Exhibit 99.2

 

Ferroglobe PLC

Annual Report and Accounts 2021

Company Registration No. 09425113

Ferroglobe PLC

Annual Report and Financial Statements

Year ended 31 December 2021

Ferroglobe PLC

Annual report and financial statements 2021

Contents	Page No.
Glossary and definitions	2
Officers and professional advisers	5
Introduction	6
Chairman’s letter to shareholders	7
Strategic report (including section 172 statement)	11
Directors’ report	20
The Board of Directors	26
Directors’ remuneration report	32
Independent auditor’s report to the members of Ferroglobe PLC	57
Consolidated financial statements	70
Notes to the consolidated financial statements	76
Parent company financial statements	162
Notes to the parent company financial statements	164
Appendix 1 — Non-IFRS financial metrics	171

Ferroglobe PLC

GLOSSARY AND DEFINITIONS

Unless the context requires otherwise, the following definitions apply throughout this U.K. Annual Report (including the Appendix, save as set out below):

“2021”	the financial year ended 31 December 2021;
“2020”	the financial year ended 31 December 2020;
“2022 AGM”	the Annual General Meeting of the Company, to be held in 2022;
“2021 Form 20-F”	the Company’s Form 20-F for the fiscal year ended 31 December 2021;
“ABL RCF”	the Credit and Security Agreement for a new $100 million North American asset-based revolving credit facility dated as of 11 October 2019, entered into between Globe and QSIP Canada ULC, as borrowers, and PNC Bank, N.A., as lender and settled in March 2021;
“ABL Revolver”	credit available under the ABL RCF;
“Adjusted EBITDA”	earnings before interest, tax, depreciation and amortisation, adjusted in accordance with Company’s adjustments announced as part of its earnings reports. Alternative Performance Measures are reconciled at Appendix 1;
“Alternative Performance Measures”	the non-IFRS financial metrics reconciled at Appendix 1;
“Aon”	Aon Plc;
“ARA”	this annual report and accounts for the financial year ended 31 December 2021;
“Articles”	the Articles of Association of the Company, from time to time;
“Auditor”	Deloitte LLP, the Company’s independent U.K. statutory auditor;
“Aurinka”	Aurinka Photovoltaic Group, S.L.;
“Blue Power”	Blue Power Corporation, S.L.;
“Board”	the Company’s board of directors;
“Business Combination”	the business combination of Globe and FerroAtlántica as the Company’s wholly owned subsidiaries on 23 December 2015;
“Business Combination Agreement”	the definitive transaction agreement entered into on 23 February 2015 (as amended and restated on 5 May 2015) by, among others, the Company, Grupo VM, FerroAtlántica and Globe;
“Capital”	net debt plus total equity. Alternative Performance Measures are reconciled at Appendix 1;

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“CEO”, “Chief Executive Officer” or “Chief Executive”	the Chief Executive Officer of the Company, or where the context requires, of the relevant company or organization;
“Companies Act”	the U.K. Companies Act 2006;
“Company” or “Ferroglobe”	Ferroglobe PLC, a company incorporated in England and Wales with registered number 09425113 and whose registered office is at 5 Fleet Place, London EC4M 7RD, United Kingdom or, where the context requires, the Group;
“Consolidated Financial Statements”	(save in the supplemental attachment when it will have the meaning given below) these consolidated financial statements for the year ended 31 December  2021
“Compensation Committee”	the compensation committee of the Company;
“EBITDA”	earnings before interest, tax, depreciation and amortisation;
“EIP”	the Ferroglobe PLC Equity Incentive Plan, adopted by the Board on 29 May 2016 and approved by shareholders on 29 June 2016;
“EU”	the European Union;
“Exchange Act”	the U.S. Securities Exchange Act of 1934 (as amended);
“Executive Chairman”	the executive chairman of the Company;
“Executive Directors” or “Executives”	the executive directors of the Company;
“FerroAtlántica” or “Grupo FerroAtlántica” or “Predecessor”	Grupo FerroAtlántica, S.A.U. a joint stock company organised under the laws of Spain, including (where the context so requires), its subsidiaries and subsidiary undertakings;
“Free cash-flow”	operating cash-flow less property, plant and equipment cash flows. Alternative Performance Measures are reconciled at Appendix 1;
“Globe” or “GSM”	Globe Specialty Metals, Inc., a Delaware corporation, including (whether the context requires) its subsidiaries and subsidiary undertakings;
“Group”	the Company and its subsidiaries;
“Grupo VM”	Grupo Villar Mir, S.A.U.;
“IASB”	International Accounting Standards Board;
“IFRS”	International Financial Reporting Standards;
“Indenture”	the indenture, dated as of 15 February 2017, among Ferroglobe and Globe as co-issuers, certain subsidiaries of Ferroglobe as guarantors, and Wilmington Trust, National Association as trustee, registrar, transfer agent and paying agent;
“KPI”	key performance indicator;

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“LIBOR”	the basic rate of interest payable in respect of the drawn amount of the ABL Revolver, interest under which is to be paid at the rate of LIBOR plus the applicable margin;
“NASDAQ”	the NASDAQ Global Select Market;
“NASDAQ Rules”	the NASDAQ Stock Market Rules;
“Net debt”	bank borrowings, debt instruments, obligations under finance leases, and other financial liabilities, less cash and cash equivalents. Alternative Performance Measures are reconciled at Appendix 1;
“Non-Executive Directors” or “NEDs”	the non-executive directors of the Company;
“Notes”	refer to the $350,000,000 aggregate principal amount of senior unsecured notes bearing interest of 9.375% issued by Ferroglobe PLC and Globe Specialty Metals, Inc., due March 1, 2022 (the “Notes”);
“Reinstated Senior Notes”	refer to the notes issued in exchange of 98.588% of the 9.375% Senior Notes due 2022 issued by Ferroglobe Finance Company PLC and Globe due December 2025;
“Stub Notes”	refer to the $4,942 thousand aggregate principal amount of 9.375% senior unsecured Notes due March 1, 2022;
“Super Senior Notes”	refer to the 9% senior secured notes due 2025 issued by Ferroglobe Finance Company, PLC;
“Ordinary Shares”	the ordinary shares of $0.01 each in the capital of the Company;
“Policy”	the directors’ remuneration policy in force from time to time;
“SHA”	the amended and restated shareholders agreement between Group VM and the Company dated 22 November 2017, as amended on 23 January 2018;
“SEC”	the U.S. Securities and Exchange Commission;
“SOX”	the U.S. Sarbanes-Oxley Act of 2002;
“SPE”	Ferrous Receivables DAC, a special purpose entity domiciled and incorporated in Ireland to which trade receivables generated by the Company’s subsidiaries in the United States, Canada, Spain and France were sold;
“U.K.”	the United Kingdom of Great Britain and Northern Ireland;
“U.S.”	the United States of America;
“Working capital”	inventories and trade and other receivables, less trade and other payables. Alternative Performance Measures are reconciled at Appendix 1;
“$”	U.S. dollars.
In the separate attachment hereto only (and for the avoidance of doubt, not in the remainder of this U.K. Annual Report), the following phrase has the meaning given below:
“Consolidated Financial Statements”	the audited consolidated financial statements of Ferroglobe and its subsidiaries as of 31 December 2021, 2020 and 2019 and for each of the years ended 31 December 2021, 2020 and 2019, including the related notes thereto, prepared in accordance with IFRS, as filed  on SEC Form 20-F.

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Ferroglobe PLC

Report and financial statements 2021

Officers and professional advisers

Directors
J López Madrid
M Amusategui
Rafael Barrilero Yarnoz	(appointed 13 May 2021)
B L Crockett
S E Eizenstat
M Garrido y Ruano   J M Alapont	(resigned 30 April 2021)
M Levi
Nicolas de Santis	(appointed 13 May 2021)
Belén Villalonga	(appointed 13 May 2021)
J Villar-Mir de Fuentes
Silvia Villar-Mir de Fuentes	(appointed 13 May 2021)
Company Secretary
Thomas Wiesner
Registered Address
5 Fleet Place
London
EC4M 7RD
Auditor
Deloitte LLP
Statutory Auditor
1 New St. Square
EC4A 3HQ London

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Ferroglobe PLC

Introduction

Ferroglobe PLC is a public limited company incorporated under the laws of England and Wales under Company Number: 09425113. Ferroglobe PLC and subsidiaries (the “Company” or “Ferroglobe”) is among the world’s largest producers of silicon metal and silicon-based alloys, important ingredients in a variety of industrial and consumer products. The Company’s customers include major silicone chemical, aluminum and steel manufacturers, auto companies and their suppliers, ductile iron foundries, manufacturers of photovoltaic solar cells and computer chips, and concrete producers. Additionally, the Company was operating hydroelectric plants (hereinafter “energy business”) in Spain until August 30, 2019 and is still operating in France.

The Company was incorporated in 2015 and its Ordinary Shares are listed for trading on the NASDAQ in U.S. dollars under the symbol “GSM”.

The Company is subject to disclosure obligations in the U.S. and the U.K. While some of these disclosure requirements overlap or are otherwise similar, some differ and require distinct disclosures. Pursuant to the requirements of the Companies Act, this document includes our directors’ strategic report, directors’ report, remuneration report and required financial information (including our statutory accounts and statutory auditor’s report for the reporting period commencing 1 January 2021 and ending 31 December 2021), which together comprise our U.K. annual reports and accounts for the period ended 31 December 2021 (the “U.K. Annual Report”).

We are also subject to the information and reporting requirements of the Exchange Act, regulations and other guidance issued by the SEC and the NASDAQ listing standards applicable to foreign private issuers. In accordance with the Exchange Act, we are required to file annual and periodic reports and other information with the SEC, including, without limitation, our 2021 Form 20-F. Certain other announcements made by the Company are furnished to the SEC on Form 6-K. Our status as a foreign private issuer requires the Company to comply with various corporate governance practices under the SOX, as well as related rules subsequently implemented by the SEC. In addition, NASDAQ Rules permit foreign private issuers to follow home country practice in lieu of the NASDAQ corporate governance standards, subject to certain exemptions and except to the extent that such exemptions would be contrary to U.S. federal securities law.

We have provided as a separate attachment to the U.K. Annual Report extracts from the 2021 Form 20-F to assist shareholders in assessing the Group’s performance and results. Investors may obtain the full 2021 Form 20-F, without charge, from the SEC at the SEC’s website at www.sec.gov or from our website at www.ferroglobe.com. Unless expressly stated otherwise, the information on our website is not part of this U.K. Annual Report and is not incorporated by reference herein.

The capitalised terms used throughout the U.K. Annual Report are defined in the Glossary and Definitions section of this U.K. Annual Report unless otherwise indicated. In the following text, the terms “we,” “our,” “the Company”, “our Company” and “us” may refer, as the context requires, to Ferroglobe or collectively to Ferroglobe and its subsidiaries. Throughout the U.K. Annual Report, rounding has been applied and numbers given and totals aggregated may differ in consequence.

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Chairman’s Letter to Shareholders

Dear fellow shareholders,

2021 was positive year for Ferroglobe. Despite the ongoing challenges facing the world, Ferroglobe was focused on the execution of its turnaround plan and restoring profitability. In the face of new COVID-19 variants and further waves of infection our people have demonstrated resilience and adaptability to ensure we continue to deliver for our customers and generate value for shareholders.

The impact of COVID-19 continues to be felt throughout our Company and the broader value chain into which we are integrated. Notwithstanding this, Ferroglobe delivered sales of $1.7 billion in 2021, an increase of 55% versus 2020. Furthermore, we posted adjusted EBITDA of $179 million in 2021 compared with $32 Million in 2020. This achievement demonstrates our turnaround plan is producing the expected results across our commercial, operational, and financial areas and we are fully focused on the plan’s execution in 2022.

The Board and I are again extremely proud of the commitment of our employees. Without their support and commitment to our vision, we would not have delivered such positive results.

Value Creation Plan

In 2020 we designed a comprehensive strategic plan focused on bolstering the long-term competitiveness of the business. 2021 marked the first year of the execution of the plan spanning across a number of value creation areas, including commercial excellence, footprint optimization, continuous plant efficiency, centralized procurement and the reduction of corporate overheads. While our multi-year plan set a target of $180 million of EBITDA impact to be driven from initiatives spread across these areas, in the first year of execution, our in-year target was $55 million. For the year, we came in above our target, achieving $58 million of EBITDA from cost cutting and commercial excellence. Separately, we have a multi-year target of $70 million of cash release from working capital. In 2021 alone we reached this target.

The financial targets are important to the longer-term performance of the Company through a cycle. However, in addition to these results, we are fundamentally changing the way we operate. By creating a new culture focused on best practices and a reshaping of decision making to a centralized model, amongst many other attributes. Ultimately, we seek to create a culture where decisions are made with the broader goal of the Company in mind to ensure our long term competitiveness. Like with any program of this caliber, there are some areas which outperformed and some which are lagging. Nonetheless, we are motivated by the embracing of the change by the broader workforce and feel this momentum can fuel even greater pockets of value.

Looking ahead, have begun thinking past the turnaround and developing a near-term strategy for the Company. In 2022, the management team has embarked on this journey and is in the process of conducting a self-assessment of the market to determine the best way to position the Company for continued success. We are excited to be able to think about new opportunities to grow and further bolster our platform. It is a stark contrast from where this company has recently been but an exciting and important step aimed at optimizing value creation for all stakeholders.

Comprehensive Refinancing Completed

2021 marked an active year with regards to our capital markets activity. At the center of the comprehensive refinancing effort was the extension of the maturity of our Senior Notes to December 2025 (from February 2022). In addition to extending the maturity profile of the company, we also issued $60 million of Super Senior Notes that provided the Company additional cash funding to support our value creation plan. Overall, we view this financing to be a success given the uncertain operating market back-drop prevailing in the midst of the pandemic.

There was a significant change in performance during the second half of 2021, coupled with the step-change in performance anticipated in 2022. We will seek to build on this and decide on the best actions relating to our balance sheet. Consistent with our objectives on the strategic side, we seek to bolster the Company’s balance sheet to ensure flexibility and competitiveness through the cycle.

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Health and Safety

Safety is always a priority for our business, and we are constantly striving to achieve a risk-free environment for all of our colleagues, contractors and third parties. In 2021 we rolled-out our new Health and Safety policy across all locations and our new Health and Safety Committee, that ensures we share best practice and other important safety related information across our organization. As an organization that is committed to zero-harm we are implementing an ambitious three-year Health and Safety plan that will reinforce the key pillars of how we manage Health and safety across the organization. Simultaneously we have remained focused on the COVID19 pandemic and have made important changes to our procedures to protect our people and ensure the integrity of our operations.

Environmental, Social, Governance

We have also been working on the necessary foundations to make Ferroglobe a leader in terms of Sustainability and Innovation, as key pillars of our future. In 2021 we started working on developing our first ESG report, which we expect to be completed during 2022. In addition, we are developing good progress on environmental projects that are expected to aid our decarbonization and energy efficiency efforts across all markets. I look froward to updating you further on these initiatives as they progress.

Performance in 2021

During the second half of 2020 we saw gradual strengthening in the pricing indices across our three main product categories. This positive momentum continued into 2021 and throughout the year we experienced improved sales volumes which increased by 18% from tn.927 thousand in 2020 to tn.1,095 in 2021. Across the year as a whole, we experienced an increase in revenue of 55%, from $1,144 million in 2020 to $1,779 million in 2021, while an operating loss of $184.4 million in 2020 improved to an operating profit of $31.39m in 2021, with the group still incurring a net loss in 2021 of $115.4m due to financing costs which included a significant non recurring charge due to the refinancing. There is more on the Company’s performance in respect of its key performance indicators in 2021 at page 175.

Board and Senior Management Changes

During 2021 we announced the appointment of four new board members who will complement our current directors’ skills and experiences and provide valuable perspectives and support to management.

Belen Villalonga Morenés

Belen Villalonga Morenés was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. She has been a member of the Audit Committee from that date and was appointed to the Corporate Governance Committee on June 23, 2021.

Ms. Villalonga is a Professor of Management and Organizations, a Yamaichi Faculty Fellow, and a Professor of Finance (by courtesy) at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at the Harvard Business School. Her teaching, research, and consulting activities are in the areas of corporate governance, strategy, and finance, with a special focus on family-controlled companies. Her award-winning research has been cited over 15,000 times in scholarly articles and international media outlets. Professor Villalonga is an independent director and audit committee member (and former chair) at Grifols, a global leader in hemoderivatives that is part of Spain’s IBEX35 blue-chip index and is also listed on NASDAQ. She is also a member of the board and of the risk, audit, and compensation & talent management committees at Banco Santander International, the Santander group’s private banking subsidiary in the United States. She was also an independent director for 13 years at Acciona, a leader in the renewable energy and infrastructure industries, as well as at Talgo, a high-speed train manufacturer, where she chaired the strategy committee.

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Ms. Villalonga holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a Ph.D. in Business Economics from the Complutense University of Madrid.

Silvia Villar-Mir de Fuentes

Silvia Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. She has been a member of the Compensation Committee since June 23, 2021. Ms. Villar-Mir de Fuentes currently serves on the board of directors of Grupo Villar Mir, a privately held Spanish group with investments across a broad range of diversified industries, which is the beneficial owner of approximately 54% of the Company’s share capital.

Mrs. Villar-Mir de Fuentes is a summa cum laude graduate in Economics and Business Studies, with concentration in finance and accounting, from The American College in London, United Kingdom.

Nicolas De Santis

Nicolas De Santis was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. He has been a member of the Compensation Committee and the Nominations Committee since June 23, 2021. Mr. De Santis is a technology entrepreneur, strategist and author with substantial experience in executive and non-executive roles. Mr. De Santis is currently the Chief Executive Officer of Corporate Vision, a strategy and innovation consultancy and incubator. Corporate Vision advises multinational corporations and start-ups on digital business transformation (including artificial intelligence and machine learning), business strategy, branding, business model innovation, sustainability strategies and corporate culture change.

Previously Mr. De Santis served on the board of publicly traded Lyris Technologies (acquired by AUREA Software in 2015). He began his management career at Landor Associates (now WPP Group). As a technology entrepreneur, he co-founded several high-profile start-ups, including opodo.com, one of Europe’s most successful start-ups, reaching $1.5 billion in gross sales.

Mr. De Santis is a regular lecturer at business schools and universities on business strategy, global branding, business model innovation and culture transformation, including IE Business School, Madrid and the University of Wyoming. He is the author of Futurising Companies® - A systematic approach to win the future by managing culture as the operating system of organisations.

Rafael Barrilero Yarnoz

Rafael Barrilero Yarnoz was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. He was appointed Chair of the Compensation Committee and a member of the Nominations Committee on June 23, 2021.

Mr. Barrilero Yarnoz is a senior advisor at Mercer Consulting. Mr. Barrilero Yarnoz has developed his career as a partner of the firm and as a member of the executive committee, leading the advisory talent and reward service for the boards of the main companies and multinationals. He has also led the business throughout the EMEA. Previously, he led the Watson Wyatt consulting firm in Madrid. He began his career as a lawyer at Ebro Agricolas focused on labour law, before serving as Ebro’s head of human resources.

Mr. Barrilero Yarnoz has a law degree from Deusto and a Masters in Financial Economics from ICADE, as well as a masters in human resources by Euroforum-INSEAD.

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On 30 April 2021 we announced the resignation from our Board of José María Alapont. The Board and I are grateful to José María for his commitments and contributions during his tenure.

Looking Ahead

We begin 2022 in a stronger position than 2021 and are poised to take advantage of the positive market conditions. However, we also remain fully focused in our efforts to continue executing our turnaround plan and implementing our strategic vision for the Company. The COVID-19 pandemic continues to present a number of uncertainties and risks and we continue to plan accordingly and ensure we make the right decisions for the company’s future into the long-term.

We are impacted by the ongoing military conflict between Russia and Ukraine. Our business may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions. Management continually tracks developments in the nascent conflict in Ukraine and is committed to actively managing our response to potential distributions to the business, but can provide no assurance that the conflict in Ukraine or other ongoing headwinds will not have a material adverse effect on our business, operations and financial results

As I reflect on 2021 I thank our shareholders for your continued support, along with our customers and other partners. I also want to recognize our employees who have worked tirelessly with passion and resilience. Our people are Ferroglobe’s greatest asset and I thank each and every one for their support.

Javier López Madrid

Executive Chairman

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Strategic report

This strategic report for the financial year to 31 December 2021 has been prepared in compliance with Section 414C of the Companies Act to provide an overview of the Group’s business and strategy. It contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

For a supplementary description of our business (including our model, strategy and competitive strengths), risks associated with our business and our results of operations, see the following sections of the 2021 Form 20-F: Part I, Item 3, Section D, Risk factors; Item 4, Information on the Company; Item 5, Operating and Financial Review and Prospects; Item 7, Major Shareholders and Related Party Transactions and Item 11, Quantitative and Qualitative Disclosures About Market Risk. These sections are set out in a separate attachment to this U.K. Annual Report.

Nature of the business

Through its operating subsidiaries, Ferroglobe is one of the world’s largest producers of silicon metal, silicon-based alloys and manganese-based alloys. Additionally, Ferroglobe currently has quartz mining activities in Spain, the United States, Canada, and South Africa, low-ash metallurgical quality coal mining activities in the United States, and interests in hydroelectric power in France. Ferroglobe controls a meaningful portion of most of its raw materials and captures, recycles and sells most of the by-products generated in its production processes.

We sell our products to a diverse base of customers worldwide, in a varied range of industries. These industries include aluminum, silicone compounds used in the chemical industry, ductile iron, automotive parts, renewable energy, photovoltaic (solar) cells, electronic semiconductors and steel, all of which are key elements in the manufacturing of a wide range of industrial and consumer products.

We are able to supply our customers with the broadest range of specialty metals and alloys in the industry from our production centers in North America, Europe, South America, Africa and Asia. Our broad manufacturing platform and flexible capabilities allow us to optimize production and focus on products most likely to enhance profitability, including the production of customized solutions and high purity metals to meet specific customer requirements. We also benefit from low operating costs, resulting from our ownership of sources of critical raw materials and the flexibility derived from our ability to alternate production at certain of our furnaces between silicon metal and silicon-based alloy products.

Business model and strategy

As part of the strategy for delivering the objectives of the Company, the Group develops new products or new specifications on a continual basis. As a consequence of these efforts, investments may be made in facilities that allow the production of new products, such as higher-grade silicon metal, solar grade silicon metal or new foundry products.

In 2020 we conducted a deep and broad evaluation of our Company with the goal of designing a strategic plan focused on bolstering the long term competitiveness of the business and returning the Company to profitability by fundamentally changing the way we operate, both operationally and financially. The multi-year value creation plan we developed essentially impacts all the functional areas of our Company as we seek to drive changes that ensure competitiveness throughout the cycle. Between 2021 and 2024, the Company set a target of achieving $180 million in cost savings and EBITDA contribution from commercial excellence, along with $70 million of cash release in working capital. 2021 was the first year of the execution phase of this value creation plan. We surpassed our 2021 targets delivering $58 million of in-year EBITDA contribution from the various initiatives, and releasing $70 million of cash through the working capital workstream. The key value drivers of our strategic plan are the following:

· Footprint optimization: One of the Company’s core advantages is our large and diverse production platform. While our asset footprint provides flexibility, at times we are restricted in our ability to quickly adapt to changing market conditions due to inherent constraints in curtailing capacity, particularly for shorter durations. Going forward, our goal is to ensure that the operating platform is more flexible and modular so shifts in production, based on needs and relative costs, are incorporated swiftly. Through this value creation driver we aim to shift our capacity footprint by optimizing production to the most competitive assets.

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· Continuous plant efficiency: We will continue to build on the success of our existing key technical metrics (KTM) programme, which consists of specific initiatives aimed at enhancing our process, minimizing waste, and improving the overall efficiency to drive down costs. The Company maintains a pipeline of initiatives developed through the sharing of best practices amongst our numerous sites and through new improvements identified by our research and development team. Under the strategic plan we have formalized the manner in which we execute such initiatives by creating operational and technical teams with the expertise critical for implementation. Furthermore, we are developing tools to track our key performance indicators in an ongoing effort to improve furnace level performance.

· Commercial excellence: We are focused on the design and delivery of commercial best practices that maximize profitable revenue, including programs aimed at consistently improve pricing, salesforce effectiveness, product mix, customer selection and focus. By organizing and analyzing client profitability we seek to optimize commercial opportunities. Our focus will be on portfolio and account management, ensuring we have the proper customer relationship management tools and clearly defined objectives for each of our customers. Front line management will require us to re-design our commercial coverage and operating model in-line with our product and customer priorities. On the pricing side, we seek to enhance communication and transparency amongst our internal teams to realize target margins on each sale.

· Centralized purchasing: We are reshaping the organization so that purchasing of many consumables can be done centrally and to support a procurement culture centered on buying better and spending better. This will enable us to improve its tracking of needs, enhance our ability to schedule purchases and enable us to benefit from bulk purchases. Buying better is a supply-led effort that focuses on price and volume allocation, negotiating prices and terms, managing price risks, pooling volumes and contracts, shifting volumes to best-price suppliers and leveraging procurement networks. Spending better is an operation-led effort to control demand, enforce compliance, reduce complexity, and perform value engineering to improve efficient spending. Through the principles of buying better and spending better, we aim to attain more than just cost reduction. Through the new organization, we seek to reduce supply chain risk, supporting continuous quality and service improvement, fostering better decision-making about suppliers and optimizing resource allocation

· Selling, general and administration & corporate overhead reduction: During our corporate review conducted in 2020, we identified significant opportunity for further cost improvement through permanent cost-cutting at the our plants, as well as at corporate levels. By tracking these costs vigorously and increasing accountability, we aim to bolster the overall cost structure at various levels. Through this value creation driver, we aim to create a culture focused on cost control and disciplines for deploying best practices to drive sound spending decisions without compromising our overall performance.

· Working capital improvement: Improving net working capital performance requires cross-functional cooperation and alignment. By increasing the collaboration amongst the global team, and having oversight and controls at the corporate level, we aim to make a significant improvement in our overall cash conversion cycle on sustainable basis. This value creation area touches on inventory management of our raw materials and finished goods, as well as monitoring and improving terms with both our suppliers and customers, commensurate with market levels.

There is more information on the Group’s business, risks, key financials and organizational structure in Part I, Item 3, Item 4, Item 5 Information on the Company of the 2021 Form 20-F (as set out in the separate attachment to this U.K. Annual Report and not forming part of our financial statements). This, together with the information in this Strategic Report, and the Operating and Financial Review and Prospects section of the 2021 Form 20-F included in the separate attachment provides a fair review of the Company’s business and its development and performance during 2021.

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Key Risks

We operate in a highly competitive industry.

The silicon metal market and the silicon based and manganese based alloys markets are global, capital intensive and highly competitive. Our competitors may have greater financial resources, as well as other strategic advantages, to maintain, improve and possibly expand their facilities, and, as a result, they may be better positioned than we are to adapt to changes in the industry or the global economy. Advantages that our competitors have over us from time to time, new entrants that increase competition in our industry, and increases in the use of substitutes for certain of our products could have a material adverse effect on our business, results of operations and financial condition.

Our business is particularly sensitive to increases in energy costs, which could materially increase our cost of production.

Electricity is one of our largest production components. The price of electricity is determined in the applicable domestic jurisdiction and is influenced both by supply and demand dynamics and by domestic regulations. Changes in local energy policy, increased costs due to scarcity of energy supply, climate conditions, the termination or non-renewal of any of our power purchase contracts and other factors may affect the price of electricity supplied to our plants and adversely affect our results of operations and financial conditions.

Because electricity is indispensable to our operations and accounts for a high percentage of our production costs, we are particularly vulnerable to supply limitations and cost fluctuations in energy markets.

Our business benefits from antidumping and countervailing duty orders and laws that protect our products by imposing special duties on unfairly traded imports from certain countries. If these duties or laws change, certain foreign competitors might be able to compete more effectively.

The current antidumping and countervailing duty orders may not remain in effect and continue to be enforced from year to year, the products and countries now covered by orders may no longer be covered, and duties may not continue to be assessed at the same rates. In the United States, rates of duty can change as a result of “administrative reviews” of antidumping and countervailing duty orders. These orders can also be revoked as a result of periodic “sunset reviews,” which determine whether the orders will continue to apply to imports from particular countries. Antidumping and countervailing duties in the European Union and Canada are also subject to periodic reviews. In the European Union and in Canada, such reviews can include interim reviews, expiry reviews and other types of proceedings that may result in changes in rates of duty or termination of the duties.

Changes in any of these factors could adversely affect our business and profitability. Finally, at times, in filing trade actions, we arguably act against the interests of our customers. Certain of our customers may not continue to do business with us as a result.

Our business operations may be impacted by various types of claims, lawsuits, and other contingent obligations.

We are involved in various legal and regulatory proceedings including those that arise in the ordinary course of our business. We estimate such potential claims and contingent liabilities and, where appropriate, record provisions to address these contingent liabilities. The ultimate outcome of the legal matters currently pending against our Company is uncertain, and although such claims, lawsuits and other legal matters are not expected individually to have a material adverse effect, such matters in the aggregate could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we could, in the future, be subject to judgments or enter into settlements of lawsuits and claims that could have a material adverse effect on our results of operations in any particular period. While we maintain insurance coverage in respect of certain risks and liabilities, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and any such insurance may not provide adequate coverage against such claims.

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Key Performance Indicators (“KPIs”)

The Board considered that the most important KPIs during 2021 were those set out below. Certain of these KPIs will also be a core area of focus during 2022.

At the corporate level, the principal KPIs that we use for measuring the overall performance of our business are:

· EBITDA

· Adjusted EBITDA

· Adjusted EBITDA margin

· Working capital improvement

· Free cash-flow

· Net Debt to Total Assets

· Net Debt to Capital; and

· Net Income.

Some of these measures are also part of our compensation structure for the key executives, as follows:

· Adjusted EBITDA: EBITDA, adjusted in accordance with Company’s adjustments announced as part of its earnings reports.

· Free cash-flow, which represents net cash provided by operating activities less payments for property, plant and equipment.

The following table sets out the Company’s performance in respect of these financial and non-IFRS measures in 2021. Refer to Appendix 1 for reconciliations of these non-IFRS measures.

Adjusted EBITDA		Adjusted EBITDA Margin		Working Capital		Net Cash- Flow
($m)				($m)		($m)
	178.7		10.1%		464.9		(14.7)
	(2020: 32.5)		(2020: 2.8)%		(2020: 339.0)		(2020: 8.9)

Reported   EBITDA		Net Income		Net Debt to Total Assets		Net Debt to Capital
($m)		($m)
	128.7		(115.4)		33.3%		55.4%
	(2020: (76.2))		(2020: (249.8))		(2020: 32.5)%		(2020: 54.5)%

In addition to these financial KPIs, there are a number of non-financial performance measures which the Company uses to gauge its success such as customer attrition, inventory rotation /obsolescence, benchmark against competitors and others. Some of these are reflected in the annual bonus and equity plan objectives for senior management and are reviewed each year to ensure their continued relevance. In the financial year ended 31 December 2021, the annual bonus was subject to meeting certain financial conditions related to net cash flow and EBITDA. Further information on performance in respect of these performance measures is in the Directors Remuneration Report at page 35.

Details of the Group’s anti-bribery and corruption and environmental policies are below and details of its employment policies and greenhouse gas emissions are set out below and in the Directors’ Report.

Principal risks and uncertainties

The Company is exposed to a number of operational risks which are monitored on an ongoing basis and which are summarised in the supplementary attachment. There is more information on the Group’s, risks, in Part I, Item 3 Information on the Company of the 2021 Form 20-F (as set out in the separate attachment to this U.K. Annual Report).

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We did not maintain an effective control environment to enable the identification and mitigation of the risk of the existence of potential material accounting errors. We have identified deficiencies in the principles associated with the control environment component of the COSO framework. There is more information on the Group’s controls and procedures in Part I, Item 15 Information on the Company of the 2021 Form 20-F (as set out in the separate attachment to this U.K. Annual Report).

Employees

As at 31 December 2021, the Group had:

· 11 directors, of whom 3 are female and 8 are male;

· 291 senior managers, of whom 210 are male and 83 are female; and

· 3,132 employees, of whom 2,850 are male and 282 are female.

Environment and other social matters

Ferroglobe is committed to conducting its business in compliance with all applicable laws and regulations in a manner that has the highest regard for human rights, the environment and the health and safety and well-being of employees and the general public. During the year under review the Group’s employees were each asked to re-confirm in writing their commitment to the Company’s Code of Conduct which emphasizes the Group’s commitment to the highest standards of integrity, ethical behavior, transparency, safety and corporate citizenship. The Code of Conduct incorporates the Group’s key policies on matters including whistleblowing, anti-bribery and corruption, environmental impacts, health and safety and respect in the workplace and the conduct of national and international trade.

Section 172 (1) Statement

This section of the U.K. Companies Act sets out a number of matters to which directors of a U.K. company must have regard in discharging their duty to promote the success of the Company. The strategic report must include a statement which describes how the directors have had regard to those matters when performing their duties. The Board welcomes this opportunity to throw more light on its governance structures and on how input from its stakeholders has informed and shaped its decision-making. In 2021 the Board exercised all their duties with regard to these and other factors as they reviewed and considered proposals from senior management and governed the Company through the Board and its Committees.

The factors which the directors must take account of can be summarised as:

· the likely consequences of any decision in the long term

· taking account of the interests of the Company’s employees and fostering business relationships with customers, suppliers and other relevant stakeholders, such as regulatory bodies, governments and local authorities

· the impact of operations on the community and the environment

· maintaining a high standard of business conduct

· acting fairly between its members

In order to take account of these factors, the Board must be informed of them. This takes place directly and indirectly, through collaborative working with management and direct and indirect feedback, as illustrated below. The Company’s internal control framework, including the Company’s Sarbanes Oxley controls, and the work of the Internal Audit team assists in providing assurance to the Board on the information made available to it.

The likely consequences of any decision in the long-term

The governance structures of the Company include delegation of certain responsibilities of the Board to its key Committees and delegation of the Board’s authority for the executive management of the Company to its executive team, subject to clearly defined limits and regular monitoring by the Board and subject also to the reservation to the Board of any matter not expressly delegated in this way.

The management team bring their annual budget to the Board for approval each year. This includes forecasts, expected revenues, costs and major expenditure and projects for the year ahead. Each year the Board typically also takes a day out of its board calendar to consider, with the majority of the management team, the Company’s strategic plan. In light of the refinancing and turnaround plan undertaken in 2021, a separate strategy day was not held by the Board, but they were kept continually updated on the status of those key initiatives throughout the year. Board strategy days are expected to resume in June 2022.

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Throughout the year, the Board has received a number of reports on the Company’s capital structure and financing arrangements. Reports were made regularly to the Board by the management team members responsible for each function and region on their area of responsibility, their performance, priorities and key decisions and risks for the immediate future and medium term, giving assurance that proper consideration is made to the longer-term in decision making throughout the business.

Staying informed on employee, customer, supplier, investor and other key stakeholders’ views

Our relationships with those who work for the Company and with the Company are key to our success. The Board stays up to date with views of our employees through a number of means: key members of the management team, usually attend the management presentation made at each Board meeting when their input is regularly solicited. They are also consulted in less formal settings. Prior to the Covid-19 pandemic, Directors had an annual schedule of visits to our facilities which enable them to spend time with our people on the ground and receive their direct feedback. One output of these pre-Covid site visits led in 2021 to an increased focus at Board level on the importance of driving a unified brand and culture for Ferroglobe. There are other channels through which the Board or its Committees receives reports on employee views; these include the VP People & Culture’ normal attendance at Compensation Committee meetings and his annual report on pay and conditions across the Group; and the confidential whistleblowing hotline, reports to which are in turn reported to the Audit Committee at its scheduled meetings. In 2021 the CEO continued with town hall meetings, face to face and virtually, with employees across the Group to keep them updated on our financial and operational performance; employees are encouraged to raise questions as part of those sessions.

We build strong relationships with our customers and suppliers, including our joint venture partners, spending a lot of time with them to best understand their goals and how to develop our business in our respective interests. The Board is aware that many of our relationships are long-term and depend on mutual trust and collaboration. The Board gets feedback on customer and supplier issues on a regular basis: through the input of the Chief Commercial Officer and Marketing and VP Supply Chain Management who normally attend management presentations in the scheduled Board meetings and through presentations each has made to the Board on their areas of responsibility, priorities and challenges.

The Board is aware that the Company relies on the support of its shareholders and their views are important to it. The Board’s interactions with these stakeholders take place through a variety of channels. The Company’s major shareholder, Grupo VM, had during 2021 four representative directors on the Board through whom views and input can be provided or sought. The Board receives feedback from other shareholders and the investment community through the Company’s quarterly results presentations . The EVP Investor Relations is a regular attendee at Board meetings and shares themes or commentary made to the Executives and management by the Company’s investors and certain other stakeholders. Shareholders typically have the opportunity to attend the general meetings of the Company, including the AGM, and put questions to directors formally at the meeting and in a more relaxed environment before and afterwards. The Company also maintains an investor relations email address on its corporate website, questions posed to which are directed to its EVP Investor Relations and Company Secretary and, where relevant, would then be raised by them with the other management team members or the Board.

Engaging with community and the environment

We engage with communities, government and regulators in the areas and countries in which we operate through a range of industry consultations, trade or industry bodies, conferences, forums and meetings. We have engaged with local charities and community groups. We also routinely consult with the local, regional and central governments and their agencies on the proposed idling of our production facilities. These matters are reported to the Board, which is kept updated on the status of these discussions and their progress.

We recognise that our business has an impact on the environment and work with relevant authorities and industry experts to manage and minimise that impact. The Audit Committee of the Board receives regular updates on any allegations of non-compliance by the business with environmental laws and regulations, such as the allegations of violations of clean air legislation in the U.S.A. made by the U.S. Department of Justice in relation to the operations and construction of our Beverly facility. There is more on this in Note 25 of our financial statements.

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Sustainability has been identified by management as a top priority. First and foremost, we recognize the criticality of company’s to take an active role in leading and driving change for the betterment of society. Furthermore, given the growing focus on sustainability amongst our stakeholders we need to create more transparency around our performance and the action plan to drive the changes required to meet our goals. In 2022 we have issued the first ESG report for 2021 financial year as the commencement of our new approach to sustainability disclosure.

In 2021 we have defined Ferroglobe’s ESG Strategy 2022-2026 which sets the roadmap that makes sustainability a strategic pillar for the organization at the global level.

The ESG Strategy is aimed at being progressively implemented from 2022 to 2026, and has been defined based on four Strategic lines:

1. Strengthening our governance framework

2. Promoting a solid & honest engagement with our people and local communities where we operate

3. Reinforcing the role of sustainability through our value chain

4. Improving our environmental footprint to enable materials which are vital for sustainable development.

A specific ESG Committee has been designated to adopt and implement the ESG Strategy through 5 specific working groups to engage all business and corporate leaders to adopt and implement the ESG responsibilities set forth in the strategy.

The ESG Committee reports to the Management Team and The Board of Directors, which is ultimately responsible for the Company´s ESG performance.

 

The ESG working groups are responsible for monitoring and coordinating the development of the 40 measures that have been established within the strategy, as well as establishing and tracking targets to measure the degree of implementation of each of them.

We have defined our ESG Strategy 2022-2026 in alignment with the United Nations Sustainable Development Goals (SDGs), identifying for each of the defined measures the specific targets to which it contributes to. In this sense, we have determined 8 out of the 17 SDGs, which are the most relevant in our activities and on which we shall focus our efforts.

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The measures set for each strategic line are summarized as follows:

· Strengthening our governance framework: Measures aimed at integrating sustainability into the Group's strategy, governance tools and organizational structure and also starting reporting through an annual ESG report.

· Promoting a solid & honest engagement with our people and local communities where we operate: Measures aimed at achieving a corporate culture by harmonizing procedures for people management, guided by the fundamental values of collaboration, leading change, respect and ownership. Focusing on Health & Safety as a top priority and guiding principle in all our operations and promoting diversity, equality and inclusion as part of Ferroglobe´s core value of respect by setting a “DEI Roadmap”.

· Reinforcing the role of sustainability throughout our value chain: Measures to promote the integration of sustainability among Ferroglobe’s value chain, both upstream and downstream by assessing our suppliers according to the ESG approach and coordinating the procedures to respond to customer´s needs in terms of ESG performance. The environmental footprint of our products will also be assessed developing specific Life Cycle Assessment studies.

· Improving our environmental footprint to enable materials which are vital for sustainable development: Measures focused at reducing the environmental impacts of products and processes and integrate the environmental risks management approach to strengthen our resiliency and sustainability. Extending the environmental and energy management systems certification according to ISO standards in our production sites. Boosting energy efficiency through technological and processes improvement. Setting a Corporate Climate Change Framework and setting specific emission reduction targets. Promoting circularity principles for waste and water management trough specific programs in the plants to reduce the global environmental footprint.

ESG Risk Management Approach

Under the Governance strategic line, ESG risks will be integrated in the Company´s risk management system, including a specific Climate Change Risks & Opportunities Assessment aligned with the TCFD recommendations.

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Maintaining a high standard of business conduct 

On behalf of the Company, the Board has adopted a number of policies which articulate the Company and the Board’s commitment to the highest standards of integrity, ethical behaviour, transparency, safety and corporate citizenship. These include, as their mainstay, the Company’s code of conduct which sets out the Company’s policies on bribery and corruption, whistleblowing, conflicts of interest and political and charitable contributions, as well as the importance of safeguarding the wellbeing of its employees and protecting its resources. The Code of Conduct is supported by further policies on whistleblowing, data protection and statements on trade compliance, tax and modern slavery. The Board has also adopted a corporate governance policy statement to protect the interests of minority shareholders (on which there is more on “Acting fairly between members” sections that follows).

The Code of Conduct is reviewed regularly and every employee of the Company and all of its Board members are asked to confirm their personal commitment to the Code on joining the Company and to re-confirm it each year thereafter. Employees have the opportunity to report suspected breaches of the Code, for which purpose a secure and confidential hotline has been established, administered by an independent third party. Allegations of breaches of the Code are normally reported to the Audit Committee at each of its scheduled meetings and regular updates on the status of follow-up actions and outcomes given.

Acting fairly between members

A significant number of the Company’s shares are held by Grupo VM, its major shareholder. The Company has a number of checks and balances in place throughout the Company’s governance framework to ensure that the interests of the majority and the minority shareholders are respected and the Board is very cognisant of its duties in this regard. These checks and balances include:

· the Company’s shareholders agreement with Grupo VM which regulates Board appointments, including those nominated by Grupo VM, Grupo VM’s rights to transfer and pledge its shares, its pre-emption rights and standstill obligations and the confidentiality agreement with Grupo VM which regulates the use, disclosure and security of confidential information shared with Grupo VM or its representatives;

· the Company’s Articles of Association which, among other things, require the approval of a majority of independent directors to any agreement or arrangement between the Company and Grupo VM;

· the Board’s corporate governance policy first adopted in October 2017 under which the Board commits to maintain a majority of independent directors on the Board. This policy was most recently renewed in November 2021 for a period of 24 months;

· the workings and functions of the Board’s key fully independent Audit and majority independent Compensation Committees;

· the Company’s related parties’ policy which stipulates how and in what way proposed related party transactions are to be submitted for consideration and approval by the Audit Committee of the Board and the Company’s register of related party transactions which is submitted to each scheduled meeting of the Audit Committee;

· the presence of directors on the Board who were nominated by Grupo VM.

The Chief Legal Officer and Group Company Secretary has primary responsibility for advising the Board on its duties and on the Company’s governance framework and normally attends all meetings of the Board and its Committees.

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The Strategic Report for the financial period ended 31 December 2021 has been reviewed and approved by the Board on 1 June 2022.

Javier Lopez Madrid

Director

Directors’ report

The Directors present their report and the audited financial statements of the Group and Company for the year ended 31 December 2021. The Directors do not need to comply with Corporate Governance requirements.

The Directors’ Report comprises these pages (22 to 62) and the other sections and pages of the Annual Report cross-referred below which are incorporated by reference.

The financial statements have been prepared under the going concern basis of accounting, with additional details provided in note 3.1 of the financial statements

As permitted by legislation, certain disclosures normally included in the Directors’ Report have instead been integrated into the Strategic Report (pages 12 to 21). These disclosures include information relating to the Group’s principal risks and uncertainties.

Directors

The directors of the Company, who held office at any time during the year to 31 December 2021, were as follows:

Javier López Madrid	Director and Executive Chairman
Marco Levi	Director and Chief Executive Officer
José María Alapont	Non-Executive Director
Rafael Barrilero Yarnoz	Non Executive Director
Bruce L. Crockett	Non-Executive Director
Stuart E. Eizenstat	Non-Executive Director
Manuel Garrido y Ruano	Non-Executive Director
Nicolas de Santis	Non-Executive Director
Marta Amusategui Vergara	Non-Executive Director
Juan Villar-Mir de Fuentes	Non-Executive Director
Silvia Villar-Mir de Fuentes	Non-Executive Director
Belén Villalonga Morenés	Non-Executive Director

On the 30 April 2021 José María Alapont resigned from the Board. On 13 May 2021 Belén Villalonga Morenés, Silvia Villar-Mir de Fuentes, Nicolas de Santis and Rafael Barrilero Yarnoz were appointed to the Board.

The biographies of our directors as at the date of this report are set out on pages 28 to 32. Details of the directors standing for election or re-election at our 2022 AGM will be set out in the notice of that meeting.

Directors’ indemnities

As required by the Articles, each director is indemnified in connection with his role as a director, to the extent permitted by law. As permitted by the Articles, the Company has purchased and maintained throughout the year under review directors’ and officers’ liability insurance.

Share repurchases

On August 21, 2018, we announced a share repurchase program, which provided authorization to purchase up to $20 million of our ordinary shares in the period ending December 31, 2018. On November 7, 2018, we completed the repurchase program, resulting in the acquisition of a total of 2,894,049 ordinary shares for total consideration of $20,100 thousand, including applicable stamp duty. The average price paid per share was $6.89. The share repurchase program resulted in 1,152,958 ordinary shares purchased and cancelled and 1,741,091 ordinary shares purchased into treasury, all of which remained held in treasury at December 31, 2018.

During 2021 the company did not perform any share repurchase (2020: None).

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Dividends

The Company has not declared any dividends during the year under review.

Political donations

During the year under review the Company has not made any political donations, incurred any political expenditure or made any contributions to an EU or non-EU political party.

Employee policies

Ferroglobe has a culture of continuous improvement through investment in people at all levels within the organisation. Its Code of Conduct (“Code”), which applies to all directors and employees of the Group, sets out Ferroglobe’s commitment to protecting, respecting and supporting its workforce. The Code was revised in 2017 to bring together Ferroglobe’s policies on key ethical, behavioral and compliance matters. Its roll-out across the Group globally was initiated in 2017, supported by mandatory training for all employees. In 2019, 2020 and 2021, Group personnel were requested to re-certify their knowledge of and continued compliance with the Code. The adoption of and training provided on the Code is consistent with our evolution to an organization with an integrated approach to human relations policies across the five continents in which the Group operates.

Those key policies include:

· Health and safety, where Ferroglobe places high value on the well-being of all personnel and is committed to providing a healthy and safe working environment;

· Respect in the workplace, promoting equality and diversity, rejecting harassment and bullying and supporting work-life balance;

· Striving to conduct operations in a way that respects the human rights of personnel, suppliers and others with whom Ferroglobe works, including local communities;

· Encouraging the reporting of wrongdoing or of any suspicions or concerns as to wrongdoing, any of which can be raised in confidence through the whistleblowing hotline which Ferroglobe has established in all countries in which it operates where it is lawful to do so.

Ferroglobe is committed to providing equal opportunities for all Group personnel and to creating an inclusive workforce by promoting employment equality. This includes pursuing equality and diversity in all its employment activities, including recruitment, training, career development and promotion and ensuring there is no bias or discrimination in the treatment of people. Ferroglobe opposes all forms of unlawful or unfair discrimination on the grounds of race, age, nationality, religion, ethnic or national origin, sexual orientation, gender or gender reassignment, marital status or disability. Wherever possible, vacancies are filled from within Ferroglobe and efforts are made to create opportunities for internal promotion.

