Ferrexpo Regulatory News (FXPO)

7 August 2013

FERREXPO plc

("Ferrexpo" or the "Group")

2013 Interim Results

Ferrexpo, the FTSE 250 iron ore pellet producer, today announces its interim year results for the six months ended 30 June 2013.

Michael Abrahams, Non-Executive Chairman, said:

"Ferrexpo has performed well in the first half of the current year and expects to increase production in the second half as its new mine, Ferrexpo Yeristovo Mining (FYM) continues to ramp up. Once the FYM mine reaches its initial planned capacity, anticipated in the second half of the year, further operating efficiencies should result. Ferrexpo's capital projects are also progressing well and, whilst the iron ore price is likely to remain volatile, the Group is in a good position to continue its investment programme, as appropriate."

1 As a result of the retrospective adoption of the amendments to IAS 19, the pension costs of the comparative periods ended 30 June 2012 and 31 December 2012 changed and had a positive effect of US$2 million and US$4 million on the previously disclosed EBITDA figures.

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

3 Last twelve months.

·; Record pellet production of 5.3 million tonnes, 11% higher than 1H 2012 driven by the ramp-up of production from the new Ferrexpo Yeristovo Mine (FYM).

·; Three million tonnes of ore mined at FYM in 1H 2013, producing 859 thousand tonnes of pellets. The development of FYM increases the Group's mining flexibility and improves efficiency.

·; Sales volumes grew by 19% to 5.3 million tonnes due to strong pellet demand from all of the Group's markets. The Group's achieved price was 6% lower than the first half of 2012 reflecting a 4% decrease in market pricing and the timing of fixed price settlements with Traditional customers.

·; Average freight costs, including transshipment, to the Far East reduced by 33% compared to a drop of 11% in the C3 index (Brazil to China). As a result of the above cost savings, the Group is on track to achieve its goal of realising an average freight cost to the Far East at or below C3. As the majority of ocean going sales are now based on CFR pricing, these reduced freight costs contribute to a higher net sales price for the Group.

·; The average C1 cash cost of production for pellets was US$61.8 per tonne(1H 2012: US$60.4 per tonne) reflecting higher costs associated with the ramp up of FYM in 1Q 2013 (1Q 2013: US$63.9 per tonne). The increase was reversed in 2Q 2013 due to increasing efficiency gains and better fixed cost absorption.

·; EBITDA of US$244 million was in line with 1H 2012 benefitting from strong volume performance and continued cost controls which were able to mitigate price volatility.

·; The Group stabilised its VAT recoverable position, with the balance due from the Ukrainian Government remaining similar to 31 December 2012 at US$305 million. This was offset by an increase in corporate profit tax prepayments amounting to US$65 million, or half of the VAT repaid to Ferrexpo in the period (31 December 2012: prepaid corporate profit tax US$25 million).

·; Balance sheet position remains strong. As of 30 June 2013, the Group's net gearing was 26% and net debt was US$566 million (31 December 2012: US$423 million), which included cash on hand of US$446 million (31 December 2012: US$597 million). Of the net debt, US$370 million or 65% was represented by overdue VAT and prepaid corporate profit tax. The Group is actively seeking ways to reduce its VAT outstanding balance.

·; The Group is on track to complete its US$647 million investment programme to increase the quantity and quality of its pellets.

There will be an analyst and investor meeting at 09.00 (UK time) today at Deutsche Bank, The Auditorium, 1 Great Winchester Street, London EC2N 2DB. A live video webcast and slide presentation of this event will be available on www.ferrexpo.com. It is recommended that participants register at 08.45. The presentation will be hosted by Michael Abrahams (Chairman), Kostyantin Zhevago (CEO) and Chris Mawe (CFO).

For further information contact:

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. In 2012, the subsidiary, Ferrexpo Poltava Mining (FPM), produced 9.3 million tonnes of iron ore pellets, while first ore was reached at the new Ferrexpo Yeristovo Mining (FYM) open pit. Ferrexpo is a top 5 seaborne supplier of pellets and the largest exporter of pellets in the CIS. The Group has a diversified customer base supplying steel mills in Austria, Slovakia, Czech Republic, Germany and other European states, as well as in Turkey, 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

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT

ESTABLISHED CAPABILITIES AND EXPANDING OPERATIONS

For the six months ended 30 June 2013, Ferrexpo is pleased to report a strong production and sales performance and EBITDA in line with the first half of 2012 at US$244 million (1H 2012: US$242 million).

During the period, Ferrexpo commenced ramp up of its new mining operations at Ferrexpo Yeristovo Mining ('FYM') increasing the Group's total pellet output by 11% compared to the same period in 2012. Strong iron ore pellet demand from all of the Group's markets enabled Ferrexpo to grow its sales volumes by 19%.

Market pricing during the period was volatile impacting the Group's achieved price, which was 6% lower than the first half of 2012.

Overall, Group operating profit benefited from strong volume performance and continued cost controls which were able to mitigate the price volatility.

Ferrexpo is a top five global seaborne pellet supplier servicing a premium customer base which largely produces sophisticated steel products. Its proximity to the major steel producing regions and its integrated infrastructure capability are enabling it to build a first class reputation within the industry. The Group will continue to invest prudently to enhance value to all stakeholders.

Results

Group revenue increased by 6% to US$775 million for the six months ended 30 June 2013 (1H 2012: US$731 million) underpinned by strong sales demand offsetting lower market pricing. In 1H 2013, the Group's average received price fell by 6% compared to the first half of 2012. Sales volumes increased by 19% to 5.3 million tonnes (1H 2012: 4.5 million tonnes).

The Group's average C1 cash cost of production for pellets for the six months to 2013 was US$61.8 per tonne (1H 2012: US$60.4 per tonne; FY 2012: US$59.6 per tonne). The increase in the C1 cost primarily reflected expenditures related to the ramp up of production at FYM. The Ukrainian Hryvnia remained stable against the US Dollar during the period.

Group profit after tax was US$126 million (1H 2012: US$147 million) reflecting higher depreciation costs following Ferrexpo Poltava Mining's ('FPM') modernisation programme and the opening of the FYM.

In the period to 30 June 2013, the Group stabilised its gross VAT recoverable position, with the balance due from the Ukrainian Government remaining similar to 2012 year end levels at US$305 million (31 December 2012: US$302 million). Prepayment of corporate profit tax increased during the period by US$40 million to US$65 million. The prepayment of US$40 million represented approximately half of the VAT repaid to Ferrexpo in the first six months of 2013 (31 December 2012: prepaid corporate profit tax amounted to US$25 million).

Ferrexpo is continuing to work constructively with Government authorities for repayment of the outstanding and overdue VAT. This amount, together with corporate profit tax prepayments, effectively accounted for 65% of the Group's net debt at 30 June 2013 of US$566 million (31 December 2012: 77% of net debt of US$423 million).

