

'C1' costs

'C1' costs represent the cash costs of production of iron ore pellets from own ore divided by production volume of own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore and concentrate and production cost of gravel.

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Cost of sales - pellet production	298,517	280,822	600,790
Depreciation and amortisation	(17,208)	(13,628)	(28,639)
Purchased concentrate and other items for resale	(13,156)	(48,817)	(102,908)
Processing costs for purchased ore and concentrate	(1,683)	(3,901)	(7,873)
Production cost of gravel	(384)	(178)	(572)
Inventory movements	18,458	3,374	481
Pension service costs	(3,128)	(2,630)	5,334
Other	(5,597)	(3,276)	(7,099)
C1 cost	275,819	211,766	459,514
Own ore produced (tonnes)	4,563,000	4,394,000	9,063,398
C1 cash cost per tonne (US$)	60.4	48.2	50.7

Net financial indebtedness

Net financial indebtedness as defined by the Group comprises cash and cash equivalents, term deposits, interest bearing loans and borrowings.

		As at	As at	As at
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Cash and cash equivalents	13	715,871	945,146	890,154
Interest bearing loans and borrowings - current	15	(18,735)	(387,901)	(18,948)
Interest bearing loans and borrowings - non-current	15	(947,679)	(531,855)	(951,430)
Net (financial indebtedness)/net funds position		(250,543)	25,390	(80,224)

Note 4: Revenue

Revenue consisted of the following:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Revenue from sales of ore pellets:
Export	685,323	811,114	1,699,154
Ukraine	194	279	742
	685,517	811,393	1,699,896
Revenue from logistics and bunker business	39,051	36,550	73,276
Revenue from services provided	1,747	853	4,092
Revenue from other sales	4,940	6,068	10,748
Total revenue	731,255	854,864	1,788,012

Export sales by geographical destination were as follows:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
China	262,609	240,327	569,924
Austria	196,743	232,205	453,586
Slovakia	69,118	50,891	121,041
Czech Republic	64,416	61,226	119,793
Turkey	36,170	28,136	83,722
Serbia	19,723	115,955	158,687
Japan	16,440	33,304	88,875
Germany	10,310	-	28,898
India	7,731	37,653	47,119
Hungary	2,063	9,125	27,509
Other	-	2,292	-
Total export revenue	685,323	811,114	1,699,154

During the period ended 30 June 2012 sales made to three customers accounted for approximately 48.2% of the revenues from export sales of ore pellets (30 June 2011: 53.8%; 31 December 2011: 50.2%).

Sales made to two customers individually amounted to more than 10% of the revenues from export sales of ore pellets. These are disclosed below:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Customer A	196,743	232,205	453,586
Customer B	69,118	166,846	279,728

Note 5: Cost of sales

Cost of sales consisted of the following:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Materials	45,664	37,094	75,246
Purchased concentrate and other items for resale	13,156	48,817	102,908
Electricity	71,101	58,286	121,364
Personnel costs	35,637	28,887	51,677
Spare parts and consumables	12,364	9,013	20,968
Depreciation and amortisation	17,208	13,628	28,639
Gas	39,958	27,989	63,485
Fuel	27,044	21,321	47,343
Repairs and maintenance	34,714	28,291	63,801
Royalties and levies	6,272	5,093	10,437
Cost of sales from logistics business	12,345	11,657	23,363
Bunker fuel	12,415	9,636	25,391
Inventory movements	(18,458)	(3,374)	(481)
Other	13,857	5,777	15,403
Total cost of sales	323,277	302,115	649,544

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Cost of sales - pellet production	298,517	280,822	600,790
Cost of sales - logistics and bunker business	24,760	21,293	48,754
Total cost of sales	323,277	302,115	649,544

Note 6: Selling and distribution expenses

Selling and distribution expenses consisted of the following:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
International freight for pellets	56,032	53,283	119,572
Railway transportation	47,896	42,692	89,185
Port charges	16,823	17,594	37,724
Other pellet transportation costs	8,447	5,245	13,453
Costs of logistics business	13,129	16,053	36,671
Gravel delivery costs	200	1,321	1,783
Advertising	4,918	3,371	6,911
Depreciation	4,279	3,997	8,231
Other	3,243	2,620	4,421
Total selling and distribution expenses	154,967	146,176	317,951

