Half-year Report

RNS Number : 0591G

Ferrexpo PLC

03 August 2016

FERREXPO plc

("Ferrexpo", the "Group" or the "Company")

2016 Interim Results

Ferrexpo plc, a top three supplier of iron ore pellets to the global steel industry, today announces interim results for the six months ended 30 June 2016.

Michael Abrahams, Non-Executive Chairman, said:

"We are pleased to report a good set of financial results given the challenging circumstances in the iron ore industry. We have improved the quality of our pellet output, increased sales volumes to record levels and significantly reduced our cost base. Cash generated from operating activities was US$142 million for the period (up 61% compared to the first half of 2015) which allowed the Group to repay US$120 million of debt amortisation in the first half of 2016.

The Group continues to control costs and to benefit from selling a premium product to the world's top steel mills. Pellet demand remains strong and Ferrexpo believes it is well placed to continue to generate positive net operating cash flows throughout the commodities cycle."

1H 2016 Financial Summary:

US$ million (unless otherwise stated)	6 months ended 30.06.16	6 months ended 30.06.15	Change	Year ended 31.12.15
Pellet production from own ore (kt)	5,700	5,504	4%	11,258
Sales volumes (kt)	6,017	5,680	6%	11,330
Revenue	458	512	-11%	961
Operating profit	133	142	-6%	251
Operating profit excl operating forex gains	131	128	2%	225
EBITDA	160	176	-9%	313
Profit before tax before special items	92	103	-11%	164
Profit before tax after special items	92	143	-36%	25
Diluted EPS before special items (US cents per share)	13.14	12.80	3%	23.86
Diluted EPS after special items (US cents per share)	13.14	19.57	-33%	5.63
Working capital decrease / (increase)	16	-28	157%	-77
Net cash flow from operating activities	142	88	61%	128
Net debt	-753	-653	15%	-868
Net debt to EBITDA (last 12 months)	2.5x	1.9x	32%	2.8

· Production volumes from own ore grew 4% to 5.7 million tonnes while output of the Group's 65% Fe pellets increased to a record 5.4 million tonnes.

· Record sales volumes for a half year period increasing 6% to 6.0 million tonnes.

· Pellet premiums recovered from lows seen at the start of the year to finish the period strongly.

· The cash cost of production reduced 23%, or by US$7.7 per tonne, to US$25.7 per tonne of pellets (1H 2015: US$33.4 per tonne) as a result of local currency devaluation, lower oil prices and increased operating efficiencies.

· Operating profit, excluding foreign exchange gains, increased 2% to US$131 million in 1H 2016 compared to US$128 million in 1H 2015.

· Net cash flows from operating activities increased by US$54 million to US$142 million compared to US$88 million in 1H 2015 while, compared to FY 2015, net cash flows from operating activities increased by US$14 million (FY 2015: net cash flows from operating activities US$128 million).

· Net debt as of 30 June 2016 was US$753 million a US$115 million reduction compared to US$868 million as of 31 December 2015. Net debt to EBITDA for the last twelve months reduced to 2.5x as of 30 June 2016 compared to 2.8x as of 31 December 2015.

· New trade finance facilities were secured in 1H 2016 with US$9 million in place at period end. The Group's cash balance increased US$9M to US$44 million as of 30 June 2016 compared to US$35 million as of 31 December 2015.

· In July 2016, the Group made the final amortisation of its US$420 million pre-export finance facility that had been amortising over the past 24 months.

There will be an analyst and investor meeting at 08.30 (UK time) today at the offices of JP Morgan on 60 Victoria Embankment, London EC4Y 0JP. A live video webcast and slide presentation of this event will be available on www.ferrexpo.com. It is recommended that participants register by 08.15. The presentation will be hosted by Michael Abrahams (Chairman), Kostyantin Zhevago (CEO) and Chris Mawe (CFO).

Webcast link: http://edge.media-server.com/m/p/vpofze3k

For further information contact:

Ferrexpo:
Ingrid McMahon	+44 207 389 8304
Maitland:	+44 207 379 5151
James Isola

Notes to Editors:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It has been mining, processing and selling high quality iron ore pellets to the global steel industry for over 35 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. The Group is currently the 3^rd largest exporter of pellets to the global steel industry and the largest exporter of pellets from the CIS. In 2015, it produced a record 11.7 million tonnes of pellets, a 6% increase compared to 2014. Ferrexpo has a diversified customer base supplying steel mills in Austria, Slovakia, the Czech Republic, Germany and other European states, as well as in China, India, Japan, Taiwan and South Korea. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com

Introduction

Ferrexpo's 2016 interim results demonstrate the strength of the business and its strategy enabling the Group to report an EBITDA margin for the first half of 2016 in line with the first half of 2015 at 35% despite very challenging industry conditions.

Weak industry prices, particularly in the first quarter of 2016, were offset by increased sales of higher quality product and significantly lower costs allowing the Group to report EBITDA in the first half 2016 of US$160 million (US$16 million below the EBITDA of US$176 million reported for first half 2015). This strong performance underpinned excellent net cash generation from operations which increased to US$142 million, US$54 million higher than the first half of 2015, reflecting lower tax, interest and working capital.

During this period of near decade low iron ore prices, the Group reduced borrowing by US$120 million, increased cash on hand by US$9 million and remains comfortably within the terms of its borrowing facilities.

The Board has not declared an interim dividend for the period (1H 2015: 3.3 US cents per Ordinary Share), however, it may review this later in the year subject to the financial capacity of the Company and to market conditions.

In July 2016, the Group made the final scheduled repayment of its US$420 million pre-export finance facility which had been amortising in equal instalments over the past 24 months.

Pricing and Sales

In the first six months of 2016 the PLATTS CFR China iron ore fines price averaged US$52 per tonne compared to an average of US$61 per tonne in the first half of 2015. The average price was slightly higher than the average of US$51 per tonne in the second half of 2015. The market was, however, volatile with iron ore trading within a wide range from an eight year low of US$38 per tonne in mid-December 2015 to a 15 month high of US$71 per tonne in April 2016. The average iron ore price in July 2016 was US$57 per tonne.

The pellet premium that the Group received in addition to the PLATTS fines price improved throughout the first half of 2016 recovering from lows seen at the start of the year to finish the period more strongly. In China the spot pellet premium traded at US$11 per tonne in January 2016 before recovering to US$22 per tonne in June 2016 (1H 2016 China spot average: US$17 per tonne; 1H 2015 China spot average: US$28 per tonne). The headline long term contract pellet premium in the key markets of Western Europe and North East Asia was slightly lower than the first half of 2015.

The Group's net realised FOB/DAP price was in line with the second half of 2015 reflecting a weak environment in the first quarter of the year before prices recovered in the second quarter of 2016 driven by improved demand for iron ore and lower pellet availability. The Group's pricing benefitted from reduced C3 freight rates (1H 2016 US$7.1 per tonne vs. 1H 2015 US$10.8 per tonne) which increased its overall realised price.

The Group achieved record sales volumes for a half year period with sales increasing 6% to 6.0 million tonnes compared to 5.7 million tonnes in the first half of 2015. Ferrexpo continues to develop its customer portfolio and successfully agreed its first long term contract in Korea during the period.

Sales of pellets exceeded production in the half year period, partially unwinding the build-up of pellet stocks in the second half of 2015. The Group sold 244 thousand tonnes of stocks during the period and as of 30 June 2016 carried 479 thousand tonnes of pellet stocks.

Production Performance and Costs

Ferrexpo's operations successfully increased production of pellets from own ore by 4% to 5.7 million tonnes (1H 2015: 5.5 million tonnes) while increasing production of premium 65% Fe pellet to 94% of total production volumes, a record level for a half year period (1H 2015: 87% of total production volumes).

The Group remained one of the lowest cost pellet producers in the world in the first half of 2016. Its C1 cash cost of production fell by 23% or US$7.7 per tonne to US$25.7 per tonne compared to US$33.4 per tonne in the first half of 2015.

Outlook

Ferrexpo is the third largest iron ore pellet exporter in the world by volume with a well invested long life asset, a competitive cost base and a diversified high quality customer portfolio. The Group operates in a premium sector of the iron ore market with high barriers to entry and is benefiting from its US$2 billion investment programme since IPO in 2007.

The Group continues to control costs intensively through its business improvement programme and to benefit from selling a niche product to key customers under long term contracts. Pellet demand remains strong and the Group believes it is well placed to continue to generate positive net operating cash flows.

Financial Results

Revenue

Group revenue was US$458 million in the first half of 2016, 11% lower than the first half of 2015 (US$512 million) reflecting a lower iron ore price index which fell on average by 14% compared to the same period in 2015. Ferrexpo increased its sales volumes by 6% to 6.0 million tonnes (1H 2015: 5.7 million tonnes) while the Group's net realised FOB/DAP price was in line with the second half of 2015 reflecting a weak environment in the first quarter of the year before prices recovered in the second quarter of 2016 driven by improved demand for iron ore and lower pellet availability. The Group's pricing benefitted from reduced C3 freight rates (1H 2016 US$7.1 per tonne vs. 1H 2015 US$10.8 per tonne) which increased its overall realised price. For further information see Market Environment and Marketing.

Costs

C1 Cost of Production

The Group's C1 cost of production reduced by US$7.7 per tonne to US$25.7 per tonne compared to US$33.4 per tonne in the first half of 2015. Of this 23% cost reduction, approximately US$2.8 per tonne was driven by mining efficiency gains (for further information see Production Costs), US$2.6 per tonne due to lower oil and gas prices, and US$2.3 per tonne was due to the Hryvnia devaluation against the US Dollar.

In the first half of 2016, the average Hryvnia per US dollar was 25.47 compared to 21.43 in the first half of 2015, a 19% depreciation. The higher rate in the first half of 2016 reduced the C1 cash cost by 7% as approximately 50% of the Group's cost to produce a pellet is in Hryvnia. This includes electricity, salary, royalties, some consumable products, spare parts and materials.

Local cost inflation during the period was primarily driven by electricity price increases (+7% vs. average 1H 2015) following the devaluation of the Hryvnia against the US Dollar. Overall, these costs were still significantly lower in US dollar terms in the first half of the year compared to the prior period. The table below shows the year on year change in CPI for the first half of 2016. Inflation peaked in January 2016 at 40.3% and thereafter CPI has slowed to 6.9% in June 2016. For further information see Update on Risks: Ukrainian Inflation.

Ukrainian 2016 Year on Year CPI

	January 2016	February 2016	March 2016	April 2016	May 2016	June 2016
Ukraine CPI	140.3	132.7	120.9	109.8	107.5	106.9

Source: www.ukrstat.gov.ua

The Group's C1 cost represents the cash cost of production for iron ore pellets, from own ore, divided by production volume of pellets from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements as well as costs of purchased ore and concentrate and production cost of gravel. Please see Note 3 of the accounts for a reconciliation of C1 Costs.

Selling and Distribution Costs

Selling and distribution costs decreased by 10% to US$101 million (1H 2015: US$113 million) as a result of the depreciation of the Hryvnia against the US Dollar as well as lower international freight rates.

The cost to transport the Group's pellets to border points for international dispatch declined 15% to US$8.6 per tonne (or US$52 million) compared to US$10.1 per tonne in the first half of 2015 (or US$57 million). All rail costs are in local currency and the net reduction compared to the first half of 2015 is after taking into account the Hryvnia depreciation against the US Dollar as well as a 15% increase in rail tariffs from May 2016.

International freight costs reduced to US$31 million in the first half of 2016 (1H 2015: US$36 million). This was driven by lower oil prices and weaker freight rates due to depressed market conditions in the shipping industry. For further information see Marketing.

Currency

Ferrexpo prepares its accounts in US Dollars. The functional currency of the Ukrainian operations is the Hryvnia.

During the first half of 2016 the Hryvnia devalued from UAH24.00 per US Dollar as of 1 January 2016 to UAH27.05 per US Dollar in February 2016 before appreciating to UAH24.85 per US Dollar as of 30 June 2016. Over half of the Group's total cost base, including inland logistics costs, are denominated in Hryvnia.

Ukrainian Hryvnia vs. US Dollar

	Spot (1.8.16)	Average 1H 2016	Average 1H 2015	Average FY 2015
UAH per US$	24.80	25.47	21.43	21.86

Source: National Bank of Ukraine

Balances at 30 June 2016 are converted at the prevailing rate. The devaluation of the currency since 31 December 2015 has resulted in a US$33 million reduction in the net assets of the Group and has been reflected in the translation reserve.