As of 30 June 2013, a US$38 million discount (31 December 2012: US$20 million) had been recorded to reflect the anticipated financing cost incurred by the Group to recover the outstanding VAT over a protracted period of time.

The Group's US$647 million capital investment programme to increase the quality and quantity of its pellet output is ongoing, supported by internally generated cash flows. During the period, the Group spent US$147 million (1H 2012: US$222 million) on these projects. As is common with brownfield developments, opportunities have arisen for the refinement and optimisation of project plans. These projects are still expected to be completed on time and to budget.

At the period end, Ferrexpo had net debt of US$566 million (31 December 2012: US$423 million), which included cash on hand of US$446 million (31 December 2012: US$597 million).

The Group's policy is to pay a modest but consistent dividend throughout the economic cycle and return capital to shareholders when appropriate, while maintaining adequate liquidity to support the business and its growth plans. The Directors recommend an interim dividend of 3.3 US cents per Ordinary Share (1H 2012: 3.3 US cents) for payment on 20 September 2013 to shareholders on the register at the close of business on 16 August 2013. The ex-dividend date will be 14 August 2013. The dividend will be paid in UK Pounds Sterling, with an election to receive in US Dollars.

Market Environment

The benchmark Platts 62% Fe CFR iron ore fines price index to North China fell from an average of US$142 per tonne in the first half of 2012 to US$118 per tonne in the second half of 2012. In the first half of 2013, the volatility continued and the benchmark price fell from a peak of US$160 per tonne in February to US$110 per tonne in May before recovering to US$130 per tonne at the end of July. Overall the index was 4% lower in the first half of 2013 compared to the first half of 2012.

As a result of these market conditions, Ferrexpo's achieved price in the first half of the year compared to the same period in 2012 decreased by 6% on average, reflecting the timing of price settlements under the Group's contractual agreements, which included 40% on a benchmark indexed price (1H 2012: 25%), 14% on a spot basis (1H 2012: 35%), and 46% on a quarterly negotiated basis (1H 2012: 40%).

Ferrexpo expects price volatility to remain due to increased stocking cycles and sentiment driven reactions to global economic news. The Group is and will continue to be cost competitive within this environment.

Market demand for iron ore pellets was robust in the first half of 2013 due to reduced availability of pellets from Brazil. Pellets are also increasingly in demand by steel mills constrained by emission targets, as pellets are the highest quality and most environmentally friendly source of iron in a steel furnace. As a pellet producer, Ferrexpo expects to benefit from these positive market developments for the Group's products which were evident in the first half of the year.

The premium achieved for pellets, compared to the equivalent fines product, increased during the period relative to the second half of 2012. In addition, customers were looking to secure a reliable long-term supply of pellets. As a result, Ferrexpo experienced strong demand year to date and expanded its volumes under long-term contracts to key customers in Turkey and Western Europe, and renewed a long-term contract in Japan.

Logistics remains a key focus and the Group continued to supply a substantial proportion of its products in the period using its own railway wagons.

The average freight cost, including transshipment, to the Far East reduced 33% compared to a drop of 11% in the C3 index (Brazil to China) over the same period in 2012. The lower costs resulted from the increased usage of capesize vessels compared to panamax vessels where 11 were loaded in 1H 2013 compared to 8 in 1H 2012. In December 2012, the Group also commenced operation of its own transshipmnet vessel, Iron Destiny, which reduced freight costs by US$1.80 per tonne in the first six months of 2013. The freight rates from the Black Sea Ports to China were also generally lower compared to 2012.

As a result of the above cost savings, the Group is on track to achieve its goal of realising an average freight cost to the Far East at or below C3. As the majority of ocean going sales are now based on CFR pricing, these reduced freight costs contribute to a higher net sales price for the Group.

Ferrexpo is the closest significant pellet supplier in nautical miles to Europe, the Middle East and Asia. It is focused on further lowering its distribution costs and increasing its pellet quality to make it the pellet supplier of choice to premium steel mills around the world.

Production

Ferrexpo is pleased to report an increase of 11% in production volumes for the first half of 2013 to 5.3 million tonnes (1H 2012: 4.7 million tonnes). This was driven by the ramp-up of production from the new pit at Ferrexpo Yeristovo Mining ('FYM'), the first new iron ore open pit mine in the Commonwealth of Independent States ('CIS') since Ukraine gained its independence in 1991.

Importantly, the development of FYM serves to lower the operational risk profile of the business and reduce its cost base going forward, initially through increased fixed cost absorption from higher volumes and then through improved processing characteristics of the FYM ore as its staged ramp up advances. The average iron content of the ore mined by FYM is 34% compared to 30% at the deposits mined by FPM.

Of the 5.3 million tonnes of pellets produced in 1H 2013; 5.1 million tonnes were from the Group's own ore (1H 2012: 4.6 million tonnes) while 0.2 million tonnes were produced from third party concentrate (1H 2012: 0.2 million tonnes). Of the output from own ore, 2.2 million tonnes of pellets contained 65% iron content (a record for the Group), compared to 2.1 million tonnes in 1H 2012. Please see table 3 in the 'Review of Operations' section of this announcement (page 9) which details production output.

Throughout the period, Ferrexpo Poltava Mining (FPM) continued with the modernisation programme of the existing mining and processing facilities. In May 2013, FPM's processing facilities produced 1 million tonnes of pellets, an encouraging sign and validation of the plant's ultimate capacity. This level of production is in line with the target of 1 million tonnes of output per month by the end of 2013. For the remainder of the year, FPM will continue to overhaul additional processing sections and focus on increasing its production capacity in order to deliver a monthly output of one million tonnes throughout 2014, including planned maintenance downtime.

Health, Safety and Environment

In accordance with the Group's policy of continuously improving safety standards, Ferrexpo is pleased to report that there have been no fatalities at its mines in well over two years, and that the lost-time injury frequency rate ('LTIFR') for the Group's mining operations was 0.65 per million man hours for the period under review (FY 2012: 0.66).

The management of Ferrexpo actively encourages and develops a culture of safety in the organisation, linking safety performance to remuneration. The Group is implementing a number of recommendations from regular internal safety audits, and previous external audits (Ukraine State Authority and DuPont), and is determined to continue to pursue best international standards for mining companies.

The environmental impact of Ferrexpo's mining and processing operations remains an important consideration when addressing operational improvements. The Group is committed to operating responsibly and sustainably. There were no environmental incidents to report in the first half of 2013.

Cost of Production

The Group's average C1 cash cost of production for pellets for the six months to 2013 was US$61.8 per tonne (1H 2012: US$60.4 per tonne; FY 2012: US$59.6 per tonne). The C1 cost increase was principally as a result of higher costs associated with the ramp up of mining and processing of the FYM ore in the first quarter of the year, which was offset to a certain extent in the second quarter due to efficiency gains and better fixed cost absorption on higher production volumes.