Greenhouse gas emissions

The UK Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 requires UK-based quoted companies to report global greenhouse gas (“GHG”) emissions data in the Annual Report and Accounts. Comparison year data for 2019, 2020 and 2021 is included in Table 2 in this report. As in 2017-2018, the 2019-2021 GHG inventory was prepared in accordance with the Ferroglobe PLC Greenhouse Gas Inventory Management Plan (2017), prepared in consultation with ERM Group, Inc. and its UK affiliate (the “IMP”).

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The Company has selected the Operational Control approach and criteria as the basis for reporting GHG emissions data, defining “Operational Control” to encompass facilities the Group owns and operates, facilities it leases and operates, and joint venture facilities it operates. All facilities within Ferroglobe’s Operational Control that are material to its Group-wide GHG emission inventory are included in reported figures. This approach means that the operations for which emissions are reported are substantially coextensive with operations comprised by Ferroglobe’s consolidated financial reporting. The Company does not have responsibility for any emission sources that are not included in its financial reporting.

Table 1 sets forth the Company’s consolidated greenhouse gas emissions expressed in metric tons of carbon dioxide equivalent (CO₂e). The figures reported below include all material direct (Scope 1) and indirect (Scope 2) emission sources for facilities within the Company’s Operational Control. Principal sources of Scope 1 emissions from operations at, or Scope 2 emissions imputed to, Ferroglobe-controlled facilities include:

· Electricity purchased or produced by Ferroglobe facilities

· Fuels purchased for consumption in stationary sources on-site at Ferroglobe facilities (e.g., natural gas, diesel, LPG)

· Fuels purchased for consumption in mobile sources owned and operated by Ferroglobe

· Process emissions associated with electric arc furnaces used for the production of silicon metal and ferroalloys.

Table 1. Company-wide Scope 1 and Scope 2 Emissions for 2021

Global GHG emissions data for period 1 January 2021 to 31 December 2021
Emissions From:	Tonnes of CO2e
Combustion of fuel and operation of facilities		2,197,734	*
Electricity, heat, steam and cooling purchased for own use		1,228,600
Company’s chosen intensity measurement:
Emissions reported above normalized to per tonne of product output

*In line with DEFRA Guidance, 977,204 tonnes of CO₂e are not included in the above table, due to being biogenic in nature.

Table 2. Company-wide Scope 1 and Scope 2 Emissions Comparison for 2019-2020-2021

Global GHG emissions data for period 1 January to 31 December 2019-2021
	2019			2020			2021
Emissions From:	Tonnes of CO2e			Tonnes of CO2e			Tonnes of CO2e
Combustion of fuel and operation of facilities		2,490,210	*		1,701,763	**		2,197,734	***
Electricity, heat, steam and cooling purchased for own use		1,929,965			1,282,333			1,228,600
Company’s chosen intensity measurement:
Emissions reported above normalized to per tonne of product output		4.99			4.92			4.42

*In line with DEFRA Guidance, 1.5 million tonnes of CO₂e are not included in the above table, due to being biogenic in nature.

**In line with DEFRA Guidance, 944,997 tonnes of CO₂e are not included in the above table, due to being biogenic in nature.

***In line with DEFRA Guidance, 997,204 tonnes of CO₂e are not included in the above table, due to being biogenic in nature.

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Methodology

In preparing the IMP and this report, the Company has adhered to the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard – Revised Edition (2004) (the “GHG Protocol”) and the UK DEFRA’s Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance (June 2013) (“DEFRA Guidance”). The Company reports material emissions of three out of the six Kyoto GHGs, viz. carbon dioxide (CO₂), methane (CH₄), and nitrous oxide (N₂O). A fourth, sulfur hexafluoride (SF₆), is present in electrical breakers at some Company facilities, but no emission of SF₆ of have been observed. The two remaining Kyoto gases, perfluorocarbons (PFCs) and hydrofluorocarbons (HFCs), are not reported since Company facilities do not emit or use materials containing them.

Financial risk management objectives/policies and hedging arrangements

Please see Part I, Item 11 (Quantitative and Qualitative Disclosures About Market Risk) of the 2021 Form 20-F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s financial risk management objectives/policies and hedging arrangements.

Post year-end events

SEPI Loan

On February 16, 2022, the Company announced that the Spanish Fund for supporting strategic companies, on a proposal of the Sociedad Estatal de Participaciones Industriales (“SEPI”), a Spanish state-owned industrial holding company affiliated with the Ministry of Finance and Administration, has approved €34.5 million in loans to Grupo Ferroatlántica, S.A.U. and Grupo Ferroátlantica de Servicios, S.L.U., wholly owned subsidiaries of the Company. These loans are part of the SEPI fund intended to provide assistance to non-financial companies operating in strategically important sectors within Spain in the wake of the COVID-19 pandemic.

The €34.5M was funded using a dual-tranche loan, with €17.25M maturing in February 2025 and €17.25M maturing in June 2025. €16.9M of the loan carries a fixed interest rate of 2% per annum, and interest on the remaining €17.6M is calculated as IBOR plus a spread of 2.5% in the first year, 3.5% in the second and third years and 5.0% in the fourth year, plus an additional 1.0% payable if the result before taxes of the Beneficiaries is positive. The loans are guaranteed by the Company and certain of its subsidiaries. The loans are guaranteed by the Company and certain of its subsidiaries.

Uncertainties caused by the Russo-Ukrainian War

The recent outbreak of war between Russia and the Ukraine has disrupted supply chains and caused instability in the global economy, while the United States and the European Union, among other countries, announced sanctions against Russia. The ongoing conflict could result in the imposition of further economic sanctions against Russia, and given Russia’s role as global exporter of metcoke, anthracite and electrodes, the Company’s business may be impacted. Currently, the Company’s charter contracts have not been affected by the events in Russia and Ukraine. However, it is possible that in the future third parties with whom the Company has or will have charter contracts may be impacted by such events. Russia and Ukraine are meaningful producers of silicon metal, ferroalloys and manganese-based alloys, exporting into our markets.

Agreement with the French Works Council

The Company reached a majority collective agreement with the French Works Council on March 30, 2022 relating to a process that was initiated in April 2021 when Ferroglobe engaged the French Works Councils to discuss proposals for its asset optimization program designed to safeguard its long-term future in Europe.

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The formal consultation procedure concerning the restructuring project in France initially targeted 355 jobs across the Company’s Château-Feuillet, Les Clavaux and Chambéry sites. Subsequently the scope of the project was amended in November 2021 to reflect the continuation of operation at the Les Clavaux facility given new developments.

Collectively, this agreement results in 195 potential job terminations and 35 employee transfers to other facilities. The project is subject to final approval from the French labor authority which is expected during the second quarter of 2022.

Future developments

As part of its strategy to serve customers better, the Group develops new products or new specifications on a continuous basis. As a consequence of these efforts, investments have been made in facilities that allow the production of new products, such as higher-grade silicon metal, solar grade silicon metal, electrodes for use in silicon metals furnaces, high-value powders for use in Li-on batteries or new foundry products. Please see Part I, Item 4, Information on the Company of the 2021 Form 20-F by way of example of how the Group has developed proprietary technologies and has pursued innovation in the development of new products.

Research and development

Please refer to Part I, Item 4, Information on the Company of the 2021 Form 20-F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s research and development activities and opportunities.

Overseas branches

The Company has no overseas branches.

Share capital structure and change of control provisions

The Company’s share capital comprises ordinary shares of $0.01 each, all of which bear the same rights and obligations. The Company’s issued share capital at 31 December 2021 is set out at Note 13 to the Consolidated Financial Statements.

The rights attaching to the Ordinary Shares are set out in the Articles, a copy of which can be obtained from the Company Secretary on request. Each Ordinary Share has one vote attaching to it for voting purposes and all holders of Ordinary Shares are entitled to receive notice of and attend and vote at the Company’s general meetings. The Articles vest power in the directors to refuse to register transfers of Ordinary Shares in certain circumstances including where the instrument of transfer is not stamped or is in favor of more than 4 transferees. There are also restrictions in the Articles affecting the terms of tender offers and any scheme of arrangement, consolidation, merger or business combination designed to protect minority shareholders while Grupo VM and its associates hold ten percent or more of the Ordinary Shares.

Significant agreements affected by a takeover

There are no agreements between the Group and any of its employees or any director of the Company that provide for compensation to be paid to the employee or director for termination of employment or for loss of office as a consequence of a takeover of the Company, other than provisions that would apply on any termination of employment.

Capital Raising and Extension of the Maturity of the Senior Notes

On March 27, 2021, Ferroglobe and Globe and certain other members of our group entered into the Lock-Up Agreement with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital that set forth a plan to implement the restructuring. On July 30,2021 the company announced the occurrence of the “Transaction Effective Date” under the lock-up agreement dated March 27, 2021 (the “Lock-Up Agreement”) between the Company and the financial stakeholders. The Issuers completed the exchange of 98.588% of the 9⅜% Senior Notes due 2022 (the “Old Notes”) issued by the Company and Globe for a total consideration per $1,000 principal amount of Old Notes comprising (i) $1,000 aggregate principal amount of new 9⅜% senior secured notes due 2025 issued by the Issuers (the “New Notes”) plus (ii) a cash fee, which the Parent, at the direction of the qualifying noteholders, applied as cash consideration for a subscription of new ordinary shares of the Company. In addition the Company issued new ordinary shares for total gross proceeds of $40 million.

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The principal elements of the restructuring, are set forth below:

- Issuance of $60 million of new senior secured notes

- Issuance of $40 million in new equity of Ferroglobe

- Extension of the maturity date of the Notes from March 31, 2022 to December 31, 2025 and amendment of certain other terms.

The Reinstated Notes Indenture require us to offer to repurchase all or any part of each holder’s Reinstated Notes upon the occurrence of a change of control, as defined in the Reinstated Notes Indenture, at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon, to the date of purchase.

Statement of disclosure to the Company’s U.K. statutory auditor

In accordance with section 418 of the Companies Act, each director at the date of this Directors’ Report confirms that:

· so far as he is aware, there is no relevant audit information of which the Auditor is unaware; and

· he has taken all the steps he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Deloitte LLP has indicated its willingness to continue in office, and a resolution that it be re-appointed is expected to be proposed at the 2022 AGM.

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By order of the Board on 1 June 2022

Javier Lopez Madrid

Director

The Board of Directors

Details of the members of the Board as at the date of this ARA are below.

Javier López Madrid

Javier López Madrid has been Executive Chairman of the Company since December 31, 2016 and Chairman of our Nominations Committee since January 1, 2018. He was first appointed to the Board on February 5, 2015 and was the Company’s Executive Vice-Chairman from December 23, 2015 until December 31, 2016.

He has been Chief Executive Officer of Grupo VM since 2008, is a member of the World Economic Forum, Group of Fifty and a member of the Board of several non profit organizations. He is the founder and largest shareholder of Financiera Siacapital and founded Tressis, Spain’s largest independent private bank. Mr. López Madrid holds a Masters in law and business from ICADE University.

Marco Levi

Marco Levi was appointed Chief Executive Officer of the Company on January 10, 2020 and appointed to its Board of Directors on January 15, 2020. Dr Levi previously served as President and CEO of Alhstrom-Munksjö Oyj, a global fiber materials company listed in Finland, where he led a successful transformation of the business by refocusing its product portfolio towards value-added specialty products. Prior to that, Dr. Levi was Senior Vice President and Business President of the $3 billion emulsion polymers division of chemicals manufacturer Styron, including during the period in which Styron division was acquired by Bain Capital from Dow Chemical Company. Dr. Levi previously had spent over twenty-two years at Dow in various departments and roles, ultimately serving as general manager of the emulsion polymers business.

Dr Levi is also a Non-Executive Director of Schweitzer-Mauduit International, Inc, the leading global performance materials company, listed on the New York Stock Exchange. Dr Levi holds a doctorate in industrial chemistry from the Università degli Studi di Milano, Statale, in Italy.

Bruce L. Crockett

Bruce L. Crockett was appointed to our Board of Directors as a Non-Executive Director on December 23, 2015. He has been a member of our Audit Committee from that date and was Chair of the Audit Committee since June 4, 2020 and served on our Compensation Committee from January 1, 2018 until June 23, 2021. Mr. Crockett was appointed on May 13, 2021 as our Senior Independent Director and on June 23, 2021 as Chair of the Corporate Governance Committee.

Mr. Crockett holds a number of other Board and governance roles. He has been Chairman of the Invesco Mutual Funds Group Board of Directors and a member of its Audit, Investment and Governance Committees, serving on the board since 1991, as Chair since 2003 and on the Board of predecessor companies from 1978. Since 2013, he has been a member of the Board of Directors and, since 2014, Chair of the Audit Committee and since 2021 member of the Governance Committee of ALPS Property & Casualty Insurance Company. He has been Chairman of, and a private investor in, Crockett Technologies Associates since 1996. He is a life trustee of the University of Rochester.

Mr. Crockett was a member of the Board of Directors of Globe from April 2014 until the closing of the Business Combination, as well as a member of Globe’s Audit Committee. He was formerly President and Chief Executive Officer of COMSAT Corporation from 1992 until 1996 and its President and Chief Operating Officer from 1991 to 1992, holding a number of other operational and financial positions at COMSAT from 1980, including that of Vice President and Chief Financial Officer. He was a member of the Board of Directors of Ace Limited from 1995 until 2012 and of Captaris, Inc. from 2001 until its acquisition in 2008 and its Chairman from 2003 to 2008.

Mr. Crockett holds an A.B. degree from the University of Rochester, B.S. degree from the University of Maryland, an MBA from Columbia University and an Honorary Doctor of Law degree from the University of Maryland.

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Stuart E. Eizenstat

Stuart E. Eizenstat was appointed to our Board of Directors as a Non-Executive Director on December 23, 2015. He has been a member of the Company’s Corporate Governance Committee since January 1, 2018 and was appointed to our Nominations Committee on May 16, 2018.

Mr. Eizenstat has been a Senior Counsel at Covington & Burling LLP in Washington, D.C. and Head of its international practice since 2001. He has served as a member of the Advisory Boards of GML Ltd. since 2003 and of the Office of Cherifien de Phosphates since 2010. He was a trustee of BlackRock Funds from 2001 until 2018.

Mr. Eizenstat was a member of Board of Directors of Globe from 2008 until the closing of the Business Combination and Chair of its Nominating Committee. He was a member of the Board of Directors of Alcatel-Lucent from 2008 to 2016 and of United Parcel Service from 2005 to 2015. He has had an illustrious political and advisory career, including serving as Special Adviser to Secretary of State Kerry on Holocaust-Era Issues from 2009 to 2017 and Special Representative of the President and Secretary of State on Holocaust Issues during the Clinton administration from 1993 to 2001. He was Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001, Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999, Under Secretary of Commerce for International Trade from 1996 to 1997, U.S. Ambassador to the European Union from 1993 to 1996 and Chief Domestic Policy Advisor in the White House to President Carter from 1977 to 1981. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II”; “The Future of the Jews: How Global Forces are Impacting the Jewish People, Israel, and its Relationship with the United States” and “President Carter: The White House Years.”

Mr. Eizenstat holds a B.A. in Political Science, cum laude and Phi Beta Kappa, from the University of North Carolina at Chapel Hill, a J.D. from Harvard Law School and nine honorary doctorate degrees and awards from the United States, French, German, Austrian, Belgian and Israeli governments.

Manuel Garrido y Ruano

Manuel Garrido y Ruano was appointed to our Board of Directors as a Non-Executive Director on May 30, 2017. He was a member of our Nominating and Corporate Governance Committee from May 30, 2017 until December 31, 2017, when he was appointed to our Corporate Governance Committee.

Mr. Garrido y Ruano has been Chief Financial Officer of Grupo Villar Mir since 2003 and he is currently member of the Board of its subsidiary in the energy sector, and member of the steering Committee of its real estate subsidiary. In June 2021 he was appointed non executive Chairman of Fertial SPA the Algerian fertilizers subsidiary of the Group.

He is Professor of Corporate Finance of one Graduate Management Program at the Universidad de Navarra, and has also been Professor of Communication and Leadership of the Graduate Management Program at CUNEF in Spain.

Mr. Garrido y Ruano was a member of the steering committee of FerroAtlántica until 2015, having previously served as its Chief Financial Officer from 1996 to 2003. He worked with McKinsey & Company from 1991 to 1996, specializing in restructuring, business development and turnaround and cost efficiency projects globally.

Mr. Garrido y Ruano holds a Masters in Civil Engineering with honours from the Universidad Politécnica de Madrid and an MBA from INSEAD, Fontainebleau, France.

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Marta de Amusategui y Vergara

Marta de Amusategui y Vergara was appointed to our Board of Directors as a Non-Executive Director on June 12, 2020. She has been a member of our Audit Committee from that date and a member of the Compensation Committee since June 23, 2021.

Ms. Amusategui has substantial experience in executive and non-executive roles, with a background in business strategy, banking and finance. She is founder and partner of Abrego Capital S.L, providing strategic and financial advisory services, and co-founder of Observatorio Industria 4.0, the professional forum leveraging knowledge and experience to assist businesses, specifically those in the secondary sector, in their digital transformation. She began her career in management consulting and investment banking, serving as Country Executive Officer and General Manager with Bank of America in Spain from 2003 to 2008.

Ms. Amusategui has been a member of the Board of Eland Private Equity, S.G.E.I.C., S.A., a private equity management company specializing in renewable energies, since 2009. Since 2020, she has been a member of the board of directors of Eccocar Sharing S.L. She has also held other Board positions in the past, including that of Telvent GIT S.A. (NASDAQ TLVT), the global IT solutions and business information services provider, where she became an independent director from early 2010 until its de-listing following acquisition in December 2011. She is currently a member of the McKinsey Alumni Council in Spain.

Ms. Amusategui holds an Industrial Engineering degree (MSc equivalent) from Universidad Pontificia de Comillas, Madrid, Spain, and an MBA from INSEAD, Fontainebleau, France. She holds a number of academic appointments, lecturing in Financing at the Three Points Digital Business School, Grupo Planeta, in Barcelona, in Managerial Competencies in CUNEF, in Madrid, and in Risk Management on the Non-Executive Directors Program at ICADE Business School, also in Madrid.

Juan Villar-Mir de Fuentes

Juan Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on December 23, 2015.

Mr. Villar-Mir de Fuentes has been Vice Chairman of Inmobiliaria Espacio, S.A since 1996 and Vice Chairman of Grupo Villar Mir, S.A.U. since 1999 and he is currently Chairman of both companies. He has been a member of the Board of Directors of Obrascon Huarte Lain, S.A. since 1996, a member of the Audit Committee and, later, a member of its Compensation Committee. Currently he is Vice Chairman of the company. He was a Board director and member of the Compensation Committee of Inmobiliaria Colonial, S.A from June 2014 to May 2017. He also was a member of the Board of Directors and of the Compensation Committee of Abertis Infraestructuras, S.A. between 2013 and 2016.

Mr. Villar-Mir de Fuentes is Patron and member of the Patronage Council of Fundación Nantik Lum and of Fundación Santa María del Camino.

Mr. Villar-Mir holds a Bachelor’s Degree in Business Administration and Economics and Business Management from the Universidad Autónoma de Madrid.

Belen Villalonga

Belen Villalonga Morenés was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. She has been a member of the Audit Committee from that date and was appointed to the Corporate Governance Committee on June 23, 2021.

Ms. Villalonga is a Professor of Management and Organizations, a Yamaichi Faculty Fellow, and a Professor of Finance (by courtesy) at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at the Harvard Business School. Her teaching, research, and consulting activities are in the areas of corporate governance, strategy, and finance, with a special focus on family-controlled companies. Her award-winning research has been cited over 15,000 times in scholarly articles and international media outlets. Professor Villalonga is an independent director and audit committee member (and former chair) at Grifols, a global leader in hemoderivatives that is part of Spain’s IBEX35 blue-chip index and is also listed on NASDAQ. She is also a member of the board and of the risk, audit, and compensation & talent management committees at Banco Santander International, the Santander group’s private banking subsidiary in the United States. She was also an independent director for 13 years at Acciona, a leader in the renewable energy and infrastructure industries, as well as at Talgo, a high-speed train manufacturer, where she chaired the strategy committee.

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Ms. Villalonga holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a Ph.D. in Business Economics from the Complutense University of Madrid.

Silvia Villar-Mir de Fuentes

Silvia Villar-Mir de Fuentes currently serves on the board of directors of Grupo Villar Mir, a privately held Silvia Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. She has been a member of the Compensation Committee since June 23, 2021. Ms. Villar-Mir de Fuentes currently serves on the board of directors of Grupo Villar Mir, a privately held Spanish group with investments across a broad range of diversified industries, which is the beneficial owner of approximately 49% of the Company’s share capital.

Mrs. Villar-Mir de Fuentes is a summa cum laude graduate in Economics and Business Studies, with concentration in finance and accounting, from The American College in London, United Kingdom.

Nicolas De Santis

Nicolas De Santis was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. He has been a member of the Compensation Committee and the Nominations Committee since June 23, 2021. Mr. De Santis is a technology entrepreneur, strategist and author with substantial experience in executive and non-executive roles. Mr. De Santis is currently the Chief Executive Officer of Corporate Vision, a strategy and innovation consultancy and incubator. Corporate Vision advises multinational corporations and start-ups on digital business transformation (including artificial intelligence and machine learning), business strategy, branding, business model innovation, sustainability strategies and corporate culture change.

Previously Mr. De Santis served on the board of publicly traded Lyris Technologies (acquired by AUREA Software in 2015). He began his management career at Landor Associates (now WPP Group). As a technology entrepreneur, he co-founded several high-profile start-ups, including opodo.com, one of Europe’s most successful start-ups, reaching $1.5 billion in gross sales.

Mr. De Santis is a regular lecturer at business schools and universities on business strategy, global branding, business model innovation and culture transformation, including IE Business School, Madrid and the University of Wyoming. He is the author of Futurising Companies® - A systematic approach to win the future by managing culture as the operating system of organisations.

Rafael Barrilero Yarnoz

Rafael Barrilero Yarnoz was appointed to our Board of Directors as a Non-Executive Director on May 13, 2021. He was appointed Chair of the Compensation Committee and a member of the Nominations Committee on June 23, 2021.

Mr. Barrilero Yarnoz is a senior advisor at Mercer Consulting. Mr. Barrilero Yarnoz has developed his career as a partner of the firm and as a member of the executive committee, leading the advisory talent and reward service for the boards of the main companies and multinationals. He has also led the business throughout the EMEA. Previously, he led the Watson Wyatt consulting firm in Madrid. He began his career as a lawyer at Ebro Agricolas focused on labour law, before serving as Ebro’s head of human resources.

Mr. Barrilero Yarnoz has a law degree from Deusto and a Masters in Financial Economics from ICADE, as well as a masters in human resources by Euroforum-INSEAD.

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Directors’ responsibilities

The directors are responsible for preparing the Company’s annual reports and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with United Kingdom adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements also comply with International Financial Reporting Standards as issued by the IASB. The directors have also chosen to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure Framework. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these group financial statements, International Accounting Standard 1 requires that directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

· make an assessment of the entity’s ability to continue as a going concern.

In preparing the parent company financial statements the directors are required to:

· Select suitable accounting policies and then apply them consistently;

· Make judgments and accounting estimates that are reasonable and prudent; and

· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue business

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the directors’ remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

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

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Directors’ responsibility statement

To the best of each directors’ knowledge:

· the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· this directors’ report and the strategic report include a fair review of the development or performance of the business and the position of the Company and its subsidiaries and subsidiary undertakings taken as a whole, together with a description of the principal risks and uncertainties that they face;

· the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

The responsibility statement was approved by the Board and signed on its behalf. 

By order of the Board on 1 June 2022

Javier Lopez Madrid

Director

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Directors’ Remuneration Report

Introduction

Dear Shareholder

As Chairman of the Compensation Committee (the Committee), and on behalf of the Board, I present the Directors’ Remuneration Report for the period ended 31 December 2021.

This includes the following three sections:

· This Annual Statement which summarises the work of the Committee during the year;

· The Annual Report on Remuneration (the ARR) which provides details of the remuneration earned by directors for the period ended 31 December 2021; and

· The new Directors’ Remuneration Policy (the Policy) which will be put forward for shareholder approval at the 2022 Annual General Meeting following the expiry of the three-year policy that was approved by shareholders in 2019. The new policy is largely unchanged from the previous one. The new Policy is set out on pages 37 to 49

This report sets out both the Company’s annual report on remuneration (the ARR) for 2021 and the directors’ remuneration policy (the 2022 Policy or the Policy). The ARR will be subject to an advisory vote and the 2019 Policy will be subject to a binding vote at the forthcoming Annual General Meeting in June. If approved, the 2022 Policy will come into immediate effect. The section in this report on remuneration in 2022 details proposed implementation of the 2022 Policy in the current year, assuming it is approved. As changes to the current Policy are limited, there are few aspects which will require revision if it is not approved. We hope to have your support for the 2022 Policy. The 2020 Policy is included on pages 37 to 42 for your information and ease of reference.

The 2019 Policy was put to shareholders at the 2019 AGM and approved by over 91% of the shareholders who voted on it.

The Policy

The Company approved the current Policy in June 2019. Under English law, such policies require shareholder approval not less than once in every three years and the review of the Policy approved in 2019 was a major priority of the Committee in 2022. We considered a number of different remuneration approaches, reviewing potential alternatives to achieve our remuneration aims and promote the long-term success of the Company. Our 2022 Policy is largely unchanged from that approved in 2019. The 2022 Policy is the next item in this report after this statement.

Management Changes

There were no changes in the Executive Directors or their salaries in 2021. In 2022 the Committee and the Board approved an increase in the base salary of the CEO Marco Levi in the amount of €200,000 annually effective as of 1 January 2022.

Annual Bonus awards for 2021 and 2020

The annual bonus objectives for the Executive Chairman and CEO in 2021 were EBITDA in relation to 35% of the award, net cash-flow in relation to 35% and an indicator related to the turnaround plan in relation to 30%. The Executive Directors achieved performance of 149% of their target bonus opportunities. See the ARR for more on the 2021 annual bonus outturn.

In the 2020 report of the Compensation Committee, we reported to you that the outturn of the 2020 annual bonus was 44% of target and that no bonus had been paid. An adjustment was made at the discretion of the Compensation Committee and Board to reflect a reduction in adjusted EBITDA, and a 2020 annual bonus at 41% of target was approved and paid in 2021, totaling $616 thousand, and which was not included in the 2020 report on directors’ remuneration.

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LTIPs vesting in 2021

Awards granted to our Executive Directors in 2018 under the EIP came to the end of their performance period on 31 December 2020 and vested in 2021. The Committee assessed their performance at 20% of target (40% of maximum), and the awards vested and became exercisable. To date, the award to our Executive Chairman has not been exercised; the award to our former CEO was exercised in 2021.

LTIPs with performance period ending in financial year 2021

The performance period of awards granted to our Executive Directors in 2019 under the EIP ended on 31 December 2021 and vested at 32.17% out of a maximum opportunity of 200% of target. In addition, the performance period of awards granted to our Executive Directors in 2021 under the EIP ended on 31 December 2021 and vested at 100% of maximum.

Non-Executive Directors and their remuneration

2021 was a challenging year for the Company and the Board met more frequently than anticipated in its usual annual calendar. Due to these exceptional requirements, the Board met 9 times in 2021, rather than the 8 times normally scheduled. No additional fees were paid to its Non-Executive Directors for the time and attention in preparing for and attending these meetings.

In 2022, the Corporate Governance Committee reviewed the structure of NED fees and decided to propose an additional payment for extraordinary meetings in the amount of £2,500 for in-person meetings and £1,250 for meetings held by video conference or telephonically. Such changes were approved by the Board. Other than these two changes, they chose not to recommend any other adjustment to the level or principles underlying NED fees, which otherwise remained unchanged in quantum from 2016.

In 2020, the Committee undertook its annual review of its terms of reference and worked with the Corporate Governance Committee and the Board in considering whether responsibility for the oversight of NED fees should more properly sit with the Corporate Governance Committee to make recommendations to the Board. While this might be unusual in the U.K. it is more common in the U.S. where the Company is listed. It was decided that this change was appropriate in light of the overall governance regime to which the Company is subject by virtue of its listing on the Nasdaq Capital Market. Since November 2020, the Corporate Governance Committee has reviewed and made recommendations to the full Board on the amount and type of compensation to be paid to the Company’s Non-Executive Directors. To meet the requirements of U.K. corporate law, this report continues to advise on NED remuneration policy and practice in the relevant period and the Corporate Governance Committee has therefore reviewed and signed off on any aspect of NED remuneration disclosed in this report.

Looking forward to 2022

After several years of realigning our commercial strategy, cost cutting and focusing on making our operational assets more competitive, the Company is well situated to capitalize on current market opportunities in 2022.  Our legacy silicon metals contracts, which were set at fixed prices, limited our upside last year and have all expired at the end of 2021.  With the resetting of the prices tied to the index, we are now going to realize the uplift in financial performance as a result in this part of our product portfolio.  Our silicon-based alloys and manganese-based alloys business also continues to build on the momentum from the end of 2021.  We continue to monitor the macro and micro economic developments with great interest and are well positioned to navigate changes in the broader operating environment.  Overall, we expect to deliver record setting results in 2022.

The Committee was pleased with the level of support received for the advisory vote at last year’s AGM with 99.5% of votes cast in favor. This year, shareholders will continue to have an advisory vote on the Directors’ Remuneration Report and there will be a second vote on the new Directors’ Remuneration Policy which is effectively a roll over of the one previously approved by shareholders in 2019. I hope we will again receive your support for the resolutions relating to remuneration at the 2022 AGM.

Signed on behalf of the Board.

Chairman of the Compensation Committee

1 June 2022

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The Policy

This section of the Directors’ Remuneration Report on pages 37 to 62 sets out the Directors’ Remuneration Policy which will be put forward for shareholder approval at the 2022 AGM on 30 June 2022 and will take formal effect from that date, subject to shareholder approval. Under English law, a company’s directors’ remuneration policy must be put to its shareholders for approval at least once every three years. The Company’s current directors’ remuneration policy was last approved by shareholders in 2019 and has been subject to extensive review by the Company’s Compensation Committee and Corporate Governance Committee. As a result of this review, a new Remuneration Policy, largely unchanged from that approved in 2019, will be put to the shareholders for approval at the 2022 AGM. There is more information on the Remuneration Policy, including on the minor changes it proposes to the policy approved in 2019, on pages 37 to 49 of the UK Annual Report and Accounts.

Changes to the Remuneration Policy

There are no substantive changes to the Policy from the one previously approved by shareholders in 2019. The policy limits applying to each element of pay remain unchanged. The policy on treatment of long-term incentive awards on cessation now includes scope for time pro-ration in all good leavers cases and for long-term incentive awards granted in 2022 and beyond good leaver treatment in relation to cessation without cause and/or resignation by an Executive Director for good reason will be at the discretion of the Committee. Similarly, in respect of long- term incentive awards granted in 2022 and beyond in the event of a takeover awards may be pro-rated at the discretion of the Committee.

Aim of the Policy

The overall aim of the Policy is to provide appropriate incentives that reflect the Company’s high-performance culture and values to maximize returns for shareholders.

In summary, our aim as regards Executive Directors is to provide remuneration which:

· attracts, retains and motivates high caliber, high performing employees;

· encourages strong performance and engagement, both in the short and the long term, to enable the Company to achieve its strategic objectives;

· link a very significant proportion of pay to performance conditions measured over the short term and longer term;

· set fixed pay levels at or around market norms to allow for a greater proportion of total remuneration opportunity to be in variable pay; and

· create strong alignment between the interests of shareholders and executives through both the use of equity in variable incentive plans and the setting of shareholding guidelines for Executive Directors.

There are no material differences in the Policy for Executive Directors compared to that of senior management other than in terms of quantum and levels of participation in incentive plans reflecting the higher weighting to variable pay and ability to influence performance outcomes. For the wider employee population, the Company aims to provide remuneration structures and levels that reflect market norms for the location at which they are based.

Operation of the Policy

Throughout the Policy, reference is made to the authority, powers and discretions vested in the Committee. It is the Committee’s practice that, in relation to any significant decision in relation to the compensation of the Company’s Executive Directors or the second tier of executive management below them, the Committee makes recommendations to the Board which determines the final decision of the Company on such matters.

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The following table summarizes the Policy as applied to Executive Director remuneration:

Components of remuneration for Executive Directors

Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
Salary	A fixed salary commensurate with the individual’s role, responsibilities and experience, having regard to broader market rates.	Reviewed annually, taking account of Group performance, individual performance, changes in responsibility, levels of increase for the broader employee population and market salary levels.	Not applicable.
Pension and retirement benefits	Attraction and retention of top talent; providing mechanism for the accumulation of retirement benefits.	Executive Directors may be paid a cash allowance in lieu of pension. The maximum cash allowance is 20% of base salary. This includes contributions to the U.S. tax-qualified defined contribution 401(k) plan.	Not applicable.
Benefits	Attraction and retention of top talent.	Benefits may include but are not limited to medical cover, life assurance and income protection insurance.	Not applicable.
		Relocation allowances may take into account a housing allowance, school fees, adviser fees for assistance with tax affairs and an expatriate allowance to cover additional expenditure incurred as a result of the relocation. Payment of such relocation allowances will be reviewed by the Committee on an annual basis
		Benefits may include tax equalization provisions applicable if an Executive moves between jurisdictions with differing tax regimes at the Company’s request. If the Executive moves to an area of higher taxation, the Company may agree to make an annual or other regular payment in cash to compensate him or her for any additional tax burden. Where the Executive moves to a jurisdiction where his or her effective tax burden is lower than that to which he or she was subject prior to such move, the Executive’s compensation may be commensurately reduced to ensure that his or her net pay remains unaffected.

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Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
		Benefits will be provided as the Committee deems necessary including to take into account perquisites or benefits received from a prior employer or as is customary in the country in which an executive resides or is relocated from.
		Benefits provided by the Company are subject to market rates and therefore there is no prescribed monetary maximum. The Company and the Committee keep the cost of the benefits under review.
		The Company provides all Executive Directors with directors’ and officers’ liability insurance and will provide an indemnity to the fullest extent permitted by the Companies Act.
Annual and other bonuses	Short-term performance-based incentive to reward achievement of annual performance objectives.	The annual bonus plan and all payments and awards under it are at the discretion of the Committee. Subject as aforesaid, the Committee will determine an Executive Director’s actual bonus amount, subject to the achievement of quantitative and qualitative performance criteria. At least two-thirds of the bonus will be based on financial metrics with any balance based on non-financial metrics. The maximum annual bonus opportunity that may be awarded to an Executive Director is normally 200% of salary. If the Committee provides higher annual bonus opportunities in any year its rationale will be clearly explained in the Annual Report on Remuneration for the relevant year. In these and other exceptional circumstances the limit will be 500% of salary. No more than 25% of the maximum annual bonus payable for each performance condition will be payable for threshold performance.	The Committee will select the most appropriate performance measures for the annual bonus for each performance period and will set appropriately demanding targets. Normally any bonus earned in excess of the target amount will be deferred for three years into shares in the Company. An Executive Director may be granted an additional long-term incentive award as described below of equal value (at maximum) to the amount of annual bonus deferred. Recovery and recoupment will apply to all bonus awards for misstatement, error or gross misconduct.

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Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
		In addition or in place of an annual bonus, the Company may pay a retention bonus where it considers it necessary to retain key Executives in situations where the relevant Executive would otherwise leave the Company and his or her retention is critical to the Company’s performance and/or the achievement of strategic goals or key projects. The grant, terms and payment of any retention bonus are at the discretion of the Committee.
		A retention bonus may be payable in cash or in shares and subject to such conditions as the Committee sees fit, including the Executive remaining with the Company for a defined period of time and/or meeting set performance criteria. The Committee would normally count any retention bonus awarded towards the 500% of salary limit.

Long-term incentive awards Focus Executive Directors’ efforts on sustainable strong long-term performance of the Company as a whole, and to aid in retention with multi-year vesting provision. Improves alignment of Executive Directors’ interests with those of the Company and shareholders. Executive Directors are eligible for awards to be granted as decided by the Committee under the Company’s long-term incentive plan. All awards are subject to performance targets as determined by the Committee for each grant, performance against which is normally measured over a three-year period. Awards usually vest three years from the date of their grant. The annual target award limit will not normally be higher than 300% of salary (based on the face value of shares at date of grant). Maximum vesting is normally 200% of target (based on the face value of shares at date of grant). There is an exceptional annual target award limit in recruitment, appointment and retention situations of 500% of salary. The Committee will select the most appropriate performance measures for long-term incentive awards for each performance period and will set appropriately demanding targets.   Recovery and recoupment will apply to all long-term incentive awards for misstatement, error or gross misconduct.

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Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
Share ownership guidelines	Increases alignment between the Executive Directors and shareholders.	Executive Directors are strongly encouraged to hold a percentage of their salary in shares. This holding guideline could be achieved through the retention of shares on vesting/exercise of share awards and may also (but is not required to) be through the direct purchase of shares by the Executive Directors.	Not applicable.

Performance Criteria and Discretions

Selection of Criteria

The Committee annually assesses at the beginning of the relevant performance period which corporate performance measures, or combination and weighting of performance measures, are most appropriate for both annual bonus and long-term incentive awards to reflect the Company’s strategic initiatives for the performance period. The Committee has the discretion to change the performance measures for awards granted in future years based upon the strategic plans of the Company. The Committee sets demanding targets for variable pay in the context of the Company’s trading environment and strategic objectives and taking into account the Company’s internal financial planning and market forecasts. Any non-financial goals will be well defined and measurable.

Discretions retained by the Committee in operating its incentive plans

The Committee operates the Group’s various plans according to their respective rules. In administering these plans, the Committee may apply certain operational discretions. These include the following:

· determine the extent of vesting based on the assessment of performance, including exercising its discretion to reduce payout as and where appropriate;

· determine “good leaver” status (as described below) and where relevant extent of vesting;

· where relevant determine the extent of vesting in the case of share-based plans in the event of a change of control in accordance with the rules of the various plans; and

· make the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events, variation of capital and special dividends).

The Committee, acting fairly and reasonably, and after consulting plan participants, may adjust the targets and/or set different measures and alter weightings for the variable pay awards already granted (in a way that the alterations are intended to create an equivalent outcome for plan participants) only if (i) an unexpected event (whether a corporate or outside event) occurs which causes the Committee to reasonably consider that the performance conditions would not achieve their original purpose without alteration and (ii) the varied conditions are materially no more or less difficult to satisfy than the original conditions. Any changes and the rationale for those changes will be set out clearly in the Annual Report on Remuneration in respect of the year in which they are made.

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Remuneration scenarios for the Executive Directors

The charts below show the level of remuneration potentially payable to each of Javier López Madrid as Executive Chairman and Marco Levi as CEO under different performance scenarios for the 2022 financial year.

In respect of the remuneration of the Executive Chairman:

In respect of the remuneration of the CEO:

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Assumptions

1. Fixed pay comprises base salary for 2022, benefits and a pension contribution of 20% of base salary for each of Javier Lopez Madrid and Marco Levi. Benefits comprise private health, income protection and life insurance arrangements at an estimated level of 5.46% of base salary for Javier Lopez Madrid and 4.52% of base salary for Marco Levi salary (excluding the one-off contribution towards relocation costs incurred in 2020) and an expatriate allowance of 20% of base salary in the case of Javier López Madrid.

2. On-target performance comprises fixed pay plus annual bonus of 100% of base salary and long-term incentives of 200% of base salary for the Executive Chairman and the CEO.

3. Maximum performance comprises fixed pay plus annual bonus of 150% of base salary for the Executive Chairman and the CEO and long-term incentives of 200% of base salary for each. Annual bonus awards and long-term inventive award levels have not yet been determined for 2022 and are illustrated at the levels awarded in 2019.

4. Maximum performance plus share price growth comprises the maximum performance scenario described above plus an assumed 50% share price growth over the performance period of the LTIP.

5. As described in the Policy, an additional long-term incentive award may be granted if part of the annual bonus is deferred, with the maximum value of such award equal to the amount of bonus deferred. As at 31 December 2021 no such awards have been made to the Executive Directors and none is to be made in respect of 2021.

Approach to Recruitment Remuneration

The Committee expects any new Executive Directors to be engaged on terms that are consistent with the Policy as set out above.

The Committee recognizes that it cannot always predict accurately the circumstances in which any new directors may be recruited. The Committee may determine that it is in the interests of the Company and shareholders to secure the services of a particular individual which may require the Committee to take account of the terms of that individual’s existing employment and/or their personal circumstances. Examples of circumstances in which the Committee expects it might need to do this are:

• where an existing employee is promoted to the Board, in which case the Company will honour all existing contractual commitments including any outstanding annual bonus or long-term incentive awards or pension entitlements and will provide other benefits consistent with those provided to senior leaders in that employee’s home country or place of residence prior to appointment to the Board;

• where an individual is relocating in order to take up the role, in which case the Company may provide certain one-off benefits in addition to benefits set out in the policy table such as reasonable relocation expenses, assistance with visa applications or other immigration issues and ongoing arrangements such as flights home and cost of education; and

• where an individual would be forfeiting fixed or valuable variable remuneration in order to join the Company, in which case the Committee may award appropriate additional compensation in addition to the limit set out in the policy table. The Committee would look to replicate the arrangements being forfeited as closely as possibly taking into account the nature of the remuneration, performance conditions, attributed expected value and the time over which any variable pay would have vested or been paid.

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In making any decision on any aspect of the remuneration package for a new recruit, the Committee would balance shareholder expectations, current best practice and the requirements of any new recruit and would strive not to pay more than is necessary to achieve the recruitment. The Committee would give full details of the terms of the package of any new recruit in the next remuneration report. Award levels under the Company’s variable incentive plans would not exceed those set out in the policy table, but their proportions can be altered for the first three years of employment.

Executive Directors’ Service Contracts and Policy on Cessation

In order to motivate and retain the Executive Directors and other senior executives, most of whose backgrounds are in the United States and Europe, the Committee has taken account of market practices in those countries in formulating the Policy, including (a) determining the treatment of annual and retention bonuses and long-term incentive awards in case of termination of their employment by the Company without cause, (b) referencing past annual bonuses in calculating the amount of payment in lieu of notice, (c) determining the extent of vesting of long-term incentive awards in the event of a takeover or change of control and (d) determining that all long-term incentive awards granted to an executive in any financial year will be subject to achievement of performance targets.

Service contracts

Subject to the Approach to Recruitment Remuneration above, all Executive Directors have rolling service contracts for an indefinite term but a fixed period of notice of termination which would normally be 12 months. With respect to newly appointed directors, the Committee may, if it considers it necessary, agree a notice period in excess of 12 months (but not exceeding 24 months), provided it reduces to 12 months within a specified transition period of not exceeding 36 months. The service contract for Javier López Madrid is in accordance with this policy and his fixed period of notice of termination is 12 months. See below for more on Marco Levi’s service contract.

The Executive Chairman’s service contract may be terminated for cause without notice and without further payment or compensation, except for sums accrued to the date of termination. In other circumstances, the Company may terminate his employment with immediate effect and make a payment in lieu of notice in the amount equivalent to the aggregate of (i) base salary, (ii) the average of annual bonuses in the last three years prior to termination, (iii) pension allowance plus (iv) cost of benefits, for the notice period (or if a notice has been served, for the unserved notice period). He would be entitled to an equivalent payment in the event of his resignation for good reason (as defined in the service contract). Similar provisions may apply in the event that he leaves following a change of control of the Company, but no additional entitlements would be expected to be set out in the Executive Director’s service contract beyond those described above. An Executive Director may also be entitled to certain amounts with respect to annual or retention bonuses and long-term incentive awards, as described below.

Marco Levi is employed under a service contract made under Spanish law (and in particular, the provisions of the Royal Decree 1382/1985 1^st of August regarding senior management (“Alta Dirección”)). Spanish employment law imposes a number of mandatory requirements, including in relation to termination. The CEO’s service contract may be terminated for cause (as defined in the service contract by reference to Spanish statutory law) without notice and without further payment or compensation, except for sums accrued to the date of termination. If the dismissal is declared null or unfair by a definitive court or labour tribunal ruling, the CEO is entitled to receive a severance payment equal to six months’ salary plus a payment equal to the Company’s costs in such six month period corresponding to the insurance and pension benefits in force at the time of termination. This severance compensation includes and absorbs the compensation and any statutory notice to which the Executive may otherwise be entitled by operation of law. In the event that the CEO is dismissed without cause, the CEO will similarly be entitled to receive a severance payment equal to six months’ salary plus an amount equal to the costs the Company would have incurred in providing pension, health insurance, income protection and life assurance benefits for the period of notice, in lieu of any statutory notice to which the CEO would otherwise be entitled. In addition, in accordance with Spanish law and as contemplated in the section Generally below, the CEO has enhanced post termination restrictive covenants. Under these provisions, the Company may be required to make an additional payment to ensure the enforceability of certain post-employment restrictions on competition for a period of six months from termination on terms which are customary in senior management employment relationships. The amount payable is 30% of the CEO’s salary at the date of termination and is deemed discharged at the rate of 15% of salary per annum throughout the employment relationship, such that on termination no further sums will be payable if an amount equal to 30% of salary has already been paid. The total amount payable on termination of the CEO’s service contract other than for cause is therefore less than 12 months’ salary and benefits.

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Where an Executive Director’s service contract is terminated for “without cause” or for “good reason” as defined in the relevant director’s service contract, the provisions outlined below in relation to annual bonus awards and long-term incentive awards as described below will apply. Executive Directors’ service contracts (or a memorandum of the terms where the contract is unwritten) are available for inspection at the Group’s office at 13 Chesterfield Street, London, W1J 5JN during normal business hours and at the Annual General Meeting.

Generally

As circumstances may require, the Committee may approve compensation payments in consideration of statutory entitlements, for a release of claims, enhanced post-termination restrictive covenants (for example, as outlined above) or transitional assistance, such as outplacement services and payment of legal fees in connection with termination, the costs of short term accommodation or leasing arrangements, home relocation expenses including tax related expenses and other ancillary payments thereto.

Annual bonus awards (including retention awards)

In the event that an Executive Director’s employment is terminated without cause, by resignation by the Executive Director for good reason, or by reason of death, injury, disability or his employing company or the business for which he works being sold out of the Group, the Company will pay an annual bonus amount in respect of the financial year in which termination occurs subject to performance conditions being met at the end of the period and with pro-rating of the award determined on the basis of the period of time served in employment during the normal vesting period but with the Committee retaining the discretion in exceptional circumstances to increase the level of vesting within the maximum annual bonus amount as determined by the performance conditions. The Committee may, if it considers it appropriate in exceptional circumstances, measure performance to the date of cessation. In other circumstances, payment will be at the Committee’s discretion. The Committee will consider the period of the year worked and the performance of the Executive Director during that period when considering how to exercise its discretion.

The terms of any retention bonus agreed to be paid to an Executive Director may provide for such bonus to be payable on that Executive Director’s employment being terminated without cause, by resignation by the Executive Director for good reason, or by reason of death, injury, disability or his employing company or the business for which he works being sold out of the Group. In any such case, the retention bonus will become payable in such circumstances.

Long-term incentive awards

As a general rule, any unvested long-term incentive award (except deferred bonus awards see below) will lapse upon an Executive Director ceasing to be an employee or director in the case of voluntary resignation or dismissal for cause. However, if the cessation is without cause, by resignation by the Executive Director for good reason, or because of his death, injury, disability or his employing company or the business for which he works being sold out of the Group or in other circumstances at the discretion of the Committee, and generally for any award granted in 2022 and beyond, then the award will normally vest in full on the date when it would have ordinarily vested subject to the performance conditions being met. Where an award vests at the discretion of the Committee that award may be pro-rated taking into account the period of time served in employment during the normal vesting period of the award. The Committee can for any cessation measure performance up to the date of cessation and permit awards to vest early in respect of which the same pro-ration principles noted above remain applicable. For awards granted in 2022 and beyond, good leaver treatment in relation to cessation without cause and/or by resignation of an Executive Director for good reason will be at the discretion of the Committee.