Note 7: General and administrative expenses

General and administrative expenses consisted of the following:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Personnel costs	15,056	14,881	26,912
Buildings and maintenance	1,278	1,081	2,182
Taxes other than income tax and other charges	734	747	1,480
Professional fees	3,633	2,752	7,799
Depreciation and amortisation	2,255	2,024	3,968
Communication	503	545	1,149
Vehicles maintenance and fuel	905	751	1,553
Repairs	619	375	1,365
Half year review fees	184	184	184
Audit fees	659	550	1,261
Non-audit fees	260	253	510
Security	1,114	856	1,859
Other	2,101	480	1,747
Total general and administrative expenses	29,301	25,479	51,969

Note 8: Foreign exchange gains and losses

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Operating foreign exchange losses	(465)	(567)	(1,360)
Non-operating foreign exchange gains/(losses)	306	5,427	(1,934)
Total foreign exchange gains/(losses)	(159)	4,860	(3,294)

Operating foreign exchange gains and losses are those items that are directly related to the production and sale of pellets (e.g. trade receivables, trade payables on operating expenditure). Non-operating gains and losses are those associated with the Group's financing and treasury activities and with local income tax payables.

Note 9: Write-offs and impairment losses

Impairment losses relate to adjustments made against the carrying value of assets where this is higher than the recoverable amount. Write-offs and impairment losses for the six months ended 30 June 2012 consisted of the following:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Write-off of inventories	-	-	105
Write-off of property, plant and equipment	90	-	175
Impairment of available-for-sale financial assets	428	198	198
Total write-offs and impairment losses	518	198	478

The impairment of the available-for-sale financial assets is related to the investment in Vostok Ruda LLC.

Note 10: Earnings per share and dividends paid and proposed

Basic EPS is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of Ferrexpo plc by the weighted average number of Ordinary Shares.

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares in issue on the assumption of conversion of all potentially dilutive Ordinary Shares. All share awards are potentially dilutive and have been included in the calculation of diluted earnings per share.

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
	(unaudited)	(unaudited)	(audited)
Profit for the period/year attributable to equity shareholders:
Basic earnings per share (US cents)	24.76	49.80	97.09
Diluted earnings per share (US cents)	27.73	49.73	96.67
Underlying earnings for the period/year attributable to equity shareholders:
Basic earnings per share (US cents)	24.98	49.04	97.47
Diluted earnings per share (US cents)	24.95	48.97	97.35

The calculation of the basic and diluted earnings per share is based on the following data:

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
Thousand	(unaudited)	(unaudited)	(audited)
Weighted average number of shares
Basic number of Ordinary Shares outstanding	585,001	584,742	584,811
Effect of dilutive potential Ordinary Shares	799	667	730
Diluted number of Ordinary Shares outstanding	585,800	585,409	585,541

The basic number of Ordinary Shares is calculated by subtracting the shares held in treasury from the total number of Ordinary Shares in issue.

'Underlying earnings' is an alternative earnings measure, which the Directors believe provides a clearer picture of the underlying financial performance of the Group's operations. Underlying earnings is calculated before non-controlling interests have been deducted and excludes adjusted items. The calculation of underlying earnings per share is based on the following earnings data:

		6 months	6 months	Year
		ended	ended	ended
		30.06.12	30.06.11	31.12.11
US$000	Notes	(unaudited)	(unaudited)	(audited)
Profit attributable to equity holders		144,808	291,122	567,822
Write-offs and impairment losses	9	518	198	478
Losses on disposal of property, plant and equipment		1,166	150	46
Non-operating foreign exchange (gains)/losses	8	(306)	(5,427)	1,934
Tax on adjusted items		(98)	639	(282)
Underlying earnings		146,088	286,682	569,998

Adjusted items are those items of financial performance that the Group believes should be separately disclosed on the face of the income statement to assist in the understanding of the underlying financial performance achieved by the Group. Adjusted items that relate to the operating performance of the Group include impairment charges and reversals and other exceptional items. Non-operating adjusted items include gains and losses on disposal of investments and businesses and non-operating foreign exchange gains and losses.

Dividends

	6 months	6 months	Year
	ended	ended	ended
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Proposed per Ordinary Share
Interim dividend for 2012: 3.3 US cents	19,309	-	-
Interim dividend for 2011: 3.3 US cents	-	19,301	-
Final dividend for 2011: 3.3 US cents	-	-	19,301
Total dividends proposed	19,309	19,301	19,301
Paid per Ordinary Share
Final dividend for 2011: 3.3 US cents	19,340	-	-
Interim dividend for 2011: 3.3 US cents	-	-	19,301
Final dividend for 2010: 3.3 US cents	-	19,362	19,362
Total dividends paid during the period	19,340	19,362	38,663

Note 11: Property, plant and equipment

During the six months ended 30 June 2012, the Group acquired property, plant and equipment with a cost of US$228,665 thousand (30 June 2011: US$136,129 thousand; 31 December 2011: US$334,666 thousand) and disposed of property, plant and equipment with original costs of US$5,793 thousand (30 June 2011: US$8,461 thousand; 31 December 2011: US$5,796 thousand).