Approximately 70% of the Group's total cost base is in Ukrainian Hryvnia. Since the end of 2008, following a 60% devaluation against the US dollar, the currency has been largely pegged at approximately UAH8 to US$1.

Capital Investment 

The Group is on track to complete its US$647 million investment programme to increase the quantity of its pellet output by circa one third to 12 million tonnes per annum in 2014, and to increase the average quality of its pellets from 63% Fe to 65% Fe in 2015.

Further development of existing mining facilities requires that the current production be maintained whilst optimisation and modernisation programmes are completed. Implementation of investment programmes in such a scenario, inevitably result in the optimisation of project plans which present opportunities for efficiency gains as well as improvements to plant designs. Both the volume increase and quality upgrade projects remain on time and within the original cost budget.

The Group holds licenses to explore and develop the largest iron ore deposit in Europe. It remains dedicated to developing these substantial reserves and thereby creating significant value for all stakeholders. Ferrexpo aims to fund capital investment out of operating cash flows and as such the pace of investment depends on the market demand and the price for iron ore as well as the economic and political environment in Ukraine. The Group will continue to evaluate and if appropriate partake in Net Present Value accretive opportunities; both within the Company and externally, that de-risk and diversify its operations.

Ferrexpo remains committed to increasing its volume output to beyond 12 million tonnes of pellets or iron ore equivalent, by developing new processing capacity at FYM. This will be considered later in the year by the Board and will be subject to market conditions as well as the provision of adequate long-term funding through both internally generated cash flows as well as appropriately priced and structured debt. 

 Financial Management

Ferrexpo has maintained strict financial discipline over many years. Key aspects of the Group's approach include funding capital expenditures principally out of operating cash flows and where appropriate fairly priced and structured debt, ensuring adequate liquidity whilst retaining competitive credit metrics and cost of financing.

Net gearing was 26% as of 30 June 2013 (21% as of 31 December 2012) and net debt to EBITDA for a trailing annual period was 1.4 x as of 30 June 2013 (1.1 x as of 31 December 2012). As of 30 June 2013, the Group had net debt of US$566 million (31 December 2012: US$423 million), which included cash on hand of US$446 million (31 December 2012: US$597 million). Of the net debt, US$370 million or 65% was represented by overdue VAT and prepaid corporate profit tax. The Group is actively seeking ways to reduce its VAT outstanding balance.

Of the US$647 million capital programme approved by the Board in November 2011, approximately US$425 million has been invested as of 30 June 2013. As such, the Group's payments for capital goods peaked in the first half of 2013 and should reduce in the remainder of the year. Ferrexpo has a degree of flexibility regarding the outstanding investments without affecting its production goals of increasing volume output to 12 million tonnes of pellets per annum and increasing the average quality of its pellet output to 65% Fe.

Ferrexpo has minimal debt repayments of approximately US$19 million in 2013, of which US$9 million remains to be paid in the second half, and US$89 million in 2014.

Ukraine

Ukraine is still at a comparatively early stage in its development as an independent democracy, and has been subject to various changes in government over the past 20 years. In June 2013, the rating agency, Fitch, revised its outlook for Ukraine from stable to negative citing an increasingly fragile external financing position. Challenges of operating in such an environment is a risk commonly faced by all mining companies in emerging markets, and the Board believes Ferrexpo has the expertise and local knowledge to manage them.

Court case

The Group faces an ongoing legal claim over a shareholding in FPM. After having taken Ukrainian legal advice, the Board believes that risks related to these court proceedings are remote. Due to the nature of the country and its court system, however, a negative outcome cannot be ruled out. The consequences of this are highlighted in note 19 of the notes to the interim financial statements. The case has been running for seven years and the Board believe it still has a considerable way to go.

VAT

As of 30 June 2013, Ferrexpo was owed US$305 million of VAT by the Ukrainian Government (31 December 2012: US$302 million). This amount has been discounted by US$38 million to US$267 million in order to reflect the cost of financing those VAT balances that are expected to be recovered more than one year after the period in which they arose. Prepaid corporate profit tax amounted to US$65 million as of 30 June 2013 (31 December 2012: US$25 million).

The Board notes that the VAT balance outstanding has stabilised due to FPM receiving regular VAT refunds thus far in 2013 (in exchange for the prepayment of corporate profit tax equal to half of the total VAT received).

On 24 July 2013, Ukraine's President signed a law allowing the Government to repay eligible budget arrears and VAT by issuing Treasury Promissory Notes. The Board believes the issue of these is still contingent upon the signing of a related law which Parliament passed on 4 July 2013.

The ultimate issue of the notes along with the final terms and conditions and the transferability and trading is still to be determined and therefore uncertain. The Board continues to closely monitor this. More detail regarding VAT and the associated discount is disclosed in note 12 of the accounts.

CSR

In 1960, the town of Komsomolsk was established adjacent to the Poltava mine to support its mining and processing operations. The town has a total population of approximately 55,000 people and Ferrexpo is the largest employer, employing approximately a quarter of the working population. The Group has been a significant investor in local community initiatives from the outset, investing funds in the social infrastructure of Komsomolsk and the surrounding area. These funds have been spent on medical facilities, social services, education, religion, culture and sporting activities, as well as on the maintenance of certain of the city's social and cultural structures.

For the six months to 30 June 2013, Ferrexpo spent approximately US$4 million on community projects as part of its ongoing social programme (1H 2012: US$10 million). Due to Ferrexpo's presence as a major local employer and its contributions to community initiatives, unemployment in Komsomolsk is significantly below the national average, and the average salary is significantly above the national average.

Corporate Governance

The Board intends to remain fully compliant with the UK Corporate Governance Code 2012 and remains committed to maintaining high standards of governance throughout the Group.

People

The Board would like to take this opportunity to thank the management team and all of Ferrexpo employees from those working at the mines in Ukraine, to those in logistics and marketing located around the world close to the Group's customers. It is to the credit of the high standards of the management team that Ferrexpo is able to position itself increasingly as a world class pellet supplier.

Outlook

Ferrexpo has performed well in the first half of the current year and expects to increase production in the second half as FYM continues to ramp up. Once the FYM mine reaches its initial planned capacity, anticipated in the second half of the year, further operating efficiencies should result. Ferrexpo's capital projects are also progressing well and, whilst the iron ore price is likely to remain volatile, the Group is in a good position to continue its investment programme, as appropriate.

REVIEW OF OPERATIONS

In total, as of 1 July 2013, Ferrexpo had estimated resources of approximately 6.8 billion tonnes classified according to the Australasian Joint Ore Reserves Committee ('JORC') code, and further estimated resources of over 13.2 billion tonnes classified according to the former Soviet Union method of classification (FSU classification). Based on a combination of the JORC and FSU classified resources, management believes the Group holds the licences to the largest iron ore deposit in Europe.