Deferred bonus awards vest in full upon cessation, other than in case of voluntary resignation by an Executive Director without good reason or dismissal for cause. Vested but unexercised awards held on cessation will remain capable of exercise for a limited period save in the case of dismissal for cause.

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In the event of a takeover all awards will vest early to the extent that the performance conditions are determined as satisfied at that time on such basis as the Committee considers appropriate. In respect of awards granted in 2022 and beyond, in the event of a takeover awards may also be pro-rated at the discretion of the Committee.

External appointments

Executive Directors may retain fees paid for external director appointments. These appointments are subject to disclosure to and approval by the Board and must be compatible with their duties as Executive Directors.

Matters taken into consideration in determining policy and differences in the remuneration policy of the Executive Directors and employees

It is not the Committee’s practice to consult with employees on matters relating to executive pay. However, the Committee will consider pay structures, practices and principles across the Group on a regular basis and take these into account in any review of the Executive Directors’ current Policy or implementation thereof.

The Committee will consider feedback from shareholders and take into account the results of both advisory and binding votes concerning executive pay at the Annual General Meeting as well as ensuring it engages with shareholders on executive pay matters. The 2021 Policy has been formulated taking into account the Company’s understanding of current shareholder views on the Company’s remuneration policy and practices.

Directors’ Remuneration Policy for Non-Executive Directors

The following table summarizes the 2021 Policy as proposed to be applied to Non-Executive Director remuneration, subject to its approval:

Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
Non-Executive Directors fees including any Non-Executive Chairman	To appropriately remunerate the Non-Executive Directors	The Non-Executive Directors are paid a basic fee. Supplemental fees may be paid for additional responsibilities and activities, such as for the committee chairmen and other members of the main Board committees (e.g. audit, compensation, nominations and corporate governance) and the Senior Independent Director, to reflect the additional responsibilities as well as travel fees to reflect additional time incurred in travelling to meetings.	Not applicable

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Element	Purpose and link to strategy	Operation and maximum opportunity	Performance framework and recovery
		These fee levels are reviewed periodically, with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.
		The Company does not currently have a Non-Executive Chairman. If one were appointed his or her fee would be set at a level with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.

		There is no maximum fee level or prescribed annual increase.
Payment of expenses and benefits	To support the Non-Executive Directors in the fulfilment of their duties	Reasonable expenses incurred by the Non-Executive Directors in carrying out their duties may be reimbursed by the Company including any personal tax payable by the Non-Executive Directors as a result of reimbursement of those expenses. The Company may also pay an allowance in lieu of expenses and may arrange and pay for the provision of advice or assistance in relation to personal taxes for which the Non-Executive Director may be liable in connection with his or her appointment to the Board, if it deems this appropriate.	Not applicable
		The Company provides Non-Executive Directors with directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the Companies Act.

Legacy Arrangements with Certain Non-Executive Directors

Prior to the Business Combination, in keeping with many other NASDAQ listed companies, Globe granted restricted stock units and share appreciation rights to its Non-Executive directors. Outstanding awards as at 31 December 2021 held by the Non-Executive Directors, who were previously Globe’s Non-Executive directors, are set out in the ARR.

It is noted that those Non-Executive Directors with restricted stock units and share appreciation rights may be regarded as not being independent by U.K. based proxy voting agencies although the Board considers them to be fully independent. It is a provision of this Policy that the Company may accelerate the vesting of or repurchase of these awards based on an independent valuation, if it deems it to be appropriate.

Letters of Appointment with Non-Executive Directors

The Company does not enter into service contracts with its Non-Executive Directors, rather the Company enters into letters of appointment for a rolling period of 12 months with each annual renewal being subject to re-election at each annual general meeting of the Company. No compensation for loss of office is payable in the event a Non-Executive Director is not re-elected. The Company may request that Non-Executive Directors resign with immediate effect in certain circumstances (including material breach of their obligations) in which case their appointment would terminate without compensation to the Non-Executive Director for such termination but with accrued fees and expenses payable up to the date of termination.

Appointment of Non-Executive Directors

For the appointment of a Non-Executive Chairman or other Non-Executive Directors, the fee arrangement would be in accordance with the approved Directors’ Remuneration Policy in place at that time.

Minor amendments

The Committee may make minor changes to the Policy, which do not have a material advantage or disadvantage overall to directors, to aid in its operation or implementation (including to take account of any change in legislative or regulatory requirements applicable to the Company) without seeking shareholder approval for a revised version of the Policy.

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Annual Report on Remuneration

Implementation of the Directors’ Remuneration Policy for the year ending 31 December 2022

This section sets out how the Committee intends to implement the Policy for the year ending 31 December 2022.

Base salary

Javier López Madrid was appointed as Executive Chairman with effect from 31 December 2016. Javier López Madrid’s salary was reviewed on his appointment and remains unchanged at £555,000 ($763,609) per annum.

Marco Levi was appointed as Chief Executive Officer on 10 January 2020 and to the Board of Directors on 15 January 2020. Marco Levi’s base salary as CEO was €600,000 ($709,620) per annum during 2021 was increased to €800,000 ($909,680) per annum effective as of 1 January 2022.

Neither Javier Lopez Madrid nor Marco Levi received any additional fees or compensation for their respective roles on the Board.

Pension and benefits

In accordance with the Policy, both Executive Directors receive a pension contribution at the rate of 20% of base salary, payable as a cash allowance, and health insurance, income protection and life assurance benefits to the value of approximately 6.2% of salary for the Executive Chairman and 6.7% for the CEO.

The Company provides directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the Companies Act.

Variable Remuneration

The objectives for the 2022 annual short-term incentives were determined by the Compensation Committee and the Board on 31 March 2022. For each of the Executive Directors, target is at 100% of base salary, with a maximum opportunity of 150% of base salary. The performance indicators are as follows:

- 2022 Adjusted EBITDA accounts for 35% weighting, with performance measured over a straight line sliding scale with $502,402 thousand representing 0% performance, $717,717 thousand representing target, and $933,032 thousand representing maximum.

- 2022 net cash flow accounts for 35% weighting, with performance measured over a straight line sliding scale with $111,384 thousand representing 0% performance, $159,120 thousand representing target, and $206,856 thousand representing maximum.

- A long-term strategy indicator accounts for 30% weighting, with Board endorsement of strategic options by June 2022 representing target and long-term endorsement of strategy by September 2022 representing maximum.

Long-term incentives

In the case of the Company’s long term incentive awards, the Committee has decided to delay the implementation of its variable compensation plans for 2022 until such time as it is feasible to set relevant and stretching targets, appropriately aligned to the Company’s strategic priorities and key financial performance indicators for 2022. The awards are expected to be structured as performance share awards with awards ordinarily vesting three years from grant subject to continued service and the achievement of performance conditions. The award levels are expected to be 100% of base salary as target and 200% of base salary as maximum in the case of the Executive Directors. Performance conditions are expected to comprise EBIT with a weighting of 40%, a cash flow measure with a weighting of 40% and relative total shareholder return relative to a comparator group with a weighting of 20%. In addition, the grants are expected to be subject to a multiplier for a health & safety measure which can both reduce or increase the total amount of payouts.

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Non-Executive Director share ownership guidelines

In 2018, the Non-Executive Directors reviewed the guidelines under which they had voluntarily agreed to apply on a cumulative basis at least a quarter of their normal annual gross fees to acquire shares under arrangements designed to ensure that shares can be purchased on a regular basis over a period of eight years and agreed several points of clarification, including that: .

· Where more or fewer shares are acquired in any year, the value of shares to be acquired in subsequent years may be reduced or increased respectively such that on a cumulative basis the 25% test is satisfied;

· Each Non-Executive Director agrees to retain his or her shares until the earlier of achieving a holding equal to twice his or her annual base fees being achieved or that director leaving the Board;

· Where a director holds outstanding and exercisable share-based or phantom restricted stock awards, the shares or notional shares under award are to be taken into account in determining the relevant director’s holding and may be exercised and disposed of at any time (with consequent effect on the director’s holding).

Fees for the Non-Executive Directors

The fee structure and levels were set following the Business Combination. Fees are set and payable in Pounds sterling and are reviewed - but not necessarily increased - annually, with changes normally effective from 1 January in each year. The fees for 2022 are the same as those for 2021 and have not changed since 2016:

Non-Executive Director base fee	£70,000 ($89,866)
Senior Independent Director	£35,000 ($44,688)
Member of Audit Committee	£17,500 ($22,344)
Member of Compensation Committee	£15,500 ($19,790)
Member of Corporate Governance Committee	£12,000 ($15,322)
Member of Nominations Committee	£1,500 ($1,915 per meeting, subject to an annual cap of £10,000 ($12,768))1
Extraordinary meetings (per meeting)
In person meetings	£2,500 ($3,210)
Meetings by videoconference/telephone	£1,250 ($1,605)
Committee Chairman	Two times committee membership fee
Travel fee (per meeting)
Intercontinental travel	£3,500 ($4,469)
Continental travel	£1,500 ($1,915)

Notes:

1. No fees are payable to the Chair of the Nominations Committee while the individual in that role is also an Executive Director

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Remuneration paid in respect of the year to 31 December 2021

Single Figure of Remuneration for the period – Audited

The table below shows the aggregate emoluments earned by the Executive Directors of the Company who served at any point in 2021 for the years ended 31 December 2021 and 31 December 2020. The emoluments shown for 2021 have been converted to USD at the Group’s average rate for year to 31 December 2021 of GBP1:USD1.3757. Those for 2020 were converted at the rate of GBP1:USD1.2838 in accordance with the 2020 U.K. Annual Report. Numbers given in Euros in any part of the Directors Remuneration Report are converted to USD at the Group’s rate of €1:USD1.183 and to GBP at the Group’s rate of €1:GBP0.8596.

	Salary1 (USD 000s)				Benefits 2 (USD 000s)				Pension3 (USD 000s)				Annual Bonus4 (USD 000s)				Long-term incentives5 (USD 000s)				Total (USD 000s)
Executive Director	2021		2020		2021		2020		2021		2020		2021		2020 Restated		2021		2020 Restated		2021		2020 Restated
Javier López Madrid		764		712		200		181		153		142		1,121		313		3,397		659		5,635		2,007
Marco Levi		710		670		47		31		141		134		1,009		303		2,455		430		4,362		1,568

	Total Fixed Remuneration		Total Variable Remuneration		Total Remuneration
Executive Director	2021	2020	2021	2020	2021	2020
Javier López Madrid	1,117	1,035	4,518	972	5,635	2,007
Marco Levi	898	835	3,464	733	4,362	1,568

(1)	No change in salary has been made year on year, any difference resulting in changes in the GBP: USD exchange rate.
(2)	For Javier López Madrid, benefits include an expatriate allowance of 20% of salary (£110,000 ($152,722) in 2021), and medical insurance and life assurance coverage as benefits. For Marco Levi, benefits include medical and life assurance coverage as benefits.
(3)	For 2021 the pension for Javier López Madrid is 20% of base salary payable as a cash supplement.
(4)	The 2020 bonus column has been restated from the U.K. Annual Report for the year ended 31 December 2020 to reflect the bonus paid in 2021 in respect of 2020 performance at 41% of target, which reflects a reduction from the 44% previously approved and disclosed in the 2020 U.K. Annual Report. Such adjustment was made at the discretion of the Compensation Committee and Board to reflect a reduction in adjusted EBITDA.
(5)	The performance period of the 2019 long-term incentive awards ended on 31 December 2021. As outlined below, the 2019 awards vested at 32.17% out of a maximum of 200%. The value of the 2019 LTIP, which forms part of the 2021 column, is calculated using the share price of $6.91 on 28 April 2022, the date of vesting. The performance period of the 2021 long-term incentive awards ended on 31 December 2021 and the awards are expected to vest on 1 January 2024 as to 100%. The value of the 2021 LTIP, which forms part of the 2021 column, is an estimate using the average share price over the last three months of 2021. The 2020 Long-term incentives column has been restated from the 2020 U.K. Annual Report to report awards during the year in which the performance period for the award was concluded. The performance period of the 2018 long-term incentive awards ended on 31 December 2020. As outlined below, the 2018 awards vested at 40.00% out of a maximum of 200%. The value of the 2018 LTIP, which forms part of the 2020 column, is calculated using the share price of $4.35 on 28 April 2021, the date of vesting. The performance period of the 2020 long-term incentive awards ended on 31 December 2020 and the awards are expected to vest on 16 December 2024 as to 31.92%. The value of the 2020 LTIP, which forms part of the 2020 column, is an estimate using the average share price over the last three months of 2020.

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The table below shows the aggregate emoluments earned by the Non-Executive Directors of the Company who served at any time during 2021 for the years ended 31 December 2021 and 31 December 2020.

	Fees ($’000)				Benefits ($’000)1				Total ($’000)
Non-Executive Directors	2021		2020		2021		2020		2021		2020
José María Alapont2		92.1		209.9		4.1		5.7		96.2		215.7
Donald G Barger Jr		-		68.7		-		4.5		-		73.2
Bruce L Crockett		202.5		145.2		14.4		4.5		217.0		149.6
Stuart E Eizenstat		119.0		119.8		-		4.5		119.0		124.3
Manuel Garrido y Ruano		112.8		105.3		-		1.9		112.8		107.2
Greger Hamilton3		-		62.6		-		-		-		62.6
Rafael Barrilero		85.5		-		4.1		-		89.6		-
Nicolas de Santis		74.4		-		-		-		74.4		-
Juan Villar Mir de Fuentes		96.3		89.9		-		-		96.3		89.9
Marta Amusategui		131.5		62.1		-		-		131.5		62.1
Silvia Villar-Mir de Fuentes		72.3		-		-		-		72.3		-
Belén Villalonga Morenes		85.2		-		4.8		-		90.0		-

(1)	Benefits comprise travel allowances.
(2)	José María Alapont was appointed as Senior Independent Director and Chairman of the Corporate Governance Committee in January 2019. He undertook additional duties in 2019 as a designated director of the Board for which he was paid additional fees totaling £9,139 in 2020 ($11,669). Mr. Alapont resigned from the Board on April 30, 2021.
(3)	Greger Hamilton undertook additional duties in 2020 as a designated director of the Board for which he was paid additional fees totaling £9,139 in 2020 ($11,669).

Annual bonus for the financial year to 31 December 2021 for the Executive Directors – audited

The target annual bonus opportunity for each of the Executive Directors was 100% of salary, with a maximum opportunity of 150%, and the performance measures for 2021 for each are detailed in the tables below. Final bonuses were approved by the Compensation Committee and Board and paid at 149% of target for the Executive Chairman and CEO.

Performance in respect of the performance metrics for 2021 is detailed in the table below.

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Performance targets and performance for the Executive Directors in 2021 were: 

Measure	Weighting (target % of award)			Threshold performance (0% of target paid)	Target performance (100% of target paid)	Stretch performance (150% of target paid)	Actual Performance	Bonus outcome (as a percentage of target)
EBITDA		35	%	$30,435 thousand	$60,870 thousand	$91,305 thousand	$128,714 thousand		150	%
Net cash-flow1		35	%	$25,261 thousand	$50,521 thousand	$75,782 thousand	$73,663 thousand		146	%
Turn-around impact		30	%	$44,000 thousand	$55,000 thousand	$60,500 thousand	$62,000 thousand		150	%

1. Pursuant to the discretion granted to the Compensation Committee and Board, net cash flow was calculated excluding $44 million in refinancing fees and $44 million related to repurchase of CO2 rights during the year.

Long term incentive awards for the financial year ended 31 December 2021 – Audited

Awards vesting/performance period ending in financial year 2021, including long-term incentive awards granted in financial year 2021

2019 LTIP awards

The performance period of the 2019 LTIP awards ended on 31 December 2021. 60% of each award was determined by Ferroglobe’s Total Shareholder Return (TSR) performance. 50% of the TSR part of the award was calculated relative to a bespoke group of peers, and the other 50% relative to the S&P Global 1200 Metals and Mining Index in line with the prior year's award. Vesting of the remaining 40% of each award related to the Company’s return on invested capital (ROIC) over the performance period as compared with the bespoke comparator group of the Company’s peers and the Company’s net operating profit after tax (NOPAT) growth as compared to the same bespoke comparator group of the Company's peers. Vesting of these awards was calculated as follows:

	Weighting			Threshold (0%)	Target (100%)	Maximum (200%)	Actual			Vesting %
Total shareholder return relative to a bespoke group1		30	%	Less than median (50th percentile)	50th percentile	90th percentile		45.2	%		107.22	%
TSR relative to the S&P 1200 Metals and Mining Index2		30	%	Less than Index TSR	Equal to Index TSR	Equal to Index TSR + 25 percentage points		57.2	%		0	%
Relative return on invested capital ("ROIC")3		20	%	Below percentile 25 (-79.9%)	Median (-68.1%)	Percentile 75 (-30.6%) and above		-150.2	%		0	%
Relative net operating profit after tax ("NOPAT") growth3		20	%	Below percentile 25  (-99.3%)	Median (-88.6%)	Percentile 75 (-74.9%) and above		-73.5	%		0	%
Weighted average (max 200%)											32.17% (out of max 200%)

1       Between the 50th and 75th percentile, proportionate vesting of between target (100%) and 150% of target. Between 75th percentile and 90th percentile, proportionate vesting of between 150% and 200% of target 

2       Equal to Index TSR + 15 percentage points, vesting of 150% of target. Straight line vesting between Index TSR and Index TSR +15 percentage points and between Index TSR+15 percentage points and Index TSR +25 percentage points 

3      Percentile 25, vesting of 50% of target

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As a result, the following awards vested during 2022:

	Type of award	Grant date	Vesting date	Number of shares awarded at target		Percentage of target award vesting (0% - 200%)	Number of shares to vest 1		Estimated value to of award to vest (USD)2
Javier López Madrid	LTIP Nil-cost option	13 March 2019	28 April 2022		342,329	32.17% out of 200%		110,113		760,881
Pedro Larrea Paguaga3	LTIP Nil-cost option	13 March 2019	28 April 2022		254,769	32.17% out of 200%		81,948		566,261

1 The number of shares shown excludes dividend equivalents to be awarded in the form of shares.

2. The value shown in the table is calculated using the share value upon vesting on 28 April 2022 of $6.91.

3. Pedro Larrea Paguaga is a ‘good leaver’ under the rules of the Equity Incentive Plan.

2018 LTIP awards

The performance period of the 2018 LTIP awards ended on 31 December 2020. 60% of each award was determined by Ferroglobe’s Total Shareholder Return (TSR) performance. 50% of the TSR part of the award was calculated relative to a bespoke group of peers, and the other 50% relative to the S&P Global 1200 Metals and Mining Index in line with the prior year's award. Vesting of the remaining 40% of each award related to the Company’s return on invested capital (ROIC) over the performance period as compared with the bespoke comparator group of the Company’s peers and the Company’s net operating profit after tax (NOPAT) growth as compared to the same bespoke comparator group of the Company's peers. Vesting of these awards was calculated as follows:

	Weighting			Threshold (0%)	Target (100%)	Maximum (200%)	Actual			Vesting %
Total shareholder return relative to a bespoke group1		30	%	Less than median (50th percentile)	50th percentile	90th percentile		Below lowest ranked			0	%
TSR relative to the S&P 1200 Metals and Mining Index2		30	%	Less than Index TSR	Equal to Index TSR	Equal to Index TSR + 25 percentage points		-93.1	%		0	%
Relative return on invested capital ("ROIC")3		20	%	Below percentile 25 (1.15%)	Median (2.24%)	Percentile 75 (3.33%) and above		-2.66	%		0	%
Relative net operating profit after tax ("NOPAT") growth3		20	%	Below percentile 25   (-99.3%)	Median   (-88.6%)	Percentile 75 (-74.9%) and above		-73.5	%		200	%
Weighted average (max 200%)											40% (out of max 200%)

1 Between the 50th and 75th percentile, proportionate vesting of between target (100%) and 150% of target. Between 75th percentile and 90th percentile, proportionate vesting of between 150% and 200% of target

2 Equal to Index TSR + 15 percentage points, vesting of 150% of target. Straight line vesting between Index TSR and Index TSR +15 percentage points and between Index TSR+15 percentage points and Index TSR +25 percentage points

3 Percentile 25, vesting of 50% of target

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As a result, the following awards vested on 28 April 2021:

	Type of award	Grant date	Vesting date	Number of shares awarded		Percentage of target award vesting (0% - 200%)			Number of vested shares 1		Value of award upon vesting (USD)2
Javier López Madrid	LTIP Nil-cost option	21 March 2018	28 April 2021		113,121		40	%		46,777		203,480
Pedro Larrea Paguaga3	LTIP Nil-cost option	21 March 2018	28 April 2021		84,187		40	%		34,813		151,437

1	The number of shares shown includes dividend equivalents awarded in the form of shares.
2.	The value shown in the table is calculated using the share price of $4.35 on 28 April 2021.
3.	Pedro Larrea Paguaga is a ‘good leaver’ under the rules of the Equity Incentive Plan.

2021 LTIP awards

On 9 September 2021 Javier López Madrid and Marco Levi were granted long-term incentive awards as set out in the table below.

	Type of award1	Basis of award (at max)2	Share value at grant		Number of shares at max		Face value of shares at max3		Vesting date	Performance period4
Javier López Madrid	Nil-cost option	200% of salary of $763,609	$	3.98		385,611	$	1,534,732	1 January 2024		Through to 31 December 2021
Marco Levi	Nil-cost option	200% of salary of $709,620	$	3.98		359,105	$	1,429,238	1 January 2024		Through to 31 December 2021

1. No price is normally payable on the exercise of the nil-cost option although the Company reserves the right to require the payment of the nominal cost of the shares as a condition of exercise if required to enable the issue or transfer of the shares.

2. Converted at GBP1:EUR0.85 and EUR1:USD1.18, being the exchange rate on the date of grant.

3. The value shown in this column has been calculated by multiplying the number of shares that would vest at max by the share value at grant. Although the share price on the date of grant was $8.86, the Compensation Committee and Board chose an issue price of $3.98 for the 2021 LTIP grant, which was an increase from the $1.97 which had been agreed by the Compensation Committee earlier in 2021 and which was disclosed in the 2021 U.K. Annual Report.

4. See below for details of the performance conditions applicable to the awards.

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Vesting of 40% of the award was determined by reference to the average closing prices for the last 15 trading days of the year, with $2.50 representing the minimum with 0% of the component vesting, $3.60 representing 50% vesting and $4.70 representing 100% vesting, with straight-line analysis between such points. The final value for the share price component was $6.20.

Vesting of 30% of the award was determined by reference to EBITDA, with $42,609 thousand representing the minimum with 0% of the component vesting, $60,870 thousand representing 50% vesting and $79,131 thousand representing 100% vesting, with straight line analysis between such points. The final performance value was $128,714 thousand.

Vesting of 30% of the award was determined by reference to net cash flow, with $35,365 thousand representing the minimum with 0% of the component vesting, $50,521 thousand representing 50% vesting and $65,677 representing 100% vesting. The final performance value was $73,633 thousand after excluding refinancing fees of $44 million and $44 million related to an exceptional CO2 rights repurchase during the year.

As a result, the awards are expected to vest at 100% of their maximum awards. The awards vest on 1 January 2024, and are subject to confirmation and modification by the Compensation Committee.

Directors’ shareholding and share interests – Audited

The table below sets out the number of shares held or potentially held by directors (including their connected persons where relevant) as at 31 December 2021.

Director	Beneficially owned shares		Number of shares under long term incentive awards without performance conditions1		Number of shares under long term incentive awards with performance conditions2		Target shareholding guideline (as a % of salary or average gross annual fees as applicable)			Percentage of Executive Director’s salary held as shares as at 31 December  20213
Javier López Madrid		168,424		1,096,919		-		-			137	%
Marco Levi		-		767,500		-		-			-
José María Alapont		15,000		-		-		-
Bruce L. Crockett		41,000		2,527		-		200	%
Stuart E. Eizenstat		56,632		-		-		200	%
Manuel Garrido y Ruano		870		-		-		200	%
Marta de Amusategui y Vergara		78,220		-		-		200	%
Juan Villar Mir de Fuentes		-		-		-		200	%
Belen Villalonga		-		-		-		200	%
Nicolas De Santis		-		-		-		200	%
Silvia Villar Mir de Fuentes		-		-		-		200	%
Rafael Barrilero		-		-		-		200	%

1. Where performance conditions have already been tested by the Board, such amounts are reflected in the “without performance conditions” column with their expected vesting values.

2. N/A.

3. Measured by reference to beneficially owned shares only and using the closing share price at 31 December 2021 of $6.21 and the annual salaries of the Executive Directors in USD as disclosed in this U.K. Annual Report and Accounts.

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The Directors’ outstanding share awards as at 31 December 2021 were as detailed below:

Director	Award type	Grant date	Outstanding1		Subject to performance conditions2	Exercisable as of 31 December  2021	Exercised during the year to 31 December 2021		Future vesting2		Vesting date
Javier López Madrid	LTIP Nil cost option	01.06.17		70,464	Yes	Yes		-		-		01.06.20
	LTIP Nil cost option	21.03.18		46,777	Yes	Yes		-		-		21.03.21
	Deferred Bonus Award: Nil cost option	14.06.18		23,066	No	Yes		-		-		14.06.21
	LTIP Nil cost option	13.03.19		110,113	Yes	No		-		110,113		28.04.22
	LTIP Nil cost option	16.12.20		432,771	Yes	No		-		432,771		16.12.24
	LTIP Nil cost option	09.09.21		385,611	Yes	No		-		385,611		01.01.24
Marco Levi	LTIP Nil cost option	16.12.20		408,395	Yes	No		-		408,395		16.12.24
	LTIP Nil cost option	09.09.21		359,105	Yes	No		-		359,105		01.01.24
Pedro Larrea Paguaga	LTIP Nil cost option	01.06.17		-	Yes	Yes		52,440		-		01.06.20
	LTIP Nil cost option	21.03.18		-	Yes	Yes		34,813		-		21.03.21
	Deferred Share Bonus Award	14.06.18		-	No	Yes		20,887		-		14.06.18
	LTIP Nil cost option	14.03.19		81,948	Yes	No		-		81,948		28.04.22
Donald G. Barger3	RSU/C	Various		23,741	No	Yes		-		-		-
Bruce L. Crockett3	RSU/C	Various		2,527	No	Yes		-		-		-

1. Deferred share bonus awards granted to the Executive Directors only. Vested awards are shown with dividend equivalents. Where performance conditions have already been tested by the Board, the number of shares vested or expected to vest in the future are reflected as “outstanding”. Where performance conditions have been tested but the related awards have not yet vested, such amounts are also reflected in the “future vesting” column.

2. Subject to performance conditions and continued employment in the case of awards to the Executive Directors. See page 56 for performance conditions applicable to the awards granted in 2021.

3. These incentive awards are legacy awards which the Company is authorised to honour following shareholder approval of the Policy in June 2019.

Total pension entitlements – Audited

Details of the value of pension contributions are provided in the Pensions column of the Single Figure of Remuneration table. Pension contributions are by way of a cash allowance or contribution to a 401(k) plan. There are therefore no specified retirement ages to disclose or consequences of early retirement.

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Executive Chairman remuneration table (in thousand)

	20211	20202	20193	20184
	Javier López Madrid	Javier López Madrid	Javier López Madrid	Javier López Madrid
Executive Chairman’s remuneration5	$5,635	$2,007	$1,078	$1,336
Annual variable pay (including as a % of maximum)6	$4,518 (80%)	$972 (48%)	$0 (0%)	$0 (0%)
LTIP awards where vesting is determined by performance in the relevant year7	§	31.92%	19.40%	17.87%

1 At the exchange rate of 1 GBP: 1.2838 USD used in the FY21 Report

2 At the exchange rate of 1 GBP: 1.2838 USD used in the FY20 Report

3 At the exchange rate of 1 GBP: 1.2772 USD used in the FY19 Report

4 At the exchange rate of 1 GBP: 1.3356 USD used in the FY18 Report

5 Remuneration comprises total remuneration

6 Annual variable pay is the bonus amounts in respect of 2019 and 2018 and, for each of those years, the percentage of maximum award it represents. Figures elsewhere in this report show bonus as a percentage of target.

7 The number of shares subject to long term incentive awards where final vesting is determined by reference to performance ending in the year under review is shown as a percentage of maximum opportunity.

§     The performance period of the 2019 LTIP awards ended on 31 December 2021 and vested at 32.17% out of a maximum opportunity of 200% of target. The performance period of the 2021 LTIP awards ended on 31 December 2021 and vested at 100% of maximum.

Percentage increase or reduction in the remuneration of the Executive Chairman

The following table shows the percentage change in 2021 in the Executive Chairman’s pay¹ compared with 2020 and the average percentage change in the same period in amounts paid to European employees of the Group as a whole. European employees have been chosen as an appropriate group against which to make the comparison as our Executive Chairman as at 31 December 2021 was based in Europe. Although there was no change in base salary for either the Executive Chairman or CEO during 2021, both experienced significant increases in variable remuneration as a result of the improved performance of the company and share price.

Executive Chairman’s pay1	CEO	Average employee pay
2020 to 2021	2020 to 2021	2020 to 2021
181%	178%	0%

1 The components of pay for these purposes includes salary, taxable benefits and annual variable pay

2 Increase in Executive Chairman and CEO pay is entirely attributable to FOREX movement.

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Relative importance of the spend on pay

The following table shows the Company’s actual spend on pay for all employees compared to distributions to shareholders in the financial year.

	1 January 2021 to 31 December 2021		1 January 2020 to 31 December 2020
Employee costs	$	280,917,000	$	214,782,000
Average number of employees		3,434		3,317
Distributions to shareholders		-		-

1. Including the costs of employees employed in FerroAtlantica SAU, whose shares were sold by the Company in 2019, resulting in an adjustment to the staff costs to $338,862,000 for 2018.

2. Including employees employed in FerroAtlantica SAU, as above.

External directorships during financial year 2021

Javier López Madrid

· Chief Executive Officer of Grupo VM.

· Non-Executive Chairman and investor of Siacapital S.L.

Marco Levi

· Non-executive director of Schweitzer-Mauduit International, Inc.

The Board was satisfied that under these arrangements the Executive Chairman and CEO had the necessary time to carry out his duties effectively during 2021.

Under the Policy, Executive Directors may retain fees paid for external director appointments. These appointments are subject to approval by the Board and must be compatible with their duties as Executive Directors.

Membership of the Committee

During the period from January 1, 2021 to the resignation of Mr. Alapont on April 30, 2021, our Compensation Committee consisted of two directors: Messrs. Alapont (Chair) and Crockett. During the period from May 1, 2021 to June 22, 2021 our Compensation Committee has consisted of one director: Mr. Crockett (Chair). During the period from June 23, 2021 to December 31, 2021, our Compensation Committee has consisted of four directors: Mses. Amusategui and Villar-Mir de Fuentes and Messrs. Barrilero (Chair) and De Santis.

The Executive Chairman, Chief Executive Officer, Chief People & Culture Officer and other members of the management team may be invited to attend meetings to assist the Committee. Other Non-Executive Directors are normally invited to attend meetings to assist the Committee in its deliberations as appropriate. No Executive, however, is present during any decision making in relation to their own remuneration.

External advisors

Aon provides independent advice to the Committee and was appointed by the Committee in early 2016. The Committee seeks advice relating to Executive remuneration and Non-Executive Director remuneration and the wider senior management population from Aon. Aon also provided advice to management, to enable their support of the Committee, primarily in relation to remuneration reporting and the operation of incentive plans but does not provide any other services to the Company except for insurance broking services.

The Committee is satisfied that the advice received from Aon in relation to executive remuneration matters is objective and independent. Aon is a member of the UK Remuneration Consultants Group and abides by the Remuneration Consultants Group Code of Conduct, which requires its advice to be objective and impartial. The fees paid to Aon for advice provided directly to the Committee in 2021 were £31,446 ($42,137) (excluding VAT), with such fees paid on a per-service basis.

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Statement of shareholder voting

The following table shows the results of the advisory vote on the 2020 Remuneration Report at the Annual General Meeting of 29 June 2021.

	For		% of votes cast		Against		% of votes cast		Withheld
Remuneration Report		129,206,472		99.52		604,398		0.47		24,547

The following table shows the results of the binding vote on the 2019 Remuneration Policy at the Annual General Meeting of 28 June 2019.

	For		% of votes cast		Against		% of votes cast		Withheld
Remuneration Policy		125,949,908		91.07		12,268,746		8.87		83,069

Approval

This Directors’ Remuneration Report, including both the Policy and Annual Report on Remuneration has been approved by the Board.

Signed on behalf of the Board.

Chairman of the Compensation Committee 

1 June 2022

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FERROGLOBE PLC 

Report on the audit of the financial statements

1. Opinion

In our opinion:

· the financial statements of Ferroglobe plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as of 31 December 2021 and of the group’s loss for the year then ended;

· the group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB);

· the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

· the consolidated income statement;

· the consolidated statement of comprehensive income;

· the consolidated and parent company statement of financial position;

· the consolidated and parent company statements of changes in equity;

· the consolidated cash flow statement;

· the related notes 1 to 31 in respect of the group financial statements; and

· the related notes 1 to 11 in respect of the parent company financial statements.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and United Kingdom adopted international accounting standards and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

Key audit matters	The key audit matters that we identified in the current year were: ·    Going concern; ·    Impairment of goodwill and property, plant and equipment (‘PP&E’) and carrying values of the parent company’s investment its subsidiaries; and ·    Refinancing.
Materiality	The materiality that we used for the group financial statements was $14.2m (2020: $9.1m), determined by reference to revenue. The assessed materiality represents approximately 0.8% of revenue (2020: 0.8%)
Scoping	As in the prior year, we focused our group audit scope primarily on the components in the following countries: ·     United States of America (‘USA’); ·     Canada; ·     France; and ·     Spain. The components subject either to full scope audits or audits of specified balances represent 94% of the group’s revenue. FerroPem SAS in France, Grupo Ferroatlantica SAU in Spain and the parent company in the UK were all subject to full scope audit. Lower materialities were applied to the procedures performed on components, ranging from $1.4m to $4.3m (2020: $1.5m to $4.6m).

4. Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting is discussed in section 5.1.

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5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Liquidity and Going concern

Key audit matter description

Company’s management is required to make an assessment regarding the adoption of the going concern basis of accounting in the preparation of the financial statements. As described in Note 3.1, the Company’s management has concluded that the Company´s working capital is sufficient for its present requirements, and anticipates generating sufficient cash from operations to satisfy its short and long-term liquidity needs. For the years ended December 31, 2021, 2020 and 2019, the Company reported net losses of $115 million, $250 million and $286 million, respectively. The business has historically been subject to fluctuations in the price of the products and market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors. The Company’s primary short-term liquidity needs are to fund its capital expenditure commitments, fund specific initiatives underlying the strategic plan, service its existing debt, fund working capital and comply with other contractual obligations. The Company is subject to certain restrictive covenants under the existing financing agreements, which limit, among other things, its ability to incur additional indebtedness. To assess liquidity risk, the Company has considered a model which considers revenues (including prices and volume assumptions), costs, net tax payments, capital expenditures and net working capital requirements. We identified going concern as a key audit matter because of the subjectivity in assessing whether the Company will be able to meet its operational and finance commitments. A high degree of auditor judgment was required when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to the forecasted future financial results and projected liquidity.

How the scope of our audit responded to the key audit matter

Our audit procedures related to management's evaluation and disclosure of liquidity and going concern basis of accounting included the following, among others: o     We obtained information about management’s plans that are intended to mitigate the adverse effects of conditions or events indicative of significant doubt about the entity’s ability to continue as a going concern.

 

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  o     We assessed the adequacy of support regarding the availability of financing, including existing arrangements for factoring receivables and the possible effects on management’s borrowing plans of existing restrictions on additional borrowing or the sufficiency of available collateral.   o     We considered external analyst reports, industry data and other external information to determine if it provided corroborative or contradictory evidence in relation to management's assumptions.   o     We assessed the reasonableness of management’s key assumptions for preparing prospective cash flow information, including projected results and forecasted future cash flows, with particular attention to assumptions that are especially sensitive or inconsistent with historical trends.   o    We inquired as to management´s knowledge of events or conditions beyond the period of management’s assessment that may cast significant doubt on the entity’s ability to continue as a going concern.   o     We evaluated the appropriateness of the Company's disclosures on this matter.

Key observations From our audit procedures performed, we concur with the Director’s assessment that the going concern basis of preparation of the financial statements is appropriate.

 

5.2. Impairment of goodwill and property, plant and equipment (‘PP&E’) and carrying values of the parent company’s investment in its subsidiaries

Key audit matter description As described in Notes 4.4, 7 and 9 to the financial statements, the Group´s consolidated goodwill balance was $29 million and the Groups´s consolidated PP&E balance was $555 million as of December 31, 2021. As mentioned in Notes 7 and 9, no significant impairments were recorded during 2021. The Group’s evaluation of goodwill and PP&E for impairment involves the comparison of the carrying amounts of assets with their recoverable amount. The determination of the recoverable amount requires significant judgement in developing and applying key underlying assumptions concerning future market and conditions (volumes, sale prices, cost structure and capital expenditure - “capex”) for the periods projected, as well as the determination of an appropriate discount rate and terminal value. For certain assets, recoverable amount has been determined at fair value less cost of disposal, which determination is subject to significant judgement.   The recoverable amount of the Group’s CGUs is also used to evaluate the parent company’s investments in subsidiaries, which through its subsidiary Ferroglobe Holding Company Ltd, principally represent the US & Canadian CGUs for Globe Specialty Metals Inc (‘GSM’) and the European and South African CGUs for Grupo Ferroatlantica SAU (‘GFAT’), and are therefore subject to similar levels of judgement and estimation uncertainty. As such, the impairment of the parent company’s investment in subsidiaries is a key audit matter for our audit of the parent company’s separate financial statements.

 

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  The carrying value of the parent company’s investment in its subsidiary, Ferroglobe Holding Company Ltd as at 31 December 2021 is $629,284 thousand as detailed in Note 3 to the parent company Financial Statements. As noted in Note 3 , no impairment has been recorded during the current year (2020: nil).   We identified impairment of goodwill and property, plant and equipment and the investment in subsidiaries of the parent company as a key audit matter because of the significant judgments involved in the assessment. A high degree of auditor judgment and an increased extent of audit effort, including the involvement of fair value specialists and an increase in the nature and extent of audit procedures as a result of the material weaknesses identified by the Company, was required to consider management’s estimates and assumptions.  

How the scope of our audit responded to the key audit matter Our audit procedures related to management´s assessment of goodwill and PP&E for impairment included the following, among others:   ·    We considered the accuracy of past forecasts developed by management to assess the reliability of the forecasting process.   ·    We considered key assumptions applied in the development of the discounted future cash flows for the periods projected.   ·     We evaluated the volumes and prices projected for the period 2022-2026 using independent sources of information (such as analyst and industry reports or prices reports, when available) and considered information that could be potentially contradictory to management's forecasts.   ·    With the assistance of our fair value specialists, we evaluated the discount rates (WACC), the long-term growth rates, the appropriate methodology for determination of terminal values and the underlying source information. Our fair value specialists also assisted in testing the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to management’s estimates.   ·    We have performed sensitivity analysis over the goodwill impairment test by comparing the results of the impairment test with significant changes and modifications to the underlying inputs such as the net cash flows and the terminal value, the discount rates (WACC) and the long-term growth rate.   ·    For those assets for which recoverable amount was determined at fair value less cost of disposal, we evaluated the main assumptions used by the Company with the assistance of our fair value specialists.   ·    In respect of the parent company, we assessed that the valuation determined in the impairment assessment for goodwill and property, plant and equipment (‘PP&E’) was appropriately allocated in the value in use calculations performed for the investments held by the parent company.  

Key observations The deficiencies identified in internal controls over the assessment of impairment of goodwill and PPE assets related to instances of both ineffective controls and controls that were not designed over the assumptions and inputs used in the impairment evaluation. We re-evaluated the nature and extent of substantive audit procedures performed as a result of the deficiencies identified.  

 

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From our audit procedures performed, including our evaluation of the methodology, valuation and accuracy of the impairment test performed, we are satisfied that the Group’s goodwill and PPE assets at 31 December 2021 are recoverable. Additionally, we are satisfied that the carrying value of the investments in subsidiaries at 31 December 2021 are recoverable.

 

5.3. Refinancing

Key audit matter description

As described in Note 18 to the financial statements, on July 29, 2021 the Company completed a restructuring of its capital and debt by the Issuance of $60 million of new senior secured notes (the “Super Senior Notes”); the issuance of $40 million in new equity of Ferroglobe; and the exchange of $345.1 million over the original $350 million in aggregate principal amount of 9.375% Senior Notes due 2022 (the “Old Notes”) for the same principal amount of new 9.375% senior secured notes due 2025 (resulting in the “Reinstated notes”) and amendment of certain other terms (the “refinancing”). The refinancing has been accounted for as an extinguishment of the Old Notes and the Company has recognised a charge of $91 million in the income statement related mainly to the advisory fees and expenses related to the exchange and to equity granted to the noteholders.   We identified the accounting for the refinancing as a key audit matter because of its significant accounting impact and because auditing the judgments made by management to determine the accounting for this transaction required a high degree of auditor judgment and an increased extent of audit effort.

How the scope of our audit responded to the key audit matter

Our audit procedures related to the accounting for the refinancing and management's judgements used to account for it included the following, among others:   o       We evaluated management's conclusion regarding the accounting treatment by performing the following:   ·      We obtained and evaluated the transaction contracts and other documentation, including terms with impact in the accounting evaluation.   ·      We obtained and analysed the Company's evaluation as to whether the exchange of the Old Notes by the Reinstated Notes was a substantial modification of the debt in accordance with the applicable accounting standards.   ·      We evaluated the Company's conclusions over the accounting for the transaction fees and expenses, including equity granted to the noteholders and underwriters.   o      We evaluated the adequacy of the Company's disclosures on this matter.

Key observations From our audit procedures performed, including our evaluation of the accounting judgements, we are satisfied that the accounting treatment of the refinancing process as at 31 December 2021 is appropriate.

 

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6. Our application of materiality

 

6.1. Materiality

 

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

 

	Group financial statements	Parent company financial statements
Materiality	$14.2m (2020: $9.1m)	$9.8m (2020: $6.4m)
Basis for determining materiality	0.8% of Revenue (2020: 0.8%)	1% of Total assets, (2020: capped at 70% of group materiality)
Rationale for the benchmark applied	Revenue is considered to be the most appropriate and stable benchmark as the Group was loss making in the current year and prior years.	As the parent company is a non-trading entity, we considered it appropriate to use total assets for determining materiality.

 

 

 

6.2. Performance materiality

 

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

 

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Group performance materiality was set at $7.1m for the 2021 audit (2020: $7.3m), representing 50% of group materiality (2020: 80%). Parent company performance materiality was set at $6.9m (2020: $5.1m), representing 70% (2020: 80%) of parent company materiality.

 

In determining performance materiality, we considered the following factors:

 

a. trading performance of the Group in the current year and in previous year;

 

b. Scale and complexity of the Group’s financial operations;

 

c. the quality of the control environment and the control deficiencies identified;

 

d. the nature, volume and size of misstatements (corrected and/or uncorrected) identified in the previous audit; and

 

e. the complexity of financial reporting matters and one-off transactions.

 

Our Performance Materiality was initially based on 70% (2020: 80%) of planning stage materiality but represents 50% of final materiality as the performance materiality was left unchanged when materiality was updated at year-end to reflect a stronger than expected revenue performance.

 

6.3. Error reporting threshold

 

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $0.71m (2020: $0.45m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

 

7. An overview of the scope of our audit

 

7.1. Identification and scoping of components

 

The group comprises four reportable segments (North America Silicon, Europe Manganese, Europe Silicon and South Africa Silicon) and the corporate business unit, with geographical CGUs reported within each.

 

Our audit scope was consistent with the prior year, with component audit teams in the following countries:

 

· United States of America (‘USA’);

 

· Canada

 

· France; and

 

· Spain.

 

Full scope audits were performed on Grupo Ferroatlantica SAU by Deloitte Spain, FerroPem SAS by Deloitte France and by Deloitte UK for the parent company in the UK.

 

Specified audit procedures were performed on the Group’s businesses in USA by Deloitte US and Canada by Deloitte Canada.

 

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Analytical procedures were performed over the Group’s residual businesses and components by Deloitte Spain, with oversight performed by Deloitte UK.

 

The materialities applied to component audits ranged from $1.4 million to $4.21.4 million (2020: $1.5 million to $4.6 million).

 

  7.2. Working with other auditors

 

The UK group audit team worked on an integrated basis with Deloitte Spain, directing and overseeing audit work performed by component teams and audit work performed directly by Deloitte Spain.

 

The integrated UK and Spanish audit teams planned, supervised and reviewed work performed by component auditors in France, USA and Canada. The level of direct involvement varied by location and included, attendance to key meetings with local engagement teams, including audit close meetings, and a detailed review of their reporting deliverables and underlying audit work documentation.

 

The coverage of our audit work across the group is shown below:

 

 

8. Other information

 

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.

 

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

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Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

 

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in respect of this regard.

 

9. Responsibilities of directors

 

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

 

10. Auditor’s responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

 

11. Extent to which the audit was considered capable of detecting irregularities, including fraud

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

 

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  11.1. Identifying and assessing potential risks related to irregularities

 

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

 

  · the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;

 

  · results of our enquiries of management, internal audit, and the audit committee about their own identification and assessment of the risks of irregularities;

 

  · any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:

 

  o identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

 

  o detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

 

  o the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

 

  · the matters discussed among the audit engagement team including component audit teams and relevant internal specialists, including tax, valuations and IT regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

 

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the revenue recognition process at the end of the year. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

 

We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act 2006 and tax regulations applicable in the key jurisdictions where the group operates.

 

In addition, we considered provisions of other laws and regulations, ,that do not have a direct effect on the financial statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. The key laws and regulations we considered in this context included employment law and environmental regulations.

 

  11.2. Audit response to risks identified

 

As a result of performing the above, we did not identify any key audit matters related to the potential risk of fraud or non-compliance with laws and regulations.

 

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Our procedures to respond to risks identified included the following:

 

  · reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

 

  · enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims;

 

  · performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

 

  · reading minutes of meetings of those charged with governance and reviewing internal audit reports;

 

  · in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; and

 

  · in addressing the risk of fraud in revenue recognition identified as a risk of cut-off, testing sales recorded in the last month of the year and in January 2022, by inspecting a sample of transactions and agreeing those to supporting documentation, in order to evaluate whether sales were recorded in the correct period in accordance with the agreed shipping terms.

 

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, including internal specialists, and component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Report on other legal and regulatory requirements

 

12. Opinions on other matters prescribed by the Companies Act 2006

 

In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

 

In our opinion, based on the work undertaken in the course of the audit:

 

· the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

· the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

 

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

 

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13. Matters on which we are required to report by exception

 

  13.1. Adequacy of explanations received and accounting records

 

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 

  · we have not received all the information and explanations we require for our audit; or

  · adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

  · the parent company financial statements are not in agreement with the accounting records and returns.

 

We have nothing to report in respect of these matters.

 

  13.2. Directors’ remuneration

 

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.

 

We have nothing to report in respect of these matters.