Operating Profit from Continuing Operations before Adjusted Items

In the first half of 2016 Group revenue declined by US$54 million compared to the first half of 2015. The reduction in revenue was largely offset by a US$44 million reduction in cost of sales and lower selling and distribution, general and administrative and other expenses. As a result operating profit from continuing operations before adjusted items was US$133 million in the first half of 2016 compared to US$142 million in the first half of 2015.

EBITDA

EBITDA for the period was US$160 million compared to US$176 million in the first half of 2015. The fall in iron ore prices during the period was offset by an improved sales mix, higher sales volumes and cost reductions. The decline reflected lower operating foreign exchange gains compared to the prior year due to a more stable Hryvnia against the US Dollar in the first half of 2016.¹

^{1 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, share based payment expenses and the net of gains and losses from disposal of investments and property, plant and equipment. Please see Note 3 of the accounts for a reconciliation of EBITDA.}

Interest

Finance expense was in line with the first half of 2015 at US$38 million. This amount includes interest expense on interest bearing loans of US$28 million compared to US$32 million in the first half of 2015. Further details on finance expense are disclosed in Note 10 of the accounts.

The Group carried lower gross debt following the repayment of US$120 million of facilities over the period. The average cost of debt for the period ended 30 June 2016 was 6.6% (30 June 2015: 5.32%; 31 December 2015: 5.97%). The increased average rate reflected US$204 million amortisation of the Group's US$420 million pre-export banking facility over the last year which has a margin of 225 bps over LIBOR and US$30 million of other facilities with an average cost of 3%.

As of 30 June 2016 gross debt was US$797 million, a 29% decrease or a US$326 million reduction compared to gross debt at 30 June 2015 of US$1.1 billion (31 December 2015: US$904 million).

Tax

The income tax expense for the first half of 2016 was US$14 million (1H 2015: US$27 million) based on a forecasted effective tax rate of 12% to 13% for the full year which is in line with the effective tax rate before special items for 2015 of 13.5%.

Over the past several years the Group has built a large prepaid corporate profit tax balance as a result of the local practice of linking VAT refunds to corporate profit tax payments. During the period CPT paid in advance reduced to US$53 million as a result of exchange rate differences. Following the period end, Ferrexpo recovered UAH100 million in cash (approximately US$4 million). Further details on prepaid corporate profit tax are disclosed in Note 11 of the accounts.

Cash Flows

Working Capital

Cash generated from operating activities increased 32% to US$174 million in the first half of 2016 compared to US$131 million in the first half of 2015. This strong performance reflected a US$16 million working capital inflow during the period due to the sale of 244 thousand tonnes of pellets held on stock at the end of 2015, a reduction in trade receivables and the recovery of overdue VAT. The Group secured new trade finance arrangements in the first half of the year, of which US$9 million was in place at the end of June 2016.

Capital Investment

Total capital expenditure in the first half of 2016 was US$24 million, in-line with the first half of 2015 at US$25 million. During the period, the Group paid US$7 million for medium and fine crushing lines to Metso France.

Financial Management

Net debt declined by US$115 million to US$753 million as of 30 June 2016 compared to US$868 million as of 31 December 2015.

Net debt to EBITDA for the last 12 months was 2.5x compared to 2.8x as of 31 December 2015. As of 30 June 2016, Ferrexpo's cash and cash equivalents balance had increased by US$9 million to US$44 million compared to US$35 million at the end of December 2015.

In the first six months of the year, the Group repaid US$105 million of debt under the US$420 million pre-export finance facility in addition to US$15 million of debt under Export Credit Agency funding lines.

The Group's debt amortisation schedule in the second half of 2016 is lower than the first half with repayments of US$76 million falling due compared to US$120 million in the first six months of the year.

In July 2016, the Group paid the final amortisation, US$17.5 million, of its US$420 million pre-export finance facility that had been amortising over the past 24 months.

Ferrexpo will continue to assess new financing options while repaying its debt obligations as they fall due.

As a result of the forecast cash flows of the business, the large reserve base and Ferrexpo's competitive positioning on the global iron ore and pellet cost curves, the accounts have been drawn up on a going concern basis, however attention is drawn to the Going Concern section of the financial statements, Note 2, and the risks facing the business.

Market Environment

Compared to the first half of 2015, global hot metal output, reflective of steel demand, fell 4% to 630 million tonnes compared to 656 million tonnes in the first half of 2015 while total supply of iron ore exports increased 4% from 721 million tonnes in the first half of 2015 to 753 million tonnes in the first half of 2016². This demand/supply dynamic impacted the iron ore price compared to the first half of 2015 and the PLATTS CFR China iron ore fines price averaged US$52 per tonne compared to an average of US$61 per tonne in the first half of 2015.

Compared to the second half of 2015, global hot metal production fell 2% to 630 million tonnes versus 644 million tonnes in the second half of 2015 while total exports of iron ore fell 1.3% in the first half of 2016 to 753 million tonnes compared to 763 million tonnes in the second half of 2015². The PLATTS CFR China iron ore fines price in the first half of 2016 was in line with the second half of 2015 at US$51 per tonne. Nevertheless, pricing remained volatile in 2015 and to date in 2016 trading within a wide range reaching a high of US$71 per tonne and a low of US$38 per tonne.

Global supply of pellet exports declined 19% to 59 million tonnes in the first half of 2016 from 72 million tonnes in the first half of 2015, according to CRU², principally reflecting a 15 million tonne or 44% reduction in supply from Brazil³. Compared to the second half of 2015 the supply of exported pellets fell 5%, again due to reduced supply from Brazil following the Samarco tailings dam accident in November 2015.

² ^{CRU July 2016 Market Outlook.}

³ ^{Reflecting the production stoppage at Samarco following a tailings dam failure in November 2015. Prior to the failure, Samarco produced approximately 30 million tonnes of pellets per annum or approximately 20% of global pellet exports.}

The pellet premium that the Group received in the first half of 2016 improved throughout the period recovering from lows seen at the start of the year to finish the period more strongly. In China the spot pellet premium fell to a low of US$11 per tonne in January 2016 before recovering to US$22 per tonne in June 2016 (1H 2016 average: US$17 per tonne, 1H 2015 average: US$28 per tonne). While the headline long term contract pellet premium in the key markets of Western Europe and North East Asia was slightly lower than the same period last year.

CRU expects pellet utilisation rates to increase to 88% in 2016 from 70% in 2015 based on a recovery in steel mill profitability from the lows seen in recent years. Together with an expected deficit in pellet supply due to the outage of Samarco, demand and pricing for pellets is expected to be well supported for the remainder of 2016.

Operational Review

Marketing

In the first half of 2016, Ferrexpo increased sales volumes by 6% to 6.0 million tonnes of iron ore pellets compared to 5.7 million tonnes in the first half of 2015. The table below shows the breakdown of sales by key market regions. Sales to Western Europe increased to 17% in the first half of 2016 compared to 9% in the first half of 2015 while sales to North East Asia increased to 13% (1H 2015:8%). This significant increase in sales to the premium steel markets follows the completion of the Group's quality upgrade project in 2015.

Of total sales volumes, 93% represented Ferrexpo Premium Pellets of 65% Fe, while 6% represented Ferrexpo Basic Pellets of 62% Fe and 1% represented Ferrexpo Pellet Feed sold together with Ferrexpo's premium pellets as part of a customer development programme.

Sales Volume by Market Regions:

	6 months ended 30.06.16	6 months ended 30.06.15
Central Europe	46%	53%
Western Europe	17%	9%
China and South East Asia	18%	24%
North East Asia	13%	8%
Turkey, Middle East, India	6%	6%
Total sales volume (million tonnes)	6,017	5,680

The Group's long term contracts are all based on a spot index iron ore fines price using various reference periods. The table below shows the breakdown of sales by pricing terms.

Sales Volume by Pricing Terms:

	6 months ended 30.06.16	6 months ended 30.06.15
Monthly spot index	79%	82%
Current quarter spot index	10%	5%
Lagging 3 month spot index	9%	6%
Spot sales fixed on day	3%	7%
Total sales volume (million tonnes)	6,017	5,680

Ferrexpo's realised price for its 65% Fe iron ore pellets is calculated by taking the average PLATTS CFR China iron ore fines index for an agreed time period, adjusting for quality and adding a pellet premium. For sales to the Far East, delivery is made on CFR terms with the resulting FOB netback determined by the actual cost of freight. For sales to European and regional markets, delivery is generally made on FOB/DAP terms which is determined by deducting a transparent freight market index such as C3.

Key Price Data:

US$ per tonne	1H 2016	1H 2015	2H 2015
Avg PLATTS iron ore fines CFR China index	52	61	51
Avg China spot pellet premium	17	28	18
Avg long term contract Atlantic pellet premium	31-32	32-33	32-33
C3 freight index	7	11	12

Note: source for China spot pellet premium in 1H 2016 is PLATTS and for 2015 is PLATTS and Metal Bulletin.

The above table represents average numbers for a six monthly period and does not show actual price movements during a period which impacts customer pricing.

The C3 freight index, as published by the Baltic Exchange, represents the industry benchmark price to transport goods by sea from Tubarao, Brazil to Qingdao, China. The C3 index declined 34% during the period compared to 1H 2015 following the substantial fall in the oil price. On average C3 freight reduced to US$7.1 per tonne in 1H 2016 (1H 2015: US$10.8 per tonne) resulting in a higher net back price for the Group.

Overall, taking account of the PLATTS fines index in the first half of 2016 compared to the second half of 2015 (as can be seen from the table above), achieved pellet premiums, and freight costs, the Group's realised price in the first half of 2016 remained in line with the second half of 2015.

Production

Health and Safety

Most regrettably there was a contractor fatality at FPM during the period when a light vehicle traveling on a FPM mine road overturned whilst completing security operations. Following the accident, Ferrexpo has further strengthened its focus on safe behaviour when driving vehicles. The prevention of all incidents and injuries to employees is the highest priority of the Board and management, who follow the principle that all accidents are avoidable.

Overall, the Group's LTIFR in the first half of 2016 was 0.89 per million man hours worked compared to 0.61 per million man hours worked in the first half of 2015. The number of accidents at FPM reduced to four in the first half of 2016 compared to 5 in the first half of 2015 while FYM LTIFR reported one accident during the period compared to zero in the first half of 2015. At the barging operations, the number of accidents rose to three in the first half of 2016 compared to one in the first half of 2015.

Both the mining and barging operations improved their LTIFR compared to the second half of 2015 as can be seen from the table below. The difference in LTIFR between the mining and barging operations principally reflects the lower hours worked at the barging operations compared to the mining operations.

Lost Time Injury Frequency Rate

LTIFR	1H 2016	1H 2015	2H 2015	2015
- FPM	0.57	0.63	0.88	0.75
- FYM	0.74	-	1.46	0.74
Ukraine	0.59	0.54	0.96	0.75
Barging	5.83	1.91	6.97	4.55
Group	0.89	0.61	1.30	0.96

Pellet Production

Pellet production from own ore increased 3.6% compared to 5.7 million tonnes (1H 2016: 5.5 million tonnes). This included a 12.3% increase in production of the Group's premium 65% Fe pellets to a record 5.4 million tonnes (1H 2015: 4.8 million tonnes). Overall total production for the first half of 2016, was 5.7 million tonnes compared to 5.8 million tonnes in first half of 2015 due to a significant reduction in output of pellets from third party concentrate. Approximately 94% of total production volumes were Ferrexpo Premium Pellets of 65% Fe compared to 87% in the first half of 2015.

The table below summarises production in the first half of 2016 compared to the first half of 2015.

Pellet Production 1H 2016 and 1H 2015 ('000)

		1H 2016	1H 2015	Change %
Pellet production from own ore		5,700	5,504	3.6
	62% Fe	364	750	-51.5
	65% Fe	5,336	4,754	12.3

Pellet production from third party materials		23	313	-92.6
	62% Fe	-	6	-100.0
	65% Fe	23	307	-92.5

Total pellet production		5,723	5,816	-1.6
	62% Fe	364	756	-51.9
	65% Fe	5,359	5,060	5.9

Note: Production in April 2016 included 39kt of concentrate that was sold as Pellet Feed to a customer in South East Asia.

Production Costs

The Group's average C1 cash cost reduced by 23% to US$25.7 per tonne in 1H 2016 compared to US$33.4 per tonne in 1H 2015 and by 19% when compared to US$31.9 per tonne for FY 2015. The decline was driven by fixed cost benefits from increased production of own ore and more efficient operating practices, lower oil and gas prices and the depreciation of the Hryvnia against the US dollar. For further information see Costs and Currency.

The Group has several projects underway which are contributing to cost savings and efficiency improvements. These include improved drilling and blasting techniques which yield better ore fragmentation and improved excavator dig rates as well as a project to increase concentrate yield by optimising the amount of reagent used and the blend ratios of ore.