Note 12: Other taxes recoverable and prepaid

	As at	As at	As at
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
VAT receivable	142,378	107,671	172,434
Other taxes prepaid	582	536	517
Total other taxes recoverable and prepaid - current	142.960	108,207	172,951
VAT receivable	79,813	-	-
Total other taxes recoverable and prepaid - non-current	79,813	-	-

VAT receivable is as a result of VAT paid on domestic Ukrainian purchases of goods capital equipment and services and on the import of goods, capital equipment and services into Ukraine to the extent that this cannot be offset on VAT paid on domestic sales. Ferrexpo currently has limited domestic sales and exports the majority of its products. As a result, VAT has to be recovered from the Government tax authority and Ferrexpo is reliant on the normal functioning of this system.

During the six month period ended 30 June 2012, FPM received VAT refunds in respect of 2011 and 2012 amounting to US$39,585 thousand and paid Ukrainian VAT amounting to US$104,260 thousand, including US$19,764 thousand in respect of capital expenditure. As a result the gross recoverable balance increased by US$59,783 thousand to US$231,437 thousand (UAH1,850 million).

Management expects this amount to be fully recovered in local currency. However, the exact timing of recovery and method of settlement is subject to uncertainties, along with the prevailing exchange rate to the US Dollar at the time of repayment. In the past, VAT has been recovered in cash and by the issuance of domestic local currency bonds. An alternative method of settlement could be to offset amounts recoverable against current and future corporate profit tax. A financial loss could result, for example from the issuance of bonds which trade at a discount at the time of issue; continued late repayment as a result of Government fiscal constraints diminishing the present value of the receivable, or the conversion to US Dollar of local currency received at a different exchange rate to that recorded at the time of payment.

Management has considered these uncertainties including potential continued International Monetary Fund support for the Ukrainian national budget, domestic economic and budgetary constraints, and current discussions with fiscal authorities in making an estimate of the timing of recovery of the VAT due. Although in the opinion of management, all VAT is due for repayment within the next six months with the majority due immediately, it has concluded that a large portion of the VAT is likely to be repaid considerably beyond the settlement terms which will result in additional funding costs for the Group. As a result, an estimated provision of US$13,224 thousand has been made to reflect this uncertainty and its effect is included in finance expense. Based on current management estimates, US$138,400 thousand of VAT will be recoverable within one year of the period end, with the remainder, amounting to US$79,813 thousand, net of the associated discount to reflect the time value of money, recoverable after more than one year of the period end.

Note 13: Cash and cash equivalents

As at 30 June 2012 the Group held cash and cash equivalents of US$715,871 thousand (30 June 2011: US$945,146 thousand; 31 December 2011: US$890,154 thousand).

Note 14: Interest bearing loans and borrowings

As at 30 June 2012 the Group has in place a syndicated US$420 million revolving pre-export finance facility and a US$500 million Eurobond.

The revolving pre-export finance facility was drawn in full on 7 October 2011. This finance facility is available for 60 months including a commitment amortisation over the final 24 months. The maturity is 31 August 2016.

As at 30 June 2012 the major bank debt facility was guaranteed and secured as follows:

■Ferrexpo AG assigned the rights to revenue from certain sales contracts;

■OJSC Ferrexpo Poltava Mining assigned all of its rights of certain export contracts for the pellets sales to Ferrexpo AG; and

■the Group pledged a bank account of Ferrexpo AG into which all proceeds from the sale of certain iron ore pellet contracts are received.

The unsecured US$500 million Eurobond was issued on 7 April 2011 and is due for repayment on 7 April 2016. The bond has a 7.875% coupon and interest is payable on a semi-annual basis.

As at 30 June 2012, the Group has other committed credit lines amounting to US$72,000 thousand (30 June 2011: US$50,000 thousand; 31 December 2011: US$50,000 thousand). These are undrawn at 30 June 2012.

Note 15: Related party disclosure

During the periods presented the Group entered into arm's length transactions with entities under the common control of the majority owner of the Group, Kostyantin Zhevago and with associated companies and with other related parties. Management considers that the Group has appropriate procedures in place to identify and properly disclose transactions with the related parties.

