PELLET MARKET

MAY 2017

D I S C L A I M E R

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abuse under the Financial Services and Markets Act 2000.

2

LONG LIFE RESOURCE BASE

INCREASING QUALITY & RELIABLE PRODUCTION

3

ACCESS TO MARKETS VIA ESTABLISHED LOGISTICS ROUTES

BR

OV

AR

IKO

VS

KO

YE

4.0BT

MA

NU

ILO

VS

KO

YE

3.4BT

KH

AR

CH

EN

KO

VS

KO

YE

2.8BT

VA

SIL

IEV

SK

OY

E

1.4BT

ZA

RU

DE

NS

KO

YE

1.5BT

GA

LE

SC

HIN

SK

OY

E

0.2BT

BE

LA

NO

VS

KO

YE

1.7BT

YE

RIS

TO

VS

KO

YE

1.2BT

GP

L 3.5B

T

PRODUCTION

DEVELOPMENT

LICENCE MAINTENANCE

0%

20%

40%

60%

80%

100%

0

2,000

4,000

6,000

8,000

10,000

12,000

07 08 09 10 11 12 13 14 15 16

% o

f 65%

Fe

outp

ut

Kt p

elle

ts

Total pellet production

% of 65% Fe pellet production

13.1FSU SOVIETCLASSIFIED RESOURCES

13.1 6.7JORC CLASSIFIED RESOURCES

F E R R E X P O H A S A S T R O N G B U S I N E S S P R O F I L E

WORLD CLASS ASSET –

+$2BN INVESTED SINCE IPO

LOW POSITION ON COST CURVE

(incl fines & lump)

NICHE PRODUCER

FPM: $1.1BN

FYM: $595M

Logistics: $312M

Source: CRU Jan 2017, CFR China, 62% Fe sinter fines equivalent

0

10

20

30

40

50

60

70

0 250 500 750 1000 1250

Breakeven price of seaborne exporters, CFR China,

62% Fe sinter fines, $/ dry t

FX

PO

2017 REVENUE UNDERPINNED BY PELLET PREMIUM

– Platts Atlantic pellet premium trading above $40 per tonne

4

C A P I TA L I N V E S T M E N T H A S D E L I V E R E R D T O P Q U A L I T Y

C U S T O M E R S

0

1000

2000

3000

4000

5000

6000

Central &EasternEurope

WesternEurope

North EastAsia

China &South East

Asia

Turkey,Middle East

& India

Ukraine/CIS

2009 2016

GROWING MARKET SHARE IN PREMIUM MARKETSSignificant growth in shipments to premium markets since 2009

DIVERSIFIED SALES PORTFOLIO

13%

6%

16%

17%

48%

CENTRAL &EASTERN EUROPE

CHINA & SOUTH

EAST ASIA

NORTH EASTASIA

WESTERN

EUROPE

TURKEY, MIDDLE EAST & INDIA

A N D I M P R O V E D M A R G I N S A S R E A L I S E D P E L L E T P R E M I U M

I N C R E A S E D W H I L E C O S T S R E D U C E D

NICHE PRODUCT, TOP CLASS CUSTOMERS, WELL INVESTED LONG LIFE ASSET BASE & LOW

POSITION ON COST CURVE DELIVERS HIGH MARGINS EVEN AT THE LOW POINT IN THE CYCLE

– Average EBITDA margin since 2007 35.6% (or $44/ tonne)

5

35.2%

43.9%46.2%

20.0%22.4%

40.9%

48.1%46.9%

42.9%

32.9%

23.8%

31.5% 32.5%

42.3%

27.9%

34.4%

30.5%

34.9%

41.1%

0

20

40

60

80

100

120

140

160

180

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

FY

200

7

1H 2

008

2H 2

008

1H 2

009

2H 2

009

1H 2

010

2H 2

010

1H 2

011

2H 2

011

1H 2

012

2H 2

012

1H 2

013

2H 2

013

1H 2

014

2H 2

014

1H 2

015

2H 2

015

1H 2

016

2H 2

016

EBITDA % Iron ore fines price

Iron ore price 9 year low

EBITDA Margin 62% Fe iron ore fines price CFR China $ per tonne

PELLETS (C.10MM SIZE)

Agglomerated iron ore product

forming a uniform high quality

feedstock for the blast furnace

Produced from magnetite ore of

<40% Fe (found in N America, CIS,

Europe, China) c. 26% of global iron

ore production

Highest value form of iron ore -

pellets are the most efficient source

of iron ore for a steel furnace

Sold for a premium based on value

in use

Uniform in size quality and iron

content (c.62-65%)

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

F U R N A C E

6

RATIO OF PELLET CONSUMPTION VARIES AT STEEL MILL:

– Pellets are a direct charge input and require less processing

– Steel mills balance the benefit of pellets vs. cost.

– Pellets allow steel mills to:

• Improve productivity per cubic meter of blast furnace capacity (65% pellets vs 62% sinter)

• Limit harmful emissions as pellets emit less CO2, fine dust and air pollution compared to sinter

• Lower coking coal per tonne of pig iron (65% pellets vs 62% fines)

• Lower capital intensity at the steel mill: pellets are less capital intensive as no investment in agglomeration required