The Group has continued to make good progress in reducing its gas consumption through co-firing with bio fuel. Since the project commenced in September 2015 approximately US$950,000 has been saved through the reduced consumption of natural gas which has declined by approximately 21 million cubic metres (representing circa 20% of total natural gas consumption on an annualised basis). The Group aims to replace up to 30% of its total natural gas consumption in the pelletiser by this method.

Ferrexpo is a low cost and efficient pellet producer and is competitively placed on the global benchmark cost curve for 62% Fe iron ore fines after adjusting for the premium it receives relative to the index fines price. This allows the Group to remain profitable even in the current low iron ore price environment.

Capital Investment

Ferrexpo's brownfield operations lend themselves to incremental additions of pellet supply subject to market conditions and funding availability. A programme to increase pellet production has been defined internally which would involve incremental investment in the existing beneficiation, pelletising and mining facilities. These projects are highly NPV accretive.

Ukraine

Economic activity in Ukraine is showing signs of recovery as indicated by an increase in industrial production of 2%⁴ in the first half of 2016 compared with the first half of 2015 and a 9%⁴ increase in construction activity compared to the first half of 2015, albeit these increases are off a low base following a recession over the past two years.

⁴ ^{Source: State Statistics Service of Ukraine}

The Group is pleased to report that the Government continues to reform the process of VAT recovery which has increased in transparency and predictability.

To date Ukraine has received US$6.7 billion of a US$17.5 billion IMF loan package which was approved in March 2015.

The Government has been in negotiations to receive a third tranche of the package which is expected to be received in the second half of the year.

Sovereign risk as measured by the yields on outstanding Ukrainian government bonds have reduced significantly since the start of 2016, for example, the outstanding Ukrainian 2019 bond is currently trading above par while the yield to maturity has fallen from a high of 11.4% in June 2016 to around 7.7% as of 1 August 2016, indicating a lower country risk environment. For further information see Update on Risks: Political and Legal risks pertaining to Ukraine.

Board

At the Annual General Meeting of the Company held on 19 May 2016, five of the Independent Directors (Oliver Baring, Wolfram Kuoni, Ihor Mitiukov, Bert Nacken and Mary Reilly) did not receive the requisite votes required for re-appointment by independent shareholders. As stated in the Company's AGM Notice dated 12 April 2016 and under Listing Rule 9.2.2.F, the Company will put the matter to a second vote of all shareholders, to be held between 90 and 120 days after the Annual General Meeting. Pending the second vote, the relevant Directors are deemed to have been re-elected to the Board. Wolfram Kuoni and Ihor Mitiukov, having completed 9 years on the Board on 1 June 2016, are now no longer deemed to be independent, in accordance with the UK Corporate Governance Code. Ihor Mitiukov will stand for re-election at the EGM on the basis that he will step down when a suitable Ukrainian successor to him has been found. Wolfram Kuoni will stand for re-election at the EGM but is likely to step down from the Board later in the year. A successor to Oliver Baring as Senior Independent Director is being sought with a view to replacing him once he ceases to be independent in December 2016.

Having consulted a number of the larger shareholders of the Company, the Board intends to hold a second vote for the re-election of all five of the above Directors, and notice of a General Meeting for this purpose will be sent to shareholders shortly.

Update on Risks

Since the publication of the 2015 annual results in March 2016, the Group assesses that the risks facing the business, as highlighted on pages 30 to 39 of the 2015 Annual Report and Accounts, remain relevant. An update is provided below on material developments of key risks during the first half of 2016.

· Debt maturity profile

As at the end of July 2016, Ferrexpo has fully repaid a US$420 million pre export finance facility that had been amortising over the past 24 months. The Group has a semi-annual US$18 million bond coupon payment due on 6 October 2016 and it will begin quarterly repayments of approximately US$44 million of its US$350 million pre export finance facility in November 2016. Should the iron ore price reduce from current levels there is a risk that the Group may not be able to service these payments. As a result of lower gearing resulting from net operating cash flow generation and good performance in the first half of the year together with a lower amortisation profile in the second half of the year the Group considers this risk to have diminished but still remains.

For further information see Going Concern Basis - Note 2 of the financial accounts.

· Interest rate risk

The Group has a mix of debt facilities at fixed and floating interest rates. An increase in US$ LIBOR could result in higher costs for the Group. As of 30 June 2016 the proportion of debt with floating interest reduced to 50% of outstanding debt (30 June 2015: 55% of outstanding debt; 31 December 2015: 56% of outstanding debt) principally due to the monthly amortisation of a US$420 million pre-export finance facility which completed in July 2016. Any new debt facilities could result in an increase in interest costs. The Group's average cost of debt for the period ended 30 June 2016 was 6.6% (30 June 2015: 5.32%; 31 December 2015: 5.97%).

· Global macroeconomic growth

The demand for steel, and hence iron ore, is driven by global economic growth trends, which in the recent past has been largely determined by Chinese economic growth as China has produced more than 45% of the world's steel output for the past 7 years. China has reported real GDP growth of 6.7% for the first half of 2016 compared to 7% in the first half of 2015 following a Government stimulus package in the first quarter of 2016. A reduction in world or Chinese GDP growth could impact demand for steel and iron ore.

· Iron ore price and pellet premiums

Fluctuations in the iron ore price have negatively impacted the financial results of the Group in the first half of 2016 compared to the comparative period in 2015. In the first six months of 2016 the PLATTS CFR China iron ore fines price averaged US$52 per tonne compared to an average of US$61 per tonne in 1H 2015. The price was volatile, however, and traded within a wide range from an eight year low of US$38 per tonne in mid-December 2015 to a 15 month high of US$71 per tonne in April 2016 before settling at around US$50 per tonne broadly in line with the average of the second half of 2015. Should the iron ore price decline further in the second half of the year there is a risk it could negatively impact the Group's profitability and cash generation ability.

Ferrexpo receives a pellet premium in addition to the iron ore fines price. Currently, a substantial portion of the Group's profit is due to this premium. The pellet premium improved throughout the first half of 2016 recovering from lows seen at the start of the year. In China the spot pellet premium traded at US$11 per tonne in January 2016 before recovering to US$22 per tonne in June 2016 (1H 2016 average: US$17 per tonne, 1H 2015 average: US$28 per tonne). While the headline long term contract pellet premium in the key markets of Western Europe and North East Asia was set at US$31 per tonne to US$32 per tonne in the first half of 2016 compared to US$32 per tonne to US$33 per tonne in the first half of 2015. The pellet premium currently represents a high proportion of the underlying iron ore fines price and there is a risk that premiums could reduce negatively impacting the Group's profitability and cash generation ability. For further information see Introduction and Market Environment.

· C3 freight

Ferrexpo is exposed to international freight rates as all of its long term contracts are priced with reference to transparent indices such as the Baltic Exchange C3 freight price (capesize route from Tubarao, Brazil to Qingdao, China). Fronthaul capesize voyage rates are currently trading at just above historic low levels, with the reductions driven by low oil prices and overcapacity. The C3 index declined 39% to US$7 per tonne in 1H 2016 to US$7 per tonne compared to US$11 per tonne in 1H 2015. An increase in freight rates would directly reduce the Group's received net back price.

· Political and legal risks pertaining to Ukraine

The economic recovery in Ukraine remains fragile and Ferrexpo remains exposed to the Government's ability to meet its payment obligations to Ferrexpo on amounts due, such as VAT refunds. Furthermore the economic recession of the past two years has impacted the Government's ability to fund usual social services and this could lead to social upheaval and political tension within local communities. Any escalation of the rebels conflict in Eastern Ukraine could have a further adverse effect on the economy and impact the ability of local companies and financial institutions to obtain funding from the international capital markets, including Ferrexpo's ability to obtain financing.

Other risks include a weak judicial system that is susceptible to outside influence, and can take an extended period of time for the courts to reach final judgment. For further information see Ukraine above and Note 20 of the financial accounts.

· Ukrainian banking sector

The Ukrainian banking sector continues to go through a period of industry rationalisation. Year to date in 2016, the National Bank of Ukraine has placed 15 banks into temporary administration and the number of operating banks in Ukraine has reduced from 180 at the start of 2014 to 102 as of 30 June 2016. The sector is still considered to be under capitalised and there remains a risk that funds held by Ferrexpo in the Ukrainian banking system could be lost.

For further information see Note 16 and Note 20 of the financial accounts.

· Ukrainian currency

The Group receives all of its income from pellet sales in US dollars while more than half of its total cost base is denominated in Ukrainian Hryvnia. Following a period of sharp devaluation against the US dollar in 2014 and 2015 the Hryvnia has been relatively stable. The average Hryvnia per US dollar in 1H 2016 was 25.5 compared to an average rate of UAH21.4 per US dollar in 1H 2015 (average FY 2015: UAH21.9 per US dollar). Since 30 June 2016, the Hryvnia has appreciated slightly against the US dollar to 24.8.

Should the Hryvnia appreciate further against the US dollar it could increase local costs in US dollar terms reducing Group profitability.

· Ukrainian inflation

In 2015 consumer price inflation reached a high of 49% following the substantial devaluation of the Hryvnia against the US Dollar in 2014 and 2015 when the Hryvnia depreciated from UAH8 per US Dollar as of 1 January 2014 to UAH24 per US Dollar as of 31 December 2015. As of 30 June 2016, year on year inflation had reduced to 6.9%. The areas of inflation that the Group is most exposed to are wages, electricity and rail tariffs. The Group looks to partly offset cost inflation through increases in mining and production efficiencies. There is a risk that the Group is unable to offset inflation through production efficiencies and that the Group's cost base could increase as a result. For further information see Costs and Ukrainian currency above.

· Ukrainian VAT

During 1H 2016, the Group received VAT refunds in full, including outstanding VAT balances from previous years. As such the current balance of VAT outstanding is a significant improvement over recent years. The process of recovering VAT in Ukraine has become more transparent for all industry participants. The risk remains, however, that there could be delays in recovering outstanding VAT should the Government's finances deteriorate.

· Ukrainian Taxes

In 2014 and 2015, VAT receivable balances in Ukraine were mainly recovered in exchange for prepayments of corporate profit tax (CPT). To date in 2016, the prepayment of CPT is no longer a requirement and the Group recovered a small portion of prepaid CPT in July 2016. Ferrexpo is hopeful that the Government will take further steps in the second half of 2016 in resolving the issue of prepaid CPT. There is a risk, however, that the Government's financial position could deteriorate and that the previous practice of prepaying CPT could resume which would absorb significant amounts of working capital. For further information see Note 11 of the financial accounts.

Directors' Responsibility Statement

The Interim Report complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Conduct 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.

A list of current Directors is maintained on the Ferrexpo plc website which can be found at www.ferrexpo.com.

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

Independent Review Report to Ferrexpo PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the Interim Consolidated Income Statement, Interim Consolidated Statement of Comprehensive Income, Interim Consolidated Statement of Financial Position, Interim Consolidated Statement of Cash Flows, Interim Consolidated Statement of Changes in Equity and related notes 1 to 22. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Emphasis of matter - Going concern

In forming our opinion, which is not qualified in this respect, we have also considered the adequacy of the disclosures made in note 2 to the financial statements concerning the Company's ability to continue as a going concern. The conditions described in note 2 indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

Ernst & Young LLP

London

2 August 2016

Interim Consolidated Income Statement

US$000	Notes	Before special items	Special items	6 months ended 30.06.16 (unaudited)	Before special items	Special items	6 months ended 30.06.15 (unaudited)	Before special items	Special items	Year ended 31.12.15 (audited)
Revenue	4	457,921	-	457,921	511,881	-	511,881	961,003	-	961,003
Cost of sales	3/5	(192,054)	-	(192,145)	(235,801)	-	(235,801)	(446,756)	-	(446,756)
Gross profit		265,867	-	265,776	276,080	-	276,080	514,247	-	514,247
Selling and distribution expenses		(101,251)	-	(101,251)	(112,934)	-	(112,934)	(226,222)	-	(226,222)
General and administrative expenses	6	(18,189)	-	(18,189)	(20,495)	-	(20,495)	(37,103)	-	(37,103)
Other income		1,649	-	1,649	3,031	-	3,031	6,852	-	6,852
Other expenses	7	(17,446)	-	(17,446)	(18,180)	-	(18,180)	(32,726)	-	(32,726)
Operating foreign exchange gains	8	2,119	-	2,119	14,865	-	14,865	26,025	-	26,025
Operating profit from continuing operations before adjusted items		132,750	-	132,750	142,367	-	142,367	251,073	-	251,073
Allowance for restricted cash and deposits	20	-	-	-	-	-	-	-	(174,579)	(174,579)
Write-offs and impairment losses	9	-	(13)	(13)	-	(981)	(981)	-	(5,555)	(5,555)
Gain on disposal of available-for-sale investment		-	-	−	-	41,767	41,767	-	41,385	41,385
Share of profit from associates		1,285	-	1,285	4,014	-	4,014	4,620	-	4,620
Losses on disposal of property, plant and equipment		(1,615)	-	(1,615)	(2,698)	-	(2,698)	(4,541)	-	(4,541)
Profit/(loss) before tax and finance from continuing operations		132,420	(13)	132,407	143,683	40,786	184,469	251,152	(138,749)	112,403
Finance income	10	90	-	90	1,671	-	1,671	2,494	-	2,494
Finance expense	10	(37,984)	-	(37,984)	(36,587)	-	(36,587)	(71,797)	-	(71,797)
Non-operating foreign exchange losses	8	(2,537)	-	(2,537)	(6,181)	-	(6,181)	(17,750)	-	(17,750)
Profit/(loss) before tax		91,987	(13)	91,974	102,586	40,786	143,372	164,099	(138,749)	25,350
Income tax (expense)/credit	11	(14,197)	-	(14,197)	(27,223)	-	(27,223)	(22,312)	28,420	6,108
Profit/(loss) for the year from continuing operations		77,790	(13)	77,777	75,363	40,786	116,149	141,787	(110,329)	31,458

Profit/(loss) attributable to:
Equity shareholders of Ferrexpo plc		77,135	(13)	77,122	74,046	40,786	114,832	140,030	(106,993)	33,037
Non-controlling interests		655	-	655	1,317	-	1,317	1,757	(3,336)	(1,579)
Profit/(loss) for the year from continuing operations		77,790	(13)	77,777	75,363	40,786	116,149	141,787	(110,329)	31,458

Earnings/(loss) per share:
Basic (US cents)	12	13.17	-	13.17	12.83	6.78	19.61	23.92	(18.27)	5.65
Diluted (US cents)	12	13.14	-	13.14	12.80	6.77	19.57	23.86	(18.23)	5.63

Interim Consolidated Statement of Comprehensive Income

US$000	Notes	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
		(unaudited)	(unaudited)	(audited)
Profit for the period/year		77,777	116,149	31,458
Items that may subsequently be reclassified to profit or loss:
Exchange differences on translating foreign operations		(32,824)	(335,332)	(472,492)
Current income tax effect		15,886	15,456	28,811
Deferred income tax effect		(11,385)	7,659	12,167
Net gains on available-for-sale financial assets	21	−	41,767	41,767
Income tax effect		−	−	-
Net other comprehensive loss before reclassification of items to profit or loss		(28,323)	(270,450)	(389,747)
Reclassification to profit or loss relating to available-for-sale investments sold or impaired		−	(41,767)	(41,767)
Net other comprehensive loss to be reclassified to profit or loss in subsequent periods		(28,323)	(312,217)	(431,514)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement (losses)/gains on defined benefit pension liability		(395)	(249)	3,878
Income tax effect		37	24	(722)
Net other comprehensive (loss)/income not being reclassified to profit or loss in subsequent periods		(358)	(225)	3,156
Other comprehensive income/(loss) for the period/year, net of tax		(28,681)	(312,442)	(428,358)

Total comprehensive income/(loss) for the period/year, net of tax		49,096	(196,293)	(396,900)

Total comprehensive income/(loss) attributable to:
Equity shareholders of Ferrexpo plc		48,929	(192,199)	(387,958)
Non-controlling interests		167	(4,094)	(8,942)
		49,096	(196,293)	(396,900)

Interim Consolidated Statement of Financial Position

US$000	Notes	As at 30.06.16	As at 30.06.15	As at 31.12.15
		(unaudited)	(unaudited)	(audited)
Assets
Property, plant and equipment	13	615,598	717,001	654,392
Goodwill and other intangible assets		38,598	45,524	40,024
Investments in associates		2,478	9,392	5,801
Available-for-sale financial assets	21	5	23	9
Inventories	15	117,773	80,369	98,802
Other non-current assets		5,748	12,455	4,652
Income taxes recoverable and prepaid	11	36,522	53,902	54,482
Other taxes recoverable and prepaid	14	-	1,182	-
Deferred tax assets		63,463	36,515	71,096
Total non-current assets		880,185	956,363	929,258
Inventories	15	100,799	112,038	96,021
Trade and other receivables		66,258	64,846	83,379
Prepayments and other current assets		19,441	28,752	18,952
Income taxes recoverable and prepaid	11	16,826	−	2,829
Other taxes recoverable and prepaid	14	34,483	54,181	50,482
Cash and cash equivalents	3/16	44,440	470,535	35,330
Restricted cash and deposits	20	8,988	−	9,308
		291,235	730,352	296,301
Assets classified as held for sale		1	−	18
Total current assets		291,236	730,352	296,319
Total assets		1,171,421	1,686,715	1,225,577
Equity and liabilities
Share capital	17	121,628	121,628	121,628
Share premium		185,112	185,112	185,112
Other reserves	17	(1,904,265)	(1,759,538)	(1,876,624)
Retained earnings		1,891,362	1,912,333	1,814,598
Equity attributable to equity shareholders of the parent		293,837	459,535	244,714
Non-controlling interest		(616)	4,065	(783)
Total equity		293,221	463,600	243,931
Interest-bearing loans and borrowings	3/18	602,341	597,447	700,351
Defined benefit pension liability		17,687	24,781	17,034
Provision for site restoration		1,027	1,814	975
Deferred tax liabilities		186	419	382
Total non-current liabilities		621,241	624,461	718,742
Interest-bearing loans and borrowings	3/18	194,770	525,643	203,299
Trade and other payables		27,364	25,826	27,566
Accrued liabilities and deferred income		18,411	27,974	16,188
Income taxes payable	11	8,976	9,869	8,161
Other taxes payable		7,438	9,342	7,690
Total current liabilities		256,959	598,654	262,904
Total liabilities		878,200	1,223,115	981,646
Total equity and liabilities		1,171,421	1,686,715	1,225,577

The financial statements were approved by the Board of Directors on the 2 August 2016.

Kostyantin Zhevago	Christopher Mawe
Chief Executive Officer	Chief Financial Officer

Interim Consolidated Statement of Cash Flows

US$000	Notes	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
		(unaudited)	(unaudited)	(audited)
Profit before tax		91,974	143,372	25,350
Adjustments for:
Depreciation of property, plant and equipment and amortisation of intangible assets		25,690	29,328	56,596
Interest expense		36,891	35,064	68,917
Interest income	10	(90)	(1,671)	(2,494)
Share of profit from associates		(1,285)	(4,014)	(4,620)
Movement in allowance for doubtful receivables		738	(29)	114
Allowance for restricted cash and deposits	20	−	−	174,579
Losses on disposal of property, plant and equipment		1,615	2,698	4,541
Gain on disposal of available-for-sale investment		−	(41,767)	(41,385)
Write-offs and impairment losses	9	13	981	5,555
Site restoration provision		(448)	53	(634)
Employee benefits		1,705	3,754	3,543
Share based payments		194	256	515
Operating foreign exchange gains	8	(2,119)	(14,865)	(26,025)
Non-operating foreign exchange losses	8	2,537	6,181	17,750
Operating cash flow before working capital changes		157,415	159,341	282,302
Changes in working capital:
Decrease in trade and other receivables		13,296	14,160	2,341
Increase in inventories		(15,261)	(36,807)	(63,965)
Increase/(decrease) in trade and other accounts payable		2,584	(7,771)	(14,787)
Decrease/(increase) in VAT recoverable and other taxes recoverable and payable		15,524	2,184	(113)
Cash generated from operating activities		173,558	131,107	205,778
Interest paid		(28,641)	(34,017)	(65,080)
Income tax paid		(1,735)	(8,131)	(11,054)
Post-employment benefits paid		(746)	(926)	(1,778)
Net cash flows from operating activities		142,436	88,033	127,866
Cash flows from investing activities
Purchase of property, plant and equipment		(23,558)	(24,610)	(64,739)
Proceeds from disposal of property, plant and equipment		35	174	242
Purchase of intangible assets		(179)	(330)	(645)
Proceeds from sale of available-for-sale investment		−	41,767	41,767
Reclassification to restricted cash and deposits	16/20	−	−	(184,523)
Interest received		84	1,602	2,056
Dividends from associates		3,076	−	1,716
Net cash flows used in investing activities		(20,542)	18,603	(204,126)
Cash flows from financing activities
Proceeds from borrowings and finance		9,267	−	-
Repayment of borrowings and finance		(119,775)	(179,944)	(393,876)
Arrangement fees paid		−	(4,416)	(15,308)
Dividends paid to equity shareholders of Ferrexpo plc⁾		−	(58,184)	(77,548)
Net cash flows used in financing activities		(110,508)	(242,544)	(486,732)
Net increase/(decrease) in cash and cash equivalents		11,386	(135,908)	(562,992)
Cash and cash equivalents at the beginning of the period/year		35,330	626,509	626,509
Effect of exchange rate changes on cash and cash equivalents		(2,276)	(20,066)	(28,187)
Cash and cash equivalents at the end of the period/year	16	44,440	470,535	35,330

Interim Consolidated Statement of Changes in Equity

For the financial year 2015 and the six months ended 30 June 2016		Attributable to equity shareholders of Ferrexpo plc
US$000	Issued capital	Share premium	Uniting of interest reserve (Note 17)	Treasury share reserve (Note 17)	Employee Benefit Trust reserve (Note 17)	Translation reserve (Note 17)	Retained earnings	Total capital and reserves	Non-controlling interests	Total equity
At 1 January 2015	121,628	185,112	31,780	(77,260)	(6,012)	(1,401,496)	1,855,690	709,442	8,159	717,601
Profit for the period	−	−	−	−	−	-	33,037	33,037	(1,579)	31,458
Other comprehensive loss	−	−	−	−	−	(424,151)	3,156	(420,995)	(7,363)	(428,358)
Total comprehensive loss for the year	−	−	−	−	−	(424,151)	36,193	(387,958)	(8,942)	(396,900)
Equity dividends paid to shareholders of Ferrexpo plc	−	−	−	−	-	-	(77,285)	(77,285)	-	(77,285)
Share-based payments	−	−	−	−	515	-	-	515	-	515
At 31 December 2015 (audited)	121,628	185,112	31,780	(77,260)	(5,497)	(1,825,647)	1,814,598	244,714	(783)	243,931
Profit for the period	−	−	−	−	−	−	77,122	77,122	655	77,777
Other comprehensive loss	−	−	−	−	−	(27,835)	(358)	(28,193)	(488)	(28,681)
Total comprehensive income for the period	−	−	−	−	−	(27,835)	76,764	48,929	167	49,096
Equity dividends paid to shareholders of Ferrexpo plc	−	−	−	−	−	−	−	−	−	−
Share-based payments	−	−	−	−	194	−	−	194	−	194
At 30 June 2016 (unaudited)	121,628	185,112	31,780	(77,260)	(5,303)	(1,853,482)	1,891,362	293,837	(616)	293,221

For the six months ended 30 June 2015		Attributable to equity shareholders of Ferrexpo plc
US$000	Issued capital	Share premium	Uniting of interest reserve (Note 17)	Treasury share reserve (Note 17)	Employee Benefit Trust reserve (Note 17)	Translation reserve (Note17)	Retained earnings	Total capital and reserves	Non-controlling interests	Total equity
At 1 January 2015	121,628	185,112	31,780	(77,260)	(6,012)	(1,401,496)	1,855,690	709,442	8,159	717,601
Profit for the period	−	−	−	−	−	−	114,832	114,832	1,317	116,149
Other comprehensive loss	−	−	−	−	−	(306,806)	(225)	(307,031)	(5,411)	(312,442)
Total comprehensive loss for the period	−	−	−	−	−	(306,806)	114,607	(192,199)	(4,094)	(196,293)
Equity dividends paid to shareholders of Ferrexpo plc	−	−	−	−	−	−	(57,964)	(57,964)	−	(57,964)
Share-based payments	−	−	−	−	256	−	−	256	−	256
At 30 June 2015 (unaudited)	121,628	185,112	31,780	(77,260)	(5,756)	(1,708,302)	1,912,333	459,535	4,065	463,600

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, which is considered to be the country of domicile, with its registered office at 55 St James's Street, London, SW1A 1LA, UK. Ferrexpo plc and its subsidiaries (the "Group") operate two mines and a processing plant near Kremenchug in Ukraine, an interest in a port in Odessa and sales and marketing activities around the world including offices in Switzerland, Dubai, Japan, China, Singapore and Ukraine. The Group also owns logistics assets in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways and an ocean going vessel which provides top off services and operates on international sea routes. 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 Kremenchug Magnetic Anomaly and are currently being extracted at the Gorishne-Plavninskoye and Lavrikovskoye ("GPL") and Yeristovskoye deposits.

The majority shareholder of the Group is Fevamotinico S.a.r.l. ("Fevamotinico"), a company incorporated in Luxembourg and 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 50.3% (30 June 2015: 50.3%; 31 December 2015: 50.3%) of Ferrexpo plc's issued share capital.

The Group's interests in its subsidiaries are held indirectly by the Company, with the exception of Ferrexpo AG, which is directly held. The Group's consolidated subsidiaries are disclosed in Note 37 of the Annual Report and Accounts 2015.

At 30 June 2016, the Group also holds through OJSC Ferrexpo Poltava Mining an interest of 48.6% (30 June 2015: 48.6%; 31 December 2015: 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 period ended 30 June 2016 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 for the year ended 31 December 2015.

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 2015. 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 2015, have been delivered to the Register of Companies. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was (i) unqualified, (ii) included a reference to a matter to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Going Concern Basis

Over the next year from the approval of the financial statements, US$158,150 thousand of debt amortisation falls due for repayment. Iron ore pricing levels have been volatile and could reduce to levels where, without associated cost relief, the Group's net cash flow generation would only be able to meet these payments over a longer period triggering cross default across part or all of its debt facilities.

The Group expects to be able to repay its facilities and meet its liabilities as they fall due based on current forecasts and also expects, that if necessary, it would be able to agree amendments to relevant facilities to make repayments over a longer period or obtain additional financing. As a result the financial statements have been drawn up on a going concern basis.

The impact of the uncertainty of the future level of the iron ore price and operating cost inputs are material uncertainties and may cast significant doubt upon the Group's ability to meet its debt amortisation obligations as they fall due and to continue as a going concern. Under these circumstances it would be necessary to restate amounts in the balance sheet, which will materially change the amounts and classification of figures contained in the financial statements.

Accounting policies adopted

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 2015.

The following new standards and interpretations have been applied from 1 January 2016, with no effect on reported results, financial position or disclosure in the interim financial statements:

Amendments to IFRS 11: Joint arrangements: Accounting for acquisitions of interests

Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation

Annual Improvements to IFRSs - 2012-2014 Cycle

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 monitored at a more detailed level, 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 EBITDA because it believes that EBITDA is a useful measure for evaluating its ability to generate cash and its operating performance. The Group's full definition of EBITDA is disclosed in the Glossary.

US$000	Notes	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
		(unaudited)	(unaudited)	(audited)
Profit before tax and finance		132,407	184,469	112,403
Allowance for restricted cash	20	−	−	174,579
Write-offs and impairment losses	9	13	981	5,555
Gain on disposal of available-for-sale investments	21	−	(41,767)	(41,385)
Share based payments		194	256	515
Losses on disposal of PPE		1,615	2,698	4,541
Depreciation and amortisation		25,690	29,328	56,596
EBITDA		159,919	175,965	312,804

C1 costs

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

US$000	Notes	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
		(unaudited)	(unaudited)	(audited)
Cost of sales - pellet production	5	174,897	215,679	405,863
Depreciation and amortisation	5	(18,458)	(22,249)	(42,750)
Purchased concentrate and other items for resale	5	(2,122)	(15,571)	(21,142)
Inventory movements	5	(7,422)	12,546	20,163
Other non-C1 cost components		(291)	(6,463)	(2,539)
C1 cost		146,604	183,942	359,595
Own ore produced (tonnes)		5,700,097	5,503,932	11,258,446
C1 cash cost per tonne US$		25.7	33.4	31.9

Net financial indebtedness

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

US$000	Notes	As at 30.06.16	As at 30.06.15	As at 31.12.15
		(unaudited)	(unaudited)	(audited)
Cash and cash equivalents	16	44,440	470,535	35,330
Interest bearing loans and borrowings - current	18	(194,770)	(525,643)	(203,299)
Interest bearing loans and borrowings - non-current	18	(602,341)	(597,447)	(700,351)
Net financial indebtedness		(752,671)	(652,555)	(868,320)

The Group's net financial indebtedness increased in the second half of the financial year 2015 by the insolvency of the Group's transactional bank in Ukraine resulting in a reduction of the balance of cash and cash equivalents available in Ukraine (see Note 16 and Note 20).

The Group's balance of cash and cash equivalents increased by US$9,110 thousand after debt repayments of US$119,775 thousand during the period ended 30 June 2016 (30 June 2015: US$179,944 thousand, 31 December US$393,876 thousand).

Note 4: Revenue

Revenue for the six months period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Revenue from sales of ore pellets and concentrate:
Export	428,552	477,081	895,520
Total revenue from sale of iron ore pellets and concentrate	428,552	477,081	895,520
Revenue from logistics and bunker business	27,834	32,766	61,247
Revenue from other sales and services provided	1,535	2,034	4,236
Total revenue	457,921	511,881	961,003

No sales were made in Ukraine during the periods presented. Export sales of iron ore pellets and concentrate by geographical destination were as follows:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Central Europe	182,636	246,808	431,429
Western Europe	79,443	43,628	105,858
North East Asia	60,224	46,995	119,170
China and South East Asia	81,933	113,157	193,566
Turkey, Middle East and India	24,316	26,493	45,497
Total export revenue	428,552	477,081	895,520

The Group markets its products across various regions. The sales segmentation data was previously disclosed by Traditional Markets, Natural Markets and Growth Markets and the disclosure of this segmentation has been changed for the period ended as of 30 June 2016 to better reflect how the Group now makes its business decisions and monitors its sales.

Information about the composition of the regions is provided in the Glossary.

Note 5: Cost of sales

Cost of sales for the six months period ended 30 June 2016 consisted of the following:

US$000	Notes	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
		(unaudited)	(unaudited)	(audited)
Energy		74,166	98,331	186,312
Personnel		10,878	17,399	28,773
Materials		30,830	35,255	72,653
Repairs and maintenance		14,928	18,562	37,388
Depreciation and amortisation		18,458	22,249	42,750
Royalties and levies		8,760	9,797	19,653
Purchased concentrate and other items for resale		2,122	15,571	21,142
Inventory movements		7,422	(12,546)	(20,163)
Logistics and bunker business		17,157	20,122	40,893
Other		7,333	11,061	17,355
Total cost of sales		192,054	235,801	446,756
Thereof for pellet production	3	174,897	215,679	405,863
Thereof for logistics and bunker business		17,157	20,122	40,893

Note 6: General and administrative expenses

General and administrative expenses for the six months period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Personnel	9,912	10,967	22,123
Office, maintenance and security	2,408	2,422	4,788
Professional fees	3,766	4,392	5,697
Audit and audit related fees	905	785	1,564
Non-audit fees	34	9	23
Depreciation and amortisation	756	825	1,540
Other	408	1,095	1,368
Total general and administrative expenses	18,189	20,495	37,103

During the six months period ended 30 June 2016, non-audit services in the amount of US$225 thousand provided for debt management activities of the Group are included in other finance cost and not included in the table above.

During the comparative period ended 31 December 2015, non-audit services totalling US$681 thousand have been capitalised as prepaid arrangement fees and are not included in the table above.

Note 7: Other expenses

Other expenses for the period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Community support donations	13,874	15,527	25,820
Movements in allowance for doubtful receivables and prepayments made	736	(29)	114
Other personnel costs	431	652	1,261
Other	2,405	2,030	5,531
Total other expenses	17,446	18,180	32,726

Note 8: Foreign exchange gains and losses

Foreign exchange gains and losses for the six months period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Operating foreign exchange gains
Revaluation of trade receivables	2,287	14,685	25,943
Revaluation of trade payables	(163)	150	118
Others	(5)	30	(36)
Total operating foreign exchange gains	2,119	14,865	26,025
Non-operating foreign exchange losses
Revaluation of interest-bearing loans	(2,203)	(27,160)	(39,858)
Revaluation of cash and cash equivalents	(102)	17,667	26,368
Others	(232)	3,312	(4,260)
Total non-operating foreign exchange losses	(2,537)	(6,181)	(17,750)
Total foreign exchange (losses)/gains	(418)	8,684	8,275

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 to the carrying value of assets where this is higher than the recoverable amount. Write-offs and impairment losses for the six months period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Write-off of receivables and prepayments	−	−	4,598
Write-off of inventories / (reversal of write-off of inventories)	9	1	(59)
Write-off of property, plant and equipment	−	969	992
Impairment of available-for-sale investments	4	11	24
Total write-offs and impairment losses	13	981	5,555

The write-off of receivables and prepayments in the comparative period ended 31 December 2015 is predominantly related to the cancellation of a contract for equipment ordered and partially prepaid in line with the terms of the contract.

Note 10: Finance income and expense

Finance income and expense for the period ended 30 June 2016 consisted of the following:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Finance income
Interest income	90	1,099	1,268
Other finance income	−	572	1,226
Total finance income	90	1,671	2,494
Finance expense
Interest expense on financial liabilities measured at amortised cost	(28,172)	(32,055)	(61,505)
Effect from capitalised borrowing costs	2,489	2,546	5,440
Interest on defined benefit plans	(1,093)	(1,523)	(2,880)
Bank charges	(5,952)	(5,465)	(12,282)
Other finance costs	(5,256)	(90)	(570)
Total finance expense	(37,984)	(36,587)	(71,797)
Net finance expense	(37,894)	(34,916)	(69,303)

Fees for liability management activities of the Group for the amount of US$5,230 thousand (30 June 2015: nil, 31 December 2015: nil) are included in other finance costs.

Note 11: Taxation

The Group pays corporate profit tax in a number of jurisdictions and its tax rate is influenced by the mix of profits primarily between Ukraine, Switzerland, the United Kingdom and Dubai, as well as the level of non-deductible expenses for tax purposes in each of these jurisdictions. For the period ended 30 June 2016, the income tax expense was based on an expected weighted average tax rate of 12.2% for the financial year 2016, adjusted for some one-off items for the period, compared to an effective tax rate before special items of 13.5% for the financial year 2015.

The income tax credit of US$6,108 thousand shown as of the end of the financial year 2015 was a result of a deferred tax credit of US$28,420 thousand recognised as a deferred tax asset in respect of the allowance for the restricted cash and deposits for which the Group expects that it will become tax deductible in a future period (see Note 20 for further details).

During the financial years 2014 and 2015, current VAT receivable balances in Ukraine were mainly recovered in exchange for prepayments of corporate profit tax. As at 30 June 2016, the balance of these prepayments made in previous periods amounted to US$52,616 thousand (30 June 2015: US$53,902 thousand; 31 December 2015: US$54,482 thousand) and it is management's view that this balance will be offset with future profits or will be refunded in cash.

The Group received a refund of prepaid corporate profit tax in Ukraine in the amount of US$4,029 thousand in July 2016 and expects further refunds in the following months. The amount already refunded or expected to be recovered later in 2016 of US$16,826 thousand was classified as current whereas the remaining balance of US$36,522 thousand is still shown as non-current due to the uncertainty as to the timing of the recovery of this balance.

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Income tax receivable balance - current	16,826	−	2,829
Income tax receivable balance - non-current	36,522	53,902	54,482
Income tax payable balance	(8,784)	(9,869)	(8,161)
Net income tax receivable	44,564	44,033	49,150

Note 12: 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 are 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 considered in the calculation of diluted earnings per share.

	Before special items	Special items	6 months ended 30.06.16 (unaudited)	Before special items	Special items	6 months ended 30.06.15 (unaudited)	Before special items	Special items	Year ended 31.12.15 (audited)
Earnings/(loss) for the period/year attributable to equity shareholders per share
Basic (US cents)	13.17	−	13.17	12.83	6.78	19.61	23.92	(18.27)	5.65
Diluted (US cents)	13.14	−	13.14	12.80	6.77	19.57	23.86	(18.23)	5.63

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

Thousands	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Weighted average number of shares
Basic number of ordinary shares outstanding	585,462	585,462	585,462
Effect of dilutive potential ordinary shares	1,646	1,347	1,422
Diluted number of ordinary shares outstanding	587,108	586,809	586,884

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

Dividends

Neither a final dividend for the financial year 2015 nor an interim dividend for 2016 were proposed.