Entities under common control are those under the control of Kostyantin Zhevago. Associated companies refers to TIS Ruda LLC, in which the Group holds an interest of 48.6%. This is the only associated company of the Group. Other related parties are principally those entities controlled by Anatoly Trefilov and Olexander Moroz. Anatoly Trefilov is a member of the supervisory board of OJSC Ferrexpo Poltava Mining from which Olexander Moroz resigned as of 14 May 2010. All transactions taking place up to 31 May 2011, being within one year of his resignation from the supervisory board, are considered to be transactions with a related party and thus included in the disclosures made for the comparative period.

Related party transactions entered into by the Group during the periods presented are summarised in the following tables:

Revenue, expenses, finance income and expenses

	6 months ended 30.06.12			6 months ended 30.06.11			Year ended 31.12.11
	(unaudited)			(unaudited)			(audited)
	Entities			Entities			Entities
	under		Other	under		Other	under		Other
	common	Associated	related	common	Associated	related	common	Associated	related
US$000	control	companies	parties	control	companies	parties	control	companies	parties
Other sales^a	939	-	50	2,618	-	1,735	6,718	-	1,783
Total related party transactions
within revenue	939	-	50	2,618	-	1,735	6,718	-	1,783
Materials^b	2,720	-	-	1,855	-	8,475	4,638	-	8,475
Purchased concentrate and other
items for resale^c	11,370	-	-	17,452	-	-	24,891	-	-
Spare parts and consumables^d	3,343	-		1,967	-	256	4,726	-	256
Fuel^e	1,374	-	-	3,798	-	-	7,980	-	-
Gas^e	-	-	-	7,741	-	-	15,455	-	-
Total related party transactions
within cost of sales	18,807	-	-	32,813	-	8,731	57,690	-	8,731
Selling and distribution expenses^f	-	10,059	4,834	-	5,232	8,909	-	16,674	13,470
General and administration
expenses^g	5,653	-	11	4,011	-	4	7,767	-	15
Total related party transactions
within expenses	24,460	10,059	4,845	36,824	5,232	17,644	65,457	16,674	22,216
Finance income^h	474	-	-	584	9	-	899	9	-
Finance expenses^h	(1,137)	-	-	(200)	-	-	(411)	-	-
Net related party finance income/
(expenses)	(663)	-	-	384	9	-	488	9	-

Entities under common control

The Group entered into various related party transactions with entities under common control. A description of the material transactions, all of which were carried out on an arm's length basis in the normal course of business for the members of the Group (see note 1), are listed below:

a Sales of power, steam and water and other materials to Kislorod PCC for US$289 thousand (30 June 2011: US$803 thousand; 31 December 2011: US$2,128 thousand). Revenue of US$500 thousand was received from Vorskla Steel Ltd. for the sale of sand (30 June 2011: US$18 thousand; 31 December 2011: US$548 thousand). Other sales as of 31 December 2011 comprised tolling fees of US$2,622 thousand paid by Vostok Ruda Ltd. to OJSC Ferrexpo Poltava Mining for the production of pellets. No pellets were produced under the tolling scheme in the first six months of the financial year 2012 (30 June 2011: US$315 thousand).

b Purchases of compressed air and oxygen from Kislorod PCC for US$2,348 thousand (30 June 2011: US$1,855 thousand; 31 December 2011: US$4,033 thousand).

c Purchases of concentrate and other items for resale from Vostok Ruda Ltd. amounting to US$11,370 thousand (30 June 2011: US$9,994 thousand; 31 December 2011: US$12,728 thousand).

c No purchases of merchant concentrate from Vostok Ruda Ltd. as of 30 June 2012 were made (30 June 2011: US$7,458 thousand; 31 December 2011: US$7,458 thousand). Vostock Ruda Ltd. earned no fees for the period to 30 June 2012. Fees on the purchase and resale for concentrate amounting to US$6 thousand were received as of 30 June 2011 (31 December 2011: US$10 thousand). This covered costs incurred in procuring and delivering third party merchant concentrate supplied.

c Handling commissions to SIA Wellmark Latvia amounting to US$25 thousand as of 30 June 2011 for the purchase of goods. No handling commissions were paid for the period to 30 June 2012 (31 December 2011: US$35 thousand).