 

14. Use of our report

 

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Nicola Barker, ACA (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, UK

1 June 2022

 

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FERROGLOBE PLC

 

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Financial Statements as of December 31, 2021 and 2020 and for each of the three years ended December 31, 2021, 2020 and 2019

 

Consolidated Statements of Financial Position as of December 31, 2021 and 2020		71
Consolidated Income Statements for the years ended December 31, 2021, 2020 and 2019		72
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019		73
Consolidated Statements of Changes in Equity for the years ended December 31, 2021, 2020 and 2019		74
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019		75
Notes to the Consolidated Financial Statements		76

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2021 AND 2020

 

Thousands of U.S. Dollars

 

				2021				2020
		Notes		US$'000				US$'000
ASSETS
Non-current assets
Goodwill		Note 7			29,702				29,702
Other intangible assets		Note 8			100,642				20,756
Property, plant and equipment		Note 9			554,914				620,034
Other non-current financial assets		Note 10			4,091				5,057
Deferred tax assets		Note 23			7,010				—
Non-current receivables from related parties		Note 24			1,699				2,454
Other non-current assets		Note 12			18,734				11,904
Non-current restricted cash and cash equivalents		Note 10			2,272				—
Total non-current assets					719,064				689,907
Current assets
Inventories		Note 11			289,797				246,549
Trade and other receivables		Note 10			381,073				242,262
Current receivables from related parties		Note 24			2,841				3,076
Current income tax assets		Note 23			7,660				12,072
Other current financial assets		Note 10			104				1,008
Other current assets		Note 12			8,408				20,714
Current restricted cash and cash equivalents		Note 10			—				28,843
Cash and cash equivalents		Note 10			114,391				102,714
Total current assets					804,274				657,238
Total assets					1,523,338				1,347,145
EQUITY AND LIABILITIES
Equity
Share capital					1,962				1,784
Reserves					544,433				696,774
Translation differences					(227,318	)			(206,759	)
Valuation adjustments					5,525				5,755
Result attributable to the Parent					(110,624	)			(246,339	)
Non-controlling interests					106,053				114,504
Total equity		Note 13			320,031				365,719
Non-current liabilities
Deferred income					895				620
Provisions		Note 15			60,958				108,487
Bank borrowings		Note 16			3,670				5,277
Lease liabilities		Note 17			9,968				13,994
Debt instruments		Note 18			404,938				346,620
Other financial liabilities		Note 19			4,549				29,094
Other obligations		Note 21			38,082				15,006
Other non-current liabilities		Note 22			1,476				1,761
Deferred tax liabilities		Note 23			25,145				27,781
Total non-current liabilities					549,681				548,640
Current liabilities
Provisions		Note 15			137,625				55,296
Bank borrowings		Note 16			95,297				102,330
Lease liabilities		Note 17			8,390				8,542
Debt instruments		Note 18			35,359				10,888
Other financial liabilities		Note 19			62,464				34,802
Payables to related parties		Note 24			9,545				3,196
Trade and other payables		Note 20			206,000				149,201
Current income tax liabilities		Note 23			1,775				2,538
Other obligations		Note 21			22,843				4,672
Other current liabilities		Note 22			74,328				61,321
Total current liabilities					653,626				432,786
Total equity and liabilities					1,523,338				1,347,145

 

Notes 1 to 31 are an integral part of the consolidated financial statements

 

The financial statements were approved by the board of directors and authorized for issue on June 1, 2022

Signed on its behalf by:

Dr. Marco Levy

Director

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS 2021, 2020 AND 2019

 

Thousands of U.S. Dollars

 

				2021				2020				2019
		Notes		US$'000				US$'000				US$'000
Sales		Note 26.1			1,778,908				1,144,434				1,615,222
Raw materials and energy consumption for production					(1,184,896	)			(835,486	)			(1,214,397	)
Other operating income		Note 4.21			110,085				33,627				54,213
Staff costs		Note 26.2			(280,917	)			(214,782	)			(285,029	)
Other operating expense					(296,809	)			(132,059	)			(225,705	)
Depreciation and amortization charges, operating allowances and write-downs		Note 26.3			(97,328	)			(108,189	)			(120,194	)
Impairment (loss) gain		Note 26.5			137				(73,344	)			(175,899	)
Net (loss) gain due to changes in the value of assets		Note 26.5			758				158				(1,574	)
(Loss) gain on disposal of non-current assets		Note 26.6			1,386				1,292				(2,223	)
Other (loss) gain					62				(1	)			—
Operating (loss) profit					31,386				(184,350	)			(355,586	)
Finance income		Note 26.4			253				177				1,380
Finance costs		Note 26.4			(149,189	)			(66,968	)			(63,225	)
Financial derivative gain		Note 19			—				3,168				2,729
Exchange differences					(2,386	)			25,553				2,884
(Loss) before tax					(119,936	)			(222,420	)			(411,818	)
Income tax benefit (expense)		Note 23			4,562				(21,939	)			41,541
(Loss) for the year from continuing operations					(115,374	)			(244,359	)			(370,277	)
(Loss) profit for the year from discontinued operations		Note 30			—				(5,399	)			84,637
Total (Loss) for the year					(115,374	)			(249,758	)			(285,640	)
Attributable to the Parent					(110,624	)			(246,339	)			(280,601	)
Attributable to non-controlling interests		Note 13			(4,750	)			(3,419	)			(5,039	)
Earnings per share
					2021				2020				2019
(Loss) attributable to the Parent (US$'000)					(110,624	)			(246,339	)			(280,601	)
Weighted average basic and dilutive shares outstanding					176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)		Note 14			(0.63	)			(1.46	)			(1.66	)
(Loss) for the year from continuing operations attribuitable to the Parent (US$'000)					(110,624	)			(240,940	)			(365,238	)
Weighted average basic and dilutive shares outstanding					176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)		Note 14			(0.63	)			(1.42	)			(2.16	)
(Loss) profit for the year from discontinued operations (US$'000)					—				(5,399	)			84,637
Weighted average basic and dilutive shares outstanding					176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)		Note 14			—				(0.03	)			0.50

 

Notes 1 to 31 are an integral part of the consolidated financial statements

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR 2021, 2020 AND 2019

 

Thousands of U.S. Dollars

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Net (loss)			(115,374	)			(249,758	)			(285,640	)
Items that will not be reclassified subsequently to income or loss:
Defined benefit obligation			2,566				3,630				(1,859	)
Tax effect			139				(45	)			—
Total income and expense that will not be reclassified subsequently to income or loss			2,705				3,585				(1,859	)
Items that may be reclassified subsequently to income or loss:
Arising from cash flow hedges			—				(3,752	)			9,663
Translation differences			(20,393	)			3,239				(8,698	)
Tax effect			—				—				—
Total income and expense that may be reclassified subsequently to income or loss			(20,393	)			(513	)			965
Items that have been reclassified to income or loss in the period:
Arising from cash flow hedges			(922	)			8,091				2,390
Tax effect			—				—				(805	)
Total transfers to income or loss			(922	)			8,091				1,585
Other comprehensive income (loss) for the year, net of income tax			(18,610	)			11,163				691
Total comprehensive (loss) for the year			(133,984	)			(238,595	)			(284,949	)
Attributable to the Parent			(131,413	)			(235,022	)			(281,097	)
Attributable to non-controlling interests			(2,571	)			(3,573	)			(3,852	)

 

Notes 1 to 31 are an integral part of the consolidated financial statements

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR 2021, 2020 AND 2019

 

Thousands of U.S. Dollars

 

		Total Amounts Attributable to Owners
		Issued				Share												Translation				Valuation				Result for				Non-controlling
		Shares				Capital				Share Premium				Reserves				Differences				Adjustments				the Year				Interests				Total
		(Thousands)				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Balance at January 1, 2019			170,864				1,784				—				941,707				(207,366	)			(11,559	)			43,661				116,145				884,372
Comprehensive (loss)  income  for the year 2019			—				—				—				—				(9,886	)			9,390				(280,601	)			(3,852	)			(284,949	)
Share-based compensation			—				—				—				4,879				—				—				—				—				4,879
Distribution of 2018 income			—				—				—				43,661				—				—				(43,661	)			—				—
Dividends paid to joint venture partner			—				—				—				—				—				—				—				(97	)			(97	)
Acquisition of non-controlling interests in Ferrosolar OPCO Group SL. and Rocas Arcillas and Minerales, S.A.			—				—				—				(14,889	)			7,100				—				—				5,881				(1,908	)
Balance at December 31, 2019			170,864				1,784				—				975,358				(210,152	)			(2,169	)			(280,601	)			118,077				602,297
Comprehensive (loss) income for the year 2020			—				—				—				—				3,393				7,924				(246,339	)			(3,573	)			(238,595	)
Share-based compensation			—				—				—				2,017				—				—				—				—				2,017
Distribution of 2019 loss			—				—				—				(280,601	)			—				—				280,601				—				—
Balance at December 31, 2020			170,864				1,784				—				696,774				(206,759	)			5,755				(246,339	)			114,504				365,719
Comprehensive (loss) income for the year 2021			—				—				—				—				(20,559	)			(230	)			(110,624	)			(2,571	)			(133,984	)
Issue of share capital			18,019				178				86,220								—				—				—				—				86,398
Share-based compensation			—				—				—				3,627				—				—				—				—				3,627
Distribution of 2020 (loss)			—				—				—				(246,339	)			—				—				246,339				—				—
Dividends paid non-controlling interests			—				—				—				—				—				—				—				(5,880	)			(5,880	)
Other changes			—				—				—				4,151				—				—				—				—				4,151
Balance at December 31, 2021			188,883				1,962				86,220				458,213				(227,318	)			5,525				(110,624	)			106,053				320,031

 

Notes 1 to 31 are an integral part of the consolidated financial statements

 

74

 

FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2021, 2020 AND 2019

 

Thousands of U.S. Dollars

 

		2021				2020				2019*
		US$'000				US$'000				US$'000
Cash flows from operating activities:
(Loss) for the year			(115,374	)			(249,758	)			(285,640	)
Adjustments to reconcile net profit (loss) to net cash provided by operating activities:
Income tax expense (benefit)			(4,562	)			21,939				(40,528	)
Depreciation and amortization charges, operating allowances and write-downs			97,328				108,189				123,024
Finance income (loss)			(253	)			(177	)			2,140
Finance costs			149,189				66,968				66,139
Financial derivative (gain) loss			—				(3,168	)			(2,729	)
Exchange differences			2,386				(25,553	)			(2,884	)
Impairment (gain) loss			(137	)			73,344				175,899
Loss (gain) on disposal of discontinued operations			—				5,399				(85,101	)
Loss (gain) due to changes in the value of assets			(758	)			(158	)			1,574
Loss (gain)  on disposal of non-current assets			(1,386	)			(1,292	)			2,223
Share-based compensation			3,627				2,017				4,879
Other loss (gain)			(62	)			—				—
Changes in operating assets and liabilities:
(Increase) decrease in inventories			(60,296	)			114,585				91,531
(Increase) decrease in trade and other receivables			(161,434	)			71,034				30,933
Increase (decrease) in trade and other payables			64,382				(55,405	)			(63,187	)
Other changes in operating assets and liabilities			29,803				14,473				(45,878	)
Income tax paid			(3,794	)			11,831				(3,589	)
Net used cash provided (used) by operating activities			(1,341	)			154,268				(31,194	)
Cash flows from investing activities:
Interest and finance income received			207				630				1,673
Payments due to investments:
Acquisition of subsidiaries			—				—				9,088
Other intangible assets			—				(2,654	)			(184	)
Property, plant and equipment			(27,597	)			(30,257	)			(32,445	)
Other financial assets			—				—				(1,248	)
Disposals:
Disposal of subsidiaries			—				—				176,590
Other non-current assets			1,919				341				8,668
Other			1,623				—				3,768
Net cash provided (used) by investing activities			(23,848	)			(31,940	)			165,910
Cash flows from financing activities:
Payment for debt and equity issuance costs			(43,755	)			(4,540	)			(15,117	)
Proceeds from equity issuance			40,000				—				—
Proceed from debt issuance			60,000				—				—
Repayment of hydro leases			—				—				(55,352	)
Increase (decrease) in bank borrowings:
Borrowings			659,083				177,593				245,629
Payments			(671,467	)			(235,296	)			(329,501	)
Amounts paid due to leases			(11,232	)			(10,315	)			(18,105	)
Other amounts (paid) due to financing activities			—				(2,863	)			(8,526	)
Interest paid			(22,177	)			(37,912	)			(43,033	)
Net cash provided (used) by financing activities			10,452				(113,333	)			(224,005	)
Total net cash flows for the year			(14,737	)			8,995				(89,289	)
Beginning balance of cash and cash equivalents			131,557				123,175				216,647
Exchange differences on cash and cash equivalents in foreign currencies			(157	)			(613	)			(4,183	)
Ending balance of cash and cash equivalents			116,663				131,557				123,175

 

* While in periods prior to 2020 Ferroglobe presented interest paid as cash flows from operating activities, in 2020 management deemed interest paid as among activities that alter the borrowing structure of the Company and therefore are most appropriately presented as among financing activities. This change allows for a fairer presentation of cash flow to users of the financial statements.

 

Notes 1 to 31 are an integral part of the consolidated financial statements

75

 

Ferroglobe PLC and Subsidiaries

 

Notes to the Consolidated Financial Statements for the years ended

December 31, 2021, 2020 and 2019

(U.S. Dollars in thousands, except share and per share data)

 

1. General information

 

Ferroglobe PLC and subsidiaries (the “Company” or “Ferroglobe”) is among the world’s largest producers of silicon metal and silicon-based alloys, important ingredients in a variety of industrial and consumer products. The Company’s customers include major silicone chemical, aluminum and steel manufacturers, auto companies and their suppliers, ductile iron foundries, manufacturers of photovoltaic solar cells and computer chips, and concrete producers. Additionally, the Company was operating hydroelectric plants (hereinafter “energy business”) in Spain until August 30, 2019 and is still operating hydroelectric plants in France.

 

Ferroglobe PLC (the “Parent Company” or “the Parent”) is a public limited company that was incorporated in the United Kingdom on February 5, 2015 (formerly named ‘Velonewco Limited’). The Parent’s registered office is 13 Chesterfield Street, London W1J 5JN (United Kingdom).

 

On December 23, 2015, Ferroglobe PLC consummated the acquisition (“Business Combination”) of Globe Specialty Metals, Inc. and subsidiaries (“GSM” or “Globe”) and Grupo FerroAtlántica, S.A.U. (“FerroAtlántica”).

 

Presentation of results of Spanish energy business for the prior years

 

As described in Note 30 of these financial statements, on June 2, 2019 the Company entered into an agreement with Kehlen Industries Management, S.L., a wholly-owned subsidiary of TSSP Adjacent Opportunities Partners, L.P., for the sale of the entire share capital of FerroAtlántica, S.A.U ("FAU"), the owner and operator of the Group's hydro-electric assets in Galicia, Spain (the “Spanish Hydro-electric Business”) and its smelting facility at Cee-Dumbria and effectively sold the Spanish Hydroelectric Business on August 30, 2019. The Spanish Hydroelectric Business was classified as a disposal group held for sale and accounted for as a discontinued operation in the second quarter of 2019.

 

76

 

2. Organization and Subsidiaries

 

Ferroglobe has a diversified production base consisting of production facilities across North America, Europe, South America, South Africa and Asia.

 

The subsidiaries of Ferroglobe PLC as of December 31, 2021 and 2020, classified by reporting segments, were as follows:

 

Percentage of Ownership

Direct

Total

Reporting Segment

Registered

Alabama Sand and Gravel, Inc.

—

100.0

North America – Silicon

Delaware - USA

Alden Resources, LLC

—

100.0

North America – Silicon

Delaware - USA

Alden Sales Corporation, LLC

—

100.0

North America – Silicon

Delaware - USA

ARL Resources, LLC

—

100.0

North America – Silicon

Delaware - USA

ARL Services, LLC

—

100.0

North America – Silicon

Delaware - USA

Core Metals Group Holdings, LLC

—

100.0

North America – Silicon

Delaware - USA

Core Metals Group, LLC

—

100.0

North America – Silicon

Delaware - USA

ECPI, Inc.

—

100.0

North America – Silicon

Delaware - USA

Gatliff Services, LLC

—

100.0

North America – Silicon

Delaware - USA

Globe BG, LLC

—

100.0

North America – Silicon

Delaware - USA

GBG Financial LLC

—

100.0

North America – Silicon

Delaware - USA

GBG Holdings, LLC

—

100.0

North America – Silicon

Delaware - USA

Globe Metallurgical Inc.

—

100.0

North America – Silicon

Delaware - USA

Globe Metals Enterprises, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Alloys I, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Alloys II, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Enterprises Holdings, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Enterprises, LLC

—

100.0

North America – Silicon

Delaware - USA

GSM Sales, Inc.

—

100.0

North America – Silicon

Delaware - USA

Laurel Ford Resources, Inc.

—

100.0

North America – Silicon

Delaware - USA

LF Resources, Inc.

—

100.0

North America – Silicon

Delaware - USA

Metallurgical Process Materials, LLC

—

100.0

North America – Silicon

Delaware - USA

Norchem, Inc.

—

100.0

North America – Silicon

Florida - USA

QSIP Canada ULC

—

100.0

North America – Silicon

Canada

Quebec Silicon General Partner

—

51.0

North America – Silicon

Canada

Quebec Silicon Limited Partnership

—

51.0

North America – Silicon

Canada

Tennessee Alloys Company, LLC

—

100.0

North America – Silicon

Delaware - USA

West Virginia Alloys, Inc.

—

100.0

North America – Silicon

Delaware - USA

WVA Manufacturing, LLC

—

51.0

North America – Silicon

Delaware - USA

Cuarzos Industriales, S.A.U.

—

100.0

Europe – Silicon

A Coruña - Spain

FerroPem, S.A.S.

—

100.0

Europe – Silicon

France

Rocas, Arcillas y Minerales, S.A.

—

100.0

Europe – Silicon

A Coruña - Spain

Ferroatlántica del Cinca, S.L.

—

99.9

Europe – Manganese

Madrid - Spain

Ferroglobe Mangan Norge A.S.

—

100.0

Europe – Manganese

Norway

Ferroglobe Manganese France S.A.S.

—

100.0

Europe – Manganese

France

Grupo FerroAtlántica, S.A.U.

—

100.0

Europe – Manganese and Silicon

Madrid - Spain

Kintuck (France) S.A.S.

—

100.0

Europe – Manganese

France

Kintuck A.S.

—

100.0

Europe – Manganese

Norway

Rebone Mining (Pty.), Ltd.

—

74.0

South Africa – Silicon

Polokwane - South Africa

Silicon Smelters (Pty.), Ltd.

—

100.0

South Africa – Silicon

Polokwane - South Africa

Silicon Technology (Pty.), Ltd.

—

100.0

South Africa – Silicon

South Africa

Thaba Chueu Mining (Pty.), Ltd.

—

74.0

South Africa – Silicon

Polokwane - South Africa

Cuarzos Indus. de Venezuela (Cuarzoven), S.A.

—

100.0

Other segments

Venezuela

Emix, S.A.S.

—

100.0

Other segments

France

Ferroatlántica de México, S.A. de C.V.

—

100.0

Other segments

Nueva León - Mexico

Ferroatlántica Participaciones, S.L.U.

—

100.0

Other segments

Madrid - Spain

Grupo FerroAtlántica de Servicios, S.L.U.

—

100.0

Other segments

Madrid - Spain

Ferroatlántica de Venezuela (FerroVen), S.A.

—

99.9

Other segments

Venezuela

Ferroatlántica Deutschland, GmbH

—

100.0

Other segments

Germany

Ferroatlántica do Brasil Mineraçao Ltda.

—

70.0

Other segments

Brazil

Ferroglobe Holding Company, LTD

100

100.0

Other segments

United Kingdom

Ferroglobe Finance Company, PLC

—

100.0

Other segments

United Kingdom

FerroManganese Mauritania S.A.R.L.

—

90.0

Other segments

Mauritania

Ferroquartz Holdings, Ltd. (Hong Kong)

—

100.0

Other segments

Hong Kong

FerroQuartz Mauritania S.A.R.L.

—

90.0

Other segments

Mauritania

Ferrosolar OPCO Group S.L.

—

100.0

Other segments

Spain

Ferrosolar R&D S.L.

—

50.0

Other segments

Spain

FerroTambao, S.A.R.L.

—

90.0

Other segments

Burkina Faso

Globe Argentina Holdco, LLC

—

100.0

Other segments

Delaware - USA

Globe Metales S.R.L.

—

100.0

Other segments

Argentina

Globe Specialty Metals, Inc.

—

100.0

Other segments

Delaware - USA

GSM Financial, Inc.

—

100.0

Other segments

Delaware - USA

GSM Netherlands, B.V.

—

100.0

Other segments

Netherlands

Hidroelectricité de Saint Beron, S.A.S.

—

100.0

Other segments

France

Mangshi FerroAtlántica Mining Industry Service Company Limited

—

100.0

Other segments

Mangshi, Dehong - Yunnan - China

Ningxia Yonvey Coal Industrial Co., Ltd.

—

98.0

Other segments

China

Photosil Industries, S.A.S.

—

100.0

Other segments

France

Ferroglobe Innovation, S.L.U

—

100.0

Other segments

Spain

Solsil, Inc.

—

92.4

Other segments

Delaware - USA

Ultracore Energy S.A.

—

100.0

Other segments

Argentina

 

77

 

2020 Subsidiaries

 

Percentage of Ownership

Direct

Total

Reporting Segment

Registered

Alabama Sand and Gravel, Inc.

—

100.0

North America – Silicon

Delaware - USA

Alden Resources, LLC

—

100.0

North America – Silicon

Delaware - USA

Alden Sales Corporation, LLC

—

100.0

North America – Silicon

Delaware - USA

ARL Resources, LLC

—

100.0

North America – Silicon

Delaware - USA

ARL Services, LLC

—

100.0

North America – Silicon

Delaware - USA

Core Metals Group Holdings, LLC

—

100.0

North America – Silicon

Delaware - USA

Core Metals Group, LLC

—

100.0

North America – Silicon

Delaware - USA

ECPI, Inc.

—

100.0

North America – Silicon

Delaware - USA

Gatliff Services, LLC

—

100.0

North America – Silicon

Delaware - USA

Globe BG, LLC

—

100.0

North America – Silicon

Delaware - USA

GBG Financial LLC

—

100.0

North America – Silicon

Delaware - USA

GBG Holdings, LLC

—

100.0

North America – Silicon

Delaware - USA

Globe Metallurgical Inc.

—

100.0

North America – Silicon

Delaware - USA

Globe Metals Enterprises, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Alloys I, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Alloys II, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Enterprises Holdings, Inc.

—

100.0

North America – Silicon

Delaware - USA

GSM Enterprises, LLC

—

100.0

North America – Silicon

Delaware - USA

GSM Sales, Inc.

—

100.0

North America – Silicon

Delaware - USA

Laurel Ford Resources, Inc.

—

100.0

North America – Silicon

Delaware - USA

LF Resources, Inc.

—

100.0

North America – Silicon

Delaware - USA

Metallurgical Process Materials, LLC

—

100.0

North America – Silicon

Delaware - USA

Norchem, Inc.

—

100.0

North America – Silicon

Florida - USA

QSIP Canada ULC

—

100.0

North America – Silicon

Canada

Quebec Silicon General Partner

—

51.0

North America – Silicon

Canada

Quebec Silicon Limited Partnership

—

51.0

North America – Silicon

Canada

Tennessee Alloys Company, LLC

—

100.0

North America – Silicon

Delaware - USA

West Virginia Alloys, Inc.

—

100.0

North America – Silicon

Delaware - USA

WVA Manufacturing, LLC

—

51.0

North America – Silicon

Delaware - USA

Cuarzos Industriales, S.A.U.

—

100.0

Europe – Silicon

A Coruña - Spain

Ferroatlántica del Cinca, S.L.

—

99.9

Europe – Manganese

Madrid - Spain

Ferroatlántica de Sabón, S.L.U.

—

100.0

Europe – Silicon

Madrid - Spain

Ferroatlántica de Boo, S.L.U.

—

100.0

Europe – Manganese

Madrid - Spain

Ferroatlántica Participaciones, S.L.U.

—

100.0

Other segments

Madrid - Spain

Ferroglobe Mangan Norge A.S.

—

100.0

Europe – Manganese

Norway

Ferroglobe Manganese France S.A.S.

—

100.0

Europe – Manganese

France

FerroPem, S.A.S.

—

100.0

Europe – Silicon

France

Ferrous Receivables DAC.

—

100.0

Other segments

Ireland

Grupo FerroAtlántica, S.A.U.

100

100.0

Europe – Manganese

Madrid - Spain

Grupo FerroAtlántica de Servicios, S.L.U.

—

100.0

Other segments

Madrid - Spain

Kintuck (France) S.A.S.

—

100.0

Europe – Manganese

France

Kintuck A.S.

—

100.0

Europe – Manganese

Norway

Rocas, Arcillas y Minerales, S.A.

—

100.0

Europe – Silicon

A Coruña - Spain

Rebone Mining (Pty.), Ltd.

—

74.0

South Africa – Silicon

Polokwane - South Africa

Silicon Smelters (Pty.), Ltd.

—

100.0

South Africa – Silicon

Polokwane - South Africa

Silicon Technology (Pty.), Ltd.

—

100.0

South Africa – Silicon

South Africa

Thaba Chueu Mining (Pty.), Ltd.

—

74.0

South Africa – Silicon

Polokwane - South Africa

Cuarzos Indus. de Venezuela (Cuarzoven), S.A.

—

100.0

Other segments

Venezuela

Emix, S.A.S.

—

100.0

Other segments

France

Ferroatlántica de México, S.A. de C.V.

—

100.0

Other segments

Nueva León - Mexico

Ferroatlántica de Venezuela (FerroVen), S.A.

—

99.9

Other segments

Venezuela

Ferroatlántica Deutschland, GmbH

—

100.0

Other segments

Germany

Ferroatlántica do Brasil Mineraçao Ltda.

—

70.0

Other segments

Brazil

Ferroatlántica I+D, S.L.U.

—

100.0

Other segments

Madrid - Spain

FerroAtlántica International Ltd.

—

100.0

Other segments

United Kingdom

Ferroglobe Services (UK) Ltd.

100

100.0

Other segments

United Kingdom

FerroManganese Mauritania S.A.R.L.

—

90.0

Other segments

Mauritania

Ferroquartz Holdings, Ltd. (Hong Kong)

—

100.0

Other segments

Hong Kong

FerroQuartz Mauritania S.A.R.L.

—

90.0

Other segments

Mauritania

Ferrosolar OPCO Group S.L.

—

100.0

Other segments

Spain

Ferrosolar R&D S.L.

—

50.0

Other segments

Spain

FerroTambao, S.A.R.L.

—

90.0

Other segments

Burkina Faso

Globe Argentina Holdco, LLC

—

100.0

Other segments

Delaware - USA

Globe Metales S.R.L.

—

100.0

Other segments

Argentina

Globe Specialty Metals, Inc.

100

100.0

Other segments

Delaware - USA

GSM Financial, Inc.

—

100.0

Other segments

Delaware - USA

GSM Netherlands, B.V.

—

100.0

Other segments

Netherlands

Hidroelectricité de Saint Beron, S.A.S.

—

100.0

Other segments

France

Mangshi FerroAtlántica Mining Industry Service Company Limited

—

100.0

Other segments

Mangshi, Dehong -Yunnan -China

Mangshi Sinice Silicon Industry Company Limited

—

100.0

Other segments

Mangshi, Dehong -Yunnan -China

Ningxia Yonvey Coal Industrial Co., Ltd.

—

98.0

Other segments

China

Photosil Industries, S.A.S.

—

100.0

Other segments

France

Silicio Ferrosolar, S.L.U.

—

100.0

Other segments

Spain

Solsil, Inc.

—

92.4

Other segments

Delaware - USA

Ultracore Energy S.A.

—

100.0

Other segments

Argentina

 

78

 

Subsidiaries are all companies over which Ferroglobe has control.

 

Control is achieved when the Company:

 

  · has power over the investee;

 

  · is exposed, or has rights, to variable returns from its involvement with the investee; and

 

  · has the ability to use its power over the investee to affect the amount of the investor’s returns.

 

The Company has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

 

  · the total voting rights held by the Company relative to the size and dispersion of holdings of the other vote holders;

 

  · potential voting rights held by the Company, other vote holders or other parties;

 

  · rights arising from other contractual arrangements; and

 

  · any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time these decisions need to be made, including voting patterns at previous shareholders’ meetings.

 

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary.

 

The Company uses the acquisition method to account for the acquisition of subsidiaries. According to this method, the consideration transferred for the acquisition of a subsidiary corresponds to the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration transferred by the Company is recognized at fair value at the date of acquisition. Subsequent changes in the fair value of the contingent consideration classified as an asset or a liability are recognized in accordance with IFRS 9 in the income statement. The costs related to the acquisition are recognized as expenses in the years incurred. The identifiable assets acquired and the liabilities and contingent liabilities assumed in a business combination are initially recognized at their fair value at the date of acquisition. The Company recognizes any non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

 

Profit or loss for the period and each component of other comprehensive (loss) income are attributed to the owners of the Company and to the non-controlling interests. The Company attributes total comprehensive (loss) income to the owners of the Company and to the non-controlling interests even if the profit or loss of the non-controlling interests gives rise to a balance receivable.

 

All assets and liabilities, equity, income, expenses and cash flows relating to transactions between subsidiaries are eliminated in full in consolidation.

 

3. Basis of presentation and basis of consolidation

 

3.1 Basis of presentation

 

These consolidated financial statements have been issued in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations Committee (collectively “IFRS”).

 

79

 

The consolidated financial statements have been authorized for issuance on May 2, 2022.

 

All accounting policies and measurement bases with effect on the consolidated financial statements were applied in their preparation.

 

The consolidated financial statements were prepared on a historical cost basis, with the exceptions disclosed in the notes to the consolidated financial statements, where applicable, and in those situations where IFRS requires that financial assets and financial liabilities are valued at fair value.

 

For the years ended December 31, 2021, 2020 and 2019, the Company reported net losses of $115,374 thousand, $249,758 thousand and $285,640 thousand, respectively. Our business has historically been subject to fluctuations in the price of the products and market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors.

 

Throughout 2021, COVID -19 and its consequences continued to impact our business, operations, and financial results. Such conditions, and any future decline in the global silicon metal, manganese-based alloys and silicon-based alloys industries could have a material adverse effect on our business, results of operations and financial condition. Also, many of our products are traded internationally at prices that are significantly affected by worldwide supply and demand, and our costs are particularly sensitive to increases in energy prices and raw material prices. Consequently, our financial performance will fluctuate with the general economic cycle, and our business is even more cyclical than the general economy.

 

With the significant change in performance during the second half of 2021, which has continued in the first quarter of 2022, our revenue and operating margins continued improving. Consistent with our strategic objectives, we seek to strengthen the Company’s balance sheet to ensure flexibility and competitiveness through the cycle.

 

In 2020 we developed a turnaround plan focused on improving our cost structure and bolstering the long-term competitiveness of the business. 2021 marked the first year of the execution of the plan spanning across a number of value creation areas, including commercial excellence, working capital optimization, footprint optimization, continuous plant efficiency, centralized procurement, and the reduction of corporate overheads. 

 

During 2022, we will continue executing on various cost cutting initiatives, as well as focusing on capability building to improve our operating model and processes. Through these efforts we seek to improve our overall decision making, establishing a new culture focused on data-driven decision making under a centralized model.

 

The market momentum in customer demand and significantly improved pricing during 2021 has been captured in the order book for the first half of 2022, and the projections for the coming twelve months reflect a strong improvement in financial performance as a consequence of the benefit of our turnaround plan, coupled with the improvement in broader operating environment.

 

We have been closely monitoring the situation in Ukraine since the war began. Russia is a key supplier of raw materials to Ferroglobe and other ferro-alloy producers. We have convened a committee that has met daily to monitor the situation, and this will continue for as long as the crisis persists. While our suppliers have not been specifically targeted by sanctions, Russia’s expulsion from Swift and sanctions on various Russian banks have presented difficulties in how we pay for raw materials from Russia, and transportation and other supply chain interruptions have impacted deliveries. We have been successful in implementing mitigating actions that we believe will alleviate these issues and allow us to continue production.

 

To support its assessment of the going concern basis of accounting, management has prepared a financial model which considers the revenues, expenditures, cash flows, net tax payments and capital expenditures for a period of at least one year from the date of approval of these financial statements. The financial projections to determine these future cash flows are modelled considering the principal variables that determine the historic flows at a Group level including prices, volumes, costs, capital expenditures and net working capital. These projections are based on the 2022 annual budget and management’s five-year financial model. Key assumptions include estimates on sale prices based on the order book and indexes. It has to be considered that sale prices are the variable to which the Company´s cash flows are more sensitive to. Sensitivities have been run, including stressed scenarios with reductions on the base case sale prices for the coming months, to reflect the key risks and uncertainties impacting the cash flow projections. The potential impact of the Ukranian war has also been considered in this analysis.

 

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2021 marked an active year with regards to our capital markets activity.  At the center of the comprehensive financing effort was the extension of the maturity of our 9 3/8% Senior Notes to December 2025 (from March 1, 2022).  In addition to extending the maturity profile of the debt of the Company, we also issued $60 million of Super Senior Notes and issued $40 million of new equity that provided the Company additional cash funding to support our strategic transformation plan. Overall, we view this financing to be a success given the uncertain operating market back-drop prevailing in the midst of the pandemic.

 

Also, the Company is subject to certain restrictive covenants under the existing financing agreements, which limit, among other things, its ability to incur certain additional indebtedness (see Note 18). In this respect we are currently discussing with financial institutions for new financing agreements within the limits of the covenants mentioned before. Additionally, the Company has increased liquidity through additional funding in early 2022 and through its own cash generation. In February 2022, the Spanish Fund for supporting strategic companies, on a proposal of the Sociedad Estatal de Participaciones Industriales (“SEPI”), approved €34.5 million in loans to Grupo Ferroatlántica, S.A.U. and Grupo Ferroátlantica de Servicios, S.L.U., wholly owned subsidiaries of the Company.

 

Ferroglobe’s primary short-term liquidity needs are to fund its capital expenditure commitments, fund specific initiatives underlying the strategic plan, service its existing debt, fund working capital and comply with other contractual obligations. Ferroglobe’s long-term liquidity needs primarily relate to debt servicing and repayment. Ferroglobe’s core objective with respect to capital management is to maintain a balanced and sustainable capital structure through the economic cycles, while keeping the cost of capital at competitive levels.  We believe our working capital is sufficient for our present requirements, and we anticipate generating sufficient cash from operations to satisfy our short and long-term liquidity needs.

 

As a result of all the analysis performed, the Company has concluded that there is no substantial doubt about its ability to continue as a going concern.  

 

3.2 International financial reporting standards

 

Application of new accounting standards

 

New and amended standards and interpretations adopted by the Company

 

No new standards effective on January 1, 2021 have a material impact on the consolidated financial statements. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

New and amended standards and interpretations not yet adopted

 

Certain new accounting standards and interpretations have been published that are not mandatory for the reporting period ended December 31, 2021 and have not been early adopted by the Company. Standards, interpretations and amendments published by the IASB that will be effective for periods beginning on or after January 1, 2022:

 

  · IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (issued on June 2020)

 

  · Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on January 2020 and July 2020 respectively)

 

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  · Amendments to;

 

IFRS 3 Business Combinations;

 

IAS 16 Property, Plant and Equipment;

 

IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and

 

Annual Improvements 2018-2020

 

  · Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on February 2021)

 

  · Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on February 2021)

 

  · Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on May 2021)

 

  · Amendments to initial application of IFRS 17 and IFRS 9: Comparative information (issued on December 2021)

 

None of these standards or interpretations that are not yet effective are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.   

 

3.3 Currency

 

Until September 30, 2021, the Parent’s functional currency was the Euro. Due to an occurrence of events and conditions that reduce the number of transactions in euros, and in accordance with International Financial Reporting Standards, management conducted a review of the functional currency of Ferroglobe PLC and they concluded that there has been a change in its functional currency from Euro to U.S. Dollars, effective since October 1, 2021.

 

Ferroglobe PLC is the parent company of Ferroglobe Group and its main assets and liabilities relate to intercompany transactions. Due to the new group structure, PLC has signed an agreement in which they agreed to convert all intercompany receivables and payables outstanding into US Dollars.. Additionally, PLC financing instruments (debt and equity instruments) are U.S. Dollars denominated.

 

The change in functional currency was implemented prospectively starting October 1, 2021. To give effect to this change, balances of the parent company as of October, 1, 2021 have been translated to USD in accordance with IAS 21 “The effect of changes in foreign exchange rates”. The functional currencies of subsidiaries are determined by the primary economic environment in which each subsidiary operates.

 

The reporting currency of the Company is U.S. Dollars and as such the accompanying results and financial position have been translated pursuant to the provisions indicated in IAS 21.

 

All differences arising from the aforementioned translation are recognized in equity under “Translation differences.”

 

Upon the disposal of a foreign operation, the translation differences relating to that operation deferred as a separate component of consolidated equity are recognized in the consolidated income statement when the gain or loss on disposal is recognized.

 

3.4 Responsibility for the information and use of estimates

 

The information in these consolidated financial statements is the responsibility of Ferroglobe’s Management.

 

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Certain assumptions and estimates were made by management in the preparation of these consolidated financial statements, including:

 

· The impairment losses on goodwill, see Note 7;

 

· the assumptions taken over forecast recovery in trading activity and cash liquidity management that mitigates any substantial doubt as to the Company’s ability to continue as a going concern, see Note 3.1;

 

· the useful life of property, plant and equipment and intangible assets, see Note 4.3;

 

· the fair value valuation of the plants, impairment losses on property, plant and equipment and intangible assets, determined by value in use or by fair value less cost of disposal methods, see Note 9;

 

· the fair value of certain unquoted financial assets, see Note 10;

 

· the fair value of financial instruments, see Note 29;

 

· the assumptions used in the actuarial calculation of pension liabilities, see Note 15;

 

· the discount rate used to calculate the present value of certain collection rights and payment obligations, see Note 15;

 

· provisions for contingencies and environmental liabilities, see Note 25;

 

The Company based its estimates and judgments on historical experience, known or expected trends and other factors that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates. Changes in accounting estimates are applied in accordance with IAS 8.

 

At the date of preparation of these consolidated financial statements no events had taken place that might constitute a significant source of uncertainty regarding the accounting effect that such events might have in future reporting periods.

 

3.5 Critical accounting judgements and key sources of estimation uncertainty

 

In the application of the Company's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Critical judgements in applying the Company's accounting policies

 

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognized in financial statements.

 

Fair value measurement of financial instruments

 

Certain of the Company's financial instruments are classified as Level 3 as they include unobservable inputs. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability; or in the absence of a principal market, in the most advantageous market for the asset or liability.

 

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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

For those assets and liabilities measured at fair value at the balance sheet date, further information on fair value measurement is provided in Note 29.

 

Going concern

 

As required by the accounting rules, the Company performs an analysis to assess the Company’s ability to continue as a going concern. In this analysis, management makes certain estimates. To assess the liquidity risk the Company has defined a financial model which considers the revenues, expenditures, cash flows, net tax payments, capital expenditures and net working capital requirements. The financial projections to determine future cash flows are modelled considering the principal variables that determine the historic flows at a Group level including prices, volumes, costs, capital expenditures and net working capital. These projections are based on the 2022 annual budget and management’s five-year financial model.

 

Debt restructuring

 

As described in Note 18, on July 29, 2021 the Company completed a restructuring of its capital and debt. To determine the accounting for this transaction, management considered the criteria for derecognition of financial liabilities set out in IFRS 9 Financial Instruments and the guidance in IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. Judgement was required to determine if the exchange of the Old Notes by the Reinstated Notes is a substantial modification of the debt, including what fees and transaction costs should be included in the quantitative test (the so called “10 per cent test¨) and to determine the accounting for fees and transaction costs related to the issuance of the new bonds and equity. We concluded that the exchange was a substantial modification and therefore it was accounted for as an extinguishment of the old debt. See Notes 4.5 and 18 for further details.

 

Impairment of assets

 

The Company’s evaluation of goodwill and PP&E for impairment involves the comparison of the carrying amounts of assets with their recoverable amount. The determination of the recoverable amount requires significant judgement in developing and applying key underlying assumptions concerning future market and conditions (volumes, sale prices, cost structure and capital expenditure - “capex”) for the periods projected, as well as the determination of an appropriate discount rate and terminal value. For certain assets, recoverable amount has been determined at fair value less cost of disposal, which determination is subject to significant judgement.

 

Key sources of estimation uncertainty

 

The key assumptions concerning the future, and other key sources of estimating uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are discussed below.

 

Impairment of assets

 

The Company reviews the carrying value of assets on a periodic basis, and whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

 

Such circumstances or events could include: a pattern of losses involving the asset; a decline in the market value for the asset; and an adverse change in the business or market in which the asset is involved. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. Estimates of future cash flows and the selection of appropriate discount rates relating to particular assets or groups of assets involve the exercise of a significant amount of judgement.

 

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The key assumptions for the value in use calculation are those regarding the discount rate, growth rate, and cash flows. Cash flow projections are based on the Company’s five year internal forecast. Estimates of selling prices and direct costs are based on past experience, expectations of future changes in the market and historic trends. Sensitivities are disclosed in Note 7 of the Consolidated Financial Statements.

 

3.6 Basis of consolidation

 

The financial statements of the subsidiaries are fully consolidated with those of the Parent. Accordingly, intercompany balances and transactions, including income, expenses and dividends, are eliminated in the consolidated financial statements. Gains and losses resulting from intercompany transactions are also eliminated.

 

Non-controlling interests are presented in “Equity – Non-controlling interests” in the consolidated statement of financial position, separately from the consolidated equity attributable to the Parent. The share of non-controlling interests in the profit or loss for the year is presented under “Loss attributable to non-controlling interests” in the consolidated income statement.

 

When necessary, adjustments are made to the financial statements of subsidiaries to align the accounting policies used to the accounting policies of the Company.

 

4.    Accounting policies

 

The principal IFRS accounting policies applied in preparing these consolidated financial statements were in effect at the date of preparation are described below.

 

4.1 Goodwill

 

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Company’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition.

 

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

 

4.2 Other intangible assets

 

Other intangible assets are assets without physical substance which can be individually identified either because they are separable or because they arise as a result of a legal or contractual right or of a legal transaction or were developed by the consolidated companies. Only intangible assets whose value can be measured reliably and from which the Company expects to obtain future economic benefits are recognized in the consolidated statement of financial position.

 

Intangible assets are recognized initially at acquisition cost. The aforementioned cost is amortized systematically over each asset’s useful life. At each reporting date, these assets are measured at acquisition cost less accumulated amortization and any accumulated impairment losses, if any. The Company reviews amortization periods and amortization methods for finite-lived intangible assets at the end of each fiscal year.

 

The Company’s main intangible assets are as follows:

 

Development expenditures

 

Development expenditures are capitalized if they meet the requirements of identifiability, reliability in cost measurement and high probability that the assets created will generate economic benefits. Developmental expenditures are amortized on a straight-line basis over the useful lives of the assets, which are between four and ten years.

 

Expenditures on research activities are recognized as expenses in the years in which they are incurred.

 

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Power supply agreements

 

Power supply agreements at rates below market acquired in business combinations are amortized on a straight-line basis over the term in which the agreement is effective.

 

Rights of use

 

Rights of use granted are amortized on a straight-line basis over the term in which the right of use was granted from the date it is considered that use commenced. Rights of use are generally amortized over a period ranging from 10 to 20 years.

 

Computer software

 

Computer software includes the costs incurred in acquiring or developing computer software, including the related installation. Computer software is amortized on a straight-line basis over two to five years.

 

Computer system maintenance costs are recognized as expenses in the years in which they are incurred.

 

Other intangible assets

 

Other intangible assets include:

 

· Supply agreements which are amortized in accordance with their estimated useful lives (see Note 8).

 

· CO₂ emissions allowances (“rights held emit greenhouse gasses”) which are not amortized, but rather are expensed when used (see Note 4.22).

 

4.3 Property, plant and equipment

 

Cost

 

Property, plant and equipment for our own use are initially recognized at acquisition or production cost and are subsequently measured at acquisition or production cost less accumulated depreciation and any accumulated impairment losses.

 

When the construction and start-up of non-current assets require a substantial period of time, the borrowing costs incurred over that period are capitalized. In 2021, 2020 and 2019 no material borrowing cost were capitalized.

 

The costs of expansion, modernization or improvements leading to increased productivity, capacity or efficiency or to a lengthening of the useful lives of the assets are capitalized. Repair, upkeep and maintenance expenses are recognized in the consolidated income statement for the year in which they are incurred.

 

Mineral reserves are recorded at fair value at the date of acquisition. Depletion of mineral reserves is computed using the units-of-production method utilizing only proven and probable reserves (as adjusted for recoverability factors) in the depletion base.

 

Property, plant and equipment in the course of construction are transferred to property, plant and equipment in use at the end of the related development period.

 

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Depreciation

 

The Company depreciates property, plant and equipment using the straight-line method at annual rates based on the following years of estimated useful life:

 

			Years of
			Estimated
			Useful
			Life
Properties for own use			25-50
Plant and machinery			8-20
Tools			12.5-15
Furniture and fixtures			10-15
Computer hardware			4-8
Transport equipment			10-15

  

Land included within property, plant and equipment is considered to be an asset with an indefinite useful life and, as such, is not depreciated, but rather it is tested for impairment annually. The Company reviews residual value, useful lives, and the depreciation method for property, plant and equipment annually.

 

Environment

 

The costs arising from the activities aimed at protecting and improving the environment are accounted for as an expense for the year in which they are incurred. When they represent additions to property, plant and equipment aimed at minimizing the environmental impact and protecting and enhancing the environment, they are capitalized to non-current assets.

 

4.4 Impairment of property, plant and equipment, intangible assets and goodwill

 

In order to ascertain whether its assets have become impaired, the Company compares their carrying amount with their recoverable amount; goodwill - the CGU been tested for impairment annually, and whenever there is an indication of impairment and property, plant and equipment and other - whenever there is an indication of impairment. Where the asset itself does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Recoverable amount is the higher of:

 

· Fair value less costs of disposal: the price that would be agreed upon by two independent parties, less estimated costs to sell, and

 

· Value in use: the present value of the future cash flows that are expected to be derived from continuing use of the asset and from its ultimate disposal at the end of its useful life, discounted at a rate which reflects the time value of money and the risks specific to the business to which the asset belongs.

 

If the recoverable amount of an asset (or cash-generating unit) is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount, and an impairment loss is recognized as an expense under “Impairment losses” in the consolidated income statement.

 

Where an impairment loss subsequently reverses (not permitted in the case of goodwill), the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized as “Impairment (loss)/gain” in the consolidated income statement.

 

The basis for depreciation is the carrying amount of the assets, deemed to be the acquisition cost less any accumulated impairment losses.

 

4.5 Financial instruments

 

Financial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

 

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Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

 

Financial assets

 

From January 1, 2018, the Company classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and those to be measured at amortized cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

 

Financial assets measured at amortized cost

  

Financial assets are classified as measured at amortized cost when they are held in a business model whose objective is to collect contractual cash flows and the contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such assets are carried at amortized cost using the effective interest method if the time value of money is significant. Gains and losses are recognized in profit or loss when the assets are derecognized or impaired and when interest is recognized using the effective interest method. This category of financial assets includes trade receivables, receivables from related parties and cash and cash equivalents.

 

Financial assets measured at fair value through other comprehensive income

 

Debt instruments are classified as measured at fair value through other comprehensive income when they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All movements in the fair value of these financial assets are taken through other comprehensive income, except for the recognition of impairment gains or losses, interest income calculated using the effective interest method and foreign exchange gains and losses. When the financial asset is derecognized, the cumulative fair value gain or loss previously recognized in other comprehensive income is reclassified to the income statement.

 

Equity instruments are classified as measured at fair value through other comprehensive income if, on initial recognition, the Company makes an irrevocable election to designate the instrument as at fair value through other comprehensive income. The election is made on an instrument-by-instrument basis and is not permitted if the equity investment is held for trading. Fair value gains or losses on revaluation of such equity investments are recognized in other comprehensive income and accumulated in the valuation adjustments reserve. When the equity investment is derecognized, there is no reclassification of fair value gains or losses previously recognized in other comprehensive income to the income statement. Dividends are recognized in the income statement when the right to receive payment is established.