Reserves and Resources

Table 1. JORC Reserve Statements as of 1 July 2013

Table 2. JORC Resource Statements as of 1 July 2013

The Ferrexpo Group currently operates two open cut mines both exploiting the Kremenchug Magnetic Anomaly located on the banks of the Dnepr River in Ukraine, and a fully integrated processing and pelletising facility. Ore is processed on-site into pellets before being shipped via rail, barge and port, predominantly using wholly owned or controlled assets. Ferrexpo markets 100% of its product through a worldwide sales organisation. The current combined output from the two mines stands at 35 million tonnes of ore, sufficient to produce 12 million tonnes of pellets per year. The addition of new processing facilities, planned for the future, will further increase concentrate and pellet output.

Ferrexpo Poltava Mining ('FPM')

Overview

FPM consists of a mine, concentrating and pellet processing facility that exploits the Gorishne-Plavninskoye and Lavrikovskoye ('GPL') deposits. As of 1 July 2013, the GPL deposits had iron ore resources of 3.6 billion tonnes, of which approximately 824 million tonnes were proved and probable reserves with an average iron content of 30% under the JORC Code.

The mine is adjacent to rail and port facilities on the Dnepr River and is approximately 6 kilometres long and over 350 metres deep. FPM operates a traditional shovel and truck open pit mining operation extracting approximately 30 million tonnes per annum of crude ore on an uninterrupted basis for over 40 years.

FPM's production facilities crush, grind and concentrate ore from both its own mine and currently the FYM mine before it is fired to produce iron ore pellets in the FPM pelletising plant. This plant contains four lines each with nameplate capability to produce 3 million tonnes of pellets. FPM currently produces two types of pellets for the Group, Ferrexpo Premium Pellets ('FPP') which contain 65% iron content and Ferrexpo Basic Pellets ('FBP') which contain 62% iron content.

FPM's own GPL mine is operating at full capacity of approximately 30 million tonnes per year (30% average iron content), which can be processed into approximately 9 million tonnes of pellets per annum.

FPM intends to increase the amount of ore it mines on an annual basis, however, it is currently sourcing additional ore from the newly opened Yeristovo mine where 3 million tonnes of ore was mined and processed in the first half of 2013, producing 859 thousand tonnes of pellets.

Yeristovo ore provides FPM with the opportunity to optimise its own mining programme, allowing FPM to maximise the grade, volume and quality of output and, as necessary, stock ore for later processing, while FPM's processing facilities are further improved as part of its ongoing capital programme.

The addition of the Yeristovo mine has significantly improved flexibility for the processing of higher grade concentrate. As FPM upgrades its processing facilities this will allow the overall iron content of its pellets to be increased with the objective that in 2015 all pellet output will have a grade of 65% Fe.

The table below highlights the Group's production statistics during the period.

Table 3. Pellet Production 1H 2013 vs 1H 2012

FPM Business Improvement Programme ('BIP')

FPM has continued to reduce costs through its BIP, which has achieved savings of UAH 33.4 million in the first half of 2013. Energy costs comprise a significant amount of its total C1 production cost, with electricity and natural gas equating to approximately 39%. Electricity consumption savings during the period were 8.6 million kWh and gas consumption was reduced by 328,000 m3. Through the first half of 2013, there were 35 projects under way (in various stages) in the mining, processing and servicing departments. The programme is targeting a continuous reduction of costs of 1% to 2% on a yearly basis.

Sustaining Capital Investment

First half 2013 sustaining capex US$49 million (1H 2012: US$57 million).

Capacity Upgrade Project

As part of sustaining capital expenditure, FPM continues to upgrade beneficiation sections and other key items of the processing plant to ensure nameplate capacity of 12 million tonnes of pellets in 2014. This will allow the plant to process ore from the new FYM mine together with ore from the existing FPM pit. In May 2013, 1 million tonnes of pellets were produced, confirming the plant's technical capacity. FPM will now focus on increasing its production capacity to deliver one million tonnes per month on a regular basis.

Development Capital Investment

Mine Life Extension Project

First half 2013 capex US$12 million (1H 2012: US$21 million).

This project which will extend the life of FPM's mine to 2032 (30 million tonnes of production per annum) is progressing well with over 59% of the targeted stripping complete as of 30 June 2013. The remaining stripping will be completed over the course of the next five years as planned.

Quality Upgrade Project

First half 2013 capex US$14 million (1H 2012: US$19 million).

As of 30 June 2013, FPM's project to increase all pellet output to 65% Fe, was approximately one third complete. This reflects good progress with installation of two new floatation units and ten vertimills all of which have been ordered and delivered and several of which are onsite and in situ. The quality upgrade project will allow for more efficient collection and processing of iron ore, particularly of lower grade ore which is mined alongside the current richer ore in the FPM mine, and sometimes partly discarded in the form of tailings or stripping waste or, if substituted by Yeristovo ore, stockpiled for later processing.

Further improvements may come with the addition of press filtration which allows for lower moisture content in the concentrate and capture of more iron from the suspension. This will be decided when the exact characteristics of the finer ground higher grade ore is known. The project is on schedule and budget but as is common with brownfield expansions, the project plan has developed whilst staying within its overall objective and cost estimates.

Ferrexpo Yeristovo Mining ('FYM')

Overview

Ferrexpo has a licence to mine the Yeristovskoye iron ore deposit at FYM, which is located approximately two kilometres north of the FPM mine. The FYM deposit has estimated resources of 1.2 billion tonnes under the JORC Code, of which approximately 627 million tonnes were proved and probable reserves with an average iron content of 34%. Assuming an iron ore production rate of 28 million tonnes per annum (broadly similar to FPM's current production), it has the capacity to add approximately 23 years to the Group's production profile or, with the addition of processing and pelletizing facilities, to double the Groups annualised output to 20 million tonnes.

Development Capital Investment

First ore at the Yeristovskoye deposit was reached in the second half of 2012. In the first half of 2013, approximately 3 million tonnes of ore was mined at FYM producing 859 thousand tonnes of pellets. Higher levels of pellet production using FYM ore is expected in the second half of 2013 as FYM's staged ramp up advances. It is expected that FYM will initially mine up to 10 million tonnes per annum by 2014 followed by incremental increases to 28 million tonnes per annum once new processing facilities have been built to accommodate the additional ore.

The FYM mine is managed and operated independently from the existing FPM mine, although its proximity to FPM allows for the sharing of certain facilities and resources, particularly during the early stages of operation, where the contribution of FYM ore will enable FPM to reach full processing capacity of 12 million tonnes per annum in 2014.