d Purchases of spare parts from AutoKraZ Holding Co. in the amount of US$2,316 thousand (30 June 2011: nil; 31 December 2011: US$1,456 thousand);

d Purchases of spare parts from OJSC Berdichev Machine-Building Plant Progress of US$249 thousand (30 June 2011: US$448 thousand; 31 December 2011: US$1,017 thousand);

d Purchases of spare parts from Valsa GTV of US$161 thousand (30 June 2011: US$370 thousand; 31 December 2011: US$541 thousand); and

d Purchase of spare parts from Komsomolsk Cogeneration Company LLC in the amount of US$736 thousand as of 31 December 2011. No procurement from Komsomolsk Company LLC were made in the period to 30 June 2012 (30 June 2011: US$736 thousand).

e Purchases of fuel for US$1,374 thousand (30 June 2011: US$3,798 thousand; 31 December 2011: US$7,980 thousand) from OJSC Ukrzakordongeologia. No procurement of gas was made during the first six months of the financial year 2012 from OJSC Ukrzakordongeologia (30 June 2011: US$7,741 thousand; 31 December 2011: US$15,455 thousand).

g Purchases from FC Vorskla for advertisement, marketing and general public relations services for the period to 30 June 2012 of US$4,749 thousand (30 June 2011: US$3,184 thousand; 31 December 2011: US$6,536 thousand).

h Transactional banking services are provided to certain subsidiaries of the Group by Bank Finance & Credit (Bank F&C) Finance income and expenses relate to these transactional banking services. Further information is provided under transactional banking arrangements below.

Associated companies

The Group entered into related party transactions with its Associated Company TIS Ruda LLC, which were carried out on an arm's length basis in the normal course of business for the members of the Group (see note 1). These are described below:

f Purchases of logistics services in the amount of US$11,003 thousand (30 June 2011: US$6,039 thousand; 31 December 2011: US$16,674 thousand) relating to port operations, including port charges, handling costs, agent commissions and storage costs.

Other related parties

The Group entered into various transactions with related parties other than those under the control of the majority owner of the Group. Descriptions of the material transactions are below:

a Sales of scrap metal to Ferrolit amounting to US$1,201 thousand and other sales of US$509 thousand as of 31 December 2011 and 30 June 2011. Ferolit is no longer a related party to the Group due to the resignation of Olexander Moroz as supervisory board member of OJSC Ferrexpo Poltava Mining in May 2010.

b Purchases of cast iron grinding bodies from Ferolit for US$8,475 thousand as of 31 December 2011 and 30 June 2011. As noted above, Ferolit is no longer a related party to the Group.

f Purchases of logistics management services from Slavutich Ruda Ltd relating to customs clearance services and the coordination of rail transit. Total billings amounted to US$4,692 thousand (30 June 2011: US$8,901 thousand; 31 December 2011: US$13,470 thousand). Slavutich Ruda Ltd. earned commission income of US$436 thousand on these services (30 June 2011: US$405 thousand; 31 December 2011: US$809 thousand).

g Purchases of legal services from Kuoni Attorneys at Law Ltd. amounting to US$11 thousand as of 30 June 2012 (30 June 2011: US$4 thousand; 31 December 2011: US$12 thousand). No services were provided by Wolfram Kuoni directly. All services were provided on an arm's length basis by other employees of Kuoni Attorneys at Law Ltd.

Purchases of property, plant, equipment

	6 months ended 30.06.12			6 months ended 30.06.11			Year ended 31.12.11
	(unaudited)			(unaudited)			(audited)
	Entities			Entities			Entities
	under		Other	under		Other	under		Other
	common	Associated	related	common	Associated	related	common	Associated	related
US$000	control	companies	parties	control	companies	parties	control	companies	parties
Purchases with independent confirmation	778	-	-	11,239	-	-	14,655	-	-
Purchases with shareholder approval	27,689	-	-	8,036	-	-	13,167	-	-
Total purchase of property, plant and equipmentⁱ	28,467	-	-	19,275	-	-	27,822	-	-

i During the first six months of the financial year 2012, the Group entered into the following transactions with related parties that were not of a revenue nature, but were in the normal course of business. As such, these transactions were, in so far as they exceeded the relevant aggregated threshold tests on a rolling annual basis, subject to independent confirmation that the terms are fair and reasonable in accordance with the requirements of the UK Listing Rules.

■ In February 2012, the Group procured design documentation from OJSC DIOS in the amount of US$21 thousand in relation to the construction of roads and loading facilities.

■ In March 2012, project management services in the amount of US$140 thousand were procured from Vorskla Steel Ltd. in connection with the construction of service facilities and technical design documentation amounting to US$618 thousand from OJSC DIOS related to the update of the beneficiation plant.