36%

59% 61%70%

85%15%

18%23%

18%

10%

47%

23% 16% 12% 5%

EU 1 EU 2 NE Asia 1 China 1 China 2

% c

onsu

mpt

ion

Sinter Lump Pellet Scrap

USAGE VARIES BUT TREND IS TOWARDS PELLETS - EXAMPLES OF BURDEN COMPONENTS AT STEEL MILLS

N O T A L L P E L L E T S G O I N T O T H E B F M A R K E T. D R P E L L E T S A R E

A B S O R B I N G C A PA C I T Y

Source: CRU, Government statistics, Bloomberg, Ferrexpo internal analysis

Million tonnes 2016 Total Blast furnace Direct reduction

Vale (Brazil + Oman) 38.0 23.6 14.3

LKAB (Sweden) 18.5 12.0 6.5

Ferrexpo (Ukraine) 11.7 11.7 -

Rio Tinto (IOC, Canada) 9.8 8.2 1.7

Cliffs (Canada) 6.8 6.8 -

ArcelorMittal (QCM Canada) 5.8 5.7 0.2

Severstal (Russia) 4.9 4.9 -

India (Various) 4.8 4.8 -

Metalloinvest (Russia) 4.0 4.0 -

Metinvest (Ukraine) 3.4 3.4 -

Bahrain Steel (Bahrain) 3.0 - 3.0

Grange (Australia) 2.6 2.6 -

CMP (Chile) 2.4 2.4 -

Cliffs (USA) 1.3 1.3 -

Evraz (Russia) 0.4 - 0.4

Other 3.1 3.1 -

Total pellet export market 120.5 94.4 26.1

Ferrexpo’s market share 10%

TOP PELLET EXPORTERS

– Samarco expected to re-enter market in 2018 at c.20MT (previous capacity 30MT)

– Vale intends to restart 7Mtpa Sao Luis pellet plant in 1H 2018 (following license approval, and investment into plant), which last

produced in 2008

7

T H E P E L L E T M A R K E T H A S H I G H B A R R I E R S T O E N T R Y

8

New pellet

capacity Duration Tonnes Cost Cost/tonne Description

Samarco2011-

20148.3MT

R$6.459BN

($3.251BN at

the time)

$391/t

Construction of 9.5MT concentrator

Construction of slurry pipeline with 20MT capacity

Construction of 8.3MT pelletising plant

Increase of capacity at port facilities by 9MT (new stacker, reclaimer, shiploader)

Metalloinvest2012-

20155MT

RUB16BN

($460M at the

time)

$92/t Construction of pellet plant

NMLK2011-

20166MT

RUB41BN

($1.4BN at the

time)

$233/tConstruction of pellet plant – $680M or $113/t

Expanded mining & beneficiation capacity

Exports of iron ore MT 2000 2016 increase

% of total

increase

Pellet feed 18 71 53 5.0%

Pellets 106 111 5 0.5%

Lump 79 247 168 15.8%

Sinter fines 266 1,105 839 78.7%

Total 468 1,534 1,066

Source: CRU, Market Outlook January 2017

Source: Company announcements

COST OF MOST RECENT CAPACITY ADDITIONS AROUND $100/T FOR PELLET PLANT ALONE

Consumption of iron ore MT 2016 2021 increase CAGR

Pellets 416 523 107 4.7%

Lump 310 352 42 2.6%

Sinter Fines 1,347 1,320 -27 -0.4%

Total 2,074 2,195 122 1.1%

Source: CRU, Market Outlook January 2017

… WHILE DEMAND FORECAST TO GROW THE STRONGESTLIMITED HISTORIC GROWTH IN TOTAL PELLET SUPPLY…

W H AT D R I V E S T H E P E L L E T P R E M I U M : C H I N A V S R E S T O F T H E

W O R L D

9

Africa: 5C&S America: 4

North America: 10

China: 15

SE Asia: 1

NE Asia:20

CIS: 2

Europe: 44

Middle East:12

IMPORTS OF PELLETS BY REGION 2016 (MT) PELLET MARKET IS DIVIDED BETWEEN CHINA & ROW:

– China is largely self sufficient in pellets

– Chinese apparent pellet production was 120MT in 2016

– Chinese pellet capacity utilisation 49%

– Chinese pellet production constrained by supply of local concentrate (at pricing below $80/t - depending on coking coal prices)

– Overcapacity in Chinese steel reduces demand for pellets at higher premiums

– Premiums will rise as environmental pressures increase & capacity decreases

– Ferrexpo does not target the Chinese market

Source: CRU, Market Outlook April 2017

ATLANTIC VS. CHINESE PELLET PREMIUM (US$/T)

0

5

10

15

20

25

30

35

40

45

50

China pellet premium Atlantic pellet premium

Source: Platts

AT L A N T I C P E L L E T P R E M I U M I S S E T B Y VA L E & L E A D I N G S T E E L

M I L L S I N E U R O P E & N O R T H E A S T A S I A

10

VALE’S MARGINAL COST OF PRODUCTION IS AROUND US$30 PER TONNE

Pellet conversion costs, $/t (nominal) 2016

Source: CRU March 2017, Ferrexpo internal analysis

Note: Ex-works cost include mining, processing and pelletising costs only and excludes royalties

– Vale is the market leader & the swing

producer

– Cost curve is also supported by high cost

large suppliers: IOC, LKAB, Cliffs

11

P E L L E T P R E M I U M S R E M A I N S TA B L E : F E R R E X P O P E L L E T I S I N G

C O S T S C . $ 1 0 P E R T O N N E V S AV E R A G E P R E M I U M S O F C . $ 3 0 / T

( 2 0 0 7 T O 2 0 1 7 )

PELLET PREMIUMS ARE RELATIVELY STABLE COMPARED TO THE IRON ORE FINES PRICE$ per tonne

Source: CRU, Market Outlook January 2017

– Ferrexpo’s pelletising cost is $8/t to $11/t through the cycle depending on cost inflation

166154

85

155166

135 140

98

56 58 57 5363 63 67

27

6212 44 37 30 32 37 34 32

4533 32 34 34

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Iron ore fines 62% CFR China Blast furnace pellet premium to non-Chinese markets

T H A N K Y O U

12