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At its recent annual meeting, Ferrexpo plc’s (Ferrexpo) board once again came under fire, with four of its eight directors ‘significant’ (at least 20% opposition) levels of investor dissent against their re-election.

As a majority stake (50.3%) of the Swiss-based mining company is by Luxembourg based holding company, Fevamotinico, Ferrexpo falls into the category of companies with controlling shareholders. These controlled companies are required under UK corporate law to ensure that the (re-)election of any independent director is approved separately by the independent shareholders of the company, as well as the company’s investors as a whole (see Practice Note: ).

While all four directors in question received over 80% support from Ferrexpo’s entire shareholder base, three of the independent non-executive directors fell foul of the 20% significant dissent threshold due to this independent vote requirement, with Vitalii Lisovenko, currently a non-executive advisor to the Minister of Finance of Ukraine, notably attracting 45.1% votes against his re-election.

This result marks an improvement over the and AGMs, with Lisovenko twice failing to receive enough support from the company’s independent shareholders to secure his re-election (54.5% and 68.2% opposition respectively). Ferrexpo’s 2021 sets out the concerns of shareholders in the aftermath of the 2020 vote:

‘From engagement with the Company’s major institutional shareholders following the 2020 AGM and 2020 General Meeting, it was understood that the reason for the significant vote against the re-election of Vitalii Lisovenko largely related to his role as Senior Independent Director, with shareholders voicing concerns that insufficient progress had been made by the Company to address corporate governance matters that emerged during 2019. Since the 2020 AGM, Mr Lisovenko, as Chair of the Committee of Independent Directors (“CID”), has enhanced procedures and internal controls as part of the process of improving the overall corporate governance framework within the Company including improvements in transparency and reporting requirements to the CID on a regular basis and the monitoring of reputational risks.’

Ferrexpo was forced both years to call a general meeting to seek Lisovenko’s re-election, where Fevamotinico’s controlling stake all but ensured his return to the miner’s board, albeit with considerable dissent from the company’s minority shareholders (: 32.6%; : 31.6%). In its 2022 Annual Report, Ferrexpo that it had again engaged with shareholders in response to the significant opposition to Lisovenko’s director role. The company acknowledged that the dissent was once more due to continued concerns regarding corporate governance. In an attempt to placate investors, Ferrexpo Fiona MacAulay to the role of senior independent director, relegating Lisovenko to the role of independent non-executive director.

In addition, non-executive director and Ukrainian billionaire, Kostyantin Zhevago, who holds the controlling share of Ferrexpo through Fevamotinico, saw 36.4% votes against his re-appointment. The company noted the dissent in its voting results, stating that it believed that ‘certain of these voting outcomes arose due to a shareholder expressing concerns regarding the number of directorships that certain directors hold’. However, it also confirmed that it is ‘comfortable that each of the directors is able to devote sufficient time to their roles’.

With opposition to certain directors emerging as a recurring theme at Ferrexpo, it will be interesting to see how the update statement that the company is required to publish within six months under provision 4 of the 2018 UK Corporate Governance Code (UKCG Code) addresses the recent voting results.

Ferrexpo, whose operating base is in central Ukraine, has managed to avoid many of the geo-political risks associated with the ongoing Ukraine conflict—unlike many of its mining counterparts with operations in Russia, which have been summarily from the FTSE indices after a collapse in their share price (for more information, see: FTSE 350 Q1 2022 reshuffle—Ukraine conflict sees board exodus at Evraz and Polymetal as share prices plummet). However, the company has not escaped unscathed. On 25 February 2022, it was to issue force majeure notices to some of its customers, as Russian military presence in the Black Sea brought about a temporary suspension of shipping operations from the port of Pivdennyi. Its mining facilities, located in Horishni Plavni, have continued to operate despite continued fighting in the Donetsk region to its immediate east. Given the disruption caused by the conflict, and Ferrexpo’s limited access to freight transport, its board to delay the publication date of its full year results, which was previously scheduled to be released on 16 March 2022, in an effort to allow the company to ‘consider the full impact of these events on the accounts, and […] provide more time for the group's independent auditor to carry out its own audit procedures, some of which will be impacted by the current situation in Ukraine’. Initially, Ferrexpo stated that it ‘is not in the position to provide a date as to when the company's full year financial accounts for 2021 will be published’. However, on 18 March 2022, the company, following consultation with the Financial Conduct Authority, to publish its full year results for 2021 by the new deadline of 30 June 2022.

Just before its AGM on 13 June 2022, Ferrexpo that it has been forced to divert all of its iron ore pellet sales along a Ukrainian rail network that is periodically disrupted by Russian air strikes, and, more recently, that infrastructure damage caused by a Russian missile strike in southwest Ukraine had significantly reduced the company’s barging operations to European customers. Despite this, Ferrexpo managed to produce 4.4 million tonnes of iron ore pellets during the first five months of 2022, 8% below the level of that of the same time in 2021. Speaking on the situation, the company’s chief executive, Jim North, noted the precarious logistical situation and confirmed that the company intends to curb output in the short term:

‘Russia's invasion of Ukraine has created a changeable and unpredictable situation, and one in which our management team is continually having to adapt and evolve our approach to operating. It is a credit to our operators and marketing team that our year to date production in the first five months of 2022 was only 8% below the same level seen in 2021, demonstrating Ferrexpo's collective flexibility despite exceptional circumstances. In light of the news announced today, we are lowering our short term production schedule for the summer months, and we will look to increase production once we have greater clarity on logistics going forward. The gradual reopening of our access to the seaborne market is a positive for the Group and we will prioritise these efforts as we understand the importance of reconnecting with this segment of our customer portfolio.’

Unsurprisingly, Ferrexpo saw its share price in the immediate aftermath of the Russian invasion, from 247.8 pence per share on 23 February 2022 to 142.3 pence per share a day later. Since then, its share price has stabilised, with little volatility.