In addition to the transaction above, the Group obtained on 24 May 2012 shareholder approval for an option to purchase up to 500 rail cars from OJSC Stahanov Rail Cars Plant between the date of the approval and 31 December 2014. As of 30 June 2012, no rail cars have been ordered under this authority.

During period ended 30 June 2011, the Group entered into the following transactions with related parties that required independent confirmation in accordance with the requirements of the UK Listing Rules.

■ In June 2011, project management services in the amount of US$140 thousand were procured from Vorskla Steel Ltd. in connection with the construction of service facilities.

■ In May 2011, the Group entered into an agreement for the purchase of equipment for the crushing and beneficiation plants from CJSC Kiev Shipbuilding and Ship Repair Plant ('KSRSSZ') in the amount of US$493 thousand. Orders were also placed for three press-filters for US$8,991 thousand from OJSC Berdichev Machine-Building Plant Progress.

■ In April 2011, the Group entered into an agreement for engineering services to be provided by OJSC DIOS in the amount of US$1,650 thousand for the upgrade of the crushing and concentrating equipment.

The purchase of 400 rail cars, with an option to purchase an additional 600 rail cars, was approved by the general meeting of the shareholders on 15 March 2011. 712 rail cars were ordered under the authority of this shareholder approval during the financial year 2011 and 288 rail cars in 2012 bringing the total ordered to 1,000 units. As of 30 June 2012, 762 rail cars have been delivered under these orders and the remainder are expected to be delivered by the end of September 2012 bringing the total fleet of own rail cars to 1,933 units; not including 200 dumper rail cars previously used in the mine and related area and recently brought into service. Purchased rail cars under this authority amounting to US$27,689 thousand were put into operation during the period ended 30 June 2012 (30 June 2011: US$8,036 thousand; 31 December 2011: US$13,167 thousand).

During the second half of the financial year 2011, the Group entered into the following transactions with related parties that required independent confirmation in accordance with the requirements of the UK Listing Rules.

■ In December 2011, the Group purchased two dust filters from OJSC Berdichev Machine-Building Plant Progress for the pellet production plant amounting to US$438 thousand.

■ In November 2011, the Group entered into another agreement with OJSC DIOS for the procurement of engineering design services in the amount of US$739 thousand.

■ In September 2011, the Group purchased 12 dumper rail cars from OJSC Stahanov Rail Cars Plant in the amount of US$1,756 thousand.

■ In August 2011, design services in relation to the conversion of a vessel were provided by Zaliv Ship Design LLC in the amount of US$483 thousand.

Balances with related parties

The outstanding balances, as a result of transactions with related parties, for the periods presented are shown in the table below:

	6 months ended 30.06.12			6 months ended 30.06.11			Year ended 31.12.11
	(unaudited)			(unaudited)			(audited)
	Entities			Entities			Entities
	under		Other	under		Other	under		Other
	common	Associated	related	common	Associated	related	common	Associated	related
US$000	control	companies	parties	control	companies	parties	control	companies	parties
Investments available-for-sale^j	755	-	-	2,336	-	-	1,286	-	-
Prepayments for property, plant
and equipment^k	13,987	-	-	605	-	-	29,080	-	-
Total non-current assets	14,742	-	-	2,941	-	-	30,366	-	-
Trade and other receivables^l	1,817	526	4	2,160	2,205	9	1,262	1,981	6
Prepayments and other current assets^m	400	-	819	2,042	-	15	414	-	279
Cash and cash equivalentsⁿ	102,017	-	-	334,080	-	-	94,933	-	-
Total current assets	104,234	526	823	338,282	2,205	24	96,609	1,981	285
Trade and other payables^o	7,745	759	125	7,696	208	1,438	2,151	549	515
Current liabilities	7,745	759	125	7,696	208	1,438	2,151	549	515

Entities under common control

j The balance of the investments available-for sale comprised shareholdings in OJSC Stahanov Rail Cars Plant (3.14%) and Vostok Ruda Ltd. (1.10%). The ultimate beneficial owner of these companies is Kostyantin Zhevago. OJSC Stahanov Rail Cars Plant is further listed on the Ukrainian stock exchange. The changes of the values in the table above are related to fair value adjustments recorded during the respective reporting periods. The shareholdings for all investments remained unchanged during the periods disclosed above. The investment in Vostok Ruda Ltd. was subject to an impairment of US$430 thousand (30 June 2011: US$198 thousand recorded as of 30 June 2011.

