Local Procurement

One of the initiatives behind Ferrexpo’s recent successes in cost and capital expenditure reduction has been a focus on local procurement. Ukraine is a good source of high quality, low cost industrial supplies and equipment.

A good example is the NLMK draglines procured by the Group to undertake the stripping operation for the new Yeristovskoye mine, which were obtained at approximately a third of the price of equivalent machines produced outside the FSU, and with shorter lead times. Two of these draglines have already been assembled and commissioned by the Group.

Ferrexpo aims to restate the capital expenditure estimates in its project feasibility studies using local procurement where possible, and move as much of its operating costs into local currency as possible.

DuPont

DuPont Safety Resources (‘DuPont’) has an outstanding record of success in assisting companies to achieve a ‘zero harm’ objective and were engaged as a result of the fatal accidents that occurred in the early part of 2008, reflecting management’s determination to improve Ferrexpo’s safety record.

DuPont carried out their initial assessment by reviewing safety documentation, carrying out interviews with employees at all levels and making observations on field tours. In their report, DuPont recognised FPM’s strengths in areas such as the commitment of the management board, the provision of a first class training centre and the professionalism of employees.

DuPont made a number of recommendations following the review and have been working with local management and employees on implementing a structured action plan. This has focused on the areas of leadership, training and behavioural practices and improving risk evaluation processes.

Ferrexpo continues to work on its short, medium and longer-term safety goals.

Air quality

FPM is constantly working on minimising the impact of its activities on air and water quality. In 2008 FPM personnel monitored and tested the effects of moistening exposed and potentially dusty surfaces in reducing dust pollution. They concluded that this moistening cut air pollution but had no negative effect on subsoil or surface water pollution.

As a result of these experiments FPM now carries out extensive watering of work faces after blasting and in the dry season. This also enabled the company to decrease expenditure on disposal costs of stripping material.

Cultural investment

The cultural centre of Komsomolsk has traditionally been the Palace of Culture and Technology. Until recently, the Palace of Culture was run by the local City Council and the facilities had become out of date.

In 2005, FPM management and the City Council agreed to cooperate on the reconstruction and re-equipping of the Palace of Culture and FPM contributed over US$800,000 to the cost of its repair and upgrading.

FPM continues to support the Palace of Culture as a unique centre for the local population and invested in the region of US$690,000 in the centre in 2008. It supports 17 distinct groups of performers and its creative groups took part in more than 120 concerts and competitions