First half 2013 capex US$51 million (1H 2012: US$65 million).

Capital expenditure in the first half of the year relates to capitalised stripping in order to extend the pit so as to allow access in the future to ore that will be processed at FYM's own processing facilities. There was also some spend associated with completion of the remaining mine infrastructure.

FYM is developing additional processing and pelletising facilities for the remaining ore mined at the FYM pit. These processing facilities are expected to increase combined output of both the FPM and FYM mines to around 20 million tonnes per annum of pellets or concentrate equivalent. This project will add an additional concentrating complex with 10 million tonnes of capacity. In October 2012, the Board approved US$30 million to begin the detailed engineering work for this development in 2013. Subject to market conditions and final Board approval, anticipated in the fourth quarter of 2013, concentrate production would be targeted to commence in the second half of 2016 with full production targeted by the end of 2017.

Ferrexpo Belanovo Mining ('FBM')

First half 2013 capex US$2 million (1H 2012: US$27 million).

The Belanovskoye deposit has total JORC resources of 1,702 million tonnes. Ferrexpo has started exploration on the Belanovo site and is installing key infrastructure to allow phased development. During the period, the Group spent US$2 million.

Northern Deposits

In April 2013, Ferrexpo successfully extended the exploration licences for the Brovarskoye, Kharchenkovskoye, Manuilovskoye, Vasilievskoye and Zarudenskoye deposits (the Northern Deposits) until 2018.

Health and Safety

Safety is fundamental to Ferrexpo's success and integral to its culture. Ferrexpo is pleased to report that there have been no fatalities at its mines in well over two years, and that the lost-time injury frequency rate ('LTIFR') for the Group's mining operations was 0.65 per million man hours for the period under review (FY 2012: 0.66).

CSR

The Board's Corporate Safety and Social Responsibility Committee monitors the management of the Group's health, safety, environmental and community programmes on a regular basis, based on best practice for mining companies.

The environmental impact of Ferrexpo's mining and processing operations remains an important consideration when addressing operational improvements. The Group remains committed to operating responsibly and sustainably. There were no environmental incidents to report in the first half of 2013.

Ferrexpo's community engagement programmes are aimed at enhancing and supporting medical facilities, social services and education facilities, as well as cultural and sporting activities. For the six months to 30 June 2013, Ferrexpo spent approximately US$4 million on community projects as part of its ongoing social programme (1H 2012: US$10 million).

Examples of the community initiatives in the town of Komsomolsk during the period include the refurbishment of a nursery school building which should significantly reduce heat loss in winter and lower energy consumption and heating bills as well as the replacement of the central heating system at a local secondary school.

Sales

Ferrexpo exports essentially all of its production to markets outside of Ukraine and receives all of its revenues in US Dollars. The marketing strategy is centred on securing sales for a large percentage of production under long-term contracts with customers who produce high value added steel products. This is designed to ensure stable and reliable off take through the economic cycle. For the period ended 30 June 2013, sales to long-term customers accounted for approximately 90% of our sales volumes from own ore, in line with 1H 2012.

Ferrexpo services the key steel producing regions in the world through three market segments:

·; Traditional markets: these lie within Central and Eastern Europe and include steel plants that were initially designed to use Ferrexpo pellets. Ferrexpo has well-established logistics routes and infrastructure to service these steel mills by both river barge and rail. The Group's products represent an attractive alternative to Brazilian and Canadian suppliers due to the closer proximity allowing for a continuous small-parcel delivery chain. Key traditional customers are based in Austria, the Czech Republic, and Slovakia.

·; Natural markets: these markets include Turkey, the Middle East and Western Europe and provide the Group with a logistics cost advantage compared to more distant producers. Ferrexpo has a relatively low market share in these markets which offer sales growth opportunities.

·; Growth markets: these markets are in Asia and have the potential to deliver new and significant sales volumes to the Group. Within this region Ferrexpo is focused not only on China and India but also on building relationships with the premium steel producers in South Korea, Taiwan and Japan. Ferrexpo concentrates on reducing its freight costs to this region by delivering via capesize vessels enabling it to remain competitive on a landed cost basis.

During the period, demand for Ferrexpo's pellets was strong from all market segments. Deliveries under long term contracts into Traditional Markets were greater than contract commitments for most of the period. Sales to Natural markets tripled compared to first half 2012 levels. This was principally due to higher volume offtake agreements with customers in Turkey and Germany. Sales to Growth markets were decreased during the period to ensure service to high quality traditional and natural market customers. With demand from long term customers in Japan and China remaining robust, growth is expected to return when output is increased. During the period Ferrexpo initiated potential new long term contracts in key markets ahead of the FYM mine expansion.

The following table shows the % of Group sales volume by market segment.

Table 4. Sales Volume by Market Segment

Logistics

Ferrexpo operates its own logistics facilities, including rail cars sufficient to transport the majority of its own product inside Ukraine, barging capacity in Europe in excess of one million tonnes per year, and a port with capacity of over five million tonnes per year with the ability to efficiently load and deliver product using capesize vessels.

In Natural and Growth markets, the Group has been steadily reducing the cost of freight. Ferrexpo's 48.6% owned berth at Port Yuzhny on the Black Sea has capacity of over 5 million tonnes per annum, whilst additional capacity is available at this port if required. Port Yuzhny was originally designed for vessels of a carrying capacity of up to 100,000 tonnes, and historically vessels were loaded in the range of 70,000 to 85,000 tonnes. Ferrexpo has developed a cost effective capability to load standard capesize vessels, typically around 172,000 to 176,000 tonnes, by use of a dedicated transhipment vessel.

In the first half of 2013, Ferrexpo loaded 11 capesize vessels compared to 8 in the first half of 2012 and it plans to load over 20 capesize vessels in 2013. Ferrexpo reduced its seaborne freight cost in the period by approximately US$1.80 per tonne as its own transhipment vessel, Iron Destiny, commenced operation. Iron destiny has also delivered product directly to customer designated ports and transshipment ports ensuring high utilisation levels of this owned asset with consequential cost reductions.

Its average freight cost, including transhipment, to the Far East reduced 33% compared to a drop of 11% for the freight cost from Brazil (the largest region of pellet production) to China (measured from the ports of Tubarao in Brazil to Qingdao in China, known as the C3 index) over the same period last year. The Group's goal is to realise an average freight cost to the Far East at or below C3. As the majority of ocean going sales is increasingly based on CFR pricing, this results in a higher net sales price for the Group.

In the first half of 2013, Ferrexpo invested US$19 million in the development of its logistics infrastructure (1H 2012: US$31 million). The majority of this spend concerned the payment for 267 rail cars which are to be delivered in the third quarter. As of 30 June 2013, the Group owned 1,933 rail cars. During the period under review, it transported a large proportion of its pellet production to Ukrainian border points using its own rail cars, reducing its reliance on state rail cars and lowering transportation costs. The remaining development capex related to completion costs for Iron Destiny and a small investment in the barge fleet.