 

Financial assets measured at fair value through profit or loss

 

Financial assets are classified as measured at fair value through profit or loss when the asset does not meet the criteria to be measured at amortized cost or at fair value through other comprehensive income. Such assets are carried on the balance sheet at fair value with gains or losses recognized in the income statement.

 

Derecognition of financial assets

 

The Company derecognizes a financial asset when:

 

- the rights to receive cash flows from the asset have expired; or

 

- the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

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On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

 

If the Company retains substantially all of the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

 

Impairment of financial assets

 

The expected credit loss model is applied for recognition and measurement of impairments in financial assets measured at amortized cost and debt instruments held at fair value through other comprehensive income. The loss allowance for the financial asset is measured at an amount equal to the 12-month expected credit losses. If the credit risk on the financial asset has increased significantly since initial recognition, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses. Changes in loss allowances are recognized in profit and loss. For trade receivables, a simplified impairment approach is applied recognizing expected lifetime losses from initial recognition. For this purpose, the Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

 

The Company writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Company’s recovery procedures, considering legal advice where appropriate. Any recoveries made are recognized in profit or loss.

 

Financial liabilities

 

The subsequent measurement of financial liabilities depends on their classification, as described below:

 

Financial liabilities measured at fair value through profit or loss

  

Financial liabilities that meet the definition of held for trading are classified as measured at fair value through profit or loss. Such liabilities are carried on the balance sheet at fair value with gains or losses recognized in the income statement. This category includes contingent consideration and derivatives, other than those designated as hedging instruments in an effective hedge.

 

Financial liabilities measured at amortized cost

 

This is the category most relevant to the Company and comprises all other financial liabilities, including bank borrowings, debt instruments, financial loans from government agencies, payables to related parties and trade and other payables.

 

After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by considering any issue costs and any discount or premium on settlement.

 

Derecognition of financial liabilities

 

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. When the Company exchanges with the existing lender one debt instrument into another one with substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Company accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between the carrying amount of the liability before the modification and the present value of the cash flows after modification are recognized in profit or loss as a modification gain or loss.

 

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4.6 Derivative financial instruments and hedging activities

  

In order to mitigate the economic effects of exchange rate and interest rate fluctuations to which it is exposed as a result of its business activities, the Company uses derivative financial instruments, such as cross currency swaps and interest rate swaps.

 

The Company’s derivative financial instruments are set out in Note 19 to these consolidated financial statements and the Company’s financial risk management policies are set out in Note 28.

 

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition of profit or loss depends on the nature of the hedge relationship. The gain or loss recognized in respect of derivatives that are not designated and effective as a hedging instrument is recognized in the consolidated income statement in the line item financial derivative gain (loss).

 

A derivative with a positive fair value is recognized as a financial asset within the line item other financial assets whereas a derivative with a negative fair value is recognized as a financial liability within the line item other financial liabilities. A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months.

  

Hedge accounting

 

The Company designates certain derivatives as cash flow hedges. For further details, see Note 19 of the consolidated financial statements.

 

At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking the hedge transaction. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

 

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to any ineffective portion is recognized immediately in profit or loss and is included in the financial derivative gain (loss) line item.

 

Amounts previously recognized in other comprehensive income and accumulated in equity in the valuation adjustments reserve are reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss, in the same line of the income statement as the recognized hedged item.

 

Hedge accounting is discontinued when the Company revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income at that time is accumulated in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

 

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4.7 Fair value measurement

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability; or in the absence of a principal market, in the most advantageous market for the asset or liability.

 

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

  · Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

 

  · Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

 

  · Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

For those assets and liabilities measured at fair value at the balance sheet date, further information on fair value measurement is provided in Note 29.

 

4.8 Inventories

 

Inventories comprise assets (goods) which:

 

  · Are held for sale in the ordinary course of business (finished goods); or

 

  · Are in the process of production for such sale (work in progress); or

 

  · Will be consumed in the production process or in the rendering of services (raw materials and spare parts).

 

Inventories are stated at the lower of acquisition or production cost and net realizable value. The cost of each inventory item is generally calculated as follows:

 

  · Raw materials, spare parts and other consumables and replacement parts: the lower of weighted average acquisition cost and net realizable value.

 

  · Work in progress, finished goods and semi-finished goods: the lower of production cost (which includes the cost of materials, labor costs, direct and indirect manufacturing expenses) or net realizable value in the market.

 

Obsolete, defective or slow-moving inventories have been reduced to net realizable value.

 

Net realizable value is the estimated selling price less all the estimated costs of selling and distribution.

 

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The amount of any write-down of inventories (as a result of damage, obsolescence or decrease in the selling price) to their net realizable value and all losses of inventories are recognized as expenses in the year in which the write-down or loss occurs. Any subsequent reversals are recognized as income in the year in which they arise.

 

The consumption of inventories is recognized as an expense in “Raw Materials and energy consumption for production” in the consolidated income statement in the period in which the revenue from their sale is recognized.

 

4.9 Raw materials and energy consumption for production

 

Raw materials and energy consumption for production comprise raw materials, energy, other direct costs and changes in inventory.

 

4.10 Cash and cash equivalents

 

The Company classifies under “Cash and cash equivalents” any liquid financial assets, such as for example cash on hand and at banks, deposits and liquid investments, that can be converted into known amounts of cash within three months and are subject to an insignificant risk of changes in value.

 

4.11 Restricted cash and cash equivalents

 

The Company classifies under “restricted cash and cash equivalents” any liquid financial assets, which meet the definition of cash and cash equivalents but the use is resticted by financial agreements.

 

4.12 Provisions and contingencies

 

When preparing the consolidated financial statements, the Parent’s directors made a distinction between:

 

  · Provisions: present obligations, either legal, contractual, constructive or assumed by the Company, arising from past events, the settlement of which is expected to give rise to an outflow of economic benefits the amount or timing of which are uncertain; and

 

  · Contingent liabilities: possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within the control of the Company, or present obligations arising from past events the amount of which cannot be estimated reliably or whose settlement is not likely to give rise to an outflow of economic benefits.

 

  · Contingent assets: possible assets that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

 

The consolidated financial statements include all the material provisions with respect to which it is considered that it is probable that the obligation will have to be settled. Contingent liabilities are not recognized in the consolidated financial statements, but rather are disclosed, as required by IAS 37 (see Note 25).

 

Provisions are classified as current or non-current based on the estimated period of time in which the obligations covered by them will have to be met. They are recognized when the liability or obligation giving rise to the indemnity or payment arises, to the extent that its amount can be estimated reliably.

 

“Provisions” includes the provisions for pension and similar obligations assumed; provisions for contingencies and charges, such as for example those of an environmental nature and those arising from litigation in progress or from outstanding indemnity payments or obligations, and collateral and other similar guarantees provided by the Company; and provisions for medium- and long- term employee incentives.

 

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Contingent assets are not recognized, but are disclosed where an inflow of economic benefits is probable. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements in the period in which the change occurs.

 

Defined contribution plans

 

Certain employees have defined contribution plans which conform to the Spanish Pension Plans and Funds Law. The main features of these plans are as follows:

 

  · They are mixed plans covering the benefits for retirement, disability and death of the participants.

 

  · The sponsor undertakes to make monthly contributions of certain percentages of current employees’ salaries to external pension funds.

 

The annual cost of these plans is recognized under Staff costs in the consolidated income statement.

 

Defined benefit plans

 

IAS 19, Employee Benefits requires defined benefit plans to be accounted for:

 

  · Using actuarial techniques to make a reliable estimate of the amount of benefits that employees have earned in return for their service in the current and prior periods.

 

  · Discounting those benefits in order to determine the present value of the obligation.

 

  · Determining the fair value of any plan assets.

 

  · Determining the total amount of actuarial gains and losses and the amount of those actuarial gains and losses that must be recognized.

 

The amount recognized as a benefit liability arising from a defined benefit plan is the total net sum of:

 

  · The present value of the obligations.

 

  · Minus the fair value of plan assets (if any) out of which the obligations are to be settled directly.

 

The Company recognizes provisions for these benefits as the related rights vest and on the basis of actuarial studies. These amounts are recognized under “Provisions” in the consolidated statement of financial position, on the basis of their expected due payment dates. All plan assets are separately held from the rest of the Company’s assets.

 

Environmental provisions

 

Provisions for environmental obligations are estimated by analyzing each case separately and observing the relevant legal provisions. The best possible estimate is made on the basis of the information available and a provision is recognized provided that the aforementioned information suggests that it is probable that the loss or expense will arise and it can be estimated in a sufficiently reliable manner.

 

The balance of provisions and disclosures disclosed in Notes 15 and 24 reflects management’s best estimation of the potential exposure as of the date of preparation of these financial statements.

 

4.13 Leases

 

The Company assesses if a contract is or contains a lease at inception of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

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The Company recognizes a right-of-use asset and a lease liability at the commencement date.

 

The lease liability is initially measured at the present value of the minimum future lease payments, discounted using the interest rate implicit in the lease, or, if not readily determinable, the incremental borrowing rate. Lease payments include fixed payments, variable payments that depend on an index or rate, as well as any extension or purchase options, if the Company is reasonably certain to exercise these options. The lease liability is subsequently measured at amortized cost using the effective interest method and remeasured with a corresponding adjustment to the related right-of-use asset when there is a change in future lease payments.

 

The right-of-use asset comprises, at inception, the initial lease liability, any initial direct costs and, when applicable, the obligations to refurbish the asset, less any incentives granted by the lessors. The right-of-use asset is subsequently depreciated, on a straight-line basis, over the lease term or, if the lease transfers the ownership of the underlying asset to the Company at the end of the lease term or, if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, over the estimated useful life of the underlying asset. Right-of-use assets are also subject to testing for impairment if there is an indicator for impairment.

 

Variable lease payments not included in the measurement of the lease liabilities are expensed to the consolidated income statement in the period in which the events or conditions which trigger those payments occur.

 

In the statement of financial position, right-of-use assets and lease liabilities are classified, respectively, as part of property, plant and equipment and current and non-current lease liabilities.

 

4.14 Current assets and liabilities

 

In general, assets and liabilities are classified as current or non-current based on the Company’s operating cycle. However, in view of the diverse nature of the activities carried on by the Company, in which the duration of the operating cycle differs from one activity to the next, in general assets and liabilities expected to be settled or fall due within twelve months from the end of the reporting period are classified as current items and those which fall due or will be settled within more than twelve months are classified as non-current items.

 

4.15 Income taxes

 

Income tax expense represents the sum of current tax and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case the related tax is recognized in other comprehensive income or directly in equity.

 

The current income tax expense is based on domestic and international statutory income tax rates in the tax jurisdictions where the Company operates related to taxable profit for the period. The taxable profit differs from net profit as reported in the income statement because it is determined in accordance with the rules established by the applicable tax authorities which includes temporary differences, permanent differences, and available credits and incentives.

 

The Company’s deferred tax assets and liabilities are provided on temporary differences at the balance sheet date between financial reporting and the tax basis of assets and liabilities, then applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized for deductible temporary differences, carry-forward of unused tax credits and losses, to the extent that it is probable, that taxable profit will be available against which the deductible temporary difference and carryforwards of unused tax credits and losses can be utilized. The deferred tax assets and liabilities that have been recognized are reassessed at the end of each closing period in order to ascertain whether they still exist, and adjustments are made on the basis of the findings of the analyses performed.

 

Income tax payable is the result of applying the applicable tax rate in force to each tax-paying entity, in accordance with the tax laws in force in the country in which the entity is registered. Additionally, tax deductions and credits are available to certain entities, primarily relating to inter-company trades and tax treaties between various countries to prevent double taxation.

 

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Income tax expense is recognized in the consolidated income statement, except to the extent that it arises from a transaction which is recognized directly to “consolidated equity”, in which case the tax is recognized directly to “consolidated equity.”

 

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority or either the same taxable entity or different taxable entities where there is an intention to settle the current tax assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

 

4.16 Foreign currency transactions

 

Foreign currency transactions are initially recognized in the functional currency of the subsidiary by applying the exchange rates prevailing at the date of the transaction.

 

Subsequently, at each reporting date, monetary assets and liabilities denominated in foreign currencies are translated to dollars at the rates prevailing on that date.

 

Any exchange differences arising on settlement or translation at the closing rates of monetary items are recognized in the consolidated income statement for the year.

 

Note 4.6 details the Company’s accounting policies for derivative financial instruments. Also, Note 28 to these consolidated financial statements details the financial risk policies of Ferroglobe.

 

4.17 Revenue recognition

 

The Company recognizes sales revenue related to the transfer of promised goods or services when control of the goods or services passes to the customer. The amount of revenue recognized reflects the consideration to which the Company is or expects to be entitled in exchange for those goods or services.

 

In the Company’s electrometallurgy business, revenue is principally generated from the sale of goods, including silicon metal and silicon- and manganese-based specialty alloys. The Company mainly satisfies its performance obligations at a point in time; the amounts of revenue recognized relating to performance obligations satisfied over time are not significant. The point in time at which control is transferred to the buyer is determined based on the agreed delivery terms, which follow Incoterms 2021 issued by International Chamber of Commerce.

 

In most instances, control passes and sales revenue is recognized when the product is delivered to the vessel or vehicle on which it will be transported, the destination port or the customer’s premises. There may be circumstances when judgment is required based on the five indicators of control below.

 

  · The customer has the significant risks and rewards of ownership and has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the goods or service.

 

  · The customer has a present obligation to pay in accordance with the terms of the sales contract.

 

  · The customer has accepted the asset. Sales revenue may be subject to adjustment if the product specification does not conform to the terms specified in the sales contract, but this does not impact the passing of control. Specification adjustments have been immaterial historically.

 

  · The customer has legal title to the asset. The Company may retain legal title until payment is received but this is for credit risk purposes only.

 

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  · The customer has physical possession of the asset. This indicator may be less important as the customer may obtain control of an asset prior to obtaining physical possession, which may be the case for goods in transit.

 

Where the Company sells on ‘C’ terms (e.g., CIF, CIP, CFR and CPT), the Company is responsible (acts as principal) for providing shipping services and, in some instances, insurance after the date at which control of goods passes to the customer at the loading point. The Company therefore has separate performance obligations for freight and insurance services that are provided solely to facilitate sale of the commodities it produces. Revenue attributable to freight and insurance services is not usually material.

 

Where the Company sells on ‘D’ terms (e.g., DDP, DAP and DAT), the Company arranges and pays for the carriage and retains the risk of the goods until delivery at an agreed destination, where ownership and control is transferred.

 

Where the Company sells on ‘F’ terms (e.g., FCA and FOB), the customer arranges and pays for the main transportation. Risk and control are transferred to the customer when the goods are handed to the carrier engaged by the customer.

 

The Company’s products are sold to customers under contracts which vary in tenure and pricing mechanisms. The majority of pricing terms are either fixed or index-based for monthly, quarterly or annual periods, with a smaller proportion of volumes being sold on the spot market.

 

Within each sales contract, each unit of product shipped is a separate performance obligation. Revenue is generally recognized at the contracted price as this reflects the stand-alone selling price. Sales revenue excludes any applicable sales taxes.

 

Physical exchanges with counterparties in the same line of business in order to facilitate sales to customers are reported net, as are sales and purchases made with a common counterparty, as part of an arrangement similar to a physical exchange.

 

Revenue from the energy business is based on the power generated and put on the market at regulated prices and is recognized when the energy produced is transferred to the power network.

 

Interest income is recognized as the interest accrues using the effective interest rate, the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

 

Dividend income from investments is recognized when the shareholders’ right to receive the payment is established.

 

4.18 Expense recognition

 

Expenses are recognized on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises.

 

An expense is recognized in the consolidated income statement when there is a decrease in the future economic benefits related to a reduction of an asset, or an increase in a liability, which can be measured reliably. This means that an expense is recognized simultaneously with the recognition of the increase in a liability or the reduction of an asset. Additionally, an expense is recognized immediately in the consolidated income statement when a disbursement does not give rise to future economic benefits or when the requirements for recognition as an asset are not met. Also, an expense is recognized when a liability is incurred and no asset is recognized, as in the case of a liability relating to a guarantee.

 

4.19 Grants

 

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.

 

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4.20 Termination benefits

 

Under current labour legislation, the Company is required to pay termination benefits to employees whose employment relationship is terminated under certain conditions. The cost of providing employee benefits are recognised in the period in which the benefit is earned by the employee, rather than when it is paid or payable.

 

4.21 CO2 emission allowances

 

The Company recognizes emission rights (allowances) received, whether allocated by government or purchased, as intangible assets. The intangible asset recognized is initially measured at fair value, being the consideration paid (if purchased on the open market) or the current market value (if granted for less than fair value).

 

When allowances are granted for less than fair value, the difference between the fair value and the nominal amount paid is recognized as a government grant. The grant is initially recognized as deferred income in the statement of financial position and subsequently recognized as “other operating income” on a systematic basis on the proportion of the CO2 emitted over total CO2 expected to be emitted for the compliance period. In the case that a better estimate of the expected CO2 emissions for the compliance period is available, the deferred income to be recognized in the statement of financial position is adjusted prospectively.

 

As the Company emits CO2, it recognizes a provision for its obligation to deliver the CO2 allowances at the end of the compliance period. The provision is remeasured and recorded as an expense at the end of each reporting period at historical cost for the emission rights (allowances) received and at adquisition cost for the CO2 purchased and at fair value for the CO2 pending to be purchased.

 

Intangible assets recognized for emissions allowances are not amortized and remain valued at historical cost until either sold or surrendered in satisfaction of the Company’s obligation to deliver the allowances to the relevant authority.

 

Sale of emission rights

 

In those cases that it is decided to sell some or even all of its rights in the expectation of later buying rights equal to its actual emissions, the accounting will be as follows.

 

The emission rights sold would be derecognized from the balance sheet against the cash received. In those cases, where the price per emission right is different to the fair value per emission right at the time they were granted, a gain or a loss on the disposal of assets will be recognized. The deferred income originally recognized for the free emission rights granted at the beginning of the compliance period that still remain in the balance sheet at the time of sale, will continue to be amortized over the remaining compliance period.

 

4.22 Share-based compensation

 

The Company recognizes share-based compensation expense based on the estimated grant date fair value of share-based awards using a Black-Scholes option pricing model. Prior to vesting, cumulative compensation cost equals the proportionate amount of the award earned to date. The Company has elected to treat each award as a single award and recognize compensation cost on a straight-line basis over the requisite service period of the entire award. If the terms of an award are modified in a manner that affects both the fair value and vesting of the award, the total amount of remaining unrecognized compensation cost (based on the grant-date fair value) and the incremental fair value of the modified award are recognized over the amended vesting period.

 

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4.23 Assets and disposal groups classified as held for sale, liabilities associated with assets held for sale and discontinued operations

 

Assets and disposal groups classified as held for sale include the carrying amount of individual items, disposal groups or items forming part of a business unit earmarked for disposal (discontinued operations), whose sale in their present condition is highly likely to be completed within one year from the reporting date. Therefore, the carrying amount of these items, which may or may not be of a financial nature, will likely be recovered through the proceeds from their disposal.

 

Liabilities associated with non-current assets held for sale include the balances payable arising from the assets held for sale or disposal groups and from discontinued operations.

 

Assets and disposal groups classified as held for sale are measured at the lower of fair value less costs to sell and their carrying amount at the date of classification in this category. Non-current assets held for sale are not depreciated as long as they remain in this category.

 

4.24 Consolidated statement of cash flows

 

The following terms are used in the consolidated statement of cash flows, prepared using the indirect method, with the meanings specified as follows:

 

  1. Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value.

 

  2. Operating activities: activities constituting the object of the subsidiaries forming part of the consolidated Company and other activities that are not investing or financing activities.

 

  3. Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

 

  4. Financing activities: activities that result in changes in the size and composition of the equity and borrowings of the Company that are not operating or investing activities. Interest payments and principal payments are presented separately.

 

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5.    Business Combinations

 

Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities assumed are recognized at their fair values at the acquisition date. Acquisition costs are recognized in profit or loss as incurred.

 

Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the amount recognized for any non-controlling interest and the acquisition-date fair values of any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the excess is recognized immediately in profit or loss as a bargain purchase gain.

 

When the consideration transferred by the Company in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination.

 

Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates at fair value with the corresponding gain or loss being recognized in profit or loss. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

 

Ferroglobe has not recorded any business combination in 2021 and 2020.

 

6.    Segment reporting

 

Operating segments are based upon the Company’s management reporting structure. During 2021, the Company has revised its operating segments to reflect the way its Chief Operating Decision Maker (“CODM”) is currently managing the business. Our revised organizational structure includes the following six operating segments:

 

  · Canada – Silicon Metals

 

  · US – Silicon Metals & Silicon Alloys

 

  · Europe – Manganese Alloys

 

  · Europe – Silicon Metals & Silicon Alloys, and

 

  · South Africa – Silicon Alloys

 

  · Other segments

 

The operating segments described above are those components whose operating results are regularly reviewed by the entity’s Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. This is due to the integrated operations within each region and product family and the ability to reallocate production based on the individual capacity of each plant. Additionally, economic factors that may impact our results of operations, such as currency fluctuations and energy costs, are also assessed at a region and product level.

 

The Company’s North America- Silicon reportable segment is the result of the aggregation of the operating segments of the United States and Canada Silicon Metals & Silicon Alloys. These operating segments have been aggregated as they have similar long-term economic characteristics and there is similarity of competitive and operating risks and the political environment in the United States and Canada. The Europe-Silicon, the Europe -Manganese and South Africa – Silicon reportable segments are equal to each related Operating segment.

 

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All other segments that do not meet the quantitative threshold for separate reporting have been grouped as “Other segments”.

 

The consolidated income statements at December 31, 2021, 2020 and 2019, by reportable segment, are as follows:

 

 

		2021
		North America				Europe				Europe				South Africa								Adjustments/
		Silicon				Manganese				Silicon				Silicon				Other segments				Eliminations (**)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Sales			524,808				476,287				665,337				117,195				43,568				(48,287	)			1,778,908
Raw materials and energy consumption for production			(323,316	)			(326,257	)			(473,884	)			(76,617	)			(33,445	)			48,623				(1,184,896	)
Other operating income			5,385				34,142				65,752				763				49,901				(45,858	)			110,085
Staff costs			(82,463	)			(33,696	)			(120,287	)			(13,268	)			(31,203	)			—				(280,917	)
Other operating expense			(43,070	)			(105,290	)			(128,755	)			(13,256	)			(51,960	)			45,522				(296,809	)
Depreciation and amortization charges, operating allowances and write-downs			(55,770	)			(18,634	)			(16,852	)			(5,081	)			(991	)			—				(97,328	)
Impairment (loss) gain			—				(376	)			(441	)			2,684				(1,730	)			—				137
Net gain due to changes in the value of assets			—				—				—				—				758				—				758
(Loss) gain on disposal of non-current assets			394				—				1,029				—				(37	)			—				1,386
Other (loss) gain			—				—				(1	)			—				63				—				62
Operating (loss) profit			25,968				26,176				(8,102	)			12,420				(25,076	)			—				31,386
Finance income			258				8,516				2,540				244				31,303				(42,608	)			253
Finance costs			(1,063	)			(25,544	)			(7,162	)			(5,693	)			(152,335	)			42,608				(149,189	)
Exchange differences			807				2,160				(263	)			135				(5,225	)			—				(2,386	)
(Loss) Profit  before tax			25,970				11,308				(12,987	)			7,106				(151,333	)			—				(119,936	)
Income tax (expense) benefit			(5,331	)			(3,674	)			7,463				(692	)			6,796				—				4,562
(Loss) profit for the year			20,639				7,634				(5,524	)			6,414				(144,537	)			—				(115,374	)
Attributable to the Parent			24,755				7,634				(5,509	)			6,821				(144,325	)			—				(110,624	)
Attributable to non-controlling interests			(4,116	)			—				(15	)			(407	)			(212	)			—				(4,750	)

 

 

(**) The amounts correspond to transactions between segments that are eliminated in the consolidation process.

 

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		2020(*)
		North America Silicon				Europe Manganese				Europe Silicon				South Africa Silicon				Other segments				Adjustments/ Eliminations (**)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Sales			425,277				240,142				467,728				80,572				25,334				(94,619	)			1,144,434
Raw materials and energy consumption for production			(280,858	)			(204,063	)			(369,130	)			(56,062	)			(19,518	)			94,145				(835,486	)
Other operating income			2,916				9,199				25,049				131				24,587				(28,255	)			33,627
Staff costs			(73,988	)			(28,337	)			(84,300	)			(11,013	)			(17,144	)			—				(214,782	)
Other operating expense			(34,315	)			(33,884	)			(51,812	)			(14,098	)			(26,679	)			28,729				(132,059	)
Depreciation and amortization charges, operating allowances and write-downs			(61,664	)			(19,086	)			(19,252	)			(7,141	)			(1,046	)			—				(108,189	)
Impairment (loss) gain			(35,685	)			305				(17,941	)			(8,677	)			(11,346	)			—				(73,344	)
Net gain due to changes in the value of assets			—				—				—				—				158				—				158
(Loss) gain on disposal of non-current assets			(869	)			1,154				1,002				—				5				—				1,292
Other (loss) gain			—				4				—				—				(5	)			—				(1	)
Operating (loss)			(59,186	)			(34,566	)			(48,656	)			(16,288	)			(25,654	)			—				(184,350	)
Finance income			679				7,122				2,338				90				11,220				(21,272	)			177
Finance costs			(857	)			(22,267	)			(10,325	)			(3,796	)			(50,995	)			21,272				(66,968	)
Financial derivative gain			—				—				—				—				3,168				—				3,168
Exchange differences			(485	)			(3,508	)			(1,226	)			(1,405	)			32,177				—				25,553
(Loss) before tax			(59,849	)			(53,219	)			(57,869	)			(21,399	)			(30,084	)			—				(222,420	)
Income tax (expense) benefit			14,213				(19,797	)			(14,446	)			(1,049	)			(860	)			—				(21,939	)
(Loss) for the year from continuing operations			(45,636	)			(73,016	)			(72,315	)			(22,448	)			(30,944	)			—				(244,359	)
(Loss) for the year from discontinued operations			—				(5,399	)							—				—				—				(5,399	)
(Loss) for the year			(45,636	)			(78,415	)			(72,315	)			(22,448	)			(30,944	)			—				(249,758	)
Attributable to the Parent			(42,603	)			(79,482	)			(71,243	)			(22,206	)			(30,805	)			—				(246,339	)
Attributable to non-controlling interests			(3,033	)			—				(5	)			(242	)			(139	)			—				(3,419	)

  

 

(*) Our operating segments have been revised in 2021 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2020 and 2019 have been restated to report results according to the operating segments revised in 2021. 

(**)  The amounts correspond to transactions between segments that are eliminated in the consolidation process.

 

101

 

		2019(*)
		North America Silicon				Europe Manganese				Europe Silicon				South Africa Silicon				Other segments				Adjustments/ Eliminations (**)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Sales			551,500				564,060				593,907				136,292				43,147				(273,684	)			1,615,222
Raw materials and energy consumption for production			(366,711	)			(502,919	)			(474,993	)			(108,823	)			(35,939	)			274,988				(1,214,397	)
Other operating income			10,418				12,828				39,001				1,323				27,144				(36,501	)			54,213
Staff costs			(87,954	)			(32,133	)			(106,681	)			(20,333	)			(37,928	)			—				(285,029	)
Other operating expense			(60,105	)			(64,851	)			(83,917	)			(19,457	)			(32,572	)			35,197				(225,705	)
Depreciation and amortization charges, operating allowances and write-downs			(72,251	)			(19,904	)			(19,667	)			(6,459	)			(1,913	)			—				(120,194	)
Impairment (loss) gain			(174,013	)			12				(1	)			—				(1,897	)			—				(175,899	)
Net (loss) due to changes in the value of assets			—				—				—				(530	)			(1,044	)			—				(1,574	)
(Loss) gain on disposal of non-current assets			(1,601	)			—				181				—				(803	)			—				(2,223	)
Operating (loss)			(200,717	)			(42,907	)			(52,170	)			(17,987	)			(41,805	)			—				(355,586	)
Finance income			529				8,999				2,074				156				17,690				(28,068	)			1,380
Finance costs			(3,914	)			(19,722	)			(5,626	)			(4,507	)			(57,524	)			28,068				(63,225	)
Financial derivative gain			—				—				—				—				2,729				—				2,729
Exchange differences			(407	)			2,812				1,161				(1,179	)			497				—				2,884
(Loss) before tax			(204,509	)			(50,818	)			(54,561	)			(23,517	)			(78,413	)			—				(411,818	)
Income tax benefit (expense)			8,520				9,258				12,782				7,761				3,220				—				41,541
(Loss) for the year from continuing operations			(195,989	)			(41,560	)			(41,779	)			(15,756	)			(75,193	)			—				(370,277	)
Profit for the year from discontinued operations			—				—				3,280				—				81,357				—				84,637
Profit (loss) for the year			(195,989	)			(41,560	)			(38,499	)			(15,756	)			6,164				—				(285,640	)
Attributable to the Parent			(190,866	)			(41,560	)			(38,499	)			(16,124	)			6,448				—				(280,601	)
Attributable to non-controlling interests			(5,123	)			—				—				368				(284	)			—				(5,039	)

 

 

(*) Our operating segments have been revised in 2021 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2020 and 2019 have been restated to report results according to the operating segments revised in 2021. 

(**)  The amounts correspond to transactions between segments that are eliminated in the consolidation process.

 

102

 

 

The consolidated statements of financial position at December 31, 2021 and 2020, by reportable segment are as follows:

 

		2021
																						Consolidation
		North America				Europe				Europe				South Africa								Adjustments/
		Silicon				Manganese				Silicon				Silicon				Other segments				Eliminations (*)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Goodwill			29,702				—				—				—				—				—				29,702
Other intangible assets			4,015				40,318				54,463				1,165				681				—				100,642
Property, plant and equipment			324,210				69,283				87,547				35,830				38,044				—				554,914
Inventories			56,318				77,425				121,813				21,008				13,233				—				289,797
Trade and other receivables (**)			867,128				487,731				319,805				51,734				1,233,809				(2,574,594	)			385,613
Cash, restricted cash and cash equivalents			61,032				32,139				10,660				6,787				6,045				—				116,663
Other			(4,420	)			3,810				18,018				1,909				26,690				—				46,007
Total assets			1,337,985				710,706				612,306				118,433				1,318,502				(2,574,594	)			1,523,338
Equity			438,915				86,234				150,320				21,048				(376,486	)			—				320,031
Provisions			21,458				42,428				128,144				6,163				390				—				198,583
Bank borrowings			—				29,972				67,749				—				1,246				—				98,967
Obligations under finance leases			6,334				11,457				—				24				543				—				18,358
Debt instruments			—				—				—				—				440,297				—				440,297
Other financial liabilities			4,033				153				—				—				62,827				—				67,013
Trade and other payables (***)			813,676				550,695				186,493				87,687				1,195,016				(2,618,022	)			215,545
Other			53,569				(10,233	)			79,600				3,511				(5,331	)			43,428				164,544
Total equity and liabilities			1,337,985				710,706				612,306				118,433				1,318,502				(2,574,594	)			1,523,338

 

		2020(*)
																						Consolidation
		North America				Europe				Europe				South Africa								Adjustments/
		Silicon				Manganese				Silicon				Silicon				Other segments				Eliminations (**)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Goodwill			29,702				—				—				—				—				—				29,702
Other intangible assets			14,604				1,790				1,841				1,265				1,256				—				20,756
Property, plant and equipment			353,145				88,883				101,391				37,526				39,089				—				620,034
Inventories			63,765				62,243				90,434				20,375				9,732				—				246,549
Trade and other receivables (***)			609,456				413,115				280,519				43,121				1,001,306				(2,099,725	)			247,792
Cash, restricted cash and cash equivalents			48,127				34,335				13,684				2,777				32,634				—				131,557
Other			(37,007	)			14,546				16,267				9,808				47,141				—				50,755
Total assets			1,081,792				614,912				504,136				114,872				1,131,158				(2,099,725	)			1,347,145
Equity			412,729				13,998				169,850				17,856				(248,714	)			—				365,719
Provisions			33,812				45,609				74,804				5,956				3,602				—				163,783
Bank borrowings			—				23,216				56,905				—				27,486				—				107,607
Obligations under finance leases			4,260				17,403				—				318				555				—				22,536
Debt instruments			—				—				—				—				357,508				—				357,508
Other financial liabilities			3,140				331				—				—				60,425				—				63,896
Trade and other payables (****)			615,690				500,813				183,123				78,807				915,381				(2,141,417	)			152,397
Other			12,161				13,543				19,453				11,935				14,915				41,692				113,699
Total equity and liabilities			1,081,792				614,913				504,135				114,872				1,131,158				(2,099,725	)			1,347,145

 

(*) Our operating segments have been revised in 2021 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2020 have been restated to report results according to the operating segments revised in 2021.

(**) These amounts correspond to balances between segments that are eliminated at consolidation.

(***) Trade and other receivables includes non-current and current receivables from group that eliminated in the consolidated process.

(****) Trade and other payables includes non-current and current payables from group that are eliminated in the consolidated process.

 

103

 

Other disclosures

 

Sales by product line

 

Sales by product line are as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Silicon metal			637,695				463,217				539,872
Manganese-based alloys			469,138				267,469				447,311
Ferrosilicon			337,833				176,447				275,368
Other silicon-based alloys			161,750				126,817				181,736
Silica fume			32,409				25,888				33,540
Other			140,083				84,596				137,395
Total			1,778,908				1,144,434				1,615,222

 

Information about major customers

 

Total sales of $870,039 thousand, $580,570 thousand, and $643,689 thousand were attributable to the Company’s top ten customers in 2021, 2020, and 2019 respectively. During 2021 and 2020, sales corresponding to Dow Silicones Corporation represented 12.2% and 13.2% respectively of the Company’s sales. Sales to Dow Silicones Corporation are included partially in the North America - Silicon segment and partially in the Europe - Silicon segment. During 2019, there was no single customer representing greater than 10% of the Company’s sales.

 

Capital expenditures by reporting segment

 

		Year Ended  December 31,
		2021				2020				2019
		US$´000				US$´000				US$´000
North America - Silicon			15,579				17,420				7,226
Europe Silicon			4,328				1,334				11,001
Europe Manganese			6,947				4,034				5,146
South Africa Silicon			3,611				2,308				3,492
Other Segments			2,944				1,963				7,175
Total			33,409				27,059				34,040

 

Non current assets by geographical area

 

The non-current assets (as defined in IFRS 8) attributable to the country of domicile and all foreign countries of operation are as follows:

 

		Year ended December 31,
		2021				2020
		US$´000				US$´000
United States of America			230,356				227,539
Europe
Spain			146,405				145,019
France			138,842				90,543
Other EU Countries			71,612				72,313
Total non-current assets in Europe			356,859				307,875
Rest of the World			124,839				154,493
Total			712,054				689,907

 

104

 

7.    Goodwill

 

Changes in the carrying amount of goodwill during the years ended December 31, are as follows:

 

		January 1,				Impairment				Exchange				December 31,				Impairment				Exchange				December 31,
		2020				(Note 26.5)				differences				2020				(Note 26.5)				differences				2021
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Globe Specialty Metals, Inc.			29,702				—				—				29,702				—				—				29,702
Total			29,702				—				—				29,702				—				—				29,702

 

On December 23, 2015, Ferroglobe PLC consummated the acquisition of 100% of the equity interests of Globe Specialty Metals, Inc. (GSM) and subsidiaries and FerroAtlántica. This Business Combination was accounted for using the acquisition method of accounting for business combinations under IFRS 3 Business Combinations, with FerroAtlántica treated as the accounting acquirer and GSM as the acquiree. The excess of the cost of acquisition over the Company’s interest in the fair value of the identifiable assets and liabilities assumed at the date of acquisition was recorded as goodwill.

 

During the years ended December 31, 2021 and December 31, 2020, in connection with our annual goodwill impairment test, the Company did not recognize an impairment charge. During the year ended December 31, 2019, the Company recognized an impairment charge of $174,008 thousand.

 

Ferroglobe operates in a cyclical market, and silicon and silicon-based alloy index pricing and foreign import pressure into the U.S. markets impact the future projected cash flows used in our impairment analysis. Recoverable value was estimated based on discounted cash flows. Estimates under the Company’s discounted income based approach involve numerous variables including anticipated sales price and volumes, cost structure, discount rates and long term growth, and therefore could impact fair values in the future. As of December 31, 2021, and 2020 the remaining goodwill for the U.S cash-generating units is $29,702 thousand.

 

Key assumptions used in the determination of recoverable value

 

In determining the asset recoverability through value in use, management makes estimates, judgments and assumptions on uncertain matters. For each cash-generating unit, the value in use is determined based on economic assumptions and forecasted operating conditions as follows:

 

		2021								2020								2019
		U.S.				Canada				U.S.				Canada				U.S.				Canada
Weighted average cost of capital			13.2	%			—	%			10.3	%			—	%			11.1	%			11.5	%
Long-term growth rate			2.3	%			—	%			2.0	%			—	%			2.0	%			2.0	%
Normalized tax rate			21.0	%			—	%			21.0	%			—	%			21.0	%			26.6	%

 

Our approach in determining the recoverable amount utilises a discounted cash flow methodology, which necessarily involves making numerous estimates and assumptions regarding, operating costs, appropriate discount rates and working capital requirements. The key assumptions used for estimating cash flow projections in the Group’s impairment testing are those relating to revenue and operating costs. The key assumptions take account of the business’s expectations for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the CGU’s historical performance and any other circumstances particular to the unit, such as business strategy and product mix.

 

These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of CGU identified for impairment testing and the criteria used to determine which assets should be aggregated. Changes in our business activities or structure may also result in additional changes to the level of testing in future periods. Further, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired.

 

105

 

The Company has defined a financial model which considers the revenues, expenditures, cash flows, pre tax payments and capital expenditures on a five year period (2022-2026), and perpetuity beyond this period. The financial projections to determine the net present value of future cash flows are modeled considering the principal variables that determine the historic flows of each group of cash-generating unit including prices, volumes, costs, CAPEX and net working capital.

 

The long-term growth rate is based on long-term average growth rate in the US.

 

8.    Other intangible assets

 

Changes in the carrying amount of other intangible assets during the years ended December 31 are as follows:

 

																		Other				Accumulated
		Development				Power Supply								Computer				Intangible				Depreciation				Impairment
		Expenditure				Agreements				Rights of Use				Software				Assets				(Note 26.3)				(Note 26.5)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Balance at January 1, 2020			50,326				37,836				16,533				5,149				42,670				(82,283	)			(18,964	)			51,267
Additions			262				—				—				—				42,561				(7,183	)			—				35,640
Disposals			—				—				—				—				(68,713	)			—				—				(68,713	)
Exchange differences			4,286				—				516				100				2,354				(3,576	)			(1,118	)			2,562
Business disposal			—				—				—				—				—				—				—				—
Balance at December 31, 2020			54,874				37,836				17,049				5,249				18,872				(93,042	)			(20,082	)			20,756
Additions			1,040				—				10				—				139,180				(7,241	)			(1,153	)			131,836
Disposals			—				—				(3,558	)			(72	)			(51,796	)			563				3,072				(51,791	)
Exchange differences			(4,216	)			—				(132	)			(87	)			(540	)			3,580				1,236				(159	)
Business disposal			—				—				—				—				—				—				—				—
Balance at December 31, 2021			51,698				37,836				13,369				5,090				105,716				(96,140	)			(16,927	)			100,642

 

Additions and disposals in other intangible assets in 2021 and 2020 primarily relate to the acquisition, use and expiration of rights held to emit greenhouse gasses by certain Spanish, French and Canadian subsidiaries (see Note 4.21).

 

During 2021 the Company recognized an impairment of $1,153 thousand in relation to our quartz mine located in Mauritania.

 

During 2021 the company has purchased rights to emit greenhouse gasses amounting $44,138 thousand.

 

During 2020 the Company disposed of rights held to emit greenhouse gasses $34,209 thousand, which result in a net reduction of other intangible assets of $32,517 thousand.

 

As a result of the Business Combination, the Company acquired a power supply agreement which provides favorable below-market power rates to the Alloy, West Virginia facility, which terminates in December 2025.

 

At December 31, 2021, the Company has certain intangible assets pledged as collateral for debt instruments in Canada (see Note 18).

 

106

 

9.    Property, plant and equipment

 

The detail of property, plant and equipment, net of the related accumulated depreciation and impairment in 2021 and 2020 is as follows:

 

														Advances and
														Property, Plant								Other Items of				Other Items				Other Items
										Other Fixtures,				and Equipment								Property,				of Leased				of Leased				Accumulated
		Land and				Plant and				Tools and				in the Course of				Mineral				Plant and				Land and				Plant and				Depreciation				Impairment
		Buildings				Machinery				Furniture				Construction				Reserves				Equipment				Buildings				machinery				(Note 26.3)				(Note 26.5)				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Balance at January 1, 2020			196,586				1,273,837				8,819				106,651				59,502				34,463				13,298				21,333				(865,937	)			(107,646	)			740,906
Additions			1,391				11,095				302				27,059				—				30				3,374				1,405				(101,006	)			(71,929	)			(128,279	)
Disposals and other			(780	)			(17,664	)			(612	)			(1,715	)			—				—				—				—				17,337				4				(3,430	)
Transfers from/(to) other accounts			904				15,830				—				(16,861	)			—				—				—				127				—				(6,937	)			(6,937	)
Exchange differences			9,924				48,487				(87	)			8,895				(177	)			(1,305	)			916				1,581				(45,901	)			(4,559	)			17,774
Balance at December 31, 2020			208,025				1,331,585				8,422				124,029				59,325				33,188				17,588				24,446				(995,507	)			(191,066	)			620,034
Additions			166				6,054				199				33,409				—				—				576				4,113				(90,087	)			1,663				(43,907	)
Disposals and other			(1,131	)			(106,295	)			(618	)			(9,374	)			—				(55	)			—				—				73,601				39,972				(3,900	)
Transfers from/(to) other accounts			65				21,883				112				(23,621	)			—				(20	)			—				730				867				(17	)			(1	)
Exchange differences			(9,911	)			(50,603	)			(636	)			(10,481	)			(306	)			476				(1,008	)			(1,527	)			49,048				7,636				(17,312	)
Balance at December 31, 2021			197,214				1,202,624				7,479				113,962				59,019				33,589				17,156				27,762				(962,078	)			(141,811	)			554,914

 

In order to ascertain whether its assets have become impaired, Ferroglobe compares their carrying amount with their recoverable amount if there are indications that the assets might have become impaired. Where the asset itself does not generate cash flows that are independent from other assets, Ferroglobe estimates the recoverable amount of the asset unit to which the asset belongs. Recoverable amount is the higher of fair value less cost of disposal and value in use, which is the present value of the future cash flows that are expected to be derived from continuing use of the asset and from its ultimate disposal at the end of its useful life, discounted at a rate which reflects the time value of money and the risks specific to the business to which the asset belongs.

 

If the recoverable amount of an asset or cash-generating unit is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount, and an impairment loss is recognized as an expense under “net impairment losses” in the consolidated income statement. The increased carrying amount of an asset due to a reversal of an impairment loss should not exceed the carrying amount that would  have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment is recognized as “impairment (loss) gain” in the consolidated income statement. The basis for depreciation or amortization is the carrying amount of the assets, deemed to be the acquisition cost less any accumulated impairment losses.

 

As at December 31, 2021 the Company tested property, plant and equipment for impairment related to our solar-grade silicon metal project based in Puertollano, Spain, Château-Feuillet plants in France and our silicon metal plant in Polokwane, South Africa for which the recoverable value was determined at fair value less cost of disposal.

 

During year ended December 31, 2021 the Company recognized an impairment reversal of $2,681 thousand in relation to our Polokwane facility in South Africa, an impairment at Château Feuillet facility in Europe $441 thousand and an impairment related to our quartz mine located in Mauritania amounting $573 thousand.

 

Fair value for Polokwane facility as of December 31, 2021 was $7,130 thousand. As this amount is higher than the carrying amount ($4,449 thousand), the company recognized an impairment reversal of $2,681 thousand.

 

Fair value for Chateau Feuillet facility as of December 31, 2021 was $7,285 thousand. As this amount is lower than the carrying amount ($7,726 thousand), the company recognized an impairment of $441 thousand.

 

107

 

During 2021, as a consequence of the sale of the Niagara facility, which had a net book value of nil (an impairment had been recognized in previous periods amounting to $$34,229) the Company has written off these amounts.

 

During 2021, as a consequence of the sale of certain OPCO assets which had a net book value of nil(an impairment had been recognized in previous periods amounting to $5,743), the Company has written off these amounts..

 

During year ended December 31, 2020 the Company recognized an impairment of $71,929 thousand in relation to our idled capacity at the Niagara facilities in the United States $34,270 thousand, at the Polokwane facility in South Africa $8,677 thousand, at Château Feuillet facility in Europe $17,941 thousand and an impairment of $11,041 thousand in relation to our solar-grade silicon metal project in Puertollano, Spain.

 

Transfer from (to) other accounts as of December 31, 2020 only includes $6,937 thousand from OpCo related to the contract signed with Aurinka.

 

During 2019 the Company disposed of FerroAtlántica, S.A.U. and Ultracore Polska Zoo, which resulted in a net reduction of property, plant and equipment of $94,401 thousand.

 

During 2019 the Company liquidated Ganzi Ferroatlántica Silicon Industry Company, Ltd. and started the process of liquidation of Mangshi Sinice Silicon Industry Company Limited, which resulted in the reduction of impairment of $48,775 thousand.

 

At December 31, 2021 and 2020, the Company has property, plant and equipment pledged as security for debt instruments in Canada, France, Norway, Spain and USA.

 

Commitments

 

At December 31, 2021 and 2020, the Company has capital expenditure commitments totaling $3,834 thousand and $2,605 thousand, respectively, primarily related to maintenance and improvement works at plants.

 

10.  Financial assets and other receivables

 

The company’s financial assets and their classification under IFRS 9 are as follows:

 

						2021 classification
						Amortised cost				Fair value through profit or loss - mandatorily measured				Fair value through other comprehensive income - designated				Total
		Note				US$'000				US$'000				US$'000				US$'000
Other financial assets			10.1				3,348				847				—				4,195
Receivables from related parties			24				4,540				—				—				4,540
Trade receivables			10.2				321,929				—				—				321,929
Other receivables			10.2				6,199				—				—				6,199
Cash and cash equivalents							114,391				—				—				114,391
Restricted cash							2,272				—				—				2,272
Total financial assets							452,679				847				—				453,526

 

						2020 classification
						Amortised cost				Fair value through profit or loss - mandatorily measured				Fair value through other comprehensive income - designated				Total
		Note				US$'000				US$'000				US$'000				US$'000
Other financial assets			10.1				3,456				2,609				—				6,065
Receivables from related parties			24				5,530				—				—				5,530
Trade receivables			10.2				202,233				—				—				202,233
Other receivables			10.2				3,847				—				—				3,847
Cash and cash equivalents							102,714				—				—				102,714
Restricted cash							28,843				—				—				28,843
Total financial assets							346,623				2,609				—				349,232

 

108

 

Restrictions on the use of group assets

 

As of year ended December 31, 2021, Cash and cash equivalents and restricted cash comprise the following:

 

		2021				2020
		US$'000				US$'000
Cash and cash equivalents			114,391				102,714
Current/Non Current restricted cash presented as Cash			2,272				28,843
Escrow: Hydro sale			2,272				6,136
ABL			—				22,500
Others			—				207
Total			116,663				131,557

 

At December 31, 2021, non-current restricted cash comprises cash in relation to the guarantees taken over escrow amounting $2,272 thousand ($6,136 thousand in 2020). The escrow was constituted in August 30, 2019, in consideration of previous FerroAtlántica; under agreement terms, the Purchaser and the Seller deposited in a restricted bank account a part of the share purchase price, guaranteeing any compensation to the purchaser for any claim under the contract. On October 30, 2021, both parts agreed the release of an amount of $3,494 thousand (€3,000 thousand) out of the Escrow funds in order to offset part of the amount that the Company owes to the buyer derived the new tolling agreement.