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Dividend proposed per Ordinary Share
Interim dividend for 2015: 3.3 US cents	−	19,320	−
Total dividends proposed	−	19,320	−

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Dividend Paid per Ordinary Share
Interim dividend for 2015: 3.3 US cents per	−	−	19,364
Final dividend for 2014: 3.3 US cents	−	19,517	19,517
Special dividend for 2014: 6.6 US cents	−	38,667	38,667
Total dividends paid during the period	−	58,184	77,548

Note 13: Property, plant and equipment

During the six months period ended 30 June 2016, the Group acquired property, plant and equipment with a cost of US$15,811 thousand (30 June 2015: US$36,223 thousand; 31 December 2015: US$93,467 thousand) and disposed of property, plant and equipment with original costs of US$4,748 thousand (30 June 2015: US$8,944 thousand; 31 December 2015: US$17,563 thousand). The total depreciation charge for the period was US$29,825 thousand (30 June 2015: US$29,693 thousand; 31 December 2015: US$66,758 thousand).

During the reporting period, the Ukrainian Hryvnia has further devalued compared to the US Dollar from 24.001 as of 31 December 2015 to 24.854 as of 30 June 2015 reducing property, plant and equipment by US$19,368 thousand (30 June 2015: US$207,209 thousand; 31 December 2015: US$286,742 thousand). This effect is reflected in the translation reserve included in shareholder's equity. See also Note 17.

The carrying value of property, plant and equipment includes capitalised borrowing costs on qualifying assets of US$14,332 thousand (30 June 2015: US$11,996 thousand; 31 December 2015: US$13,021 thousand).

Note 14: Other taxes recoverable and prepaid

As at 30 June 2016 taxes recoverable and prepaid comprised:

US$000	As at 30.06.16	As at 30.06.15	As at 31.12.15
	(unaudited)	(unaudited)	(audited)
VAT receivable	34,372	54,073	50,395
Other taxes prepaid	111	108	87
Total other taxes recoverable and prepaid - current	34,483	54,181	50,482
VAT receivable	-	1,182	-
Total other taxes recoverable and prepaid - non-current	-	1,182	-
Total other taxes recoverable and prepaid	34,483	55,363	50,482

As at 30 June 2016, US$32,607 thousand of the VAT receivable relates to the Group's Ukrainian business operations (30 June 2015: US$53,286 thousand; 31 December 2015: US$48,280 thousand). The table below provides a reconciliation of the VAT receivable balances in Ukraine:

US$000	6 months ended 30.06.16	6 months ended 30.06.15	Year ended 31.12.15
	(unaudited)	(unaudited)	(audited)
Opening balance, gross	49,339	72,837	72,837
Net VAT incurred	40,074	46,700	91,149
VAT received in cash	(54,972)	(45,975)	(89,034)
Translation difference	(833)	(18,566)	(25,613)
Closing balance, gross	33,608	54,996	49,339
Allowance	(1,001)	(1,710)	(1,059)
Closing balance, net	32,607	53,286	48,280

During the period ended 30 June 2016, the devaluation of the Ukrainian Hryvnia compared to the US Dollar was significantly less than in the comparative periods presented above. The local currency in Ukraine has devalued by approximately 4% compared to the US Dollar; from 24.001 as at 31 December 2015 to 24.854 as at the end of this reporting period, compared to 33% and 52% during the comparative periods ended 30 June 2015 and 31 December 2015. As a result of the significant devaluation of the Ukrainian Hryvnia during the comparative period ended 31 December 2015, the balance of the outstanding VAT balances expressed in US Dollar decreased by US$25,613 thousand, compared to US$833 thousand in the period ended 30 June 2016. This effect is reflected in the translation reserve. See also Note 17.

As at 30 June 2016, management expect that overdue balances totalling US$8,594 thousand (30 June 2015: US$26,101 thousand; 31 December 2015: US$30,613 thousand) to be recovered within one year. The total VAT receivable balance shown in the table above is net of an allowance of US$1,001 thousand (30 June 2015: US$1,710 thousand; 31 December 2015: US$1,059 thousand) to reflect the uncertainties in terms of the recovery of VAT receivable balances related to one of the Ukrainian subsidiaries with its mine still being developed.

Note 15: Inventories

Inventories are held at the lower of cost or net realisable value.

As at 30 June 2016 ore stockpiles amounting to US$117,773 thousand (30 June 2015: US$80,369 thousand; 31 December 2015: US$98,802 thousand) were classified as non-current as this ore is not planned to be processed within one year.

Note 16: Cash and cash equivalents

As at 30 June 2016 cash and cash equivalents comprised:

US$000	Notes	As at 30.06.16	As at 30.06.15	As at 31.12.15
		(unaudited)	(unaudited)	(audited)
Cash at bank and on hand		44,440	320,695	35,330
Short-term deposits		−	149,840	−
Total cash and cash equivalents	3	44,440	470,535	35,330

The available cash and cash equivalents balance reduced during the second half of the financial year 2015 following the insolvency of the Group's transactional bank in Ukraine (see Note 20 for further information) and debt repayments amounting to US$393,876 thousand during the financial year 2015. The debt repayments during the period ended 30 June 2016 totalled US$119,775 thousand (30 June 2015: US$179,944 thousand). Further information on the Group's gross debt is provided in Note 18.

The balance of cash and cash equivalents held in Ukraine amounts to US$12,447 thousand as at 30 June 2016 (30 June 2015: US$167,030 thousand; 31 December 2015: US$13,896 thousand).

The Group's exposure to liquidity, counterparty and interest rate risk as well as a sensitivity analysis for financial assets and liabilities are disclosed in Note 31 of the Annual Report and Accounts 2015.

Note 17: Share capital and reserves

The share capital of Ferrexpo plc at 30 June 2016 was 613,967,956 (30 June 2015: 613,967,956; 31 December 2015: 613,967,956) Ordinary Shares at par value of £0.10 paid for cash, resulting in share capital of US$121,628 thousand, which is unchanged since the Group's Initial Public Offering in June 2007. This balance includes 25,343,814 shares (30 June 2015: 25,343,814 shares; 31 December 2015: 25,343,814 shares), which are held in treasury, resulting from a share buyback that was undertaken in September 2008, and 3,162,399 shares held in the employee benefit trust reserve (30 June 2015:3,192,399 shares; 31 December 2015: 3,162,399 shares).

The translation reserve includes the effect from the exchange differences arising on translation of non-US Dollar functional currency operations (mainly in Ukrainian Hryvnia). During the period ended 30 June 2016, the devaluation of the Ukrainian Hryvnia compared to the US Dollar was significantly less than in the comparative periods ended 30 June 2015 and 31 December 2015. The local currency in Ukraine has devalued from 24.001 as at 31 December 2015 to 24.854 as at the end of this reporting period compared to the US Dollar (approximately 4%); compared to 33% and 52% during the comparative periods ended 30 June 2015 and 31 December 2015. The exchange differences arising on translation of the Group's foreign operations are initially recognised in the other comprehensive income. See also the Interim Consolidated Statement of Comprehensive Income of these financial statements for further details.

As at 30 June 2016 other reserves attributable to equity shareholders of Ferrexpo plc comprised.

For the financial year 2015 and the six months ended 30 June 2016
US$000	Uniting of interest reserve	Treasury share reserve	Employee Benefit Trust reserve	Translation reserve	Total other reserves
At 1 January 2015	31,780	(77,260)	(6,012)	(1,401,496)	(1,452,988)
Foreign currency translation differences	−	−	−	(465,129)	(465,129)
Tax effect	−	−	−	40,978	40,978
Total comprehensive loss for the year	−	−	−	(424,151)	(424,151)
Share based payments	−	−	515	−	515
At 31 December 2015 (audited)	31,780	(77,260)	(5,497)	(1,825,647)	(1,876,624)
Foreign currency translation differences	−	−	−	(32,336)	(32,336)
Tax effect	−	−	−	4,501	4,501
Total comprehensive income/(loss) for the period	−	−	−	(27,835)	(27,835)
Share based payments	−	−	194	−	194
At 30 June 2016 (unaudited)	31,780	(77,260)	(5,303)	(1,853,482)	(1,904,265)

For the six months ended 30 June 2015
US$000	Uniting of interest reserve	Treasury share reserve	Employee Benefit Trust reserve	Translation reserve	Total other reserves
At 1 January 2015	31,780	(77,260)	(6,012)	(1,401,496)	(1,452,988)
Foreign currency translation differences	−	−	−	(329,921)	(329,921)
Tax effect	−	−	−	23,115	23,115
Total comprehensive loss for the period	−	−	−	(303,806)	(303,806)
Share based payments	−	−	256	−	256
At 30 June 2015 (unaudited)	31,780	(77,260)	(5,756)	(1,708,302)	(1,759,538)

Note 18: Interest bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost and denominated in US Dollars.

US$000	Notes	As at 30.06.16	As at 30.06.15	As at 31.12.15
		(unaudited)	(unaudited)	(audited)
Current
Eurobond issued		−	284,411	−
Syndicated bank loans - secured		148,750	204,000	166,250
Other bank loans - secured		21,803	21,193	21,504
Other bank loans - unsecured		345	1,499	1,431
Obligations under finance leases		3,550	3,912	3,444
Trade finance facilities		9,306	−	−
Interest accrued		11,016	10,628	10,670
Total current interest bearing loans and borrowings	3	194,770	525,643	203,299

Non-current
Eurobond issued		335,530	156,074	333,536
Syndicated bank loans - secured		218,750	367,500	306,250
Other bank loans - secured		35,304	54,946	43,867
Other bank loans - unsecured		4,864	7,487	6,939
Obligations under finance leases		7,893	11,440	9,759
Total non-current interest bearing loans and borrowings	3	602,341	597,447	700,351
Total interest bearing loans and borrowings		797,111	1,123,090	903,650

As at 30 June 2016 the Group has a revolving syndicated US$350 million pre-export finance facility, which is fully drawn, and a remaining drawn balance of US$17,500 thousand of a syndicated US$420 million pre-export finance facility. The amortisation of the US$350 million facility commences in November 2016 with eight quarterly instalments to the final maturity date of 8 August 2018. The US$420 million facility was fully repaid by 31 July 2016 and cancelled.

As at 30 June 2016 the major bank debt facilities were guaranteed and secured as follows:

· Ferrexpo AG and Ferrexpo Middle East FZE 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 Ferrexpo Middle East FZE; and

· the Group pledged bank accounts of Ferrexpo AG and Ferrexpo Middle East FZE into which all proceeds from the sale of certain iron ore pellet contracts are received.

In addition to the Group's major bank debt facilities listed above, an unsecured US$500 million Eurobond was issued on 7 April 2011, which the Group exchanged and cancelled through the issuance of new notes at par value totalling US$346,385 thousand and the repayment of US$153,615 thousand in cash. The exchange was completed in two transactions on 24 February 2015 and 6 July 2015. As a result of the two exchanges completed, the tenor of the notes outstanding was extended from April 2016 to April 2019 with two equal instalments of US$173,193 thousand falling due on 7 April 2018 and 2019, respectively. The new notes have a 10.375% interest coupon payable semi-annually, compared to 7.875% for the initially issued notes in April 2011.

As at 30 June 2016, the Group has open trade finance facilities in the amount of US$9,306 thousand (30 June 2015: nil, 31 December 2015: nil), which are secured against receivables related to these specific trades.

Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in Note 31 of the Annual Report and Accounts 2015.

Note 19: 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 refer 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 who is a member of the supervisory board of OJSC Ferrexpo Poltava Mining. Related party transactions entered into by the Group during the periods presented are summarised in the tables on the following pages.

Revenue, expenses, finance income and finance expenses

	6 months ended 30.06.16 (unaudited)			6 months ended 30.06.15 (unaudited)			Year ended 31.12.15 (audited)
US$000	Entities under common control	Asso-ciated compa- nies	Other related parties	Entities under common control	Asso- ciated compa- nies	Other related parties	Entities under common control	Asso- ciated compa- nies	Other related parties
Sales of pellets ^a	1,975	-	-	-	-	-	2,871	-	-
Other sales ^b	120	-	36	168	-	377	334	-	496
Total related party transactions within revenue	2,095	-	36	168	-	377	3,205	-	496
Materials ^c	3,119	-	4	3,269	-	6	6,909	-	12
Purchased concentrate and other items for resale ^d	-	-	-	277	-	-	277	-	-
Spare parts and consumables ^e	715	-	-	513	-	2	1,298	-	2
Gas ^f	4,297	-	-	21,750	-	-	45,869	-	-
Total related parties transactions within cost of sales	8,131	-	4	25,809	-	8	54,353	-	14
Selling and distribution expenses ^g	5,384	10,710	436	5,456	11,024	3,796	10,896	22,248	5,023
General and administration expenses ^h	345	-	317	397	-	320	849	-	382
Allowance for restricted cash and deposits ⁱ	-	-	-	-	-	-	174,579	-	-
Total related parties transactions within expenses	13,860	10,710	757	31,662	11,024	4,124	240,677	22,248	5,419
Finance income ^j	-	-	-	1,343	-	-	2,039	-	-
Finance expenses ^j	(22)	-	-	(30)	-	-	(58)	-	-
Net finance income	(22)	-	-	1,313	-	-	1,981	-	-

The Group entered into various related party transactions. A description of the most material transactions, which are in aggregate over US$200 thousand (on an expected annualised basis) in the current or comparative periods is given below. All transactions were carried out on an arm's length basis in the normal course of business.

Entities under common control

a Spot sales of pellets in the amount of US$1,975 thousand (30 June 2015: nil; 31 December 2015: US$2,871 thousand) to VA Intertrading AG.

c Purchases of compressed air, oxygen and metal scrap from Kislorod PCC for US$1,543 thousand (30 June 2015: US$1,906 thousand; 31 December 2015: US$3,918 thousand);

c Purchases of cast iron balls from AutoKraZ Holding Co. for US$495 thousand (30 June 2015: US$659 thousand; 31 December 2015: US$1,063 thousand); and

c Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas for US$976 thousand (30 June 2015: US$652 thousand; 31 December 2015: US$1,787 thousand).

d Purchases of concentrate and other items for resale from Vostok Ruda Ltd. amounting to US$277 thousand during the financial year 2015. No such purchases during the six months period ended 30 June 2016 (30 June 2015: US$277 thousand).

e Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship Repair Plant ("KSRSSZ") in the amount of US$190 thousand (30 June 2015: US$107 thousand; 31 December 2015: US$338 thousand);

e Purchases of spare parts from Valsa GTV of US$250 thousand (30 June 2015: US$52 thousand; 31 December 2015: US$273 thousand); and

e Purchases of ferromanganese from Raw and Refined Commodities AG for US$102 thousand (30 June 2015: US$209 thousand; 31 December 2015: US$484 thousand).

f Procurement of gas for US$4,297 thousand (30 June 2015: US$21,750 thousand; 31 December 2015: US$45,869 thousand) from OJSC Ukrzakordongeologia.

g Purchases of advertisement, marketing and general public relations services from FC Vorskla of US$5,384 thousand (30 June 2015: US$5,436 thousand; 31 December 2015: US$10,855 thousand).

h Insurance premiums of US$185 thousand (30 June 2015: US$213 thousand; 31 December 2015: US$429 thousand) paid to ASK Omega for workmen's insurance and other insurances; and

h Fees of US$147 thousand and US$273 thousand paid to Bank Finance & Credit (Bank F&C) during the comparative periods ended 30 June 2015 and 31 December 2015 for bank services. No such fees paid during the financial year 2016 (see also footnote i below).

i The Group recorded during the financial year 2015 an allowance for its cash and deposits (including the deposits previously shown as non-current assets) held at Bank F&C resulting in a charge of US$174,579 thousand recognised in the income statement subsequent to the insolvency of the bank declared by the National Bank of Ukraine (see also Note 16 and Note 20).

j Transactional banking services were provided to certain subsidiaries of the Group by Bank F&C in previous periods. Finance income and expense relate to these transactional banking services.

Associated companies

g Purchases of logistics services in the amount of US$10,710 thousand (30 June 2015: US$11,024 thousand; 31 December 2015: US$22,248 thousand) relating to port operations, including port charges, handling costs, agent commissions and storage costs.

Other related parties

b Sales of material and services to Slavutich Ruda Ltd. in the amount of US$364 thousand and US$481 thousand during the comparative periods ended 30 June 2015 and 31 December 2015, respectively. No such sales during the period ended 30 June 2016.

g Purchases of logistics management services from Slavutich Ruda Ltd. relating to customs clearance services and the coordination of rail transit totalling US$436 thousand (30 June 2015: US$3,796 thousand; 31 December 2015: US$5,023 thousand).

h Consulting fees paid to Nage Capital Management AG of US$61 thousand (30 June 2015: US$320 thousand; 31 December 2015: US$382 thousand) controlled by former member of the board of directors of Ferrexpo plc who resigned in August 2014. The Group entered into this transaction within one year of his resignation and therefore considered it to be a transaction with a related party.

h Consulting fees totalling US$256 thousand (30 June 2015: nil; 31 December 2015: US$106 thousand) paid to David L. Frauman, who was appointed as Board member on 26 October 2015 and retired from the Board on 10 March 2016. The Group entered into the agreement with David L. Frauman when he was appointed as a member of the Board and this agreement was cancelled at the time of his retirement from the Board.

Purchases of property, plant, equipment and investments

The table below details the transactions of a capital nature which were undertaken between Group companies and entities under common control, associated companies and other related parties during the periods presented.

	6 months ended 30.06.15 (unaudited)			6 months ended 30.06.15 (unaudited)			Year ended 31.12.15 (audited)
US$000	Entities under common control	Asso-ciated companies	Other related parties	Entities under common control	Asso- ciated companies	Other related parties	Entities under common control	Asso- ciated companies	Other related parties
Purchases with shareholder approval	-	-	-	842	-	-	842	-	-
Purchases in the ordinary course of business	27	-	-	1,195	-	-	1,257	-	5
Total purchases of property, plant and equipment ^k	27	-	-	2,037	-	-	2,099	-	5

Individual transactions of a capital nature which exceeded US$200 thousand are described below.

Entities under common control

Current year

k During the period ended 30 June 2016, the Group entered in various transactions of a capital nature with related parties totalling US$27 thousand. These transactions were in the ordinary course of business.

Prior periods:

k During the financial year 2015, the Group entered into various transactions of a capital nature with related parties totalling to US$1,257 thousand, which were in the ordinary course of business:

· The Group procured a filter in the amount of US$958 thousand from OJSC Berdichev Machine-Building Plant Progress for the quality upgrade of the pelletising plant at Ferrexpo Poltava Mining; and

· The Group procured design documentation services from OJSC DIOS totalling US$288 thousand.

In April 2015 the Group received 27 rail cars totalling US$1,431 thousand (US$842 thousand at the prevailing exchange rate at delivery) in addition to 25 rail cars received in 2015. A total of 300 rail cars were ordered in February 2014 under the authority of a shareholder approval obtained on 24 May 2012. As a consequence of the conflict in the Eastern part of Ukraine, the producer of the rail cars was not in the position to produce and deliver all rail cars ordered and prepaid. The remaining balance of the prepayment was fully written-off as of 31 December 2015, after having provided for it already as of 31 December 2014.

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 30.06.16 (unaudited)			6 months ended 30.06.15 (unaudited)			Year ended 31.12.15 (audited)
US$000	Entities under common control	Asso-ciated compa-nies	Other related parties	Entities under common control	Asso- ciated companies	Other related parties	Entities under common control	Asso- ciated companies	Other related parties
Available-for-sale financial assets ^l	5	-	-	23	-	-	9	-	-
Other non-current assets ^m	-	-	-	3,546	-	-	-	-	-
Prepayments for property, plant and equipment	28	-	-	44	-	-	24	-	-
Total non-current assets	33	-	-	3,613	-	-	33	-	-
Trade and other receivables ⁿ	282	3,608	179	685	-	52	688	2,273	8
Prepayments and other current assets ^o	186	-	-	2,501	-	30	680	-	-
Cash and cash equivalents ^p	-	-	-	165,381	-	-	-	-	-
Total current assets	468	3,608	179	168,567	-	82	1,368	2,273	8
Trade and other payables ^q	636	1,469	60	1,246	578	66	902	2,625	91
Current liabilities	636	1,469	60	1,246	578	66	902	2,625	91

A description of the most material balances which are over US$200 thousand in the current or comparative periods is given below.

Entities under common control

l The balance of the investments available-for-sale comprised shareholdings in PJSC Stakhanov Railcar Company (1.10%) and Vostok Ruda Ltd. (1.10%). The ultimate beneficial owner of these companies is Kostyantin Zhevago. PJSC Stakhanov Railcar Company 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 balance of US$5 thousand as at 30 June 2016 related to the investment in PJSC Stakhanov Railcar Company (30 June 2015: US$23 thousand; 31 December 2015: US$9 thousand).

m As at the end of the comparative period ended 30 June 2015, other non-current assets related to a deposit of US$3,109 thousand with Bank F&C, which was deposited for loans and mortgages granted by the bank to employees of the Group under the Group's social loyalty programme. As at 31 December 2015, an allowance for the full amount of US$3,105 thousand (at the exchange rate at the end of the period) with Bank F&C was recorded subsequent to the insolvency of Bank F&C declared by the National Bank of Ukraine on 17 September 2015. Further information is provided in footnote (q) below and in Note 20.

n As of 31 December 2015, trade and other receivables included outstanding amounts due from Kislorod PCC of US$404 thousand (30 June 2015: US$343 thousand) for the sale of power, steam and water. No such receivable balance as of 30 June 2016.

o The balances as at the end of the comparative periods ended 30 June 2015 and 31 December 2015 include prepayments of US$659 thousand and US$577 thousand made to Vostok Ruda Ltd. for purchases of concentrate. An allowance for the full amount prepaid was recorded during the period ended 30 June 2016 as a result of the bankruptcy filed by the related party.

o The balance as of the end of the comparative period ended 30 June 2015 included a prepayment in the amount of US$1,748 thousand made to OJSC Ukrzakordongeologia for the procurement of gas. No such prepayment was made as of 30 June 2016 and 31 December 2015.

p As at the end of the comparative period ended 30 June 2015, cash and cash equivalents with Bank F&C were US$164,681 thousand. On 17 September 2015, the National Bank of Ukraine announced that it had adopted a decision to declare Bank F&C insolvent and the bank was put into temporary administration by the Deposit Guarantee Fund. As a consequence, a full allowance was recorded in September 2015 for the balance of cash and deposits held at Bank F&C at this point of time. See footnote (i) and Note 20 for further information.

q As at the end of the comparative period ended 30 June 2015, trade and other payables included US$494 thousand for compressed air and oxygen purchased from Kislorod PCC (31 December 2015: US$475 thousand). No such outstanding balance as of 30 June 2016.

Associated companies

n Trade and other receivables included US$3,608 thousand (30 June 2015: nil; 31 December 2015: US$2,273 thousand) for dividends receivable from TIS Ruda LLC.

q Trade and other payables included US$1,469 thousand (30 June 2015: US$578 thousand; 31 December 2015: US$2,625 thousand) related to purchases of logistics services from TIS Ruda LLC.

Transactional banking arrangements

The Group had transactional banking arrangements with Bank Finance & Credit ('Bank F&C') in Ukraine which was under common control of Kostyantin Zhevago. See Note 16 and Note 20 for further information.

Note 20: Commitments and contingencies

Commitments

US$000	As at 30.06.16	As at 30.06.15	As at 31.12.15
	(unaudited)	(unaudited)	(audited)
Operating lease commitments	42,150	30,371	39,552
Capital commitments on purchase of PPE	27,330	91,015	32,591

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.

Deposit Guarantee Fund and Liquidator of Bank F&C

The Group's principal subsidiary, OJSC Ferrexpo Poltava Mining ('FPM'), received a credit of US$9,984 thousand (US$8,988 thousand at the exchange rate as at 30 June 2016) to its account with Bank F&C following the introduction of the temporary administration on 18 September 2015. FPM filed a claim against Bank F&C under the management of the Administrator, as appointed by the Deposit Guarantee Fund, on 30 October 2015 in the Kyiv City Commercial Court for the release of this amount in accordance with applicable legislation. The hearing on 4 December 2015 ruled in favour of FPM. This court ruling was subsequently appealed. During the hearing on 25 May 2016, the initial decision in favour of the Group was upheld by the Kyiv Appellate Commercial Court and on 10 June 2016, the decision was further appealed by the Liquidator of Bank F&C with a hearing date yet to be confirmed.

Based on the positive decisions from the Kyiv City Commercial Court and the Kyiv Appellate Commercial Court, despite the recent further appeal, management of the Group expects to be successful in the upcoming appeal and that this amount ultimately will be recovered in full as required under Ukrainian legislation. See also Note 16 for further information.

The Group recorded a full allowance for the cash balance held in Bank F&C in September 2015 following its insolvency and temporary administration (see also Note 16). As at 30 June 2016, the balance of restricted cash and deposits with a full allowance amounts to US$162,632 thousand (31 December 2015: US$168,575 thousand with full allowance). The level of recoverability of balances that were held with Bank F&C at the point of time of the insolvency declared by the NBU cannot be reasonably assessed at the current time due to the complexity, uncertainties and the level of the ultimate recovery of the bank's loan portfolio net of costs during liquidation.

Salvage of grounded vessel

The Group is currently involved in arbitration proceedings in respect of the costs incurred for the salvage of a grounded vessel off the coast of Singapore carrying the Group's iron ore pellets to China. Although the Group's customer was at risk in respect of the insurance cover for the pellets shipped, the Group received a claim from the salvage operator as the Group still had the title to the goods during the vessel's period of salvage. The arbitration hearing took place on 6 May 2016 in London and the final award from the Arbitrator is expected to be received in August 2016. In case of a decision by the Arbitrator in favour of the opposing party, the Group would still aim to claim the amount in the amount of approximately US$5,000 thousand from the insurance company of the customer who was on risk for the vessel's period of salvage.

Share dispute

The Group was involved in a share dispute which commenced in 2005 and has been disclosed in its various public documents since IPO in 2007. On 20 October 2014, the Kyiv City Commercial Court dismissed the claim of the opposing party in full. This judgment was confirmed by the Kyiv Appeal Commercial Court and the Higher Commercial Court of Ukraine on 28 January 2015 and 14 April 2015, respectively. No further court proceedings have been initiated by the opposing party.

Tax and other regulatory compliance

Ukrainian legislation and regulations regarding taxation and customs 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. This also includes a transfer pricing law which significantly increased the power of the tax authorities. The Group does not believe that these risks are any more significant than those of similar enterprises in Ukraine.

As at 30 June 2016, there are no recoverable VAT balances in the process of being considered by the Ukrainian court system (30 June 2015: US$2,491 thousand; 31 December 2015: US$1,147 thousand).

Note 21: Financial instruments

Fair values

Set out below are the carrying amounts and fair values of the Group's financial instruments that are carried in the interim consolidated statement of financial position:

	Carrying amount			Fair Value
US$000	As at 30.06.16 (unaudited)	As at 30.06.15 (unaudited)	As at 31.12.15 (audited)	As at 30.06.16 (unaudited)	As at 30.06.15 (unaudited)	As at 31.12.15 (audited)
Financial assets
Cash and cash equivalents	44,440	470,535	35,330	44,440	470,535	35,330
Restricted cash and deposits	8,988	-	9,308	8,988	-	9,308
Trade and other receivables	66,258	64,846	83,379	66,258	64,846	83,379
Available-for-sale financial assets	5	23	9	5	23	9
Other financial assets	8,102	12,278	5,757	8,102	12,278	5,757
Total financial assets	127,793	547,682	133,783	127,793	547,682	133,783
Financial liabilities
Trade and other payables	27,364	25,826	27,566	27,364	25,826	27,566
Accrued liabilities	18,411	24,826	14,223	18,411	24,826	14,223
Interest bearing loans and borrowings	797,111	1,123,090	903,650	743,667	1,079,801	1,204,836
Total financial liabilities	842,866	1,173,742	945,439	789,442	1,173,742	1,267,684

Interest bearing loans and borrowings

The fair values of interest-bearing loans and borrowings are based on the discounted cash flows using market interest rates except for the fair value of the Eurobond issued, which is based on the market price quotation at the reporting date.

Available-for-sale financial assets

As at 9 June 2015, the Group disposed its 15.5% available-for-sale equity investment in Ferrous Resources Limited ("Ferrous") for a total cash consideration of US$41,767 thousand resulting in a gain in this amount realised in the period ended 30 June 2015. This investment was acquired during the financial year 2013 with total transaction costs of US$82,382 thousand and fully impaired as at 30 September 2014 due to uncertainties in respect of the operational activity and the future development of the mining operation at this point of time. In the period ended 30 June 2015, the investment was revalued to US$41,800 thousand based on an irrevocable tender and support agreement signed on 29 April 2015 for the disposal of the stake in Ferrous for a cash consideration of US$41,800 thousand, which was considered to be the fair value of the investment at the end of this reporting period and the gain from this revaluation was recognised in the statement of other comprehensive income. This gain was reclassified to profit or loss at the point of time of the completion of the disposal.

The available-for-sale equity investment in PJSC Stakhanov Railcar Company in the amount of US$5 thousand (30 June 2015: US$23 thousand; 31 December 2015: US$9 thousand) is measured at its fair value based on the quoted market price for its shares on the Ukrainian Stock exchange ('PFTS') and are categorised as Level 1 financial instrument within the fair value hierarchy

As of 30 June 2016, the fair value of the available-for-sale financial assets in Level 1 decreased by US$18 thousand (30 June 2015: decrease of US$23 thousand; 31 December 2015: decrease of US$37 thousand).

Other financial assets and liabilities

The fair values of cash and cash equivalents, trade and other receivables and payables, restricted cash and deposits, other financial assets and accrued liabilities are approximately equal to their carrying amounts due to their short maturity.

There were no transfers between the different levels during the reporting period.

Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy is shown in the table below:

US$000	As at 30.06.16	As at 30.06.15	As at 31.12.15
	(unaudited)	(unaudited)	(audited)
Opening balance	-	-	-
Total gains or losses:	-	-	-
- in profit or loss	-	41,767	41,767
- in other comprehensive income	-	-	-
Disposal	-	(41,767)	(41,767)
Transfer out of Level 3	-	-	-
Closing balance	-	-	-

Further information on the Group's exposure to interest rate, foreign currency and liquidity risk is provided in Note 31 of the Annual Report and Accounts 2015.

Note 22: Events after the reporting period

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

Glossary

Act	The Companies Act 2006
AGM	The Annual General Meeting of the Company
Articles	Articles of Association of the Company
Audit Committee	The Audit Committee of the Company's Board
Belanovo or Belanovskoye	An iron ore deposit located immediately to the north of Yeristovo
Benchmark Price	Platts 62% Fe iron ore fines price CFR China
Beneficiation Process	A number of processes whereby the mineral is extracted from the crude ore
BIP	Business Improvement Programme, a programme of projects to increase production output and efficiency at FPM
Board	The Board of Directors of the Company
Bt	Billion tonnes
Capesize	Capesize vessels are typically above 150,000 tonnes deadweight. Ships in this class include oil tankers, supertankers and bulk carriers transporting coal, ore, and other commodity raw materials. Standard capesize vessels are able to transit through the Suez Canal
Capital Employed	The aggregate of equity attributable to shareholders, non-controlling interests and borrowings
Central Europe	This segmentation for the Group's sales includes Austria, Czech Republic, Hungary and Serbia
CFR	Delivery including cost and freight
C1 Costs	Represent the cash costs of production of iron pellets from own ore, divided by production volume, from own ore, and excludes non-cash costs such as depreciation, pension costs and inventory movements, costs of purchased ore, concentrate and production cost of gravel
China and South East Asia	This segmentation for the Group's sales includes China, Indonesia, Malaysia, Taiwan and Vietnam
CIF	Delivery including cost, insurance and freight
CIS	The Commonwealth of Independent States
Code	The UK Corporate Governance Code
Company	Ferrexpo plc, a public company incorporated in England and Wales with limited liability
CPI	Consumer Price Index
CSR	Corporate Safety and Social Responsibility
CSR Committee	The Corporate Safety and Social Responsibility Committee of the Board of the Company
DAP	Delivery at place
DFS	Detailed feasibility study
Directors	The Directors of the Company
Dragline Excavators	Heavy machinery used to excavate material. A dragline consists of a large bucket which is suspended from a boom
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, share based payment expenses and the net of gains and losses from disposal of investments and property, plant and equipment
EBITDA margin	EBITDA (see definition above) as a percentage of revenue
EBT	Employee Benefit Trust
EPS	Earnings per share
Executive Committee	The Executive Committee of management appointed by the Company's Board
Executive Directors	The Executive Directors of the Company
FBM	Ferrexpo Belanovo Mining, also known as BGOK, a company incorporated under the laws of Ukraine
Fe	Iron
Ferrexpo	The Company and its subsidiaries
Ferrexpo AG Group	Ferrexpo AG and its subsidiaries including FPM
Fevamotinico S.a.r.l.	A company incorporated with limited liability in Luxembourg
FOB	Delivered free on board, which means that the seller's obligation to deliver has been fulfilled when the goods have passed over the ship's rail at the named port of shipment, and all future obligations in terms of costs and risks of loss or damage transfer to the buyer from that point onwards
FPM	Ferrexpo Poltava Mining, also known as Ferrexpo Poltava GOK Corporation or PGOK, a company incorporated under the laws of Ukraine
FRMC	Financial Risk Management Committee, a sub-committee of the Executive Committee
FTSE 250	The index of Financial Times Stock Exchange consisting of the 101^st to the 350^th largest companies listed on the London Stock Exchange
FYM	Ferrexpo Yeristovo Mining, also known as YGOK, a company incorporated under the laws of Ukraine
Group	The Company and its subsidiaries
Growth Markets	These are predominantly in Asia and have the potential to deliver new and significant sales volumes to the Group
HSE	Health, safety and environment
IAS	International Accounting Standards
IASB	International Accounting Standards Board
IFRS	International Financial Reporting Standards, as adopted by the EU
IPO	Initial public offering
Iron ore concentrate	Product of the benefication process with enriched iron content
Iron ore sinter fines	Fine iron ore screened to -6.3mm
Iron ore pellets	Balled and fired agglomerate of iron ore concentrate, whose physical properties are well suited for transportation to and reduction within a blast furnace
JORC	Australasian Joint Ore Reserves Committee - the internationally accepted code for ore classification
K22	GPL ore has been classified as either K22 or K23 quality, of which K22 ore is of higher quality (richer)
KPI	Key Performance Indicator
Kt	Thousand tonnes
LIBOR	The London Inter Bank Offered Rate
LLC	Limited Liability Company
LTIFR	Lost-Time Injury Frequency Rate
LTIP	Long-Term Incentive Plan
m3	Cubic metre
Majority Shareholder	Fevamotinico S.a.r.l., The Minco Trust and Kostyantin Zhevago (together)
Mm	Millimetre
Mt	Million tonnes
Mtpa	Million tonnes per annum
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
Nominations Committee	The Nominations Committee of the Company's Board
Non-executive Directors	Non-executive Directors of the Company
NOPAT	Net operating profit after tax
North East Asia	This segmentation for the Group's sales includes Japan and Korea
OHSAS 18001	International safety standard 'Occupational Health & Safety Management System Specification'
Ordinary Shares	Ordinary Shares of 10 pence each in the Company
Ore	A mineral or mineral aggregate containing precious or useful minerals in such quantities, grade and chemical combination as to make extraction economic
Panamax	Modern panamax ships typically carry a weight of between 65,000 to 90,000 tonnes of cargo and can transit both Panama and Suez canals
PPI	Ukrainian producer price index
Probable Reserves	Those measured and/or indicated mineral resources which are not yet 'proved', but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions
Proved Reserves	Measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of determination and under specific economic conditions
Rail car	Railway wagon used for the transport of iron ore concentrate or pellets
Relationship Agreement	The relationship agreement entered into among Fevamotinico S.a.r.l., Kostyantin Zhevago, The Minco Trust and the Company
Remuneration Committee	The Remuneration Committee of the Company's Board
Reserves	Those parts of mineral resources for which sufficient information is available to enable detailed or conceptual mine planning and for which such planning has been undertaken. Reserves are classified as either proved or probable
Sinter	A porous aggregate charged directly to the blast furnace which is normally produced by firing fine iron ore and/or iron ore concentrate, other binding materials, and coke breeze as the heat source
Spot price	The current price of a product for immediate delivery
Sterling/£	Pound Sterling, the currency of the United Kingdom
STIP	Short-Term Incentive Plan
Tailings	The waste material produced from ore after economically recoverable metals or minerals have been extracted. Changes in metal prices and improvements in technology can sometimes make the tailings economic to process at a later date
Tolling	The process by which a customer supplies concentrate to a smelter and the smelter invoices the customer the smelting charge, and possibly a refining charge, and then returns the metal to the customer
Ton	A US short ton, equal to 0.9072 metric tonnes
Tonne or t	Metric tonne
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
Treasury Shares	A company's own issued shares that it has purchased but not cancelled
TSF	Tailings storage facility
TSR	Total shareholder return. The total return earned on a share over a period of time, measured as the dividend per share plus capital gain, divided by initial share price
UAH	Ukrainian Hryvnia, the currency of Ukraine
Ukr SEPRO	The quality certification system in Ukraine, regulated by law to ensure conformity with safety and environmental standards
US$/t	US Dollars per tonne
VAT	Value Added Tax
Value-in-use	The implied value of a material to an end user relative to other options, e.g. evaluating, in financial terms, the productivity in the steel making process of a particular quality of iron ore pellets versus the productivity of alternative qualities of iron ore pellets.
WAFV	Weighted average fair value
Western Europe	This segmentation for the Group's sales includes Germany and Italy
WMS	Wet magnetic separation
Yeristovo or Yeristovskoye	The deposit being developed by FYM

This information is provided by RNS

The company news service from the London Stock Exchange

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