The Group's barging subsidiary transported 648 thousand tonnes of pellets in the first half of the year (1H 2012: 695 thousand tonnes). It currently operates 140 barges for transporting dry cargo, such as pellets.

Pricing

Pellets are a premium iron ore product which can be directly charged into the blast furnace and provide steelmakers with a higher level of productivity. As a result iron ore pellets are generally priced at a premium compared to iron ore fines or lump. Ferrexpo's pellets are relatively low in alumina and phosphorus, which is particularly important to flat steel manufacturers. Pellets can generally be shipped consistently in cold climates as the lower moisture content makes them easier to handle and less prone to freezing.

Due to limited pellet supply in the first half of the year and an increase in demand for pellets from the Middle East the pellet premium has increased compared with the average achieved in 2012.

In the industry there are a number of pricing methodologies being applied by industry participants depending on geography and customer. The Group will follow international pricing trends increasing the proportion of contracts priced on a formula or index basis with relevant quality adjustments. Ferrexpo believes that its geographic proximity to key steel customers represents an attractive alternative to the major seaborne suppliers due to the lower costs of transporting pellets over a shorter distance from Ukraine.

In line with the industry, Ferrexpo's sales contracts are based on various time periods. In the first half of 2013, 40% were based on a benchmark indexed priced (1H 2012: 25%), 14% on a spot basis (1H 2012: 35%), and 46% on a quarterly negotiated basis (1H 2012: 40%).

FINANCIAL REVIEW

Summary Financial Results

1 As a result of the retrospective adoption of the amendments to IAS 19, the pension cost for the period ended 30 June 2012 was amended and had a positive effect of US$1.6 million on the previously disclosed EBITDA figures.

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

Revenue

Total revenue increased by 5.9% to US$774.7 million for 1H 2013 (1H 2012: US$731.3 million) due to strong sales growth of 18.7% to 5.3 million tonnes (1H 2012: 4.5 million tonnes), which offset lower pricing during the period.

The average realised price achieved by the Group for its pellets was 6.3% lower compared to the first half of 2012, reflecting the 3.7% decrease in the Platts benchmark iron ore price index and the timing of the applicable price reference period under some of the Group's index linked and fixed quarterly negotiated price contracts.

In the first half of 2013, 40% of sales volumes were based on a benchmark indexed priced (1H 2012: 25%), 14% on a spot basis (1H 2012: 35%), and 46% on a quarterly negotiated basis (1H 2012: 40%).

The DAP FOB price achieved by Ferrexpo also benefited from lower freight rates to seaborne markets along with an improved performance from the Group's own logistics businesses contributing positively to the Group's net sales price.

Revenue from other sales amounted to US$33.9 million (1H 2012: US$45.7 million). This included revenue from external freight services and bunker fuel sales at the Group's logistics operation.

Cost of Sales

Total Group cost of sales for 1H 2013, including costs of sales for the logistics and bunker business as well as the cost of production of pellets from third party concentrate, was US$389.3 million (1H 2012: US$321.7 million).

Cost of sales related to pellet production from own ore was US$375.6 million (1H 2012: US$296.9 million). Production from own ore increased 11.4% to 5.1 million tonnes (1H 2012: 4.6 million).

Cost of sales for pellet production includes the C1 cash cost of production which amounted to US$314.4 million (1H 2012: US$275.8 million). C1 costs represent the cash cost of production of pellets from own ore, divided by production volume from own ore, and excludes non cash costs such as depreciation.

C1 costs increased by 2.3% from US$60.4 per tonne in 1H 2012 to US$61.8 per tonne. The increase reflects higher production costs associated with the ramp up of production at Ferrexpo Yeristovo Mining ('FYM') and a 6.3% increase in electricity tariffs. These costs were partially offset by marginally lower oil prices and lower unit consumption of electricity, gas, fuel, oil and consumables reflecting higher production levels and continued operating efficiency improvements.

Over half of the C1 cash costs are denominated in Ukrainian Hryvnia, which remained stable in the first half of 2013, compared to 1H 2012, at around UAH8.0 to the US Dollar.

Non C1 cost of sales related to pellet production amounted to US$61.2 million for the period (1H 2012: US$21.1 million), principally reflecting higher depreciation and amortisation of US$19.1 million following FPM's modernisation programme and the start of operations at the FYM mine. The total of the comparative period ended 30 June 2012 included a positive effect from inventory movements of US$18.5 million.

Gross Margin

As a result of the factors discussed above, the Group's gross margin was 50% in 1H 2013 compared to 56% in the first half of 2012.

Selling and Distribution Expenses

Selling and distribution expenses were US$155.8 million for the first half compared to US$155.0 million in 1H 2012.

Selling and distribution costs incurred in transporting product to the Ukrainian border were US$74.3 million (1H 2012: US$73.9 million), equating to US$15.1 per tonne (1H 2012: US$16.5 per tonne). These costs primarily include railway freight to the southern ports at Yuzhny and Izmail and to the western Ukrainian border as well as port charges. The costs per tonne benefited from discounts received by the Group for using its own rail cars and from the mix of sales to the various export points. Rail tariffs increased by 0.7% compared to 1H 2012.

Beyond the Ukrainian border, international freight costs to seaborne markets amounted to US$42.6 million (1H 2012: US$56.0 million) and the related tonnages shipped to Natural and Growth markets increased by 31.3%. The lower costs resulted from the increased usage of capesize vessels compared to panamax vessels where 11 were loaded in 1H 2013 compared to 8 in 1H 2012. The freight rates from the Black Sea Ports to China were also generally lower compared to 2012 and efficiencies were gained from the commencement of the Group's own transhipment vessel, Iron Destiny. Ferrexpo's average freight cost, including transshipment, to the Far East in the first half of the year compared to 1H 2012 reduced 33.0%.

EBITDA

EBITDA increased to US$243.9 million for the period compared to US$241.9 million for 1H 2012. The increase was due to strong growth in sales volumes offsetting higher costs from the ramp up of production at FYM and lower achieved sales prices.

Finance Income and Expense

Net debt at the period end was US$566.3 million (31 December 2012: US$423.4 million). Average facilities available during the period amounted to US$1,022.8 million (1H 2012: US$968.6 million) reflecting increases in Export Credit Agency ('ECA') backed loans and some minor movements in committed credit lines available to the Group.

Finance income was US$1.1 million (1H 2012: US$1.5 million) reflecting lower average cash balances. Income from interest earned was US$1.0 million (1H 2012: US$1.4 million). The average cash balance in 1H 2013 was US$491.4 million compared to US$808.2 million in 1H 2012.