 

The Company has certain restrictions for the disposal of the cash in Norway recorded in “cash and cash equivalents” due to local requirements, amounting $1,497 thousand.

 

The Company has also restrictions for the disposal of the cash in the joint ventures with Dow Corning, when the Company want to access to the excess cash available in the joint ventures, it is necessary to organise a board meeting and approve a dividend payment. Each partner receives its dividend portion accordingly, amounting to $51,956 thousand as of December 31, 2021.

 

On March 16, 2021, the Company repaid in its entirety the remaining balance at the date of the ABL and the restricted cash was offset with the payment.

 

109

 

10.1 Other financial assets

 

At December 31, 2021, other financial assets comprise the following:

 

		2021
		Non-
		Current				Current				Total
		US$'000				US$'000				US$'000
Other financial assets held with third parties:
Other financial assets at amortised cost			3,348				—				3,348
Equity securities			743				104				847
Total			4,091				104				4,195

 

At December 31, 2020, other financial assets comprise the following:

 

		2020
		Non-
		Current				Current				Total
		US$'000				US$'000				US$'000
Other financial assets held with third parties:
Other financial assets at amortised cost			3,456				—				3,456
Equity securities			1,601				1,008				2,609
Total			5,057				1,008				6,065

 

Other financial assets at amortized cost mainly comprises deposits given to French government by Ferropem ($2,718 thousand in 2021 and 2,679 thousand in 2020), a Ferroglobe subsidiary, in respect of effort de construction. The law in France requires employers and companies to provide a certain size to invest a portion of their budget in the construction or renovation of housing (including through direct investment, providing mortgages, and other). In this case, the mandatory contribution has been made in the form of a loan, to be returned by the French government in twenty years.

 

Listed equity securities comprises investments held by Globe Argentina Metales in Pampa Energía.

 

For those assets measured at fair value at the balance sheet date, further information on fair value measurement is provided in Note 29.

 

10.2 Trade and other receivables

 

Trade and other receivables comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Trade receivables			322,935				203,930
Less – allowance for doubtful debts			(1,006	)			(1,697	)
			321,929				202,233
Tax receivables(1)			25,244				13,166
Government grant receivables			27,701				23,016
Other receivables			6,199				3,847
Total			381,073				242,262

 

 

(1) “Tax receivables” is primarily related to VAT receivables, which are recovered either by offsetting against VAT payables or are expected to be refunded by the tax authorities in the relevant jurisdictions.

 

The trade and other receivables disclosed above are short-term in nature and therefore their carrying amount is considered to approximate their fair value.

 

110

 

The changes in the allowance for doubtful debts during 2021 and 2020 were as follows:

 

		Allowance
		US$'000
Balance at January 1, 2020			4,543
Impairment losses recognized			504
Amounts written off as uncollectible			(3,666	)
Changes in the scope of consolidation			—
Exchange differences			315
Balance at December 31, 2020			1,697
Impairment losses recognized			(580	)
Amounts written off as uncollectible			—
Changes in the scope of consolidation			—
Exchange differences			(111	)
Balance at December 31, 2021			1,006

 

Securization and factoring of trade receivables

 

On February 6, 2020, the Company entered into an amended and restated accounts receivables securitization program via which trade receivables generated by certain of the Company’s subsidiaries in Spain and France are financed both directly through the existing Irish special purpose vehicle (“SPE”) and indirectly through a French “fonds commun de titrisation”. The incorporation of the “fonds commun de titirsation” into the program allowed for the sale of certain Euro-denominated receivables that were not eligible under the previous structure and increased the available funding. The senior lender’s commitments under the amended and restated securitization program were $150,000 thousand. Finacity remained as intermediate subordinated lender providing a cash consideration of $2,808 thousand, and the Company’s European subsidiaries continued as senior subordinated and junior subordinated lenders as well as, having interests in the senior and intermediate subordinated loan tranches.

 

On October 2, 2020, the Company ended the receivables funding agreement over European receivables and cancelled the securitization program, signing a new factoring agreement with a Leasing and Factoring Agent, for anticipating the collection of receivables of the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS). As a result of the agreement, the Agent provided a cash consideration of circa $48.8 million, repurchased the receivables portfolio sold to the SPE on September 28, and consequently assumed the loan tranche of the senior borrower to the SPE. Also, the senior loan and intermediate subordinate loan tranches were paid with internal sources of funds, terminating the financing structure of the securitization program.

 

The main characteristics of the factoring agreement are the following:

 

- the maximum cash consideration advanced for the financing facility is up to €60,000 thousand;

 

- over collateralization of 10% of accounts receivable as guarantee provided to the Agent until payment has been satisfied;

 

- Annual fee of 0.15% applied to the annual revenues ceded to the Agent;

 

- Financing commission of 1% charged annually;

 

Other conditions are set in relation to credit insurance policy which has been structured in an excess of loss policy where the first €5,000 thousand of bad debt losses are not covered by the insurance provider. The Company has assumed the cash collateralization for the entire excess of loss, as agreed in contractual terms.

 

111

 

During 2021, the factoring agreement provided upfront cash consideration of approximately $659,083 thousand ($169,105 thousand for the three months ended December 31, 2020). The Company has repaid $ 640,168 thousand ($95,800 thousand in 2020), showing at December 31, 2021, an on-balance sheet bank borrowing debt of $93,090 thousand (2020: $74,844 thousand), see Note 16.

 

At December 31, 2021, the Company held $ 115,684 thousand of accounts receivables recognized in consolidated balance sheet in respect of factoring agreement (89,154 thousand at December 31, 2020). Finance costs incurred during the year ended December 31, 2021, amounts $3,202 thousand ($916 thousand, at December 31, 2020) recognized in finance costs in the consolidated income statement.

 

As of December 31, 2021, the Company exceeded the limit, the lender agreed a temporary increase of the limit (See Note 16).

 

Judgements relating to the accounting for the factoring agreement

 

The Company has assessed whether it has transferred substantially all risks and rewards, continuing to be exposed to the variable returns from its involvement in the factoring agreement as it is exposed to credit risk, so the conclusion is that the derecognition criteria is not met and therefore, the account receivables sold are not derecognized from the balance sheet and an obligation is recognized as bank borrowings for the amount of cash advanced by the Leasing and Factoring Agent. The amount repayable under the factoring agreement is presented as on-balance sheet factoring and the debt assigned to factoring is showed as bank borrowings. See Note 16.

 

Government grants

 

The Company has been awarded government grants in relation to its operations in France, Spain and Norway, including grants in relation to the compensation of costs associated with the emission of CO₂.

 

During the year ended December 31, 2021, the Company recognized $31,588 thousand of income related to government grants, the amount was deducted against the related expense in Raw Materials and energy consumption for production (2020: $30,420 thousand of income). The Company has no unfulfilled conditions in relation to government grants, but certain grants would be repayable if the Company were to substantially curtail production or employment at certain plants.

 

11.   Inventories

 

Inventories comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Finished goods			118,080				100,711
Raw materials in progress and industrial supplies			110,965				99,259
Other inventories			42,815				46,274
Advances to suppliers			17,937				305
Total			289,797				246,549

 

During 2021 the Company recognised an expense of $1,095 thousand (2020: $1,939 thousand) in respect of write-downs of inventory to net realisable value. The Company records expense for the write-down of inventories to Raw Materials and energy consumption for production in the consolidated income statement, see Note 4.8.

 

At December 31, 2021, inventories in the Company’s subsidiaries in the United States, Canada, Norway and Spain ($180,575 thousand) were pledged forming part of the collateral for debt instruments, see Note 18.

 

112

 

 

12. Other assets

 

Other assets comprise the following at December 31:

 

		2021												2020
		Non-												Non-
		Current				Current				Total				Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Guarantees and deposits given			18,020				299				18,319				10,290				253				10,543
Prepayments and accrued income			27				3,213				3,240				—				10,656				10,656
Other assets			687				4,896				5,583				1,614				9,805				11,419
Total			18,734				8,408				27,142				11,904				20,714				32,618

 

At December 31, 2021, the amount in Guarantees and deposits given increased due to a cash deposit made during the year with TAC (Tennessee Valley Authority) which supplies power to "Core Metals Group Holdings, LLC” and to letter of credits related to the insurance company in “Global Specialty Metals, Inc”.

 

At December 31, 2021, the figure in Prepayments and accrued income decreased due to prepayments recorded in “Grupo FerroAtántica S.A.U” as of December 31, 2020.

 

13.  Equity

 

Share capital

 

Ferroglobe PLC was incorporated on February 5, 2015 and issued one ordinary share with a face value of $1.00. The share was issued but uncalled. On October 13, 2015, the Company increased its share capital by £50,000 by issuing 50,000 sterling non-voting redeemable preference shares (the “Non-voting Shares”) as well as 14 ordinary shares with a par value of $1.00. Subsequently on October 13, 2015, the Company consolidated the 15 ordinary shares at a par value of $1.00 to two ordinary shares with a par value of $7.50, for a total amount of $15.00.

 

On December 23, 2015, the Company acquired all of the issued and outstanding ordinary shares from Grupo Villar Mir, S.A.U., par value €1,000 per share, of Grupo FerroAtlántica, S.A.U. in exchange for 98,078,161 newly-issued Ferroglobe Class A ordinary shares, nominal value $7.50 per share, making Grupo FerroAtlántica, S.A.U. a wholly-owned subsidiary of the Company. The company subsequently redeemed all Non-voting Shares.

 

Subsequently on December 23, 2015, Gordon Merger Sub, Inc., a wholly owned subsidiary of the Company, merged with Globe Specialty Metals, Inc., and all outstanding shares of GSM common stock, par value $0.0001 per share were converted to the right to receive one newly-issued Ferroglobe ordinary share, nominal value $7.50 per share. The ordinary shares were registered by the Company pursuant to a registration statement on Form F-4, which was declared effective by the SEC on August 11, 2015, and trade on the NASDAQ Global Select Market under the ticker symbol “GSM.”

 

On June 22, 2016 the Company completed a reduction of the share capital and as such the nominal value of each share has been reduced from $7.50 to $0.01, with the amount of the capital reduction being credited to a distributable reserve.

 

On November 18, 2016, Class A Ordinary Shares were converted into ordinary shares of Ferroglobe as a result of the distribution of beneficial interest units in the Ferroglobe Representation and Warranty Insurance Trust to certain Ferroglobe shareholders.

 

During the years ended December 31, 2019 and December 31, 2020, the Company did not issue new ordinary shares of any class.

 

Upon the closing of the financing transaction at July 29, 2021, the company issued 8,918,618 new ordinary shares to Rubric Capital Management LP on behalf of certain managed or sub-managed funds and accounts and Grupo Villar Mir, S.A.U for a total issued share capital of $40 million, and 1,900,000 shares and 7,013,872 shares par value $0.01 amounting to $51,522 thousand as equity work fee and bondholder equity stake related to the financing transactions.

 

The transaction fees incurred in the issuance of the share capital of $40 million amounting to $6,647 thousand have been accounted for as a deduction from equity.

 

On October 6, 2021, the Company has entered into an equity distribution agreement (the “Equity Distribution Agreement”) with B. Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the ordinary shares, par value $0.01 per share, of Ferroglobe PLC, by which the Company may offer and sell ordinary shares having an aggregate offering price of up to $100,000,000 from time to time through B. Riley Securities, Inc. and Cantor Fitzgerald & Co. as our sales agents. The company has sold 186,053 ordinary shares with net proceeds of $1.4 million.

 

113

 

At December 31, 2021, there were 188,882,316 ordinary shares in issue with a par value of $0.01, for a total issued share capital of $1,962 thousand, (2020: 170,863,773 ordinary shares in issue with a par value of $0.01, for a total issued share capital of $1,784 thousand). The Company held 1,568,854 ordinary shares in treasury.

 

At December 31, 2021, the Company’s largest shareholders are as follows:

 

		Number of Shares				Percentage of
Name		Beneficially Owned				Outstanding Shares (*)
Grupo Villar Mir, S.A.U.			91,125,519				48.60	%
Rubric Capital Management LP			13,648,711				7.3	%
The Goldman Sachs Group, Inc.			9,806,757				5.2	%

 

(*) 187,313,460 ordinary shares were outstanding at 31 December 2021, comprising 188,882,316 shares in issue less 1,568,854 shares held in treasury

 

Valuation adjustments

 

Valuation adjustments comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Actuarial gains and losses			5,525				4,833
Hedging instruments and other			—				922
Total			5,525				5,755

 

Changes in actuarial gain and losses are due to remeasurements of the net defined benefit liability, see Note 15.

 

Capital management

 

The Company’s primary objective is to maintain a balanced and sustainable capital structure through the industry’s economic cycles, while keeping the cost of capital at competitive levels so as to fund the Company’s growth. The main sources of financing are as follows:

 

  1. cash flow from operations;

 

  2. bank borrowings,

 

  3. debt instruments, including the Reinstated Senior Notes and the Super Senior Notes due 2025.

 

  4. factoring and forfaiting of receivables

 

Capital Raising and Extension of the Maturity of the Notes

 

On March 27, 2021, Ferroglobe and Globe and certain other members of our group entered into the Lock-Up Agreement with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital that set forth a plan to refinance the Notes and restructure our balance sheet. On July 30,2021 the company announced the occurrence of the “Transaction Effective Date” under the lock-up agreement dated March 27, 2021 (the “Lock-Up Agreement”) between the Parent and the financial stakeholders. The Transaction Effective Date marked the completion of the financing proposal.

 

114

 

The principal elements of the restructuring, are set forth below: 

 

  · Issuance of $60 million of new senior secured notes

 

  · Issuance of $40 million in new equity of Ferroglobe

 

  · Extension of the maturity date of the Notes from March 31, 2022 to December 31, 2025 and amendment of certain other terms.

 

The Company manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may restructure or issue new borrowings or debt, make dividend payments, return capital to shareholders or issue new shares. Management’s review of the Company’s capital structure includes monitoring of the leverage ratio.

 

Dividends

 

There have not been dividends paid or proposed by the Company during the year ended December 31, 2021 neither during the year ended December 31, 2020.

 

There were earnings distributed by a Joint Venture participated by a Globe Speciality Metals, Inc subsidiary to non-controlling interests during the year ended December 31, 2021.

 

Non-controlling interests

 

The changes in non-controlling interests in the consolidated statements of financial position in 2021 and 2020 were as follows:

 

		Balance
		US$'000
Balance at January 1, 2020			118,077
Loss for the year			(3,419	)
Translation differences			(154	)
Balance at December 31, 2020			114,504
Loss for the year			(4,750	)
Dividends paid to joint venture partner			(5,880	)
Translation differences			166
Other			2,013
Balance at December 31, 2021			106,053

 

The stand-alone statutory information regarding the largest non-controlling interests, in accordance with IFRS 12 Disclosure of Interests in Other Entities, is as follows:

 

WVA Manufacturing, LLC (WVA) was formed on October 28, 2009 as a wholly-owned subsidiary of Globe. On November 5, 2009, Globe sold a 49% membership interest in WVA to Dow Corning Corporation (currently named “Dow”), an unrelated third party. As part of the sale of the 49% membership interest to Dow, an operating agreement and an output and supply agreement were established. The output and supply agreement states that of the silicon metal produced by WVA, 49% will be sold to Dow and 51% to Globe, which represents each member’s ownership interest, at a price equal to WVA’s actual production cost plus $100 per metric ton. The agreement will automatically terminate upon the dissolution or liquidation of WVA in accordance with the joint venture agreement between Globe and Dow. As of December 31, 2021 and 2020, the balance of Non-controlling interest related to WVA was $61,912 thousand and $70,270 thousand, respectively.

 

Quebec Silicon Limited Partnership (QSLP), formed under the laws of the Province of Québec on August 20, 2010 is managed by its general partner, Quebec Silicon General Partner Inc., which is 51% property of Globe. QSLP owns and operates the silicon metal operations in Bécancour, Québec. QSLP’s production output is subject to a supply agreement, which sells 51% of the production output to Globe and 49% to Dow, which represents each member’s ownership interest, at a price equal to QSLP’s actual production cost plus 31 Canadian dollars per metric ton. As of December 31, 2021 and 2020, the balance of non-controlling interest related to QSLP was $37,682 thousand and $44,808 thousand, respectively.

 

115

 

		2021								2020								2019
		WVA				QSLP				WVA				QSLP				WVA				QSLP
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Statements of Financial Position
Non-current assets			76,865				63,088				80,887				67,806				80,923				63,639
Current assets			66,336				46,186				58,404				37,095				56,839				30,931
Non-current liabilities			14,677				19,005				14,677				18,186				14,677				19,944
Current liabilities			32,612				14,671				23,208				16,320				27,579				7,277
Income Statements
Sales			165,660				89,446				156,995				70,637				167,503				78,414
Operating profit			6,696				2,093				5,900				3,113				6,688				252
Profit before taxes			6,507				1,237				5,900				2,898				6,423				(36	)
Net (loss) income			3,318				613				3,008				1,666				3,276				(70	)
Cash Flow Statements
Cash flows from operating activities			11,981				8,997				28,683				15,387				2,287				3,720
Cash flows from investing activities			(3,893	)			(4,956	)			(7,977	)			(5,227	)			(2,256	)			(3,544	)
Cash flows from financing activities			—				—				—				—				—				227
Exchange differences on cash and cash equivalents in foreign currencies			—				31				—				45				—				149
Beginning balance of cash and cash equivalents			27,272				12,524				6,566				2,319				6,535				1,767
Ending balance of cash and cash equivalents			35,360				16,596				27,272				12,524				6,566				2,319

 

116

 

14.  Earnings (loss) per ordinary share

 

Basic earnings (loss) per ordinary share are calculated by dividing the consolidated profit (loss) for the year attributable to the Parent by the weighted average number of ordinary shares outstanding during the year, excluding the average number of treasury shares held in the year, if any. Dilutive earnings (loss) per share assumes the exercise of stock options, provided that the effect is dilutive.

 

		2021				2020				2019
		US$'000				US$'000				US$'000
(Loss) for the year from continuing operations			(115,374	)			(244,359	)			(370,277	)
(Loss) profit for the year from discontinued operations			—				(5,399	)			84,637
Total (Loss) for the year			(115,374	)			(249,758	)			(285,640	)
Attributable to the Parent			(110,624	)			(246,339	)			(280,601	)
Attributable to non-controlling interests			(4,750	)			(3,419	)			(5,039	)
Earnings per share
			2021				2020				2019
Numerator:
(Loss) attributable to the Parent (US$'000)			(110,624	)			(246,339	)			(280,601	)
Denominator:
Weighted average basic and dilutive shares outstanding			176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)			(0.63	)			(1.46	)			(1.66	)
Numerator:
(Loss) for the year from continuing operations attribuitable to the Parent (US$'000)			(110,624	)			(240,940	)			(365,238	)
Denominator:
Weighted average basic and dilutive shares outstanding			176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)			(0.63	)			(1.42	)			(2.16	)
Numerator:
(Loss) profit for the year from discontinued operations (US$'000)			—				(5,399	)			84,637
Denominator:
Weighted average basic and dilutive shares outstanding			176,508,144				169,269,281				169,152,905
Basic and diluted (loss) earnings per ordinary share (US$)			—				(0.03	)			0.50

 

Potential ordinary shares of 4,359,436, of 3,411,974 and of 445,008 were excluded from the calculation of diluted earnings (loss) per ordinary share in 2021, 2020 and 2019 respectively because their effect would be anti-dilutive.

 

117

 

15.  Provisions

 

Provisions comprise the following at December 31:

 

		2021												2020
		Non- Current				Current				Total				Non- Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Provision for pensions			41,238				180				41,418				56,395				191				56,586
Environmental provision			2,562				1,133				3,695				2,910				1,256				4,166
Provisions for litigation			—				1,952				1,952				—				1,355				1,355
Provisions for third-party liability			8,905				—				8,905				10,759				—				10,759
Provisions for C02 emissions allowances			3,033				107,213				110,246				—				40,161				40,161
Provision for restructuring cost			—				22,350				22,350				—				2				2
Other provisions			5,220				4,797				10,017				38,423				12,331				50,754
Total			60,958				137,625				198,583				108,487				55,296				163,783

 

118

 

Restructuring provision is related to the restructuring process in Château-Feuillet facility in France amounting $21,717 thousand and Cinca facility in Spain amounting $633 thousand.

 

The changes in the various line items of provisions in 2021 and 2020 were as follows:

 

										Provisions for				Provisions for				Provisions for				Provisions for
		Provision for				Environmental				Litigation				Third				CO2 Emissions				Restructuring				Other
		Pensions				Provision				in Progress				Party Liability				Allowances				Cost				Provisions				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Balance at January 1, 2020			57,729				4,108				3,905				9,263				34,938				2				21,002				130,943
Charges for the year			5,340				117				184				268				38,249				—				30,890				75,048
Provisions reversed with a credit to income			(1,843	)			—				—				—				—				—				(1,972	)			(3,815	)
Amounts used			(3,514	)			(26	)			(2,886	)			(198	)			(35,860	)			—				—				(42,484	)
Provision against equity			(3,260	)			—				—				568				—				—				—				(2,692	)
Exchange differences and others			2,134				(33	)			152				858				2,834				—				838				6,783
Disposals from business divestitures			—				—				—				—				—				—				—				—
Balance at December 31, 2020			56,586				4,166				1,355				10,759				40,161				2				50,754				163,783
Charges for the year			5,990				28				934				588				97,982				31,838				(12	)			137,348
Provisions reversed with a credit to income			(1,419	)			(189	)			—				—				(7,830	)			—				(9,419	)			(18,857	)
Amounts used			(9,911	)			(1	)			(233	)			(535	)			(18,420	)			(9,534	)			(269	)			(38,903	)
Provision against equity			(6,847	)			—				—				(1,081	)			—				—				—				(7,928	)
Transfers from/(to) other accounts			—				(33	)			—				—				—				44				(28,437	)			(28,426	)
Exchange differences and others			(2,981	)			(276	)			(104	)			(826	)			(1,647	)			—				(2,600	)			(8,434	)
Balance at December 31, 2021			41,418				3,695				1,952				8,905				110,246				22,350				10,017				198,583

 

119

 

The main provisions relating to employee pensions are as follows:

 

France

 

These relate to various obligations assumed by FerroPem, SAS with various groups of employees relate to long-service benefits, medical insurance supplements and retirement obligations, all of which are defined unfunded benefit obligations, whose changes in 2021 and 2020 were as follows:

 

		2021				2020
		US$'000				US$'000
Obligations at the beginning of year			34,496				32,795
Current service cost			1,082				1,580
Borrowing costs			212				242
Actuarial differences			(3,003	)			(2,170	)
Benefits paid			(995	)			(1,037	)
Exchange differences			(2,412	)			3,086
Others			(3,430	)			—
Obligations at the end of year			25,950				34,496

 

At December 31, 2021 and 2020 the effect of a 1% change in discount rate would have resulted in a change to the provision of approximately $3,288 thousand and $4,953 thousand, respectively.

 

The following table reflects the gross benefit payments that are expected to be paid for the benefit plans for the year ended December 31, 2021:

 

		2021
		US$'000
2022			1,016
2023			1,281
2024			2,078
2025			1,563
2026			1,488
Years 2027-2031			8,458

 

The subsidiary recognized provisions in this connection based on an actuarial study performed by an independent expert.

 

South Africa

 

Defined benefit plans relate to Retirement medical aid obligations and Retirement benefits. Actuarial valuations are performed periodically by independent third parties and in the actuary’s opinion the fund was in a sound financial position. The valuation was based upon the amounts as per the latest valuation report received from third party experts.

 

Retirement medical aid obligations

 

The Company provides post-retirement benefits by way of medical aid contributions for employees and dependents.

 

Retirement benefits

 

It is the policy of the Company to provide retirement benefits to all its employees and therefore membership of the retirement fund is compulsory. The Company has both defined contribution and defined benefit plans. The pension fund obligation is recognized in current provisions as the Company will contribute the difference to the plan assets within the next 12 months.

 

120

 

In this regard, the changes of this provision in 2021 and 2020 were as follows:

 

		2021				2020
		US$'000				US$'000
Obligations at beginning of year			3,461				4,601
Current service cost			32				47
Borrowing costs			390				435
Actuarial differences			526				(1,238	)
Benefits paid			(232	)			(278	)
Exchange differences			(398	)			(106	)
Obligations at end of year			3,779				3,461

 

At December 31, 2021 and 2020, the effect of a 1% change in the cost of the medical aid would have resulted in a change to the provision of approximately $481 thousand and $378 thousand, respectively.

 

The breakdown, in percentage, of the plan assets are as follows:

 

		2021				2020
Cash			2.85	%			1.84	%
Equity			47.21	%			41.70	%
Bond			17.32	%			18.53	%
Property			2.79	%			1.68	%
International			28.42	%			32.02	%
Others			1.41	%			4.23	%
Total			100.00	%			100.00	%

 

As of December 31, 2021 and 2020 the Plan assets amounted to $1,706 thousand and $2,204 thousand, respectively. Changes in the fair value of plan assets linked to the defined benefit plans in South Africa were as set forth in the following table:

 

		2021				2020
		US$'000				US$'000
Fair value of plan assets at the beginning of the year			2,204				2,126
Interest income on assets			172				200
Benefits paid			(775	)			—
Actuarial differences			223				(77	)
Other			(118	)			(45	)
Fair value of plan assets at the end of the year			1,706				2,204
Actual return on assets			395				122

 

Venezuela

 

Benefit Plan

 

The company FerroVen has pension obligations to all of its employees who, once reaching retirement age, have accumulated at least 15 years of service to the company and receive a Venezuelan Social Security Institute (IVSS) pension. In addition to the pension paid by the IVSS, 80% of the basic salary accrued when the pension benefit is awarded is guaranteed and paid by means of a lifelong monthly pension.

 

The most recent of the present value of the defined benefit obligation actuarial valuation was determined at December 31, 2021 by independent actuaries. The present value of the obligation for defined unfunded benefit cost, the current service cost and past service cost were determined using the projected unit credit method.

 

121

 

In this regards, the changes of this provision in 2021 and 2020 were as follows:

 

		2021				2020
		US$'000				US$'000
Obligations at the beginning of year			22				2,577
Current service cost			102				26
Borrowing costs			115				596
Benefits paid			(2	)			(2	)
Exchange differences			(47	)			(956	)
Other			—				(2,220	)
Obligations at the end of year			190				22

 

The summary of the main actuarial assumptions used to calculate the aforementioned obligations is as follows:

 

		France				South Africa							Venezuela
		2021		2020		2021		2020					2021				2020
Salary increase		1.60%-6.10%		1.60%-6.10%		N/A		5.80%-9.10%						500	%			500	%
Discount rate		0.75%		0.75%		10.60-11.60%		9.80%-13.2%						536	%			536	%
Expected inflation rate		1.60%		1.60%		5.80-7.10%		4.80%-7.60%						550	%			550	%
Mortality		TGH05/TGF05		TGH05/TGF05		SA 85-90 / PA (90)		SA 85-90 / PA (90)						GAM 83				GAM 83
Retirement age		65		65		63		63						63-64				65

 

High percentages are driven by hyperinflationary economy in Venezuela.

 

North America

 

a. Defined Benefit Retirement and Post-retirement Plans

 

Globe Metallurgical Inc. (“GMI”) sponsors three non-contributory defined benefit pension plans covering certain employees, which were all frozen in 2003. Core Metals sponsors a non-contributory defined benefit pension plan covering certain employees, which was closed to new participants in April 2009.

 

The Plan’s liabilities have been completely settled as a result of the amendment terminating the plan.
There are no remaining participants due to the plan termination effective September 30, 2021. All obligations have been satisfied due to the plan termination. The total settlement payment amounting to $2,784 thousand resulted in a net income of $1,027 thousand.

 

Quebec Silicon Limited partnership (“QSLP”) sponsors a contributory defined benefit pension plan and postretirement benefit plan for certain employees, based on length of service and remuneration. Post-retirement benefits consist of a group insurance plan covering plan members for life insurance, disability, hospital, medical, and dental benefits. The contributory defined benefit pension plan was closed to new participants in December 2013. On December 27, 2013, the Communications, Energy and Paper Workers Union of Canada (“CEP”) ratified a new collective bargaining agreement, which resulted in a curtailment pertaining to the closure of the postretirement benefit plan for union employees retiring after January 31, 2016. The Company’s funding policy has been to contribute, as necessary, an amount in excess of the minimum requirements in order to achieve the Company’s long-term funding targets.

 

122

 

 

Benefit Obligations and Funded Status – The following provides a reconciliation of the benefit obligations, plan assets and funded status of the North American plans as of December 31, 2021 and 2020:

 

		2021																2020
		USA				Canada								Total				USA				Canada								Total
										Post-																Post-
		Pension				Pension				retirement								Pension				Pension				retirement
		Plans				Plans				Plans								Plans				Plans				Plans
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Benefit obligation			—				25,349				8,569				33,918				39,214				28,110				9,632				76,956
Fair value of plan assets			(14	)			(22,417	)			—				(22,431	)			(36,011	)			(22,337	)			—				(58,348	)
Provision for pensions			(14	)			2,932				8,569				11,487				3,203				5,773				9,632				18,608

 

All North American pension and post-retirement plans are underfunded. At December 31, 2021 and 2020, the accumulated benefit obligation was $25,349 thousand and $67,324 thousand for the defined pension plan and $8,569 thousand and $9,632 thousand for the post-retirement plans, respectively.

 

The assumptions used to determine benefit obligations at December 31, 2021 and 2020 for the North American plans are as follows:

 

North America – 2021

North America – 2020

USA

Canada

USA

Canada

Pension

Pension

Postretirement

Pension

Pension

Postretirement

Plan

Plan

Plan

Plan

Plan

Plan

Salary increase

N/A

2.75% - 3.00%

N/A

N/A

2.75% - 3.00%

N/A

Discount rate

N/A

3.21%

3.30%

2.25%

2.61%

2.75%

Expected inflation rate

N/A

N/A

N/A

N/A

N/A

N/A

Mortality

N/A

CPM2014- Private Scale CPM-B

CPM2014- Private Scale CPM-B

Pri-2012 Blue Collar Mortality

CPM2014- Private

CPM2014- Private Scale CPM-B

Retirement age

N/A

58-60

58-60

65

58-60

58-60

 

The discount rate used in calculating the present value of our pension plan obligations is developed based on the BPS&M Pension Discount Curve for 2021 and 2020 and the Mercer Proprietary Yield Curve for 2021 and 2020 for QSLP Pension and post-retirement benefit plans and the expected cash flows of the benefit payments.

 

The Company expects to make discretionary contributions of approximately $861 thousand to the defined benefit pension and post-retirement plans for the year ending December 31, 2021.

 

The pension plan exposes the Company to the following risks:

 

(i) Investment risk: The defined benefit obligation is calculated using a discount rate. If the return on plan assets is below this rate, a plan deficit occurs.

 

(ii) Interest rate risk: Variation in bond rates will affect the value of the defined benefit obligation.

 

(iii) Inflation risk: The defined benefit obligation is calculated assuming a certain level of inflation. An actual inflation higher than expected will have the effect of increasing the value of the defined benefit obligation.

 

123

 

The following reflects the gross benefit payments that are expected to be paid in future years for the benefit plans for the year ended December 31:

 

						Non-pension
						Postretirement
		Pension Plans				Plans
		US$'000				US$'000
2022			1,043				194
2023			1,086				203
2024			1,176				228
2025			1,230				251
Years 2026-2030			6,599				1,578

 

The accumulated non-pension post-retirement benefit obligation has been determined by application of the provisions of the Company’s health care and life insurance plans including established maximums, relevant actuarial assumptions and health care cost trend rates projected at 5.1% for 2021 and decreasing to an ultimate rate of 4.0% in fiscal 2040. At December, 31 2021 and 2020, the effect of a 1% increase in health care cost trend rate on the non-pension post-retirement benefit obligation is $1,735 thousand and $2,085 thousand, respectively. At December, 31 2021 and 2020 the effect of a 1% decrease in health care cost trend rate on the non-pension post-retirement benefit obligation is ($1,327) thousand and ($1,567) thousand.

 

The changes to these obligations in the current year ended December 31, 2021 were as follows:

 

		2021
		USA				Canada								Total
		Pension				Pension				Post-retirement
		Plans				Plans				Plans
		US$'000				US$'000				US$'000				US$'000
Obligations at the beginning of year			39,214				28,110				9,632				76,956
Service cost			151				162				371				684
Borrowing cost			566				720				262				1,548
Actuarial differences			(18	)			(2,688	)			(1,555	)			(4,261	)
Benefits paid			(1,693	)			(1,020	)			(169	)			(2,882	)
Exchange differences							65				28				93
Expenses			(119	)			—				—				(119	)
Plan settlement			(38,101	)			—				—				(38,101	)
Obligations at the end of year			—				25,349				8,569				33,918

 

The plan assets of the defined benefit and retirement and post-retirement plans in North America are comprised of assets that have quoted market prices in an active market. The breakdown as of December 31, 2021 and 2020 of the assets by class are:

 

		2021				2020
Cash			—	%			33	%
Equity Mutual Funds			27	%			10	%
Fixed Income Securities			14	%			32	%
Assets held by insurance company			59	%			25	%
Total			100	%			100	%

 

124

 

For the year ended December 31, 2021, the changes in plan assets were as follows:

 

		2021
		USA				Canada
		Pension				Pension
		Plans				Plans				Total
		US$'000				US$'000				US$'000
Fair value of plan assets at the beginning of the year			36,011				22,337				58,348
Interest income on assets			514				582				1,096
Benefits paid			(1,693	)			(1,020	)			(2,713	)
Actuarial return on plan assets			(610	)			(47	)			(657	)
Exchange differences			—				57				57
Other			48				508				556
Plan Settelment			(34,256	)			—				(34,256	)
Fair value of plan assets at the end of the year			14				22,417				22,431

 

b. Other Benefit Plans

 

The Company administers healthcare benefits for certain retired employees through a separate welfare plan requiring reimbursement from the retirees.

 

The Company’s subsidiary, GMI, provides two defined contribution plans (401(k) plans) that allow for employee contributions on a pretax basis. The Company agrees to match 25% of participants’ contributions up to a maximum of 6% of compensation. Additionally, the Company sponsors a defined contribution plan for employees of Core Metals. Under the plan, the Company may make discretionary payments to salaried and non-union participants in the form of profit sharing and matching funds.

 

Other benefit plans offered by the Company include a Section 125 cafeteria plan for the pretax payment of healthcare costs and flexible spending arrangements.

 

Environmental provision

 

Environmental provisions related to $2,562 thousand of non-current environmental rehabilitation obligations as of December 31, 2021 (2020: $2,910 thousand) and $1,133 thousand of current environmental rehabilitation obligations as of December 31, 2021 (2020: $1,256 thousand). A significant part of these provisions is related to the company's mining activity.

 

Provisions for litigation

 

Certain employees of FerroPem, SAS, then known as Pechiney Electrometallurgie, S.A., may have been exposed to asbestos at its plants in France in the decades prior to FerroAtlántica’s purchase of that business in December 2004. The Company has recognized a provision of $1,143 thousand during the year ended December 31, 2021 as part of the current portion of Provisions for litigation (2020: $1,080 thousand). See Note 25 for further information.

 

The timing and amounts potential liabilities arising from such exposures is uncertain. The provision reflects the Company’s best estimate of the expenditure required to meet resulting obligations.

 

Provisions for third-party liability

 

Provisions for third-party liability presented as non-current obligations $8,905 thousand relate to health costs for retired employees (2020: $10,759 thousand) in the The Company’s subsidiary, FerroPem, SAS.

 

The following table reflects the gross benefit payments that are expected to be paid for the benefit plans for the year ended December 31, 2021:

 

		2021
		US$'000
2022			-
2023			532
2024			269
2025			272
2026			277
Years 2027-2031			1,428

 

The recognized provisions are based on an actuarial study performed by an independent expert.

 

125

 

Other provisions

 

Included in other provisions are current obligations arising from past actions that involve a probable outflow of resources that can be reliably estimated. Other provisions include taxes of $2,506 thousand (2020: $6,053 thousand) and $6,422 thousand are related to the accrued estimated costs of reclaiming the land after it has been mined for gravel or coal.

 

16.  Bank borrowings

 

Bank borrowings comprise the following at December 31:

 

		2021
						Non-Current				Current
		Limit				Amount				Amount				Total
		US$'000				US$'000				US$'000				US$'000
Borrowings carried at amortised cost:
Borrowings from receivable factoring facility			67,956				—				93,090				93,090
Other loans			—				3,670				2,207				5,877
Total							3,670				95,297				98,967

 

		2020
						Non-Current				Current
		Limit				Amount				Amount				Total
		US$'000				US$'000				US$'000				US$'000
Borrowings carried at amortised cost:
Credit facilities			100,000				—				27,237				27,237
Borrowings from receivable factoring facility			73,626				—				74,844				74,844
Other loans							5,277				249				5,526
Total							5,277				102,330				107,607

 

Credit facilities

 

Credit facilities comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Secured loans carried at amortised cost
Principal amount			—				31,155
Unamortised issuance costs			—				(3,918	)
Accrued interest			—				—
Total			—				27,237
Amount due for settlement within 12 months			—				27,237
Amount due for settlement after 12 months			—				—
Total			—				27,237

 

126

 

On October, 11, 2019, Ferroglobe subsidiaries Globe Specialty Metals, Inc., and QSIP Canada ULC, as borrowers, entered into a Credit and Security Agreement for a new $100 million north American asset-based revolving credit facility (the “ABL Revolver”), with PNC Bank, N.A., as lender.

 

On March 16, 2021, the Company has repaid in its entirety the remaining balance at the date for an amount equal to $39,476 thousand, cancelling its obligations derived from the contract.

 

Borrowings from receivable factoring facility

 

On October 2, 2020, the Company ended the receivables funding agreement over European receivables, signing a new factoring agreement with a Leasing and Factoring Agent, for anticipating the collection of receivables of the Company’s European entities. As a result of the agreement, the Agent provided a cash consideration of circa $48.8 million, repurchased the receivables portfolio sold to the SPE on September 28, and consequently assumed the loan tranche of the senior borrower to the SPE. Also, the senior loan and intermediate subordinate loan tranches were paid with internal sources of funds, terminating the financing structure of the securitization program (See Note 10).

 

The main characteristics of the agreement are the following:

 

- the maximum cash consideration advanced for the financing facility is up to EUR 60,000 thousand;

 

- over collateralization of 10% of accounts receivable as guarantee provided to the Agent until payment has been satisfied;

 

- Annual fee of 0.15% applied to the annual revenues ceded to the Agent;

 

- Financing commission of 1% charged annually;

 

Other conditions are set in relation to credit insurance policy which has been structured in an excess of loss policy where the first EUR 5,000 thousand of bad debt losses are not covered by the insurance provider. The Company has assumed the cash collateralization for the entire excess of loss, as agreed in contractual terms.

 

Judgements relating to the accounting for the factoring agreement

 

The Company has assessed whether it has transferred substantially all risks and rewards, continuing to be exposed to the variable returns from its involvement in the factoring agreement as it is exposed to credit risk, so the conclusion is that the derecognition criteria is not met and therefore, the account receivables sold are not derecognized from the balance sheet and an obligation is recognized as bank borrowings for the amount of cash advanced by the Leasing and Factoring Agent.

 

As of December 31, 2021, the Company exceeded the limit, the lender agreed a temporary increase of the limit.

 

Other Loans

 

Include loans held by The Company to finance their current activities in France and Argentina. The loan related to France was signed in July 2020 for an amount of $5,277 thousand. The balance as of December 31, 2021 is $3,670 thousand. The loan is zero interest rate, guaranteed by French government, and the initial period is one year duration, with repayment of up to five years. The loans related to Argentina are three short term loans for a total amount of $975 thousand due in 2022.

  

Since December 2019, the Company entered into a forfaiting program where some of the Company’s French and Spanish entities may assign their rights to receive payments under the Contracts with the customer “ArcelorMittal Sourcing s.c.a.” in accordance with a forfaiting scheme.

 

127

 

Foreign currency exposure of bank borrowings

 

The breakdown by currency of bank borrowings at December 31, is as follows:

 

		2021
		Non-Current				Current
		Principal				Principal
		Amount				Amount				Total
		US$'000				US$'000				US$'000
Borrowings in US Dollars			—				1,245				1,245
Borrowings in Euros			3,670				94,052				97,722
Total			3,670				95,297				98,967

 

		2020
		Non-Current				Current
		Principal				Principal
		Amount				Amount				Total
		US$'000				US$'000				US$'000
Borrowings in US Dollars			—				27,486				27,486
Borrowings in other currencies			5,277				74,844				80,121
Total			5,277				102,330				107,607

 

Contractual maturity of non-current bank borrowings

 

The contractual maturity of bank borrowings at December 31, 2021, was as follows:

 

		2021
		2022				2025				Total
		US$'000				US$'000				US$'000
Credit facilities			—				—				—
Borrowings from supplier factoring facility			93,941				—				93,941
Other loans			2,229				3,670				5,899
Total			96,170				3,670				99,840

 

17.  Leases

 

Lease obligations

 

Lease obligations as at December 31 are as follows:

 

		2021												2020
		Non-												Non-
		Current				Current				Total				Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Other leases			9,968				8,390				18,358				13,994				8,542				22,536
Total			9,968				8,390				18,358				13,994				8,542				22,536

 

As of December 31, 2021 and 2020 Ferroglobe holds short-term leases and low-value leases for which it has elected to recognise right of use assets and lease liabilities. Each lease is reflected in the statement of financial position as a right of use asset and a lease liability.

 

As of December 31, 2021 and 2020 Ferroglobe has not recorded any expense relating to variable lease payments.

 

128

 

The detail, by maturity, of the non-current payment obligations under leases as of December 31, 2021 is as follows:

 

		2023				2024				2025				2026				2027 and after				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Other leases			5,905				1,672				1,027				310				1,054				9,968
Total			5,905				1,672				1,027				310				1,054				9,968

 

IFRS 16 has had the following effect on components of the consolidated financial statements:

 

		2021				2020
		US$'000				US$'000
Balance at December 31,			(22,536	)			(25,872	)
Additions			(7,761	)			(5,471	)
Disposals and other			517				102
Interest			(1,100	)			(1,358	)
Lease payments			11,285				11,673
Exchange differences			1,237				(1,610	)
Balance at December 31,			(18,358	)			(22,536	)

 

Lease liabilities were discounted at the average incremental borrowing rate of 5.5%.

 

Leases are presented as follows in the Statement of financial position:

 

		2021				2020
		US$'000				US$'000
Non-current assets
Leased land and buildings			17,156				17,588
Leased plant and machinery			27,762				24,446
Accumulated depreciation			(29,855	)			(22,498	)
Non-current liabilities
Lease liabilities			(9,968	)			(13,994	)
Current liabilities
Lease liabilities			(8,390	)			(8,542	)

 

Leases are presented as follows in the Consolidated income statement:

 

		2021				2020
		US$'000				US$'000
Depreciation and amortization charges, operating allowances and write-downs
Depreciation of right of use assets			7,357				10,112
Finance costs
Interest expense on lease liabilities			1,100				1,358
Exchange differences
Currency translation losses on lease liabilities			1,237				(1,610	)
Currency translation gains on right of use assets			(1,838	)			2,138

 

Leases are presented as follows in the Statement of cash flows:

 

		2021				2020
		US$'000				US$'000
Payments for:
Principal			10,185				10,315
Interest			1,100				1,358

 

129

 

18.  Debt instruments

 

Debt instruments comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Notes carried at amortised cost
Secured Super Senior Notes			60,000				—
Secured Reinstated Senior Notes			351,003				—
Unsecured Stub Notes			4,942				350,000
Unamortised issuance costs			(6,064	)			(3,380	)
Accrued coupon interest			30,416				10,888
Total			440,297				357,508
Amount due for settlement within 12 months			35,359				10,888
Amount due for settlement after 12 months			404,938				346,620
Total			440,297				357,508

 

On February 15, 2017, Ferroglobe and Globe (together, the “Issuers”) co-issued $350,000 thousand aggregate principal amount of 9.375% senior unsecured notes due March 1, 2022 (the “Notes”). The proceeds were used primarily to repay existing indebtedness, including borrowings, certain credit facilities and other loans. Interest on the Notes is payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2017.

  

On March 27, 2021, Ferroglobe and Globe and certain other members of our group entered into the Lock-Up Agreement with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital that set forth a plan to implement a debt restructuring plan.

 

On July 30,2021 the company announced the occurrence of the “Transaction Effective Date” under the lock-up agreement dated March 27, 2021 (the “Lock-Up Agreement”) between the Parent and the financial stakeholders. The Transaction Effective Date marks the completion of the financing process.

 

As part of the transaction:

 

● The Company completed the exchange of 98.588% of the 9⅜% Senior Notes due 2022 (the “Stub Notes”) issued by the Ferroglobe and Globe for a total consideration per $1,000 principal amount of Old Notes comprising (i) $1,000 aggregate principal amount of new 9⅜% senior secured notes due 2025 issued by Ferroglobe Finance Company, PLC and Globe (“the Issuers”) (the “Reinstated Senior Notes”) plus (ii) a fee amounting to $51,611 thousand. Notes not exchanged (the “Stub Notes”) are due on March 1, 2022.

 

● Ferroglobe Finance Company, PLC (a new, subsidiary of the Company) issued $60 million in aggregate proceeds of new 9% senior secured notes due 2025 (the “Super Senior Notes”).

 

At the completion of the comprehensive refinancing, we recognized a charge of $90.8 million (See Note 26.4). This relates to all the advisory fees and expenses, including equity granted to the noteholders, incurred during the refinancing of the prior 9.375% Senior Notes due 2022, which were deemed to be extinguished at closing and replaced with new 9.375% million Senior Notes due 2025.

 

130

 

For accounting purposes the refinancing of the Senior Notes has been considered a debt extinguishment. As a consequence:

 

(i) We recognized a finance expense amounting to $31.7 million related to the advisory fees incurred in the exchange of the notes,

 

(ii) Similarly to the transaction fees, the shares issued to the bondholders and the work fee were recognized as a one-off expense, amounting $51.6 million at market value.

 

(iii) In the case of an extinguishment, any outstanding upfront fees that had been capitalized at the issuance of the original notes needs to be recycled through profit and loss, this amounted $1 million. Additionally, as a result of the refinancing, the gross carrying amount of the amortized cost of the Reinstated Notes has been adjusted to reflect actual and revised estimated contractual cash flows. The gross carrying amount of the Reinstated Notes has been recalculated as the present value of the estimated future contractual cash flows that are discounted at the effective interest rate of 9.096%. The adjustment amounts to $6,462 and it was recognized as an expense in the income statement. After the exchange the Senior notes were accounted under the amortized cost method.

 

The fair value of the Reinstated Senior Notes maturing on December 31, 2025, determined by reference to the closing market price on the last trading day of the year (Level 1), was $354,084 thousand.

 

The fair value of the Super Senior Notes maturing on June 30, 2025, determined by reference to the closing market price on the last trading day of the year (Level 1), was $60,742 thousand.

 

The fair value of the Stub Notes maturing on March 1, 2022, determined by reference to the closing market price on the last trading day of the year (Level 1), was $5,082 thousand.

 

Super Senior Notes

 

On May 17, 2021, Ferroglobe Finance Company, PLC (a new, subsidiary of the Company, “The UK issuer”) issued a tranche of the Super Senior Notes, comprising an initial $40 million of an aggregate of $60 million 9.0% senior secured notes due 2025. Additional Super Senior Notes were issued on July 29, 2021 such that a total of $60 million in aggregate principal amount was outstanding on such date.