k Prepayments outstanding of US$13,326 thousand in respect of key components for rail cars purchased from OJSC Stahanov Rail Cars Plant (30 June 2011: nil; 31 December 2011: US$28,705 thousand). Prepayments of US$373 thousand were made to DIOS (30 June 2011: US$372 thousand; 31 December 2011: US$302 thousand) for engineering design services. The remaining prepayments for rail cars will be offset on deliveries to be made by September 2012.

l As of 30 June 2012, trade and other receivables included outstanding amounts due from Vorskla Steel Ltd. of US$1,401 thousand (30 June 2011: US$133 thousand; December 2011: US$828 thousand) in relation to other sales and US$356 thousand (30 June 2011: US$289 thousand; 31 December 2011: US$349 thousand) from Kislorod PCC for the sale of power, steam and water.

m Prepayments and other current assets relate mainly to prepayments of US$169 thousand made to OJSC Berdichev Machine-Building Plant Progress for spare parts (30 June 2011: US$102 thousand; 31 December 2011: US$194 thousand) and US$135 thousand to ASK Omega for insurance premiums. The balance for the comparative period ended 30 June 2011 included advance payments of US$1,725 thousand to OJSC Ukrzakordongeologia for fuel (31 December 2011: nil). Advance payments are in the normal course of business as requested by any third party supplier in Ukraine.

n As of 30 June 2012, cash and cash equivalents with Bank F&C were US$102,017 thousand (30 June 2011: US$334,080 thousand; 31 December 2011: US$94,933 thousand). Further information is provided under Transactional banking arrangements below.

o Trade and other payables amounting to US$532 thousand for compressed air and oxygen purchased from Kislorod PCC (30 June 2011: US$448 thousand; 31 December 2011: US$535 thousand); US$1,072 thousand in relation to the purchase of rail cars from OJSC Stahanov Rail Cars Plant (30 June 2011: nil; 31 December 2011: nil); US$5,500 thousand to FC Vorskla for advertisement, marketing and general public relations services (30 June 2011: nil; 31 December 2011: nil). The balance of trade and other payables as of 31 December 2011 comprised US$1,276 thousand due to Vostok Ruda Ltd. and is related to purchased concentrate (30 June 2011: US$613 thousand).

Associated companies

l Other receivables of US$526 thousand as of 30 June 2012 relate to the provision of rail cars to TIS Ruda LLC for the storage of cargo at the port. The balance of US$2,205 thousand as of 30 June 2011 relates to dividend declared (31 December 2011: US$1,749 thousand). This dividend receivable as of 31 December 2011 was collected in the first two months of the financial year 2012.

Other related parties

m Prepayments and other current assets relate to advance payments of US$819 thousand to Slavutich Ruda Ltd. for distribution services (30 June 2011: US$14 thousand; 31 December 2011: US$279 thousand). Advance payments are in the normal course of business and are common for the provision of supplies in Ukraine.

o Trade and other payables amounting to US$125 thousand as of 30 June 2012 are in respect of distribution services provided by Slavutich Ruda Ltd. (30 June 2011: US$453 thousand; 31 December 2011: US$515 thousand). US$983 thousand of the balance of trade and other payables as of 30 June 2011 related to purchased material from Ferrolit, which is no longer a related party.

Transactional banking arrangements

The Group has transactional banking arrangements with Bank Finance & Credit ('Bank F&C') for its main day-to-day banking needs in Ukraine in the normal course of business. Bank F&C is under common control of the majority shareholder of Ferrexpo plc. In respect of these arrangements, finance income and finance costs as well as cash and cash equivalents at Bank F&C are disclosed in the tables above. The Group has an undrawn multicurrency revolving loan facility agreement with Bank F&C which will expire on 16 April 2013. The maximum limit of this undrawn facility is UAH80,000 thousand (US$10,009 thousand at the exchange rate as of 30 June 2012) at an interest rate for Ukrainian Hryvnia advances of 18% per annum. The total value of pledges for this loan facility is US$9,579 thousand.

Bank F&C provides mortgages and loans to employees of the Group for the acquisition, construction and renovation of apartments in Ukraine. This is part of a social loyalty programme started by the Group in December 2011 allowing certain employees of the Group to borrow at preferential interest rates. OJSC Ferrexpo Poltava Mining and LLC Ferrexpo Yeristovo GOK act as guarantors for the bank's loans to the employees of the Group and have deposited US$2,065 thousand at Bank F&C as security. The interest rate margin earned by Bank F&C covers the costs of administrating the mortgages and loans. Detailed information on the social loyalty programme is provided in the Corporate Social Responsibility Review section of the Annual Report and Accounts 2011.