Finance expense was US$48.5 million (1H 2012: US$46.1 million). This included an US$18.0 million discount which reflected the anticipated financing cost incurred by the Group to recover outstanding VAT over a protracted period of time. The total discount recorded as of 30 June 2013 was US$38 million (31 December 2012: US$20 million; 1H 2012: US$13.2 million).

Foreign Exchange Gains and Losses

A small operating foreign exchange gain of US$0.3 million was recorded, which was the net effect of various changes in foreign currencies compared to the US Dollar (1H 2012: loss of US$0.5 million). Non-operating foreign exchange gains for the period were US$1.3 million compared to a US$0.5 million gain in 1H 2012. This related mainly to the income received from the conversion of US Dollars for settlement of liabilities denominated in Ukrainian Hryvnia at an exchange rate higher than the one applicable upon initial recognition.

Income Tax Expense

The income tax expense for the period was US$24.0 million in line with 1H 2012. The tax expense reflects an expected weighted average tax rate of 16.0% for the year ended 31 December 2013. This takes into account the various jurisdictions in which the Group operates, lower expected corporate profit tax rates in Ukraine (19% for 2013 compared to 21% in 2012) and the mix of profits as well as major non tax deductible items. The effective income tax rate for the year ended 31 December 2012 was 17.8%.

Summary of Group Liquidity and Debt

The Group has gross debt and committed undrawn facilities of US$1,038.1 million, representing 64.2% of shareholders' equity. The Group's net debt to EBITDA for a trailing annual period was 1.4 x as of 30 June 2013 (1.1x as of 31 December 2012).

Ferrexpo has continued to develop its funding sources to closely match the risk profile of the Group and its development programmes. During the period it has increased ECA backed funding which provides long tenor low interest rate debt for key equipment lines and other equipment leasing programmes. The table below shows the Group's mix of debt instruments.

Ferrexpo's US$500 million corporate bond is a five-year Eurobond maturing in 2016 and the US$420 million pre-export finance loan is a five-year revolving facility with a final maturity date of 31 August 2016 (straight line amortisation over 24 months prior to final maturity). The average tenor of the Group's outstanding ECA funding is 5.2 years. The average cost of the Group's debt was 5.2% (1H 2012: 5.3%)

Cash Flows

Net cash flow from operating activities was US$83.2 million (1H 2012: US$69.7 million).

Working capital increased by US$66.7 million in 1H 2013, principally reflecting an increase in trade receivables and other inventories. Gross VAT receivables stabilised during the period increasing by US$3.1 million compared to an increase of US$63.0 million in 1H 2012.

Total capital investment for 1H 2013 was US$146.8 million compared to US$222.0 million for 1H 2012.

The Group invests part of its free cash flow and appropriate debt facilities in both sustaining and modernisation capital investment as well as in its growth projects. In the period, sustaining capital expenditure was US$51.7 million (1H 2012: US$59.6 million) for the Group, of which US$49.2 million was invested at FPM (1H 2012: US$57.4 million). The remaining US$2.5 million was invested in the Group's barge fleet (1H 2012: US$2.1 million).

US$25.5 million (1H 2012: US$39.7 million) was invested in FPM's development projects while growth capital expenditure at FYM was US$50.7 million (1H 2012: US$65.1 million).

In 1H 2013 US$2.3 million was spent on the Belanovskoye and other deposits (H1 2012: US$26.6 million).

Capital investment in logistics was US$19.0 million in 1H 2013 (1H 2012: US$31.0 million), which was primarily related to the acquisition of rail cars.

The Group paid a dividend of US$58.2 million in the period (1H 2012: US$19.3 million) which included a US$19.4 million ordinary payment and the payment of a US$38.8 million special dividend, both including withholding taxes.

VAT

As of 30 June 2013, the gross amount of VAT owed to the Group increased by US$3.1 million to US$307.9 million compared to US$304.8 million as of 31 December 2012. After an appropriate discount, the VAT balance recorded in the balance sheet stood at $269.9 million compared to $284.8 million as of 31 December 2012.

Although the majority of the VAT outstanding balance is due immediately, it is expected that a large proportion will only be recovered after a significant delay. Therefore, in accordance with accounting standards, a discount of US$38.0 million has been recorded to reflect the financing costs associated with recovery more than one year after the end of this reporting period.

In the first half of 2013, the Group received regular VAT refunds in respect of Ferrexpo Poltava Mining from the Ukrainian Government amounting to US$88.0 million. This was in exchange for the payment of corporate profit tax which amounted to US$49.9 million, part of which is a prepayment in respect of future periods. At the end of June, prepaid corporate profit tax amounted to US$65.4 million (31 December 2012: prepaid corporate profit tax US$24.9 million).

Management expects the full gross balance in local currency to be recovered in due course. Full details on Ukrainian VAT receivable are disclosed in note 12 to the accounts.

Going Concern

The Group's business activities and its financial performance are set out in the Chairman's and CEO's Review and in the Review of Operations on pages 4 to 21, The financial position of the Company, its cash flows, liquidity position and borrowing facilities together with its risk factors are described in the Financial Review on pages 22 to 24. In addition, note [37] of our 2012 Annual Report & Accounts include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives and details of its financial instruments; and its exposures to credit risk, liquidity risk as well as currency risk and interest rate risk.

The Group's forecasts and projections, taking into account possible changes in the iron ore market and general economic environment, show that the Group generates sufficient operating cash flows to comply with the amortisation schedule for the existing major debt facility and to finance the anticipated development projects.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate financial resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements of the Group.

Directors' Responsibility Statement

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

We confirm that to the best of our knowledge:

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

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

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

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

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

For and on behalf of the Board

Michael Abrahams CBE DL

Chairman

Chris Mawe

Chief Financial Officer

 Interim Consolidated Income Statement

Interim Consolidated Statement of Comprehensive Income

Interim Consolidated Statement of Financial Position

The financial statements were approved by the Board of Directors on 6 August 2013.

Kostyantin Zhevago Christopher Mawe

Chief Executive Officer Chief Financial Officer

Interim Consolidated Statement of Cash Flows

Interim Consolidated Statement of Changes in Equity

For the financial year 2012 and the six months ended 30 June 2013

For the six months ended 30 June 2012

Notes to the Interim Condensed

Consolidated Financial Statements

Note 1: Corporate information

Organisation and operation

Ferrexpo plc (the 'Company') is incorporated in the United Kingdom with registered office at 2-4 King Street, London, SW1Y 6QL, UK. Ferrexpo plc and its subsidiaries (the 'Group') operate a mine and processing plant near Kremenchug in Ukraine, an interest in a port in Odessa and sales and marketing activities in Switzerland, Dubai and Kiev. The Group also owns a logistics group located in Austria which operates a fleet of vessels operating on the Rhine and Danube waterways. The Group's operations are vertically integrated from iron ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group's mineral properties lie within the Kremenchug Magnetic Anomaly and are currently being exploited 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 ultimately owned by The Minco Trust, of which Kostyantin Zhevago, the Group's Chief Executive Officer, is a beneficiary. At the time this report was published, Fevamotinico held 51.0% (30 June 2012: 51.0%; 31 December 2012: 51.0%) of Ferrexpo plc's issued share capital. The Group's operations are largely conducted through Ferrexpo plc's principal subsidiary, OJSC Ferrexpo Poltava Mining. The Group comprises of Ferrexpo plc and its consolidated subsidiaries as set out below:

1 The entity was incorporated in December 2012.

2 The entities were incorporated in February and March 2013.

The Group's interests in the entities listed above are held indirectly by the Company.