 

The Super Senior Notes are governed by an indenture (the “Super Senior Notes Indenture”) entered into by, among others, the UK Issuer, GLAS Trustees Limited, as trustee, Global Loan Agency Services Limited, as paying agent, GLAS Trust Corporation Limited, as security agent, and the guarantors named therein (the “Super Senior Notes Guarantors”). The Super Senior Notes mature on June 30, 2025 and are secured by certain share pledges, bank account pledges, intercompany receivables pledges, inventory pledges and security over certain mine concessions, real property, leases and other assets.

 

The Super Senior Notes, and the guarantees thereof, are general secured, senior obligations of the UK Issuer and the Super Senior Notes Guarantors, as applicable, and rank senior in right of payment to any and all of the existing and future indebtedness of the UK Issuer and the Super Senior Notes Guarantors, as applicable, that is expressly subordinated in right of payment to the Super Senior Notes and such guarantees, as applicable.

 

The Super Senior Notes Indenture require us to offer to repurchase all or any part of each holder’s Super Senior Notes upon the occurrence of a change of control, as defined in the Super Senior Notes Indenture, at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon, to the date of purchase.

 

The Super Senior Notes Indenture restricts, among other things, the ability of Ferroglobe and its restricted subsidiaries to:

 

o borrow or guarantee additional indebtedness;

o pay dividends, repurchase shares and make distributions of certain other payments;

o make certain investments;

o create certain liens;

o merge or consolidate with other entities;

o enter into certain transactions with affiliates;

o sell, lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and

o guarantee certain types of other indebtedness of Ferroglobe and its restricted subsidiaries without also guaranteeing the Super Senior Notes.

 

131

 

Reinstated Senior Notes

 

Pursuant to the Exchange Offer, Ferroglobe PLC, the UK Issuer and Globe offered to eligible holders of the Old Notes the opportunity to exchange any and all of the Old Notes for new 9⅜% senior secured notes due 2025 issued by the UK Issuer and Globe.

 

The Reinstated Notes are governed by an indenture (the “Reinstated Notes Indenture”) entered into by, among others, Ferroglobe Finance Company PLC and Globe, as issuers, GLAS Trustees Limited, as trustee, Global Loan Agency Services Limited, as paying agent, GLAS Trust Corporation Limited, as security agent, and the guarantors named therein. The Reinstated Notes are guaranteed on a senior basis by Ferroglobe and each subsidiary of Ferroglobe that guarantees the UK Issuer’s obligations under the Super Senior Notes (other than Globe) (the “Reinstated Notes Guarantors”). The Reinstated Notes mature on December 31, 2025 and are secured by the same collateral that secures the Super Senior Notes.

 

The Reinstated Notes, and the guarantees thereof, are general secured, senior obligations of Ferroglobe Finance Company PLC and Globe and the Reinstated Notes Guarantors, as applicable, and will rank senior in right of payment to any and all of the existing and future indebtedness of Ferroglobe, Globe and the Reinstated Notes Guarantors, as applicable, that is expressly subordinated in right of payment to the Reinstated Notes and such guarantees, as applicable.

 

The Reinstated Notes Indenture require us to offer to repurchase all or any part of each holder’s Reinstated Notes upon the occurrence of a change of control, as defined in the Reinstated Notes Indenture, at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon, to the date of purchase.

  

The Reinstated Notes Indenture restricts, among other things, the ability of Ferroglobe and its restricted subsidiaries to:

  

o borrow or guarantee additional indebtedness;

o pay dividends, repurchase shares and make distributions of certain other payments;

o make certain investments;

o create certain liens;

o merge or consolidate with other entities;

o enter into certain transactions with affiliates;

o sell, lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and

o guarantee certain types of other indebtedness of Ferroglobe and its restricted subsidiaries without also guaranteeing the Reinstated Notes.

 

Compared to the Old Notes Indenture (prior to certain amendments on July 29, 2021) the Reinstated Notes Indenture have generally more stringent restrictive covenants. Some of these differences include, among others, the following:

 

o the elimination of baskets or a reduction of basket sizes in the debt covenant, restricted payment covenant, permitted investments,

o permitted liens and asset disposition;

o the addition of a net leverage test in the debt covenant and reduced flexibility in financial calculations;

o requirement to apply certain excess proceeds to repay debt in accordance with the applicable intercreditor agreement;

o lower event of default thresholds; and

o a 90% guarantor coverage test.

 

132

 

 

 

Stub Notes

 

The Stub Notes are senior unsecured obligations of the Issuers and are guaranteed on a senior basis by certain subsidiaries of Ferroglobe. The Notes are listed on the Irish Stock Exchange. As of December 31, 2021 $4.9 million in aggregate principal amount of the Old Notes was outstanding. This balance was settled on March 1, 2022.

 

The Old Notes are governed by the Old Notes Indenture entered into by, among others, Ferroglobe and Globe, as issuers, Wilmington Trust, National Association, as trustee, registrar and paying agent, and the guarantors named therein (the “Old Notes Guarantors”).

 

The Old Notes and the guarantees thereof are general unsecured, senior obligations of Ferroglobe and Globe and the Old Notes Guarantors, as applicable, and rank senior in right of payment to any and all of the existing and future indebtedness of Ferroglobe, Globe and the Old Notes Guarantors, as applicable, that is expressly subordinated in right of payment to the Old Notes and such guarantees, as applicable.

 

Ferroglobe and Globe may redeem all or, from time to time, part of the Old Notes at a redemption price of 100% of the principal amount of the Old Notes being redeemed plus accrued and unpaid interest and additional amounts, if any, to, but not including, the applicable redemption date.

 

19.  Other financial liabilities

 

Other financial liabilities comprise the following at December 31:

 

		2021												2020
		Non-												Non-
		Current				Current				Total				Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Financial loans from government agencies			4,549				62,464				67,013				29,094				34,802				63,896
Derivative financial instruments			—				—				—								—				—
Total			4,549				62,464				67,013				29,094				34,802				63,896

 

Financial loans from government agencies

 

On September 8, 2016, FerroAtlántica, S.A.U, as borrower, and the Spanish Ministry of Industry, Tourism and Commerce (the “Ministry”), as lender, entered into two loan agreements under which the Ministry made available to the borrower loans in aggregate principal amount of €44,999 thousand and €26,909 thousand, respectively, in connection with industrial development projects relating to the Company’s solar grade silicon project. The loan is contractually due to be repaid in 7 installments over a 10-year period with the first three years as a grace period. The loan of €26,909 thousand was repaid in April 2018. Interest on outstanding amounts under each loan accrues at an annual rate of 3.55%. Default interests are calculated at an annual rate of 3.75%. As of December 31, 2021, the amortized cost of the loan was €54,578 thousand (equivalent to $61,815 thousand) (2020: €44,824 thousand and $55,004 thousand). In November 2018, FAU agreed to transfer to OpCo certain assets which had been acquired with the proceeds of the REINDUS Loan and used exclusively by OpCo in connection with the joint venture in consideration of OpCo assuming liability for the REINDUS Loan. Reindus loan fair value as of December 31, 2021, based on discounted cash flows at a market interest rate (Level 2), amounts to $44,200 thousand.

  

The agreements governing the loans contain the following limitations on the use of the proceeds of the outstanding loan: (1) the investment of the proceeds must occur between January 1, 2016 and February 24, 2019; (2) the allocation of the proceeds must adhere to certain approved budget categories; (3) if the final investment cost is lower than the budgeted amount, the borrower must reimburse the Ministry proportionally; and (4) the borrower must comply with certain statutory restrictions regarding related party transactions and the procurement of goods and services. On May 24, 2019, a report on uses of the loan was presented to the Ministry. On January 26, 2021, the Company received a decision from the Administration under which it was agreed to extend the grace period and the term of loan, and it will be completed by 2030.

 

On January 25, 2022, the Ministry opened a hearing to decide on reimbursement of the loan. The company presented its allegations on February 15, 2022. Based on those allegations, the reimbursement procedure has been suspended and a new final report is expected to be made by the Ministry by the end of 2022 ending the administrative procedure and establishing the definitive amount of the partial reimbursement to be made. Due to this event, the company has decided to reclassify the financial loan to the short term.

 

133

 

The remaining non-current and current balances are related to loans granted mainly by Canadian and Spanish government agencies.

 

Derivative financial instruments

 

The Company does not hold derivative financial instruments as of December 31, 2021 and December 31, 2020.

 

Cross currency swap

 

The Company's operations generate cash flows predominantly in Euros and US dollars. The Company is been exposed to exchange rate fluctuations between these currencies as it expected to convert Euros into US dollars to settle a proportion of the interest and principal of the Notes (see Note 18). To manage this currency risk, the Parent Company entered a cross-currency swap (the “CCS”) on May 12, 2017 where on a semi-annual basis received interest of 9.375% on a notional of $192,500 thousand and pay interest of 8.062% on a notional of €176,638 thousand and it was expected to exchange these Euro and US dollar notional amounts at maturity of the Notes in 2022. The timing of payments of interest and principal under the CCS coincided exactly with those of the Notes.

 

In March, 2020, the Company closed out the cross currency swap resulting in the receipt of cash proceeds of $3,608 thousand.

 

The fair value of the CCS at December 31, 2020 was $ nil (2019: $9,600 thousand) (see Note 29).

 

The Parent Company, which had an Euro functional currency, designated $150,000 thousand of the notional amount of the CCS as a cash flow hedge of the variability of the Euro functional currency equivalents of the future US dollar cash flows of $150,000 thousand of the principal amount of the Notes. In March, 2020, the CCS hedging foreign exchange risk of the Notes was closed out resulting in a change in fair value of $11,161 thousand since the last year end closing. As 77% of the derivative was designated as hedging instrument in a cashflow hedge relationship, $3,168 thousand were recognized in finance income in the income statements for the non-designated portion (2019: $2,729 thousand) and $11,161 thousand were recognized through other comprehensive income in the valuation adjustments reserve (2019: $9,663 thousand gain). Considering that the hedged item remained as a highly probable transaction, the corresponding valuation adjustment reserve should be reclassified to the income statement as the hedged item affects profit or loss over the period to maturity of the Notes. In that sense, during the period of 2020 amounts transferred from the valuation adjustments reserve to the income statement comprised a gain of $5,090 thousand transferred to exchange differences (2019: $2,874 thousand) and a gain of $429 thousand transferred to finance costs (2019: $1,639 thousand). At December 31, 2020, a balance of $(2,226) thousand in respect of the cash flow hedge of the CCS remained in the valuation adjustment reserve. At December 31, 2021, as consecuence of the extinguishment of the original financial liability, the remaining cash flow hedge of the CCS was accounted through profit or loss.

 

At December 31, 2020, the remaining $42,500 thousand of the notional amount of the CCS was not designated as a cash flow hedge before closed out and was accounted for at fair value through profit or loss, resulting in a gain of $3,164 thousand for the year ended December 31, 2020, which is recorded in financial derivative gain in the consolidated income statement (2019: $2,736 thousand).

 

Interest rate swaps

 

The Company previously entered into interest rate swaps to manage the risk of changes in interest rates on certain non-current and current obligations. Since June 30, 2015, the interest rate swaps have been considered as ineffective hedges and as a result the changes in fair value of these derivatives are recognized through profit or loss. During the year ended December, 31, 2019 the Company disposed of the swap relating to the lease of hydroelectrical installations as part of the sale of its 100% interest in subsidiary FerroAtlántica, S.A.U. (“FAU”) to investment vehicles affiliated with TPG Sixth Street Partners.

 

134

 

20.   Trade and other payables

 

Trade and other payables comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Payable to suppliers			200,999				147,512
Trade notes and bills payable			5,001				1,689
Total			206,000				149,201

 

21.   Other Obligations

 

Other obligations comprise the following at December 31:

 

		2021												2020
		Non-												Non-
		Current				Current				Total				Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Payable to non-current asset suppliers			135				2,677				2,812				130				2,633				2,763
Guarantees and deposits			14				4,554				4,568				17				266				283
Contingent consideration			13,504				13,023				26,527				14,859				1,773				16,632
Tolling agreement liability			24,429				2,589				27,018				—				—				—
Total			38,082				22,843				60,925				15,006				4,672				19,678

 

In 2021 we disaggregated “Other liabilities” into an additional line to the balance sheet “Other obligations“ to separately present certain contractual obligations whose nature and function differs from other items presented in the “Other liabilities line”, so as to allow a better understanding of the Company´s financial position.

 

Obligations contained in the new line Other obligations: “Tolling agreement liability”, which used to be presented within “Provisions”; “Glencore earn-out liability”, “Payable to non-current asset suppliers” and “Guarantees and deposits”, which were presented in prior periods within “Other liabilities”, and have been classified as Other obligations for all the years presented.

 

Contingent consideration

 

On February 1, 2018 the Company acquired 100% of the outstanding ordinary shares of Kintuck (France) SAS and Kintuck AS from a wholly-owned subsidiary of Glencore International AG (“Glencore”) and obtained control of both entities. The new subsidiaries were renamed as Ferroglobe Mangan Norge AS and Ferroglobe Manganèse France SAS. The Company completed the acquisition through its wholly-owned subsidiary Ferroatlántica., see Note 5. Consideration included both cash and contingent consideration.

 

The contingent consideration arrangement requires the Company to pay the former owners of Kintuck (France) SAS and Kintuck AS a sliding scale commission based on the silicomanganese and ferromanganese sales spreads of Ferroglobe Mangan Norge and Ferroglobe Manganèse France, up to a maximum amount of $60,000 thousand (undiscounted). The contingent consideration applies to sales made up to eight and a half years from the date of acquisition and if it applies, the payment is on annual basis. During 2021, the total payment made amounts to $3,273 thousand.

 

The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $nil thousand and $60,000 thousand.

 

The fair value of the contingent consideration arrangement as at December, 31, 2021 of $26,537 thousand (2020: $16,632 thousand) was estimated by applying the income approach based on a Monte Carlo simulation considering various scenarios of fluctuation of future manganese alloy spreads as well at the cyclicality of manganese alloy pricing. The fair value measurement is based on significant inputs that are not observable in the market, which IFRS 13 Fair Value Measurement refers to as Level 3 inputs. Key assumptions include discount rates of 10.7 percent and 10.9 percent for Ferroglobe Mangan Norge and Ferroglobe Manganèse France respectively (2020: 12.5 percent and 11.5 percent), prices, spread and cost assumptions. Average simulated revenues in Ferroglobe Mangan Norge and Ferroglobe Manganèse France are between $245,292 thousand and $311,050 thousand per year (2020: between $135,868 thousand and $262,441 thousand). The liability has increased primarily driven by an increase in forecasted volumes and prices as a result of the current market outlook, increased operational costs and the combined impact of FX and inflation forecasts, this was partially offset by an increase in the variable and fixed costs. Changes in the value of contingent consideration are presented in the income statement Raw materials and energy consumption for production.

 

135

 

Sensitivity to changes in assumptions

 

Changing assumptions, could significantly affect the evaluation of the fair value of the contingent consideration. The following changes to the assumptions used in the Monte Carlo simulation could lead to the following changes in the fair value:

 

Sensibility on

discount rate

Contigent consideration

Decrease

Increase

December 31, 2021

by 10%

by 10%

Fair value contingent consideration

26,526

26,922

26,145

 

Tolling agreement liability

 

On August 30, 2019, Grupo FerroAtlántica, S.A.U. sold its 100% interest in the remainder of FerroAtlántica, S.A.U. to Kehlen Industries Management, S.L.U., an affiliate of U.S.-based TPG Sixth Street Partners. The FerroAtlántica, S.A.U. assets transferred by means of this transaction included ten hydroelectric power plants and the Cee-Dumbría ferroalloys manufacturing plant, all located in the province of A Coruña, Spain. Under the terms of the transaction, the Group will become exclusive off-taker of finished products produced at the smelting plant at C and supplier of key raw materials to that facility pursuant to a tolling agreement expiring in 2060.

 

In November 2020, the Tribunal Superior de Justicia de Galicia dismissed the request of  separation of the Cee-Dumbria's hydroelectric plants and the ferroalloys plants. Grupo FerroAtlantica, S.A.U. appealed to the Supreme Court, in 2021 the appeal was dismissed. At December 31, 2021, the liability recognized amounts to $27,018 thousand (€23,855 thousand). After the Supreme Court dismissal of appeal, there is no longer uncertainty in time and amounts, therefore the liability has been reclassified from “Provisions” to “Other obligations”.

 

22.   Other liabilities

 

Other liabilities comprise the following at December 31:

 

		2021												2020
		Non-												Non-
		Current				Current				Total				Current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Remuneration payable			—				36,046				36,046				20				27,552				27,572
Tax payables			—				17,613				17,613				—				23,177				23,177
Other liabilities			1,476				20,669				22,145				1,741				10,592				12,333
Total			1,476				74,328				75,804				1,761				61,321				63,082

 

136

 

Tax payables

 

Tax payables comprise the following at December 31:

 

		2021								2020
		Current				Total				Current				Total
		US$'000				US$'000				US$'000				US$'000
VAT			4,839				4,839				4,061				4,061
Accrued social security taxes payable			6,251				6,251				13,266				13,266
Personal income tax withholding payable			820				820				1,111				1,111
Other			5,703				5,703				4,739				4,739
Total			17,613				17,613				23,177				23,177

 

Share-based compensation

 

a. Equity Incentive Plan

 

On May 29, 2016, the board of Ferroglobe PLC adopted the Ferroglobe PLC Equity Incentive Plan (the “Plan”) and on June 29, 2016 the Plan was approved by the shareholders of the Company. The Plan is a discretionary benefit offered by Ferroglobe PLC for the benefit of selected senior employees of Ferroglobe PLC and its subsidiaries. The Plan’s main purpose is to reward and foster performance through share ownership. Awards under the plan may be structured either as conditional share awards or options with a $nil exercise price (nil cost options). The awards are subject to a service condition of three years from the date of grant.

 

Details of the Plan awards during the current and prior years are as follows:

  

		Number of awards
Outstanding as of December 31, 2019			2,175,853
Granted during the period			1,411,271
Exercised during the period			(175,150	)
Outstanding as of December 31, 2020			3,411,974
Granted during the period			1,307,934
Exercised during the period			(309,462	)
Expired/forfeited during the period			(51,010	)
Outstanding as of December 31, 2021			4,359,436
Exercisable as of December 31, 2021			455,790

 

The awards outstanding under the Plan at December 31, 2021 and December 31, 2020 were as follows:

 

												Fair Value at
Grant Date		Performance Period				Expiration Date		Exercise Price				Grant Date				2021				2020
September 9, 2021			December 31, 2023			September 9, 2031			nil			$	8.83				1,307,934				—
December 16, 2020			December 31, 2024			December 16, 2030			nil			$	1.23				1,411,271				1,411,271
March 13, 2019			December 31, 2022			March 13, 2029			nil			$	2.69				1,184,441				1,184,441
June 14, 2018			N/A			June 13, 2028			nil			$	9.34				70,774				85,739
March 21, 2018			December 31, 2021			March 20, 2028			nil			$	22.56				136,434				263,153
June 20, 2017			December 31, 2020			June 20, 2027			nil			$	15.90				—				17,342
June 1, 2017			N/A			June 1, 2027			nil			$	10.96				834				834
June 1, 2017			December 31, 2020			June 1, 2027			nil			$	16.77				168,469				304,811
November 24, 2016			December 31, 2019			November 24, 2026			nil			$	16.66				79,279				144,383
																	4,359,436				3,411,974

 

The awards outstanding as of December 31, 2021 had a weighted average remaining contractual life of 8.37 years (2020: 11.93 years).

 

137

 

The weighted average share price at the date of exercise for stock options exercised in the year ended December 31, 2021 was $5.28.

 

At December 31, 2021, 4,287,828 of the outstanding awards were subject to performance conditions (2020: 3,325,401 awards). For those awards subject to performance conditions, upon completion of the three years service period, the recipient will receive a number of shares or nil cost options of between 0% and 200% of the above award numbers, depending on the financial performance of the Company during the performance period. The performance conditions can be summarized as follows:

 

Vesting Conditions

40% based on share price

30% based on Operating (Loss) profit plus depreciation and amortization charges

30% based on net cash flow

 

There were no performance obligations linked to 71,608 of the awards outstanding at December 31, 2021 (2020: 86,573 awards). These awards were issued as deferred bonus awards and vest subject to remaining in employment for three years.

 

Fair Value

 

The weighted average fair value of the awards granted during the year ended December 31, 2021 was $8.83 (2020: $1.23). The Company estimates the fair value of the awards using Stochastic and Black-Scholes option pricing models. Where relevant, the expected life used in the model has been adjusted for the remaining time from the date of valuation until options are expected to be received, exercise restrictions (including the probability of meeting market conditions attached to the option), and performance considerations. Expected volatility is calculated over the period commensurate with the remainder of the performance period immediately prior to the date of grant.

 

The following assumptions were used to estimate the fair value of the awards:

 

		Grant date
		September  9, 2021				December  16, 2020				March 13, 2019				March 21, 2018				June 20, 2017				June 01, 2017				November 24, 2016
Fair value at grant date		$	8.83			$	1.23			$	2.69			$	22.56			$	1,590			$	16.77			$	11.81
Grant date share price		$	8.57			$	1.61			$	2.44			$	15.19			$	1,050			$	10.96			$	11.81
Exercise price			0.01				Nil				Nil				Nil				Nil				Nil				Nil
Expected volatility			104.75	%			91.30	%			53.54	%			49.86	%			43.15	%			43.09	%			44.83	%
Option life			2.31 years				4.00 years				3.00 years				3.00 years				3.00 years				3.00 years				3.00 years
Dividend yield			—				—				—	%			—	%			—	%			—	%			—	%
Risk-free interest rate			0.28	%			0.27	%			2.40	%			2.48	%			1.52	%			1.44	%			1.39	%
Remaining performance period at grant date (years)			2.31				4.04				2.81				2.78				2.53				2.58				2.10
Company TSR at grant date			NA				NA				(48.1	)%			2.1	%			(0.3	)%			4.0	%			40.0	%
Median comparator group TSR at grant date			NA				NA				(4.8	)%			(6.2	)%			(7.2	)%			(3.7	)%			56.4	%
Median index TSR at grant date			NA				NA				10.9	%			(8.4	)%			0.6	%			4.8	%			45.7	%

 

At the date of grant for these awards, all of the opening averaging period and some of the performance period had elapsed. The Company’s TSR relative to the median comparator group TSR and median index TSR at grant date may impact the grant date fair value; starting from an advantaged position increases the fair value and starting from a disadvantaged position decreases the fair value.

 

138

 

To model the impact of the TSR performance conditions, we have calculated the volatility of the comparator group using the same method used to calculate the Company’s volatility, using historical data, where available, which matches the length of the remaining performance period grant date.

 

The Company’s correlation with its comparator group was assessed on the basis of all comparator group correlations, regardless of the degree of correlation, have been incorporated into the valuation model.

 

For the year ended December 31, 2021, share-based compensation expense related to this stock plan amounted to $3,627 thousand, which is recorded in staff costs (2020: $2,017 thousand).

 

Prior to the business combination, shares of Globe Specialty Metals common stock were registered pursuant to Section 12(b) of the Exchange Act and listed on NASDAQ. As a result of the business combination between Ferroglobe and Globe, each share of Globe common stock was converted into the right to receive one Ferroglobe ordinary share. The shares of Globe common stock were suspended from trading on NASDAQ effective as of the opening of trading on December 24, 2015. Ferroglobe ordinary shares were approved for listing on The NASDAQ Global Market. At the effective time of the business combination, GSM stock and stock-based awards were replaced with stock and stock-based awards of Ferroglobe in a one to one exchange.

 

There were not options exercised or expired during the year ended December 31, 2021 and 2020.

 

A summary of options outstanding is as follows:

 

										Weighted-
										Average
						Weighted-				Remaining
						Average				Contractual				Aggregate
		Number of				Exercise				Term in				Intrinsic
		Options				Price				Years				Value
Outstanding as of December 31, 2019			26,268			$	16.70				0.16			$	—
Expired/forfeited during the period
Outstanding as of December 31, 2020			26,268			$	16.70				0.16			$	—
Expired/forfeited during the period							—
Outstanding as of December 31, 2021			26,268			$	16.70				0.16			$	—
Exercisable as of December 31, 2021			26,268			$	16.70				0.16			$	—

 

For the year ended December 31, 2021, share based compensation expense related to stock options under this plan was $120 thousand (2020: $18 thousand).  The expense is reported within staff costs in the consolidated income statement.

 

b. Executive bonus plan assumed under business combination with Globe

 

Prior to the business combination, Globe also issued restricted stock units under the Company’s Executive Bonus Plan. The fair value of restricted stock units is based on quoted market prices of the Company’s stock at the end of each reporting period. These restricted stock units proportionally vest over three years, but are not delivered until the end of the third year. The Company will settle these awards by cash transfer, based on the Company’s stock price on the date of transfer. For the year ended December 31, 2021, no restricted options were exercised and for the year ended December 31, 2020, no restricted options were exercised. As of December 31, 2021, and 2020, restricted stock units of 26,268 were outstanding.

 

139

 

For the year ended December 31, 2021, share based compensation expense for these restricted stock units was $120 thousand (2020: $18 thousand income before tax and $11 thousand income after tax). The expense is reported within staff costs in the consolidated income statement. At December 31, 2021 and 2020, the liability associated with the restricted stock option was $163 thousand and $43 thousand, respectively included in other current liabilities.

 

c. Stock appreciation rights assumed under business combination with Globe

 

Globe issued cash-settled stock appreciation rights as an additional form of incentivized bonus. Stock appreciation rights vest and become exercisable in one-third increments over three years. The Company settles all awards by cash transfer, based on the difference between the Company’s stock price on the date of exercise and the date of grant. The Company estimates the fair value of stock appreciation rights using the Black-Scholes option pricing model. As of December 31, 2021 there were no appreciation rights outstanding (2020: 16,510).

 

23.  Tax matters

 

The components of current and deferred income tax expense (benefit) are as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Consolidated income statement
Current income tax
Current income tax charge			5,284				4,307				2,133
Adjustments in current income tax in respect of prior years			—				901				4,753
Adjustments in current income tax due to discounted operations			—				—				—
Total			5,284				5,208				6,886
Deferred tax
Origination and reversal of temporary differences			(9,954	)			(20,961	)			(48,618	)
Impact of tax rate changes			-				—				(46	)
Impairment of deferred tax assets			-				37,660				—
Adjustments in deferred tax in respect of prior years			108				33				237
Total			(9,846	)			16,732				(48,427	)
Income tax expense (benefit)			(4,562	)			21,939				(41,541	)

 

140

 

As the Company has significant business operations in Spain, France, South Africa and the United States, a weighted effective tax rate is considered to be appropriate in estimating the Company’s expected tax rate. The following is a reconciliation of tax expense based on a weighted blended statutory income tax rate to our effective income tax expense for the years ended December 31, 2021, 2020, and 2019:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Accounting profit/(loss) before income tax			(119,936	)			(222,420	)			(411,818	)
Adjustment for discontinued operations			—				(5,399	)			(28,135	)
Accounting profit/(loss) before income tax			(119,936	)			(227,819	)			(439,954	)
At weighted effective tax rate of 18% (2020: 24% and 2019: 24%)			(22,650	)			(54,294	)			(105,369	)
Non-taxable income/(expenses)			—				—				(17,020	)
Non-deductible income/ (expenses)			(11,399	)			6,779				49,390
Movements in unprovided deferred tax			—				—				4,604
Differing territorial tax rates			2,603				3,064				(3,987	)
Adjustments in respect of prior periods			—				(50	)			2,160
Other items			27,885				70,123				20,407
Elimination of effect of interest in joint ventures			(782	)			899				917
Other permanent differences			(673	)			(389	)			9,234
Incentives and deductions			88				(2,456	)			(1,302	)
US State taxes			367				(1,737	)			(824	)
Taxable capital gains			—				—				249
Adjustments in current income tax due to discontinued operations			—				—				—
Income tax expense (benefit)			(4,562	)			21,939				(41,541	)

 

Other items mainly comprise unrecognised temporary differences for tax losses.

 

Deferred tax assets and liabilities

 

For the year ended December 31, 2021:

 

		Opening				Prior Year				Recognised in				Impairment of Deferred Tax								Exchange				Closing
		Balance				Charge				P&L				Assets				Reclassifications				Differences				Balance
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Intangible assets			(458	)			21				(34	)			—				—				20				(451	)
Biological assets			(1	)			—				1				—				—				—				—
Provisions			14,235				(7	)			8,503				—				(986	)			(73	)			21,673
Property, plant & equipment			(48,263	)			(585	)			(7,481	)			—				3,238				860				(52,231	)
Inventories			64				—				(64	)			—				—								—
Tax losses			9,525				—				1,491				—				(3,959	)			(704	)			6,353
Incentives & credits			1,426				—				7,906				—				—				1				9,333
Partnership interest			(8,983	)			—				469				—				—				—				(8,514	)
Other			4,674				—				(266	)			—				1,256				39				5,703
Total			(27,781	)			(571	)			10,525				—				(451	)			143				(18,135	)

 

For the year ended December 31, 2020:

 

		Opening				Prior Year				Recognised in				Impairment of Deferred Tax								Exchange				Closing
		Balance				Charge				P&L				Assets				Reclassifications				Differences				Balance
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Intangible assets			(414	)			—				(44	)			—				—				—				(458	)
Biological assets			(1	)			—				—				—				—				—				(1	)
Provisions			15,928				—				2,757				(3,357	)			(1,655	)			562				14,235
Property, plant & equipment			(64,697	)			—				16,094				(219	)			434				125				(48,263	)
Inventories			(2,542	)			—				639				—				1,993				(26	)			64
Tax losses			41,728				—				(1,073	)			(33,162	)			(154	)			2,187				9,525
Incentives & credits			2,139				—				—				(921	)			169				40				1,426
Partnership interest			(9,890	)			—				1,647				—				(740	)			—				(8,983	)
Other			3,243				—				909				—				533				(10	)			4,674
Total			(14,506	)			—				20,928				(37,660	)			580				2,878				(27,781	)

 

141

 

Presented in the statement of financial position as follows:

 

		2021				2020
		US$'000				US$'000
Deferred tax assets			45,246				31,528
Deferred tax liabilities			(63,381	)			(59,309	)
Offset between deferred tax assets and deferred tax liabilities			38,236				31,528
Total deferred tax assets due to temporary differences recognized in the statement of financial position			7,010				—
Total deferred tax liabilities due to temporary differences recognized in the statement of financial position			(25,145	)			(27,781	)

 

 

142

 

 

Unrecognised deductible temporary differences, unused tax losses and unused tax credits

 

		2021				2020
		US$'000				US$'000
Unused tax losses			624,635				513,189
Unused tax credits			8,487				8,685
Unrecognised deductible temporary differences			135,174				106,952
Total			768,296				628,826

 

In general terms, neither the NOLs nor the tax credits have an expiration date in the jurisdictions where they derive from.

 

Unused tax losses and unrecognized deductible temporary differences have increased in 2021 compared to 2020 due to the losses in most of the jusrisdictions during 2021.

 

Throughout 2021 a debt restructuring has been undertaken, being completed in July 2021. For the purpose of the debt restructuring, a group reorganization has been completed in order to attend the specific needs and requirements posed by the bondholders for the purpose of securing their investment. This group restructuring has consisted of the incorporation of two subsidiaries sitting under Ferroglobe PLC. These two entities, which are tax resident in the United Kingdom, are Ferroglobe Holding Company Limited and Ferroglobe Finance Company PLC. Additionally, within the framework of the debt restructuring, the exchanged and the new bonds have been secured with guarantees over the subsidiaries of the Ferroglobe group and their assets. Within the framework of the group reorganization, Ferroglobe PLC has transferred to Ferroglobe Holding Company Limited its stake in Globe Specialty Metals, Inc. and Grupo Ferroatlántica, S.A.U. Likewise, within the debt restructuring and group reorganization Ferroglobe PLC has assigned to Ferroglobe Finance Company PLC the original issued bonds which bondholders approved the debt restructuring in exchange for intercompany notes.

 

All the tax implications arising from the debt restructuring and group reorganization have been analysed and it has set forth guidelines for the operatives put in place as a result of these transactions.

 

For United States purposes, the main tax concern was the eventual triggering of cancellation of debt income as a result of the difference in carrying value of the original bonds compared to the new bonds at the time of first trading. For such reasons it was analysed the tax base of all assets and subsidiaries of Globe Specialty Metals, Inc. since this type of income can be set off against property of the entity generating thereof. No taxable income of such nature was generated since the trading value of the new bonds was higher from inception compared to the trading value of the old bonds.

 

Likewise, it was concluded that the transfer of the shares of Globe Specialty Metals, Inc. did not trigger any taxable event because Ferroglobe Holding Company Ltd was duly checked open for tax purposes and consequently this transfer of shares was disregarded for United States tax purposes.

 

From a United Kingdom perspective, also the main concern was the eventual taxable event resulting from the difference in carrying value of the exchanged debt instruments. No taxation arose in this regard.

 

The debt restructuring cost has been recharged to the entities of the group benefiting therefrom in line with arm’s length principles and following the accounting treatment of such type of costs.

 

The transfer of the shares of Globe Specialty Metals, Inc. and Grupo Ferroatlántica, S.A.U. should be treated as a tax neutral reorganization and thus non-taxable in the United Kingdom.

 

The equity issuance did not result in a change of control event for Ferroglobe PLC and consequently no limitation on its tax attributes resulted.

 

143

 

It was also a relevant topic the risk of falling into the pro-rata rule for value added tax purposes as a result of the intercompany financing put in place to allocate the bonds and the intercompany balances from Ferroglobe PLC to Ferroglobe Finance Company PLC and Ferroglobe Holding Company Limited respectively. To avoid this risk, a value add tax group was put in place in the United Kingdom amongst these three entities.

 

Additionally, it was analysed and concluded that no taxation arose neither in the United Kingdom nor in the respective jurisdiction of the subsidiaries of the Ferroglobe group as a result of the direct or indirect transfer of their shares when being contributed down by Ferroglobe PLC to Ferroglobe Holding Company Limited.

 

Management of tax risks

 

The Company is committed to conducting its tax affairs consistent with the following objectives:

 

(i) to comply with relevant laws, rules, regulations, and reporting and disclosure requirements in whichever jurisdiction it operates;

 

(ii) to maintain mutual trust, transparency and respect in its dealings with all tax authorities; and

 

(iii) to adhere with best practice and comply with the Company's internal corporate governance procedures, including but not limited to its Code of Conduct

 

For further details please refer to the group's tax strategy which can be found here: http://investor.ferroglobe.com/corporate-governance.

 

The Group's tax department maintains a tax risk register on a jurisdictional basis.

 

In the jurisdictions in which the Company operates, tax returns cannot be deemed final until they have been audited by the tax authorities or until the statute-of-limitations has expired. The number of open tax years subject to examination varies depending on the tax jurisdiction. In general, the Company has the last four years open to review. The criteria that the tax authorities might adopt in relation to the years open for review could give rise to tax liabilities which cannot be quantified.

 

24.  Related party transactions and balances

 

Continued operations

 

Balances with related parties at December 31 are as follows:

 

		2021
		Receivables								Payables
		Non-Current				Current				Non-Current				Current
		US$'000				US$'000				US$'000				US$'000
Inmobiliaria Espacio, S.A.			—				2,841				—				—
Villar Mir Energía, S.L.U.			1,699				—				—				8,808
Espacio Information Technology, S.A.U.			—				—				—				737
Other related parties			—				—				—				—
Total			1,699				2,841				—				9,545

 

		2020
		Receivables								Payables
		Non-Current				Current				Non-Current				Current
		US$'000				US$'000				US$'000				US$'000
Inmobiliaria Espacio, S.A.			—				3,078				—				—
Villar Mir Energía, S.L.U.			2,454				—				—				2,458
Espacio Information Technology, S.A.U.			—				—				—				701
Other related parties			—				(2	)			—				37
Total			2,454				3,076				—				3,196

 

The loan granted to Inmobiliaria Espacio, S.A. accrues a market interest (EURIBOR three month rate plus 2.75%) and has a maturity in the short-term that is renewed tacitly upon maturity. Unless the parties agree the repayment, the loan is extended it automatically for one year.

 

The balance with the other related parties arose as a result of the commercial transactions performed with them (see explanation of main transactions below).

144

 

Continuing operations

 

Transactions with related parties in 2021, 2020 and 2019 are as follows:

 

		2021
						Raw materials
						and energy
		Sales and Operating Income				consumption for production				Other Operating Expenses				Finance Income (Note 26.4)
		US$'000				US$'000				US$'000				US$'000
Inmobiliaria Espacio, S.A.			—				—				—				—
Villar Mir Energía, S.L.U.			—				132,566				1,365				—
Espacio Information Technology, S.A.U.			—				—				3,266				—
Enérgya VM Gestión, S.L			—				—				120				—
Aurinka			—				—				111				—
Other related parties			—				—				68				—
Total			—				132,566				4,930				—

 

		2020
						Raw materials
						and energy
		Sales and Operating Income				consumption for production				Other Operating Expenses				Finance Income (Note 26.4)
		US$'000				US$'000				US$'000				US$'000
Inmobiliaria Espacio, S.A.			—				—				—				16
Villar Mir Energía, S.L.U.			—				39,900				647				—
Espacio Information Technology, S.A.U.			—				—				3,171				—
Enérgya VM Gestión, S.L			—				—				79				—
Aurinka			—				1				308				—
Other related parties			—				—				3				—
Total			—				39,901				4,208				16

 

		2019
						Raw materials
						and energy
		Sales and Operating Income				consumption for production				Other Operating Expenses				Finance Income (Note 26.4)
		US$'000				US$'000				US$'000				US$'000
Inmobiliaria Espacio, S.A.			—				—				1				68
Villar Mir Energía, S.L.U.			—				65,406				681				—
Espacio Information Technology, S.A.U.			—				—				3,566				—
Enérgya VM Generación, S.L			1				—				1				—
Enérgya VM Gestión, S.L			—				1				89				—
Aurinka			—				—				3,206				—
Other related parties			143				—				7				—
Total			144				65,407				7,551				68

 

“Raw Materials and energy consumption for production” of the related parties vis-à-vis Villar Mir Energía, S.L.U. relates to the purchase of energy from the latter by the Company’s Europe – Manganese Alloys and Europe – Silicon Metals & Silicon Alloys segment. FerroAtlántica pays VM Energía a service charge in addition to paying for the cost of energy purchase from the market. Under contracts entered into with FAU on June 22, 2010 and December 29, 2010 (assigned to FerroAtlántica de Boo, S.L.U. (“FAU Boo”) and to FerroAtlántica de Sabon, S.L.U. (“FAU Sabon”) in August 2019 in anticipation of the FAU Disposal), and with Hidro Nitro Española on December 27, 2012 (assigned to FerroAtlántica del Cinca when Hidro Nitro Española was sold in December 2018), VM Energía supplies the energy needs of the Boo, Sabón and Monzón electrometallurgy facilities, as a broker for FAU BOO or FAU Sabon (now Grupo Ferroatlantica) and Hidro Nitro Española (now FerroAtlántica del Cinca) in the wholesale power market. The contracts allow FAU Boo or FAU Sabon (now Grupo Ferroatlantica) and Hidro Nitro Española (now FerroAtlántica del Cinca) to buy energy from the grid at market conditions without incurring costs normally associated with operating in the complex wholesale power market, as well as to apply for fixed price arrangements in advance from VM Energía, based on the energy markets for the power, period and profile applied for. For the fiscal year ended December 31, 2021, Grupo Ferrotlantica and FerroAtlantica del Cinca’s obligations to make payments to VM Energía under their respective agreements for the purchase of energy plus the service charge amounted to $102,066 thousand and $30,501 thousand, respectively.

 

145

 

“Other operating expenses" corresponds to the payment to Espacio Information Technology, S.A. (“Espacio I.T.”), provides information technology and data processing services to Ferroglobe PLC and certain of its direct and indirect subsidiaries: FAU (until shortly prior to the FAU Disposal when such services were assigned to Grupo FerroAtlántica de Servicios, S.L.U. (“Servicios”)), FerroAtlántica de Mexico, Silicon Smelters (Pty), Ltd. and FerroPem, SAS pursuant to several contracts. Additionally corresponds to the Payment to Villar Mir Energia, S.L.U that provides the energy needs of the mining facilities operated by RAMSA and CISA in the wholesale power market.

 

Discontinued operations

 

At 31 December, 2020 and 2021, there were not discontinued transactions considered with Related Parties. Transactions with related parties in 2019 are as follows:

 

		2019
						Raw materials
						and energy
		Sales and Operating Income				consumption for production				Other Operating Expenses
		US$'000				US$'000				US$'000
Villar Mir Energía, S.L.U.			—				—				373
Enérgya VM Generación, S.L			12,635				—				117
Enérgya VM Gestión, S.L			—				66				—
Total			12,635				66				490

 

25.   Guarantee commitments to third parties and contingent liabilities

 

Guarantee commitments to third parties

 

As of December 31, 2021 and 2020, the Company has provided bank guarantees commitments to third parties amounting $11,948 thousand and $19,969 thousand, respectively. Management believes that any unforeseen liabilities at December 31, 2021 and 2020 that might arise from the guarantees given would not be material.

 

Contingent liabilities

 

In the ordinary course of its business, Ferroglobe is subject to lawsuits, investigations, claims and proceedings, including, but not limited to, contractual disputes and employment, environmental, health and safety matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations, claims and proceedings asserted against it, we do not believe any currently pending legal proceeding to which it is a party will have a material adverse effect on its business, prospects, financial condition, cash flows, results of operations or liquidity.

 

Stamp Tax litigation procedure

 

On February 2021 the Central Economic-Administrative Court ruled against the interest of Ferroglobe in a stamp duty litigation procedure initiated in 2015, where the taxpayer is Abanca, the financial institution through which a sale and lease back of the electric production plants in Galicia was conducted in 2012. Ferroglobe has agreed with Abanca that it continues the litigation at the judiciary level by filing an appeal before the Audiencia Nacional. This filing has been completed in April 2021. As a result of the continuation of this litigation process, with the appropriate granting of bank guarantee by the taxpayer (Abanca), neither payment of the tax reassessment (circa 1.4MM Euro plus delay interest) nor of the penalty proposed (circa 600K Euro) are due at this stage of the process. We anticipate this stage will take between two to four years to be resolved by the Audiencia Nacional. In case the Audiencia Nacional rules against the interests of Ferroglobe, the full amount of the tax reassessment and the penalty would be payable by Ferroglobe in applying a compensation agreement in place between Abanca and Ferroglobe.

 

146

 

Asbestos-related claims

 

Certain employees of FerroPem, SAS, then known as Pechiney Electrometallurgie, S.A. (“PEM”), may have been exposed to asbestos at its plants in France in the decades prior to FerroAtlántica Group’s purchase of that business in December 2004. During the period in question, PEM was wholly-owned by Pechiney Bâtiments, S.A., which had certain indemnification obligations to FerroAtlántica pursuant to the 2004 Share Sale and Purchase Agreement under which our FerroAtlántica acquired PEM. As of December 31, 2021, approximately 100 such employees have “declared” asbestos-related injury to the French social security agencies. Approximately three quarters of these cases now have been closed. Of the remaining cases, approximately half include assertions of “inexcusable negligence” (“faute inexcusable”) which, if upheld, may lead to material liability in the aggregate on the part of FerroPem. Other employees may declare further asbestos-related injuries in the future, and may likewise assert inexcusable negligence. Litigation against, and material liability on the part of, FerroPem will not necessarily arise in each case, and to date a majority of such declared injuries have been minor and have not led to significant liability on Ferropem’s part. Whether liability for “inexcusable negligence” will be found is determined case-by-case, often over a period of years, depending on the evolution of the claimant’s asbestos-related condition, the possibility that the claimant was exposed while working for other employers and, where asserted, the claimant’s ability to prove inexcusable negligence on PEM’s part. Because of these and other uncertainties, no reliable estimate can be made of FerroPem’s eventual liability in these matters, with exception of three grave cases that were litigated through the appeal process and in which claimants’ assertions of inexcusable negligence were upheld against FerroPem. Liabilities in respect to asbestos-related claims have been recorded at December 31, 2021 at an estimated amount of $1,143 thousand in Provisions for litigation in progress ($1,080 thousand in 2020).

 

Environmental matters

 

Since 2016, GMI has been negotiating with the U.S. Department of Justice (the “DOJ”) and the U.S. Environmental Protection Agency (the “EPA”) to resolve two Notices of Violation/Findings of Violation (“NOV/FOV”) that the EPA issued to the Beverly facility. The first NOV/FOV was issued on July 1, 2015 and alleges certain violations of the Prevention of Significant Deterioration (“PSD”) and New Source Performance Standards provisions of the Clean Air Act associated with a 2013 project performed at GMI’s Beverly facility. Specifically, the July 2015 NOV/FOV alleges violations of the facility’s existing operating and construction permits, including allegations related to opacity emissions, sulfur dioxide and particulate matter emissions, and failure to keep necessary records and properly monitor certain equipment. The second NOV/FOV was issued on December 6, 2016, and arises from the same facts as the July 2015 NOV/FOV and subsequent EPA inspections. The second NOV/FOV alleges opacity exceedances at certain units, failure to prevent the release of particulate emissions through the use of furnace hoods at a certain unit, and the failure to install Reasonably Available Control Measures (as defined) at certain emission units at the Beverly facility. Since that time, GMI and the authorities have continued negotiations regarding potential resolution of the NOV/FOVs, which negotiations are ongoing. As part of the ongoing consent process to resolve the NOVs/FOVs, the authorities could demand that GMI install additional pollution control equipment or implement other measures to reduce emissions from the facility, as well as pay a civil penalty. At this time, however, GMI is unable to determine the extent of potential injunctive relief or the amount of civil penalty a negotiated resolution of this matter may entail. Should the DOJ and GMI be unable to reach a negotiated resolution of the NOVs/FOVs, the authorities could institute formal legal proceedings for injunctive relief and civil penalties. The statutory maximum penalty is $93,750 per day per violation, from April, 2013 to December 2021, and $109,024 per day thereafter.

 

26.   Income and expenses

 

26.1 Sales

 

Sales by segment for the years ended December 31 are as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
North America - Silicon			524,808				425,277				551,500
Europe - Silicon			665,337				467,728				593,907
Europe - Manganese			476,287				240,142				564,060
South Africa - Silicon			117,195				80,572				136,292
Other segments			43,568				25,334				43,147
Eliminations			(48,287	)			(94,619	)			(273,684	)
Total			1,778,908				1,144,434				1,615,222

 

147

 

Sales by geographical area for the years ended December 31 are as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Spain			251,528				133,370				183,969
Germany			292,774				191,107				249,911
Italy			76,721				42,067				99,796
France			130,811				79,491				109,513
Other EU Countries			176,046				88,443				220,475
USA			515,095				404,633				533,764
Rest of World			335,933				205,323				217,794
Total			1,778,908				1,144,434				1,615,222

 

26.2 Staff costs

 

The average monthly number of employees (including Executive Directors) was:

 

		2021				2020				2019
Directors			8				6				8
Senior Managers			289				291				345
Employees			2,997				3,020				3,383
Total			3,294				3,317				3,736

 

Staff costs are comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Wages, salaries and similar expenses			214,374				161,957				208,317
Pension plan contributions			7,571				3,641				12,787
Employee benefit costs			58,972				49,184				63,925
Total			280,917				214,782				285,029

 

148

 

26.3 Depreciation and amortization charges, operating allowances and write-downs

 

Depreciation and amortization charges, operating allowances and write-downs are comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Amortization of intangible assets (Note 8)			7,241				7,183				7,305
Depreciation of property, plant and equipment (Note 9)			90,087				101,006				112,824
Other write-downs and reversals			—				—				65
Total			97,328				108,189				120,194

 

26.4 Finance income and finance costs

 

Finance income is comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Finance income of related parties (Note 24)			—				16				68
Other finance income			253				161				1,312
Total			253				177				1,380

 

Finance costs are comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Interest on debt instruments			42,579				34,989				33,705
Interest on loans and credit facilities			12,584				8,404				15,533
Interest on note and bill discounting			88				363				373
Interest on leases			1,100				1,358				1,972
Trade receivables securitization expense (Note 10)			399				15,044				9,192
Other finance costs			92,439				6,810				2,450
Total			149,189				66,968				63,225

 

At the completion of the comprehensive refinancing, the Company recorded a finance cost of $90.8 million (See Note 18).

 

26.5 Impairment losses and net (loss) gain due to changes in the value of assets

 

Impairment losses and net loss gain due to changes in the value of assets are comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Impairment of goodwill (Note 7)			—				—				(174,008	)
Impairment of intangible assets (Note 8)			(1,153	)			—				(211	)
Impairment of property, plant and equipment (Note 9)			1,663				(71,929	)			(1,224	)
Impairment of non-current financial assets			(373	)			—				(456	)
Impairment of other			—				(1,415	)			—
Impairment (reversal)/losses			137				(73,344	)			(175,899	)
Increase (decrease) in fair value of biological assets (Note 29)			—				—				(530	)
Other (loss) / profit			758				158				(1,044	)
Net (loss) gain due to changes in the value of assets			758				158				(1,574	)

 

149

 

26.6 (Loss) gain on disposal of non-current assets

 

Loss (gain) on disposal of non-current assets is comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Gain on disposal of intangible assets			—				1,692				—
Gain on disposal of property, plant and equipment			2,462				473				353
Loss on disposal of property, plant and equipment			(1,123	)			(873	)			(1,761	)
Gain on disposal of other non-current assets			47				—				6
Loss on disposal of other non-current assets							—				—
(Loss) gain on disposal of subsidiary			—				—				(821	)
Total			1,386				1,292				(2,223	)

 

During 2021, Ferroglobe has sold the assets related to Niagara facility, the Company received net cash proceeds of $1,370 thousand and recognized a gain on disposal for the same amount (zero was the net book value of Niagara assets as of December 31, 2020). Additionally, the French subsidiary FerroPem has sold property of Chateau-Feuillet facility, amounting to $1,092 thousand fully depreciated.

 

Loss on disposal during 2021 is mainaly due to asset disposals in American and Candian subsidieries.

 

During 2020, Ferroglobe sold CO2 emissions rights that were derecognized from the balance sheet against the cash received, as the carrying amount price per emission right was lower to the sales price per CO2 emission right, an income of $1,692 thousand was recognized on the disposal of intangible assets.

 

On September 19, 2019, Ferroglobe closed on the sale of its subsidiary Ultracore Polska ZOO, which manufactures cored wire in Poland, recognized a loss on disposal of $821 thousand.

 

26.7 Contractual assets and liabilities

 

Contractual assets and liabilities are comprised of the following for the years ended December 31:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Contractual Assets			5,785				5,152				5,271
Contractual Liabilities			5,047				1,687				134
Total			10,832				6,839				5,405

 

Contractual assets are recorded within “trade and other receivables” and relate to unbilled services.

 

Contractual liabilities are recorded within “Trade an other payable” and relate to advances from customers.

 

150

 

27.   Remuneration of key management personnel

 

The remuneration of the key management personnel, which comprises the Company’s management committee, during the years ended December 31 is as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Fixed remuneration			5,244				5,086				5,404
Variable remuneration			1,209				756				254
Contributions to pension plans and insurance policies			373				319				350
Share-based compensation			3,627				2,017				4,882
Termination benefits			119				1,886				1,147
Other remuneration			17				9				7
Total			10,589				10,073				12,044

 

During 2021, 2020 and 2019, no loans and advances have been granted to key management personnel.

 

28.   Financial risk management

 

Ferroglobe operates in an international and cyclical industry which exposes it to a variety of financial risks such as currency risk, liquidity risk, interest rate risk, credit risk and risks relating to the price of finished goods, raw materials and power.

 

The Company’s management model aims to minimize the potential adverse impact of such risks upon the Company’s financial performance. Risk is managed by the Company’s executive management, supported by the Risk Management, Treasury and Finance functions. The risk management process includes identifying and evaluating financial risks in conjunction with the Company’s operations and quantifying them by project, region and subsidiary. Management provides written policies for global risk management, as well as for specific areas such as foreign currency risk, credit risk, interest rate risk, liquidity risk, the use of hedging instruments and derivatives, and investment of surplus liquidity.

 

The financial risks to which the Company is exposed in carrying out its business activities are as follows:

 

a) Market risk

 

Market risk is the risk that the Company’s future cash flows or the fair value of its financial instruments will fluctuate because of changes in market prices. The primary market risks to which the Company is exposed comprise foreign currency risk, interest rate risk and risks related to prices of finished goods, raw materials and power.

 

151

 

Foreign currency risk

 

Ferroglobe generates sales revenue and incurs operating costs in various currencies. The prices of finished goods are to a large extent determined in international markets, primarily in US dollars and Euros. Foreign currency risk is partly mitigated by the generation of sales revenue, the purchase of raw materials and other operating costs being denominated in the same currencies. Although it has done so on occasions in the past, and may decide to do so in the future, the Company does not generally enter into foreign currency derivatives in relation to its operating cash flows. At December 31, 2021, and December 31, 2020, the Company was not party to any foreign currency forward contracts.

 

In July 2021 the Company completed a restructuring of its $350,000 thousand of senior unsecured Notes due 2022. This included the issue of additionally $60,000 thousand of super senior secured Notes due 2025 (see Note 18) and the repayment of certain existing indebtedness denominated in a number of currencies across its subsidiaries. The Company is exposed to foreign exchange risk as the interest and principal of the Notes is payable in US dollars, whereas its operations principally generate a combination of US dollar and Euro cash flows. On May 12, 2017, the Company entered into a cross currency interest rate swap to exchange 55% of the principal and interest payments in US dollars for principal and interest payments in Euros (see Note 19). In March, 2020, the Company closed out the cross currency swap resulting in the receipt of cash proceeds of $3,608 thousand (see Note 19).

 

During the year ended December 31, 2021 and 2020 the Company did not enter into any cross currency swaps.

 

Foreign currency Sensitivity analysis

 

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, accounts payable and inventories that are denominated in foreign currency.

 

Depreciation or appreciation of the USD by 10% against EUR, CAD and ZAR at December 31, 2021, while all other variables were remained constant, would have increased or (decreased) the net profit before tax of $35,310 thousand.

 

Interest rate risk

 

Ferroglobe is exposed to interest rate risk in respect of its financial liabilities that bear interest at floating rates. These primarily comprise credit facilities (see Note 16) and lease commitments (see Note 17).

 

During the year ended December 31, 2021 and 2020, the Company did not enter into any interest rate derivatives in relation to its interest bearing credit facilities. At December 31, 2020, the Company had drawn down $28,168 thousand under its credit facilities and nil at December 31, 2021.

 

152

 

b) Credit risk

 

Credit risk refers to the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss. The Company’s main credit risk exposure related to financial assets is set out in Note 10 and includes trade receivables, other receivables and other financial assets.

 

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. The Company has established policies, procedures and controls relating to customer credit risk management. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, the Company insures its trade receivables with reputable credit insurance companies.

 

Since October 2020, the Company entered into a factoring program where the receivables of some of the Company’s French and Spanish entities are prefinanced by a factor. (see Note 10 and 16).

 

Since December 2019, the Company entered into a forfaiting program where some of the Company’s French and Spanish entities may assign their rights to receive payments under the Contracts with the customer “ArcelorMittal Sourcing s.c.a.” in accordance with a forfaiting scheme.

 

c) Liquidity risk

 

The purpose of the Company’s liquidity and financing policy is to ensure that the Company keeps sufficient funds available to meet its financial obligations as they fall due. The Company’s main sources of financing are as follows:

 

· $345,058 thousand aggregate principal amount of 9.375% senior secured notes due March 1, 2025 (the “Reinstated Senior Notes”). Interest is payable semi-annually on January 31 and July 31 of each year.

 

· $60,000 thousand aggregate principal amount of 9% super senior secured notes due March 1, 2025 (the “Super Senior Notes”). The proceeds from the Notes, issued on May 17, 2021 and July 29, 2021, were primarily used to repay certain existing indebtedness of the Parent Company and its subsidiaries. Interest is payable semi-annually on January 31 and July 31 of each year.

 

153

 

 

 

  · On September 8, 2016, FerroAtlántica, S.A.U, as borrower, and the Spanish Ministry of Industry, Tourism and Commerce (the “Ministry”), as lender, entered into two loan agreements under which the Ministry made available to the borrower loans in aggregate principal amount of €44,999 thousand and €26,909 thousand, respectively, in connection with industrial development projects relating to the Company’s solar grade silicon project. The loan is contractually due to be repaid in 7 instalments over a 10-year period with the first three years as a grace period. The loan of €26,909 thousand was repaid in April 2018. Interest on outstanding amounts under each loan accrues at an annual rate of 3.55%. As of December 31, 2021, the amortized cost of the loan was €54,578 thousand (equivalent to $61,815 thousand) (2020: €44,824 thousand and $55,004 thousand), see Note 19.

 

  · On October 2, 2020, the Company ended the receivables funding agreement and cancelled the securitization program, signing a new factoring agreement with a Factor, for anticipating the collection of receivables of the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS). As a result of the agreement, the Leasing and Factoring Agent provided a cash consideration of circa $48.8 million, repurchased the receivables portfolio sold to the SPE on September 28 2020, and consequently assumed the loan tranche of the senior borrower to the SPE. Also, the Senior loan and intermediate subordinate loan tranches were paid with internal sources of funds, at closing, there was cash release of $18 million from restricted cash relating to a special purpose vehicle under prior securitization program (see Note 10). As of December 31, 2021, the Company exceeded the limit, the lender agreed a temporary increase of the limit.

 

  · $100,000 thousand North-American asset-based, revolving credit facility. Loans under the ABL Revolver may be borrowed, repaid and reborrowed at any time until the facility’s expiration date. The legal final maturity date of the ABL Revolver is October 11, 2024. The terms of the facility provide a spring forward provision which requires the ABL Revolver to be repaid on the date which is three months prior to the maturity date of the senior unsecured Notes (March 1, 2022), which would currently imply a facility repayment date of December 1, 2021. At December 31, 2020 $31,155 thousand was utilized. The ABL Revolver was fully repaid in March 2021.

 

  · On July 23, 2020, Ferroglobe subsidiary, Ferropem, S.A.S., as borrower, contracted a loan with BNP Paribas, as lender, amounting to €4,456 thousand, to finance Company’s activities in France. The loan is guaranteed by the French government as part of the COVID-19 relief measures. Repayment of principal and payment of interest and accessories offer the possibility for the Borrower to extend the amortization of the amounts due at maturity for an additional period of 1 to 5 years. Interest rate is zero percent and the borrower is liable to pay a 0.50% fee calculated on the capital borrowed equivalent to an amount of €22 thousand.

 

  · On June 2, 2020, Ferroglobe subsidiary, Silicium Québec, as borrower, contracted a $7,000 thousand loan with Investissement Québec, a regional government loan & investment agency, as lender, to finance its capital expenditures activities in Canada. The loan is to be repaid in 84 installments over a 10 year period with the first three years as a grace period. Interest rate on outstanding amounts is zero percent.

 

  · On March 3, 2022, Grupo FerroAtlántica and Grupo FerroAtlántica de Servicios (together the “Beneficiaries”) and the Sociedad Estatal de Participaciones Industriales (“SEPI”), a Spanish state-owned industrial holding company affiliated with the Ministry of Finance and Administration, entered into a loan agreement of €34.5 million. This loan is part of the SEPI fund intended to provide assistance to non-financial companies operating in strategically important sectors within Spain in the wake of the COVID-19 pandemic. The funds are subject to certain governance conditions that imply, among others, the prohibition of distributing dividends, paying non-mandatory coupons or acquiring own shares and the prohibition of the use of the funds for financing economic activities of the group subsidiaries that are not beneficiaries.

 

154

 

Quantitative information

 

  i. Interest rate risk:

 

At December 31, the Company’s interest-bearing financial liabilities were as follows:

 

		2021
		Fixed rate				Floating rate				Total
		US$'000				US$'000				US$'000
Bank borrowings			—				98,967				98,967
Obligations under leases			—				18,358				18,358
Debt instruments			440,297				—				440,297
Other financial liabilities (*)			67,013				—				67,013
			507,310				117,325				624,635

 

 

(*)      Other financial liabilities comprise loans from government agencies and exclude derivative financial instruments (see Note 19).

 

 

		2020
		Fixed rate				Floating rate				Total
		US$'000				US$'000				US$'000
Bank borrowings			—				107,607				107,607
Obligations under leases			—				22,537				22,537
Debt instruments			357,508				—				357,508
Other financial liabilities (*)			63,896				—				63,896
			421,404				130,144				551,548

 

 

(*)      Other financial liabilities comprise loans from government agencies and exclude derivative financial instruments (see Note 19).

 

Analysis of sensitivity to interest rates

 

At December 31, 2021, an increase of 1% in interest rates would have given rise to additional borrowing costs of $990 thousand (2020: $1,064 thousand).

 

  ii. Foreign currency risk:

 

Notes and cross currency swap

 

The Parent Company has been historically exposed to exchange rate fluctuations as it had a Euro functional currency and future commitments to pay interest and principal in US dollars in respect of its outstanding debt instruments of $150,000 thousand (see Note 18). To manage this foreign currency risk, the Parent Company entered in 2017 into a cross currency swap and designated a portion of this as an effective cash flow hedge of the future interest and principal amounts due on its debt instruments. In March, 2020, the Company closed out the cross currency swap (see Note 19).

 

In 2021, due to an occurrence of events and conditions that reduce the number of transactions in euros, management conducted a review of the functional currency of the Parent Company and concluded that there has been a change in its functional currency from Euro to US Dollars, effective since October 1, 2021 (see Note 3.3). Therefore, The Parent Company is no longer exposed to exchange rate fluctuations.

 

Foreign currency swaps in relation to trade receivables and trade payables

 

At December 31, 2021 and 2020, the Company has no foreign currency swaps in place in respect of foreign currency accounts receivable and accounts payable.

 

155

 

  iii. Liquidity risk:

 

The table below summarizes the maturity profile of the Company’s financial liabilities at December 31, 2021, based on contractual undiscounted payments. The table includes both interest and principal cash flows. The cash flows for debt instruments assume that principal of the Stub Notes is repaid at maturity in March 2022 and the principal of the Super Senior Notes and the Reinstated Senior Notes are repaid at maturity in June and December 2025 respectively (see Note 18).

 

		2021
		Less than 1 year				Between 1-2 years				Between 2-5 years				After 5 years				Total
		US$'000				US$'000				US$'000				US$'000				US$'000
Bank borrowings			95,899				—				3,670				—				99,569
Leases			8,092				5,897				3,251				1,289				18,529
Debt instruments			57,440				37,749				493,585				—				588,774
Financial loans from government agencies			63,868				4,304				245								68,417
Payables to related parties			9,545				—				—				—				9,545
Payable to non-current asset suppliers			2,677				135				—				—				2,812
Contingent consideration			13,023				10,684				6,844				—				30,551
Tolling agreement liability			2,589				2,367				5,952				18,379				29,287
Trade and other payables			206,000				—				—				—				206,000
			459,133				61,136				513,547				19,668				1,053,484

 

		2020
		Less than 1 year				Between 1-2 years				Between 2-5 years				After 5 years				Total
		US$'000				US$'000				US$'000				US$'000				US$'000
Bank borrowings			108,613				5,277				—				—				113,890
Finance leases			8,796				6,350				7,130				1,748				24,024
Debt instruments			32,813				366,406				—				—				399,219
Financial loans from government agencies			36,672				7,209				18,274				6,501				68,656
Payables to related parties			3,196				—				—				—				3,196
Payable to non-current asset suppliers			130				2,633				—				—				2,763
Contingent consideration			1,772				4,175				15,892				3,277				25,116
Trade and other payables			149,201				—				—				—				149,201
			341,193				392,050				41,296				11,526				786,065

 

Changes in liabilities arising from financing activities

 

The changes in liabilities arising from financing activities during the year ended December 31, 2021 and 2020 were as follows:

 

		January 1, 2021				Changes from financing cash flows				Effect of changes in foreign exchange rates				Changes in fair values				Interest expenses				Other changes				December 31, 2021
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Bank borrowings			107,607				(15,604	)			1,927				—				—				5,037				98,967
Obligations under leases			22,536				(11,232	)			(1,188	)			—				—				8,242				18,358
Debt instruments (*)			357,508				43,295				—				6,462				36,233				(3,201	)			440,297
Financial loans from government agencies (Note 19)			63,896				(2,252	)			(702	)			—				6,071				—				67,013
Total liabilities from financing activities			551,547				14,207				37				6,462				42,304				10,078				624,635
Dividends paid							—
Proceeds from stock option exercises							—
Other amounts paid due to net financing activities (**)							(3,755	)
Payments to acquire or redeem own shares							—
Net cash (used) by financing activities							10,452

 

(*) Changes from financing cash flows in debt instruments include payments due to interest amounting to $16,705 thousand and proceeds from debt issuances of $60,000 thousand.

 

(**) Other amounts paid due to financing activities include payments due to equity issuance costs amounting to $43,755 thousand and proceeds from equity issuance of $40,000 thousand.

 

156

 

		January 1, 2020				Changes from financing cash flows				Effect of changes in foreign exchange rates				Changes in fair values				Other changes (*)				December 31, 2020
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Bank borrowings			158,998				(67,343	)			10,295				—				5,657				107,607
Obligations under leases			25,873				(10,315	)			1,608				—				5,370				22,536
Debt instruments			354,952				(32,812	)							—				35,368				357,508
Financial loans from government agencies (Note 19)			56,939				—				4,865				—				2,092				63,896
Derivative financial instruments (Note 19)			9,600				3,608				(86	)			(14,329	)			1,207				—
Total liabilities from financing activities			606,362				(106,862	)			16,682				(14,329	)			49,694				551,547
Dividends paid							—
Proceeds from stock option exercises							—
Other amounts paid due to net financing activities							(6,471	)
Payments to acquire or redeem own shares							—
Net cash provided by financing activities							(113,333	)

 

(*) Other changes include interest expenses

 

29. Fair value measurement

 

Fair value of assets and liabilities that are measured at fair value on a recurring basis

 

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities that are carried at fair value in the statement of financial position:

 

December 31, 2021

Quoted prices in active markets

Significant observable inputs

Significant unobservable inputs

Total

(Level 1)

(Level 2)

(Level 3)

US$'000

US$'000

US$'000

US$'000

Other financial assets (Note 10):

Listed equity securities

847

847

—

—

Other obligations (Note 21)

Contingent consideration in a business combinations

(26,527

)

—

—

(26,527

)

 

December 31, 2020

Quoted prices in active markets

Significant observable inputs

Significant unobservable inputs

Total

(Level 1)

(Level 2)

(Level 3)

US$'000

US$'000

US$'000

US$'000

Other financial assets (Note 10):

Listed equity securities

2,609

2,609

—

—

Other obligations (Note 21)

Contingent consideration in a business combinations

(16,632

)

—

—

(16,632

)

  

157

 

A reconciliation of the beginning and ending balances of all liabilities at fair value on recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2021, presented as follows:

 

		Total
		US$'000
Fair value at December 31, 2019			(21,965	)
Changes in fair value through profit or loss			5,333
Fair value at December 31, 2020			(16,632	)
Changes in fair value through profit or loss			(13,168	)
Payments			3,273
Fair value at December 31, 2021			(26,527	)

 

30. Non-current assets held for sale and discontinued operations

 

Discontinued operations

 

At 31 December, 2021, there were not discontinued operations.

 

For the year ended 31 December, 2020, the Company recorded $5,399 thousand related to price adjustment on the sale of Group’s hydro-electric assets in 2019. The amount was recognized in Discontinued operations in Consolidated Income Statement.

 

On June 2, 2019 the Company entered into an agreement with Kehlen Industries Management, S.L., a wholly-owned subsidiary of TSSP Adjacent Opportunities Partners, L.P., for the sale of the entire share capital of FerroAtlántica, S.A.U ("FAU"), the owner and operator of the Group's hydro-electric assets in Galicia (the “Spanish Hydroelectric Business”) and its smelting facility at Cee-Dumbria. The Spanish Hydroelectric Business was classified as disposal group held for sale in the second quarter of 2019 and has been accounted for as a discontinued operation. Prior to completion of the sale, all other assets of FAU unrelated to the Spanish Hydroelectric Business and the Cee-Dumbria smelting facility were transferred to other Group entities.

 

Following the satisfaction of conditions precedent, the sale of FAU completed on August 30, 2019, resulting in gross cash proceeds of $177,627 thousand and a profit on disposal of $85,102 thousand. Under the terms of the transaction, the Group became exclusive off-taker of finished products produced at the smelting plant at Cee-Dumbria and supplier of key raw materials to that facility pursuant to a tolling agreement expiring in 2060.

 

Analysis of the result for the period from the discontinued operations

 

The results of the discontinued operations included in the (loss) profit after taxes from discontinued operations are set out below. The comparative results of the Spanish Hydroelectric Business at December 31, 2020 and 2019 have been represented them as profit (loss) from discontinued operations.

 

158

 

The profit and loss statement from discontinued operations is as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Sales			—				—				13,164
Raw materials and energy consumption for production			—				—				(271	)
Other operating income			—				—				365
Staff costs			—				—				(1,450	)
Other operating expense			—				—				(1,995	)
Depreciation and amortization charges, operating allowances and write-downs			—				—				(2,830	)
Impairment losses			—				—				—
Operating Profit (loss)			—				—				6,983
Net finance expense			—								(6,433	)
(LOSS) PROFIT BEFORE TAXES FROM DISCONTINUED OPERATIONS			—				—				550
Income tax expense			—				—				(1,015	)
Gain on sale of discontinued operation			—				(5,399	)			85,102
(LOSS) PROFIT AFTER TAXES FROM DISCONTINUED OPERATIONS			—				(5,399	)			84,637

 

Basic earnings (loss) per ordinary share are calculated by dividing the consolidated profit (loss) for the year attributable to the Discontinued Operations by the weighted average number of ordinary shares outstanding during the year, excluding the average number of treasury shares held in the year, if any. Dilutive earnings (loss) per share assumes the exercise of stock options, provided that the effect is dilutive. The Earnings per share is showed as follows:

 

		2021				2020				2019
Basic earnings (loss) per ordinary share computation
Numerator:
Profit (loss) attributable to Discontinued Operations (US$'000)			—				(5,399	)			84,637
Denominator:
Weighted average basic shares outstanding			—				169,269,281				169,152,905
Basic earnings (loss) per ordinary share (US$)			—				(0.03	)			0.50
Diluted earnings (loss) per ordinary share computation
Numerator:
Profit (loss) attributable to Discontinued Operations (US$'000)			—				(5,399	)			84,637
Denominator:
Weighted average basic shares outstanding			—				169,269,281				169,152,905
Effect of dilutive securities			—				—				—
Weighted average dilutive shares outstanding			—				169,269,281				169,152,905
Diluted earnings (loss) per ordinary share (US$)			—				(0.03	)			0.50

 

159

 

The statement of cash flows from discontinued operations is showed as follows:

 

		2021				2020				2019
		US$'000				US$'000				US$'000
Cash flows from operating activities:
Profit for the period			—				(5,399	)			84,637
Adjustments to reconcile net (loss) profit to net cash provided by operating activities:
Income tax expense (benefit)			—				—				1,015
Depreciation and amortization charges, operating allowances and write-downs			—				—				2,830
Net Finance expense			—				—				6,433
Gains on disposals of non-current and financial assets			—				5,399				(85,102	)
Changes in working capital
Decrease / (increase) in accounts receivable			—				—				(10,341	)
Decrease / (increase) in inventories			—				—				2
Increase / (Decrease) in accounts payable			—				—				89
Other changes in operating assets and liabilities
Other, net			—				(24	)			69,243
Income tax paid			—				—				—
Interest paid			—				—				(2,307	)
Total cash flow from operating activities			—				(24	)			66,499
Cash flows from investing activities:
Payments due to investments:
Property, plant and equipment			—				—				(126	)
Disposals:
Disposal of business, net of cash			—				—				—
Total cash flow from investing activities			—				—				(126	)
Cash flows from financing activities:
Other financing activities			—				—				(66,457	)
Total cash flow from financing activities			—				—				(66,457	)
INCREASE / (DECREASE) IN CASH			—				(24	)			(84	)
CASH AT BEGINNING OF PERIOD			—				24				108
CASH AT END OF PERIOD			—				—				24

 

31. Events after the reporting period

 

SEPI Loan

 

On February 16, 2022, the Company announced that the Spanish Fund for supporting strategic companies, on a proposal of the Sociedad Estatal de Participaciones Industriales (“SEPI”), a Spanish state-owned industrial holding company affiliated with the Ministry of Finance and Administration, has approved €34.5 million in loans to Grupo Ferroatlántica, S.A.U. and Grupo Ferroátlantica de Servicios, S.L.U., wholly owned subsidiaries of the Company. These loans are part of the SEPI fund intended to provide assistance to non-financial companies operating in strategically important sectors within Spain in the wake of the COVID-19 pandemic.

 

The €34.5M was funded using a dual-tranche loan, with €17.25M maturing in February 2025 and €17.25M maturing in June 2025. €16.9M of the loan carries a fixed interest rate of 2% per annum, and interest on the remaining €17.6M is calculated as IBOR plus a spread of 2.5% in the first year, 3.5% in the second and third years and 5.0% in the fourth year, plus an additional 1.0% payable if the result before taxes of the Beneficiaries is positive. The loans are guaranteed by the Company and certain of its subsidiaries.

 

160

 

The funds are subject to certain governance conditions that imply, among others, the prohibition of distributing dividends, paying non-mandatory coupons or acquiring own shares and the prohibition of the use of the funds for financing economic activities of the group subsidiaries that are not beneficiaries.

 

Uncertainties caused by the Russo-Ukrainian War

 

The recent outbreak of war between Russia and the Ukraine has disrupted supply chains and caused instability in the global economy, while the United States and the European Union, among other countries, announced sanctions against Russia. The ongoing conflict could result in the imposition of further economic sanctions against Russia, and given Russia’s role as global exporter of metcoke, anthracite and electrodes, the Company’s business may be impacted. Currently, the Company’s charter contracts have not been affected by the events in Russia and Ukraine. However, it is possible that in the future thirdparties with whom the Company has or will have charter contracts may be impacted by such events. Rusia and Ukraine are meaningful producers of silicon metal, ferroalloys and manganese-based alloys, exporting into our markets. Management continually tracks developments in the conflict in Ukraine and actively manages our response to potential distributions to the business.

 

Agreement with the French Works Council

 

The Company reached a majority collective agreement with the French Works Council on March 30, 2022 relating to a process that was initiated in April 2021 when Ferroglobe engaged the French Works Councils to discuss proposals for its asset optimization program designed to safeguard its long-term future in Europe.

 

The formal consultation procedure concerning the restructuring project in France initially targeted 355 jobs across the Company’s Château-Feuillet, Les Clavaux and Chambéry sites. Subsequently the scope of the project was amended in November 2021 to reflect the continuation of operation at the Les Clavaux facility given new developments.

 

Collectively, this agreement results in 195 potential job terminations and 35 employee transfers to other facilities. The project is subject to final approval from the French labor authority which is expected during the second quarter of 2022.

 

161

 

PARENT COMPANY BALANCE SHEET

 

AS OF DECEMBER 31, 2021 AND 2020
Thousands of U.S. Dollars

 

				2021				2020
		Notes		US$'000				US$'000
ASSETS
Non-current assets
Investment in subsidiaries		3			629,284				631,274
Property, plant and equipment		8			105				2
Trade and other receivables		4			227,865				221,878
Total non-current assets					857,255				853,154
Current assets
Trade and other receivables		4			160,224				88,385
Other current assets					441				5,619
Cash and cash equivalents					1,311				1,065
Total current assets					161,976				95,069
Total assets					1,019,230				948,223
EQUITY AND LIABILITIES
Equity
Share capital					1,964				1,784
Other reserves		6			(164,783	)			(280,036	)
Translation differences					—				47,296
Valuation adjustments					—				922
Retained earnings					774,530				797,875
Total equity					611,712				567,841
Net current (liabilities) assets					(245,517	)			(136,736	)
Total assets less current liabilities					611,737				716,418
Non-current liabilities
Debt instruments		7			—				148,551
Bank borrowings					—				(1	)
Lease liabilities		9			25				27
Total non-current liabilities					25				148,577
Current liabilities
Debt instruments		7			2,181				4,605
Lease liabilities		9			568				492
Trade and other payables		5			404,024				225,440
Current Income tax liabilities					490				519
Other current liabilities					230				749
Total current liabilities					407,492				231,805
Total equity and liabilities					1,019,230				948,223

 

Notes 1 to 10 are an integral part of these financial statements.

 

The Company reported a loss for the financial year ended December 31, 2021 of $44,490 thousand (2020: profit of $4,146 thousand).

 

The financial statements of Ferroglobe PLC with registration number 9425113 were approved by the Board and authorized for issue on June 1, 2022.

 

Signed on behalf of the Board.

 

Dr. Marco Levi

Director

 

162

 

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR 2021 AND 2020
Thousands of U.S. Dollars

 

 

		Equity attributable to equity holders of the Company
		Share capital				Other reserves				Translation differences				Valuation adjustments				Retained earnings				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Balance at December 31, 2019			1,784				(282,025	)			39,236				(3,417	)			793,729				549,307
Comprehensive (loss) income for the period			—				—				8,060				4,339				4,146				16,545
Share-based compensation			—				1,989				—				—				—				1,989
Balance at December 31, 2020			1,784				(280,036	)			47,296				922				797,875				567,841
Issue share capital			178				84,786				—				—				—				84,965
Share-based compensation			—				2,161				—				—				—				2,161
Comprehensive (loss) income for the period			—				—				1,290				—				(108,164	)			(106,874	)
Net (loss)/gain on cash flow hedges			—				—				—				(922	)			—				(922	)
Balance at September 30, 2021			1,962				(193,089	)			48,586				—				689,711				547,171
Effect of change in functional currency			—				25,403				(48,586	)			—				23,186				2
Balance at October 01, 2021			1,962				(167,686	)			—				—				712,897				547,173
Issue share capital			2				1,440				—				—				—				1,442
Share-based compensation			—				1,464				—				—				—				1,464
Comprehensive (loss) income for the period			—				—				—				—				61,633				61,633
Net (loss)/gain on cash flow hedges			—				—				—				—				—				—
Balance at December 31, 2021			1,964				(164,783	)			—				—				774,530				611,712

 

163

 

1.    Significant accounting policies

 

The separate financial statements of the Company are presented as required by the Companies Act 2006.  The Company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council (the “FRC”). In the year ended December 31, 2021 the Company has continued to adopt FRS 101 as issued by the FRC. Accordingly, the financial statements have therefore been prepared in accordance with FRS 101 (Financial Reporting Standard 101) Reduced Disclosure Framework as issued by the FRC incorporating the Amendments to FRS 101 issued by the FRC in July 2015 and July 2016.

 

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payment, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, certain related party transactions and the requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ in relation to standards not yet effective. Where required, equivalent disclosures are given in the consolidated financial statements.

 

The financial statements have been prepared on the historical cost basis except for the re-measurement of certain financial instruments to fair value. The principal accounting policies adopted are the same as those set out in Notes 3 and 4 to the consolidated financial statements except as noted below.

 

Investment in subsidiaries and impairment

 

Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. At each balance sheet date, the Company reviews the carrying amount of its investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).

 

Recoverable amount is the higher of the fair value less costs to sell and the value in use. In assessing value in use, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

Impact of new International Financial Reporting Standards

 

There are no new or amended standards or interpretations adopted during the year that have a significant impact on the financial statements.

 

1.1 Critical accounting judgements and key sources of estimation uncertainty

 

In the application of the Company's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

164

 

Critical judgements in applying the Company's accounting policies

 

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognized in financial statements.

 

Impairment of assets

 

The Company reviews the carrying value of assets on a periodic basis, and whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

 

Such circumstances or events could include: a pattern of losses involving the asset; a decline in the market value for the asset; and an adverse change in the business or market in which the asset is involved. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. Estimates of future cash flows and the selection of appropriate discount rates relating to particular assets or groups of assets involve the exercise of a significant amount of judgement.

 

Cash flow projections are based on the Company’s five year internal forecasts, the results of which are reviewed by the Board. Estimates of selling prices and direct costs are based on past experience, expectations of future changes in the market and historic trends.

 

Change of functional currency

 

Until September 30, 2021, the Parent’s functional currency was the Euro. Due to an occurrence of events and conditions that reduce the number of transactions in euros, and in accordance with International Financial Reporting Standards, management conducted a review of the functional currency of Ferroglobe PLC and they concluded that there has been a change in its functional currency from Euro to U.S. Dollars, effective since October 1, 2021.

 

Ferroglobe PLC is the parent company of Ferroglobe Group and its main assets and liabilities relate to intercompany transactions. Due to the new group structure, PLC has signed an agreement in which they agreed to convert all intercompany receivables and payables outstanding into US Dollars. Additionally, PLC financing instruments (debt and equity instruments) are U.S. Dollars denominated.

 

The change in functional currency was implemented prospectively starting October 1, 2021. To give effect to this change, balances of the parent company as of October, 1, 2021 have been translated to USD in accordance with IAS 21 “The effect of changes in foreign exchange rates”. The functional currencies of subsidiaries are determined by the primary economic environment in which each subsidiary operates.

 

Key sources of estimation of uncertainty

 

The key assumptions concerning the future, and other key sources of estimating uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are discussed below.

 

Allowances against the carrying value of investment in subsidiaries

 

Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment. The recoverable amounts of individual investments in subsidiaries are determined from value in use calculations with a discounted cash flow model being used to calculate this amount. The key assumptions for the value in use calculation are those regarding the discount rate, growth rate, and cash flows.

 

Cash flow projections are based on the Company’s five year internal forecasts, the results of which are reviewed by the Board. Estimates of selling prices and direct costs are based on past experience, expectations of future changes in the market and historic trends. Sensitivities are disclosed in Note 7 of the Consolidated Financial Statements.

 

165

 

2.    Profit (loss) for the year

 

As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account or statement of other comprehensive income for the year. The profit (loss) attributable to the Company is disclosed directly beneath the Company’s balance sheet.

 

Auditor’s remuneration

 

The analysis of the auditor’s remuneration in respect to the Group is as follows:         

 

		2021  US$'000				2020  US$'000
Audit Fees			5,296				4,810
Audit-Related Fees			770				38
Total audit fees			6,066				4,848
Tax Fees			37				3
All Other Fees			13				—
Total non-audit fees			50				3
Total			6,116				4,851

 

The company has €71.1 million of unrecognised tax losses in 2021 (2020: €54.6 million).

 

3.    Investment in subsidiaries

 

The Company’s investments at the balance sheet date in the share capital of its subsidiaries include the following:

 

Company		Country		Ownership				Currency		Purpose
Ferroglobe Holding Company, LTD		United Kingdom			100	%		USD		Electrometallurgy

 

During 2021 the Company completed the refinancing of its debt instruments. As part of the refinancing process two new entities were incorporated Ferroglobe Finance Company PLC “FinCo” and Ferroglobe Holding Company LTD “HoldCo”. A step of this refinancing process was for Ferroglobe PLC to transfer all of its investments to the new incorporated entity HoldCo. Therefore, Ferroglobe PLC transferred the shares of GSM and GFAT in exchange of shares of HoldCo. This transaction was accounted at their existing carrying values.

 

Investments in subsidiaries are stated at cost less provision for impairments and the Directors believe that the carrying value of the investments is supported by their underlying net assets or expected cash generation.

 

The change in carrying value of investments is as follows:

 

		2021				2020
		US$'000				US$'000
Cost:
At January 1			631,274				610,534
Translation differences			—				20,740
Effect of change in functional currency			(1,990	)			—
At December 31			629,284				631,274
Provision for impairment:
At January 1			—				—
Impairment			—				—
At December 31			—				—
Net book value:
At December 31			629,284				631,274

 

166

 

The following are subsidiaries of the Company:

 

Name		Country of incorporation		Nature of the business
Grupo FerroAtlántica, S.A.U.		Spain (1)		Electrometallurgy
FerroPem, S.A.S.		France (2)		Electrometallurgy
Silicon Smelters (Pty.), Ltd.		South Africa (3)		Electrometallurgy
Globe Specialty Metals, Inc		United States of America (4)		Electrometallurgy
Globe Metallurgical, Inc.		United States of America (4)		Electrometallurgy
WVA Manufacturing, LLC		United States of America (5)		Electrometallurgy
xºQuebec Silicon LP		Canada (6)		Electrometallurgy
Globe Metales, S.A.		Argentina (7)		Electrometallurgy
Ferroglobe Mangan Norge AS		Norway (8)		Electrometallurgy
Ferroglobe Manganese France SAS		France (9)		Electrometallurgy
FerroAtlántica del Cinca, S.L.		Spain (1)		Electrometallurgy
Ferroglobe Finance Company, PLC		United Kingdom (10)		Electrometallurgy
Ferroglobe Holding Company, LTD.		United Kingdom (10)		Electrometallurgy

 

 

Registered Offices:

 

1. Pº Castellana, Nº 259-D Planta 49ª, 28046, Madrid, Spain

2. 517, Av. de la Boisse., Chambery, France

3. Beyersnek Road Po Box 657, Polokwane, 0700 ZA, South Africa

4. 1595 Sparling Road, Waterford OH 45786, United States

5. Route 60 East, Alloy WV 25002, United States

6. 6500 Rue Yvon-Trudeau, Becancour Québec G9H 2V8, Canada

7. Pico 1641 - Floor 8th - Rooms A and C, Buenos Aires, Argentina

8. Mo Industripark, 8624 Mo-i-Rana, Norway

9. Route De L’Ecluse , de Mardyck, 59792, Grande Synthe, France

10. 5 Fleet Place, London, England, EC4M 7RD

 

The following subsidiaries were dormant and subsequently have been dissolved during 2021:

 

  · Ferroatlantica International Ltd was subsequently dissolved on 23 March 2021; and

  · Ferroglobe Services (UK) Ltd was subsequently dissolved on 4 May 2021.

 

Further information about subsidiaries, including disclosures about non-controlling interests, is provided in Note 2 to the consolidated financial statements.

 

4.    Trade and other receivables

 

		2021												2020
		Non-current				Current				Total				Non-current				Current				Total
		US$'000				US$'000				US$'000				US$'000				US$'000				US$'000
Amounts receivable from subsidiaries			227,865				159,874				387,740				221,878				88,033				309,911
VAT recoverable			—				237				237				—				294				294
Other receivables			—				113				113				—				58				58
Total			227,865				160,224				388,090				221,878				88,385				310,263

 

Current amounts due from subsidiaries are repayable on demand and are non interest bearing.

 

Non-current amounts receivable from related parties comprise loans receivable from subsidiaries. The loans bear interest at a rate of 6 month EURIBOR + 9.32% per annum.

 

167

 

5.    Trade and other payables

 

		2021				2020
		US$'000				US$'000
Amounts payable to subsidiaries			392,803				217,803
Trade payables			11,221				7,637
Total			404,024				225,440

 

Amounts payable to related parties comprise $392,803 thousand payable to subsidiaries (2020: $217,803 thousand). Amounts payable to subsidiaries include variable rate interest bearing loans of $251,411 thousand (2020: $186,968 thousand).

 

The Company guarantees the debts and liabilities of certain of its UK subsidiaries, Ferroglobe Finance Company PLC (company number: 13353128) and Ferroglobe Holding Company Ltd (company number: 13347942) at the balance sheet date in accordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under these guarantees as remote.

 

6.    Shareholders’ funds

 

The change in other reserves is as follows:

 

		Other reserves
		Merger reserve				Share premium				Share-based payment				Own shares				Total
		US$'000				US$'000				US$'000				US$'000				US$'000
Balance at December 31, 2019			(280,023	)			420				9,510				(11,932	)			(282,025	)
Share-based compensation			—				—				1,989				—				1,989
Balance at December 31, 2020			(280,023	)			420				11,499				(11,932	)			(280,036	)
Issued share capital			—				86,226				—				—				86,226
Share-based compensation			—				—				3,625				—				3,625
Effect of change in functional currency			37,402				(11,573	)			(2,020	)			1,593				25,402
Balance at December 31, 2021			(242,621	)			75,073				13,104				(10,339	)			(164,783	)

 

7.    Debt instruments

 

Debt instruments comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Unsecured notes carried at amortised cost
Principal amount			2,116				150,000
Unamortised issuance costs			—				(1,531	)
Accrued coupon interest			65				4,687
Total			2,181				153,156
Amount due for settlement within 12 months			2,181				4,605
Amount due for settlement after 12 months			—				148,551
Total			2,181				153,156

 

On February 15, 2017, Ferroglobe issued $150,000 thousand aggregate principal amount of 9.375% Senior Notes due March 1, 2022 (the "Notes"). Issuance costs of $5,193 thousand were incurred. Interest on the Notes is payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2017.

 

On March 27, 2021, Ferroglobe and Globe and certain other members of our group entered into the Lock-Up Agreement with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital that set forth a plan to implement the restructuring. On July 30,2021 the company announced the occurrence of the “Transaction Effective Date” under the lock-up agreement dated March 27, 2021 (the “Lock-Up Agreement”) between the Company and the financial stakeholders. The Issuers completed the exchange of 98.588% of the 9⅜% Senior Notes due 2022 (the “Old Notes”) issued by the Company and Globe for a total consideration per $1,000 principal amount of Old Notes comprising (i) $1,000 aggregate principal amount of new 9⅜% senior secured notes due 2025 issued by the Issuers (the “New Notes”) plus (ii) a cash fee amounting to $51,611 thousand, which the Parent, at the direction of the qualifying noteholders, applied as cash consideration for a subscription of new ordinary shares of the Company. In addition, the Company issued new ordinary shares for total gross proceeds of $40 million.

 

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As part of the refinancing process, Ferroglobe PLC cancelled 98.588% of the Old Notes and FinCo issued the New Notes amounting $345 million.

 

The Old Notes are governed by the Old Notes Indenture entered into by, among others, Ferroglobe and Globe, as issuers, Wilmington Trust, National Association, as trustee, registrar and paying agent, and the guarantors named therein (the “Old Notes Guarantors”).

 

The Old Notes and the guarantees thereof are general unsecured, senior obligations of Ferroglobe and Globe and the Old Notes Guarantors, as applicable, and rank senior in right of payment to any and all of the existing and future indebtedness of Ferroglobe, Globe and the Old Notes Guarantors, as applicable, that is expressly subordinated in right of payment to the Old Notes and such guarantees, as applicable.

 

The fair value of the Note maturing on March 1, 2022, determined by reference to the closing market price on the last trading day of the year, was $5,082 thousand and has been fully settled.

 

8.    Property, plant and equipment

 

The detail of property, plant and equipment, net of the related accumulated depreciation and impairment in 2021 and 2020 is as follows:

 

		Leased Land				Leased Plant				Accumulated
		and Buildings				and Machinery				Depreciation				Impairment				Total
		US$'000				US$'000				US$'000				US$'000				US$'000
Balance at December 31, 2019			2,007				4				(791	)			(1,218	)			2
Depreciation charge for the year			—				—				(3	)			—				(3	)
Impairment			—				—				—				—				—
Exchange differences			186				—				(71	)			(112	)			3
Balance at December 31, 2020			2,193				4				(865	)			(1,330	)			2
Additions			215				—				(109	)			—				106
Disposals			(107	)			—				107				—				—
Depreciation charge for the year			—				—				—				—				—
Impairment			—				—				—				—				—
Exchange differences			(108	)			—				42				63				(3	)
Balance at December 31, 2021			2,192				4				(824	)			(1,267	)			105

 

During 2021 the Company recognised an addition of $215 thousand in relation to the new lease for the London office.

 

9.    Leases

 

Lease obligations comprise the following at December 31:

 

		2021				2020
		US$'000				US$'000
Balance as at January, 1			519				1,252
Additions			215				—
Interest			3				41
Lease payments			(111	)			(840	)
Exchange differences			(32	)			66
Balance as at December, 31			593				519
Analysed as:
Current			568				492
Non-current			25				27

 

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10. Events after the reporting period

 

Uncertainties caused by the Russo-Ukrainian War

 

The recent outbreak of war between Russia and the Ukraine has disrupted supply chains and caused instability in the global economy, while the United States and the European Union, among other countries, announced sanctions against Russia. The ongoing conflict could result in the imposition of further economic sanctions against Russia, and given Russia’s role as global exporter of metcoke, anthracite and electrodes, the Company’s business may be impacted. Currently, the Company’s charter contracts have not been affected by the events in Russia and Ukraine. However, it is possible that in the future third parties with whom the Company has or will have charter contracts may be impacted by such events. Rusia and Ukraine are meaningful producers of silicon metal, ferroalloys and manganese-based alloys, exporting into our markets. Management continually tracks developments in the conflict in Ukraine and actively manages our response to potential distributions to the business.

 

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Appendix 1 -  Non-IFRS financial metrics (unaudited)

 

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Profit, Working Capital, Free Cash Flow, Net Debt, Net Debt to total assets and Net Debt to Capital are non-IFRS financial metrics that Ferroglobe utilizes to measure its success. The Company has included these financial metrics to provide supplemental measures of its performance. We believe these metrics are important because they eliminate items that have less bearing on the Company’s current and future operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures.

 

Adjusted EBITDA

 

		2021				2020
		US$'000				US$'000
(Loss) profit attributable to the parent			(110,624	)			(246,339	)
(Loss) profit from discontinued operations			—				5,399
Loss attributable to non-controlling interest			(4,750	)			(3,419	)
Income tax (benefit) expense			(4,562	)			21,939
Net finance expense			148,936				66,791
Financial derivatives loss (gain)			—				(3,168	)
Exchange differences			2,386				(25,553	)
Depreciation and amortization charges, operating allowances and write-downs			97,328				108,189
EBITDA			128,714				(76,161	)
Impairment loss			(137	)			73,344
Restructuring and termination costs			27,368				3,770
New strategy implementation			22,700				—
Energy: France			—				70
Staff costs: South Africa			—				158
Other idling costs			—				2,887
Provision Ithaka			—				28,441
Adjusted EBITDA			178,645				32,510

 

Adjusted EBITDA Margin

 

		2021				2020
		US$'000				US$'000
Adjusted EBITDA			179,330				32,510
Sales			1,778,908				1,144,434
Adjusted EBITDA Margin			10.1	%			2.8	%

 

Adjusted Net Profit

 

		2021				2020
		US$'000				US$'000
(Loss) profit attributable to the parent			(110,624	)			(246,339	)
Tax rate adjustment			17,026				93,113
Impairment loss			(112	)			49,874
Restructuring and termination costs			22,442				2,564
New strategy implementation			18,614				—
Energy: France			—				48
Staff costs: South Africa			—				107
Other idling costs			—				1,963
Tolling agreement (1)			—				—
Adjusted (loss)/profit attributable to the parent			(52,654	)			(98,671	)

 

 

¹ Non-IFRS financial metrics in 2020 included $19,340 thousand adjustment regarding the tolling agreement.

 

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Working Capital

 

		2021				2020
		US$'000				US$'000
Inventories			289,797				246,549
Trade and other receivables			381,073				242,262
Trade and other payables			(206,000	)			(149,201	)
Working Capital			464,870				339,610

 

Free Cash Flow

 

		2021				2020
		US$'000				US$'000
Net cash provided by operating activities			(1,341	)			154,268
Payments for property, plant and equipment			(27,597	)			(30,257	)
Free Cash Flow			(28,938	)			124,011

 

Net Debt

 

		2021				2020
		US$'000				US$'000
Bank borrowings			98,967				107,607
Debt instruments			440,297				357,508
Lease obligations			18,358				39,866
Other financial liabilities			67,013				63,896
Cash and cash equivalents			(114,391	)			(102,714	)
Non-current restricted cash and cash equivalents			(2,272	)			(28,843	)
Net Debt			507,972				437,320

 

Capital

 

		2021				2020
		US$'000				US$'000
Net Debt			507,972				437,320
Equity			320,031				365,719
Capital			828,003				803,039

 

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