Note 16: Commitments and contingencies

Commitments

	As at	As at	As at
	30.06.12	30.06.11	31.12.11
US$000	(unaudited)	(unaudited)	(audited)
Operating lease commitments	79,899	52,594	61,361
Capital commitments on purchase of PPE	145,692	99,040	137,029

Legal

In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.

The Group is currently involved in a share dispute which commenced in 2005 and which was disclosed and as relevant updated in the Group's 2007 Annual Report and Accounts and IPO and Eurobond prospectuses.

In 2005, a former shareholder of OJSC Ferrexpo Poltava Mining ('FPM') initiated legal proceedings against certain nominee companies that were ultimately controlled by Kostyantin Zhevago in order to seek the invalidation of the agreement related to the sale of a 40.19% stake in FPM sold to these nominee companies in 2002. The case was considered several times by different courts in Ukraine.

The current status of the dispute is set out below:

A final decision in the proceedings was taken by the Supreme Commercial Court of Ukraine on 21 April 2010 in favour of the claimant so that the agreements on the sale of the FPM shares were recognised as invalid on the grounds of formal defects under Ukrainian law. On 6 October 2011, the claimants filed a new court claim in Ukraine with the intention to invalidate the decision of the general shareholders meeting of FPM which took place on 20 November 2002 and all subsequent changes in FPM's charter capital in order to obtain restitution to the shareholding position as existed before 20 November 2002 and to register the shares in their names.

On 22 November 2011, Ferrexpo AG filed a claim against the claimants at the High Court in London seeking a confirmation of ownership in FPM shares. The claim was launched in order to take an active step outside Ukraine to resolve this long-running dispute. By a judgement dated 4 April 2012, the proceedings in the UK were stayed while the case continues in Ukraine.

The management of the Group, after having taken local legal advice assesses the risk related to this share dispute to be remote as the claim has little legal merit. Neither the final decision by the Supreme Commercial Court of Ukraine nor the subsequent Ukrainian claim entitles claimants with direct enforcement rights to the shares of FPM currently owned by the Group through Ferrexpo AG. While there exist certain risks surrounding the operation and independence of Ukrainian courts, Ferrexpo has been advised that the restitution of the status quo ante of the shareholding position as sought by claimants does not have any basis under Ukrainian law for various legal, technical and practical reasons. It follows that no provision was recorded for this dispute as of 30 June 2012.

Tax and other regulatory compliance

Ukrainian legislation and regulations regarding taxation and custom regulations continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations and inconsistent enforcement by local, regional and national authorities, and other governmental bodies. Instances of inconsistent interpretations are not unusual.

The uncertainty of application and the evolution of Ukrainian tax laws, including those affecting cross border transactions, create a risk of additional tax payments having to be made by the Group, which could have a material effect on the Group's financial position and results of operations. The Group does not believe that these risks are any more significant than those of similar enterprises in Ukraine.

Note 17: Other financial assets

Other financial assets are available-for-sale investments, which are measured subsequent to initial recognition at fair value, categorised into Levels 1 to 3 based on the degree to which the fair value is observable.

There were no changes in fair value hierarchy during the period ended 30 June 2012 and in the equivalent comparative period.

During the period ended 30 June 2012, a decrease of the fair value of the available-for-sale investments of US$120 thousand was recorded in other comprehensive income (30 June 2011: US$794 thousand; 31 December 2011: US$1,868 thousand). In the same period, an impairment of US$428 thousand was recorded in the income statement (30 June 2011: US$198 thousand; 31 December 2011: US$198 thousand).

Note 18: Business combination

Business combination in previous years

On 31 December 2010, the Group acquired Helogistics Holding GmbH and its subsidiaries ('Helogistics') in order to develop the Group's distribution and logistics capabilities. The initial accounting for the acquisition of Helogistics as of 31 December 2010 (acquisition date) was only provisionally determined.

During the financial year 2011, the necessary valuations and assessments have been received so that the accounting for this acquisition has been finalised resulting in adjustments of the provisionally determined fair values of certain assets acquired and liabilities assumed. These adjustments did not have an effect on the gain on bargain purchase of US$2,623 thousand initially recognised as of 31 December 2010. Further details are provided in the Annual Report and Accounts 2011. These adjustments have been reflected in the statement of financial position of the comparative period ended on 30 June 2011 and the income statement effect of these is immaterial.

Note 19: Events after the reporting period

No material adjusting or non-adjusting events have occurred subsequent to the period end.

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