At 30 June 2013, the Group also holds through OJSC Ferrexpo Poltava Mining an interest of 48.6% (30 June 2012: 48.6%; 31 December 2012: 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 2013 have been prepared in accordance with International Accounting Standard ('IAS') 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2012.

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 2012. 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 2012, has been delivered to the Register of Companies. The auditors' report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Financing and going concern

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

The Group faces several risks to its business and strategy, which are included in the Risks section of the Annual Report & Accounts 2012 and these risks should be considered in conjunction with these financial statements.

The Directors are of the view that the Group is a going concern and the interim consolidated financial statements have been drawn up on this basis. Further information on the going concern assessment of the Directors is given on page 18 of this report.

Changes in accounting policies

The accounting policies and methods of computation adopted in the preparation of the interim condensed consolidated financial statements are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012 except for the adoption of new amendments and improvements to IFRSs effective as of 1 January 2013, noted below:

Standards adopted affecting reported results, financial position or disclosures

IFRS 13 Fair value measurement

The new standard became effective for financial years beginning on or after 1 January 2013 and provides guidance on how to measure fair value under IFRS and when fair value is required or permitted and requires additional specific disclosures. The adoption of this new standard did not have an impact on the financial position or performance of the Group. The additional disclosures to be made in the interim consolidated financial statements are provided in note 20.

IAS 1 Financial statement presentation - presentation of items of other comprehensive income

The amended standard became effective for financial years beginning on or after 1 July 2012. The amendment requires the grouping of items in other comprehensive income based on whether they will be potentially reclassifiable to profit or loss at a future point of time or whether they will never be reclassified. The amendment did affect the presentation of the consolidated statement of comprehensive income only and did not have an impact on the Group's financial position or performance.

IAS 16 Property, plant and equipment

The improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory and became effective for financial years beginning on or after 1 January 2013. The amendment affected presentation only and did not have an impact on the Group's financial position or performance. As a result of this improvement, major spare parts and servicing equipment were reclassified from inventory to property, plant and equipment and previously disclosed balances changed by US$2,930 thousand and US$5,524 thousand at 30 June 2012 and 31 December 2012 respectively.

IAS 19 Employee benefits

The most fundamental change of the numerous amendments made to IAS 19 is the removal of the so-called 'corridor-approach' require the recognition of all actuarial gains and losses from the re-measurement of the defined benefit obligation and the fair values of the plan assets in other comprehensive income in the current period. In addition, finance income from scheme assets is now recognised as part of the interest on the net defined benefit liability using the discount rate used to measure the defined benefit obligation; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised; and scheme administration costs (other than costs of managing the plan assets) are recognised in profit and loss as they are incurred. The adoption of the amendments became effective for financial years beginning on or after 1 January 2013 with the following effect on the Group's financial position and performance as well as presentation of the defined benefit pension liability:

As a result of the retrospective adoption of the amendments to IAS 19, the pension costs of the comparative periods ended 30 June 2012 and 31 December 2012 changed as follows. Further details in respect of the defined benefit pension liability are provided in note 17.

The application of IAS 19 revised did not have a material impact on the Group's interim consolidated statement of cash flows, the basic and diluted earnings per share.

Standards and interpretations adopted with no effect on reported results, financial position or disclosures

IFRS 1 First-time adoption of IFRS - government loans

The amendment requires first-time adopters to apply the requirements of IAS 20 Accounting for government grants and disclosure of government assistance prospectively to government loans existing at the date of transition to IFRS. This amendment became effective for financial years beginning on or after 1 January 2013. This amended standard is not relevant to the Group as not a first-time adopter and did consequently not have an impact on the financial position or performance of the Group.

IFRS 7 Financial instruments: disclosures - offsetting financial assets and financial liabilities

The amendment requires disclosure of information about rights of offset and related arrangements (e.g. collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar agreement. The amendments became effective for financial years beginning on or after 1 January 2013 with retrospective disclosure for all comparative periods. The adoption of this amended standard did not have an impact on the financial position or performance of the Group.

IFRIC 20 Stripping costs in the production phase of a surface mine

The new interpretation covers the accounting for the necessary removal of mine waste materials in order to gain access to the mineral ore deposit during the production phase of a mine. The interpretation provides guidance on the accounting and separation of the costs of stripping activities resulting in the production of inventory in the current period or improved access to further mineral ore deposits that will be mined in future periods. The new interpretation applies to annual periods beginning on or after 1 January 2013. The adoption of this new interpretation did not have an impact on the financial position or performance of the Group.

Seasonality

The Group's operations are not affected by seasonality.

Note 3: Segment information

The Group is managed as a single entity which produces, develops and markets its principal product, iron ore pellets, for sale to the metallurgical industry. While the revenue generated by the Group is analysed, there are no separate measures of profit reported to the Group's Chief Operating Decision-Maker ('CODM'). In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment which are disclosed in the income statement for the Group. The management monitors the operating result of the Group based on a number of measures including EBITDA, C1 costs and the net financial indebtedness.

EBITDA

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

As a result of the retrospective adoption of the amendments to IAS 19, the pension costs of the comparative periods ended 30 June 2012 and 31 December 2012 changed and had a positive effect of US$1,620 thousand and US$3,847 thousand on the previously disclosed EBITDA figures.

C1 costs

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

Net financial indebtedness

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

Note 4: Revenue

Revenue for the six months period ended 30 June 2013 consisted of the following:

Export sales of iron ore pellets and concentrate by geographical destination were as follows:

During the period ended 30 June 2013 sales made to three customers accounted for approximately 49.3% of the revenues from export sales of ore pellets (30 June 2012: 48.2%; 31 December 2012: 44.7%).

Sales made to customers individually amounted to more than 10% of total sales are disclosed below:

Note 5: Cost of sales

Cost of sales for the six months period ended 30 June 2013 consisted of the following:

Note 6: Selling and distribution expenses

Selling and distribution expenses for the six months period ended 30 June 2013 consisted of the following: