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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     
For the transition period from                  to                 

Commission file number: 001-37668

Ferroglobe PLC

(Exact name of Registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

13 Chesterfield Street,

London W1J 5JN, United Kingdom

+44(0)7501308322

(Address of principal executive offices)

Beatriz García-Cos Chief Financial Officer and Principal Accounting Officer

13 Chesterfield Street,

London W1J 5JN, United Kingdom

+44(0)7501308322

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

    

Name of each exchange on which registered

Ordinary Shares (nominal value of $0.01)

GSM

NASDAQ Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares (nominal value of $0.01)

187,433,543

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No     

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

† Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report    

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP

International Financial Reporting Standards as issued

Other

by the International Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

TABLE OF CONTENTS

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

1

PART I

5

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

5

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

5

ITEM 3.

KEY INFORMATION

5

ITEM 4.

INFORMATION ON THE COMPANY

34

ITEM 4A.

UNRESOLVED STAFF COMMENTS

62

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

62

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

98

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

112

ITEM 8.

FINANCIAL INFORMATION

119

ITEM 9.

THE OFFER AND LISTING

121

ITEM 10.

ADDITIONAL INFORMATION

121

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

139

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

142

PART II

143

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

143

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

143

ITEM 15.

CONTROLS AND PROCEDURES.

143

ITEM 16.

[RESERVED]

146

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT.

146

ITEM 16B.

CODE OF ETHICS.

146

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

146

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

147

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

147

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

147

ITEM 16G.

CORPORATE GOVERNANCE.

147

ITEM 16H.

MINE SAFETY DISCLOSURE

148

PART III

149

ITEM 17.

FINANCIAL STATEMENTS.

149

ITEM 18.

FINANCIAL STATEMENTS.

149

ITEM 19.

EXHIBITS.

149

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This annual report includes statements that are, or may be deemed to be, forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements are made under the "safe harbor" provision under Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this annual report, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we operate or are seeking to operate or anticipated regulatory changes in the markets in which we operate or intend to operate. These statements are often, but not always, made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,” “plan,” “potential,” “predict(s),” “will,” “expect(s),” “estimate(s),” “project(s),” “positioned,” “strategy,” “outlook,” “aim,” “assume,” “continue,” “forecast,” “guidance,” “projected,” “risk” and similar expressions.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance and are based on numerous assumptions. Our actual results of operations, financial condition and the development of events may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements. Investors should read the section entitled “Item 3.D.—Key Information—Risk Factors” and the description of our segments in the section entitled “Item 4.B.—Information on the Company—Business Overview” for a more complete discussion of the factors that could affect us. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in, or suggested by, the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following:

the impacts of the COVID-19 pandemic;
the impacts of the Ukraine-Russia conflict;
increase in energy prices, disruptions in the supply of power and changes in governmental regulation of the power sector and the effect on costs of production;
the outcomes of pending or potential litigation;
operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected;
the retention of certain key employees;
intense competition and expected increased competition in the future;
our ability to adapt products and services to changes in technology or the marketplace;
our ability to maintain and grow relationships with customers and clients;
the historic cyclicality of the metals industry and the attendant swings in market price and demand;
availability of raw materials and transportation;
costs associated with labor disputes and stoppages;
our ability to maintain our liquidity and to generate sufficient cash to service indebtedness;
integration and development of prior and future acquisitions;

1

the availability and cost of maintaining adequate levels of insurance;
our ability to protect trade secrets, trademarks and other intellectual property;
equipment failures, delays in deliveries or catastrophic loss at any of our manufacturing facilities, which may not be covered under any insurance policy;
exchange rate fluctuations;
changes in laws protecting U.S., Canadian and European Union companies from unfair foreign competition (including antidumping and countervailing duty orders and laws) or the measures currently in place or expected to be imposed under those laws;
compliance with, or potential liability under, environmental, health and safety laws and regulations (and changes in such laws and regulations, including in their enforcement or interpretation);
risks from international operations, such as foreign exchange fluctuations, tariffs, duties and other taxation, inflation, increased costs, political risks and our ability to maintain and increase business in international markets;
risks associated with mining operations, metallurgical smelting and other manufacturing activities;
our ability to manage price and operational risks including industrial accidents and natural disasters;
our ability to acquire or renew permits and approvals;
potential losses due to unanticipated cancellations of service contracts;
risks associated with potential unionization of employees or work stoppages that could adversely affect our operations;
changes in tax laws (including under applicable tax treaties) and regulations or to the interpretation of such tax laws or regulations by governmental authorities;
changes in general economic, business and political conditions, including changes in the financial markets;
uncertainties and challenges surrounding the implementation and development of new technologies;
risks related to our capital structure; and
risks related to our ordinary shares.

These and other factors are more fully discussed in the “Item 3.D.—Key Information—Risk Factors” and “Item 4.B.—Information on the Company—Business Overview” sections and elsewhere in this annual report.

The factors described above and set forth in “Item 3.D.—Key Information—Risk Factors” section are not exhaustive. Other sections of this annual report describe additional factors that could adversely affect our business, financial condition or results of operations. Moreover, we operate in a very competitive and rapidly changing commercial environment. New risk factors emerge from time to time and it is not possible for us to predict or list all such risks, nor can we assess the impact of all possible risks on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained, or implied by, in any forward-looking statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report

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and the documents we reference herein carefully and completely, with the understanding that our actual future results or performance may be materially different from what we anticipate.

CURRENCY PRESENTATION AND DEFINITIONS

In this annual report, references to “$,” “US$” and “U.S. Dollars” are to the lawful currency of the United States of America, references to “Euro” and “€” are to the single currency adopted by participating member states of the European Union relating to Economic and Monetary Union and references to “Pound Sterling” and “£” are to the lawful currency of the United Kingdom.

Unless otherwise specified or the context requires otherwise, all financial information for the Company provided in this annual report is denominated in U.S. Dollars.

Definitions

Unless otherwise specified or the context requires otherwise in this annual report:

the terms (1) “we,” “us,” “our,” “Company,” “Ferroglobe,” and “our business” refer to Ferroglobe PLC and its subsidiaries, including Globe Specialty Metals, Inc. (“Globe”) and its consolidated subsidiaries and Grupo FerroAtlántica, S.A.U. (“FerroAtlántica”) and its consolidated subsidiaries; (2) “Globe” refers solely to Globe Specialty Metals, Inc. and its consolidated subsidiaries and (3) “FerroAtlántica” or the “FerroAtlántica Group” refers solely to FerroAtlántica and its consolidated subsidiaries;
“Business Combination” refers to the business combination of Globe and FerroAtlántica as wholly-owned subsidiaries of Ferroglobe PLC on December 23, 2015;
“Class A Ordinary Shares” refers to share capital issued in connection with the Business Combination, which was subsequently converted into ordinary shares of Ferroglobe PLC as a result of the distribution of beneficial interest units in the Ferroglobe Representation and Warranty Insurance Trust to certain Ferroglobe PLC shareholders on November 18, 2016;
“Consolidated Financial Statements” refers to the audited consolidated financial statements of Ferroglobe PLC and its subsidiaries as of December 31, 2022 and December 31, 2021 and for each of the years ended December 31, 2022, 2021 and 2020, including the related notes thereto, prepared in accordance with IFRS (as such terms are defined herein);
“IFRS” refers to International Financial Reporting Standards as issued by the International Accounting Standards Board;
“Reinstated Senior Notes” refer to the notes issued in exchange of 98.588% of the 9.375% Notes due 2022  issued by Ferroglobe Finance Company PLC and Globe due December 2025;
“Super Senior Notes” refer to the 9.0% senior secured notes due 2025 issued by Ferroglobe Finance Company, PLC;
“Stub Notes” refer to the $4,942 thousand aggregate principal amount of 9.375% Notes due March 1, 2022;
“Predecessor” refers to FerroAtlántica for all periods prior to the Business Combination;
“Antecessor” refers to Globe for all periods prior to the Business Combination;
“shares” or “ordinary shares” refer to the authorized share capital of Ferroglobe PLC;
“tons” refer to metric tons (approximately 2,204.6 pounds or 1.1 short tons);

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“U.S. Exchange Act” refers to the U.S. Securities Exchange Act of 1934, as amended; and
“U.S. Securities Act” refers to the U.S. Securities Act of 1933, as amended.
“ABL Revolver” refers the credit agreement, dated as of June, 30, 2022, Ferroglobe subsidiaries Globe Specialty Metals, Inc., and QSIP Canada ULC, as borrowers, for a Credit and Security Agreement for a new $100 million north American asset-based revolving credit facility, with Bank of Montreal, as lender.
“IBOR” refers to the basic rate of interest used under some financial instruments.
“Leasing and Factoring Agent” refers to the finance entity which signed, on October 2, 2020, a factoring agreement with Grupo Ferroatlantica S.A.U. and Ferropem, Ferrgolobe’s subsidiaries, to anticipate the collection of accounts receivable.
“ZAR” refers to the currency abbreviation in forex markets for the South African Rand, the official currency of South Africa.

PRESENTATION OF FINANCIAL INFORMATION

The selected financial information as of December 31, 2022 and December 31, 2021 and for the years ended December 31, 2022, 2021 and 2020 is derived from our Consolidated Financial Statements, which are included elsewhere in this annual report and which are prepared in accordance with IFRS.

Certain numerical figures set out in this annual report, including financial data presented in millions or thousands and percentages describing market shares, have been subject to rounding adjustments, and, as a result, the totals of the data in this annual report may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data set forth in “Item 5.—Operating and Financial Review and Prospects” are calculated using the numerical data in our Consolidated Financial Statements or the tabular presentation of other data (subject to rounding) contained in this annual report, as applicable, and not using the numerical data in the narrative description thereof.

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PART I

ITEM 1.       IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.       OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.       KEY INFORMATION

A.    Selected Financial Data

Reserved

B.    Capitalization and indebtedness.

Not applicable.

C.    Reasons for the offer and use of proceeds.

Not applicable.

D.    Risk factors.

An investment in our ordinary shares carries a significant degree of risk. You should carefully consider the following risks and all other information in this annual report, including our Consolidated Financial Statements elsewhere in the 20-F. Additional risks and uncertainties we are not presently aware of, or that we currently deem immaterial, could also affect our business operations and financial condition. If any of these risks are realized, our business, results of operations and financial condition could be adversely affected to a material degree. As a result, the trading price of our ordinary shares could decline and you could lose part or all of your investment.

Risks Related to Our Business and Industry

Our operations depend on industries including the aluminum, steel, polysilicon, silicone and photovoltaic/solar industries, which, in turn, rely on several end-markets. A downturn or change in these industries or end-markets could adversely affect our business, results of operations and financial condition.

Because we primarily sell silicon metal, silicon based alloys, manganese based alloys and other specialty alloys we produce to manufacturers of aluminum, steel, polysilicon, silicones, and photovoltaic products, our results are significantly affected by the economic trends in the steel, aluminum, polysilicon, silicone and photovoltaic industries. Primary end users that drive demand for steel and aluminum include construction companies, shipbuilders, electric appliance, car manufacturers, and companies operating in the rail and maritime industries. The primary end users that drive demand for polysilicon and silicones include the automotive, chemical, photovoltaic, pharmaceutical, construction and consumer products industries. Demand for steel, aluminum, polysilicon and silicones from such companies is strongly correlated with changes in gross domestic product and is affected by global economic conditions. Fluctuations in steel and aluminum prices may occur due to sustained price shifts reflecting underlying global economic and geopolitical factors, changes in industry supply-demand balances, the substitution of one product for another in times of scarcity, and changes in national tariffs. Lower demand for steel and aluminum can quickly cause a substantial build-up of steel and aluminum stocks, resulting in a decline in demand for silicon metal, silicon-based alloys, manganese-based alloys, and other specialty alloys. Polysilicon and silicone producers are subject to fluctuations in crude oil, platinum, methanol and natural gas prices, which could adversely affect their businesses. Changes in power regulations in different countries, fluctuations in the relative costs of different sources

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of energy, and supply-demand balances in the different parts of the value chain, among other factors, may significantly affect the growth prospects of the photovoltaic industry. A significant and prolonged downturn in the end markets for steel, aluminum, polysilicon, silicone and photovoltaic products, could adversely affect these industries and, in turn, our business, results of operations and financial condition.

COVID-19 has had a material detrimental impact on our business and financial results, and such impact could continue for an unknown period of time.

COVID-19 has been and continues to be a complex and evolving situation, with governments, public institutions and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation; limitations on the size of in-person gatherings, restrictions on freight transportations, closures of, or occupancy or other operating limitations on work facilities, and quarantines and lock-downs. COVID-19 and its consequences significantly impacted our business, operations, and financial results. The extent to which COVID-19 impacts our business, operations, and financial results going forward will depend on the factors described above and numerous other evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the COVID-19 pandemic; the effectiveness of vaccines or treatments; COVID-19’s impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates; its short and longer-term impact on the demand for our products, group business, and levels of customer confidence; the ability of our owners to successfully navigate the impacts of COVID-19; and how quickly economies, and demand recovers after the pandemic subsides.

COVID-19 has negatively impacted, and in the future may negatively impact to an extent we are unable to predict, our revenues. In addition, COVID-19 and its impact on global and regional economies, and the specialty chemical industry, made it difficult to obtain financing during the height of the pandemic.  If a significant number of our sales volumes are terminated as a result of bankruptcies, sales or foreclosures, our results of operations could be materially adversely affected. Also, testing our intangible assets or goodwill for impairments could result in additional charges, which could be material. For the reasons set forth above, COVID-19 has had and may in the future will have a material adverse effect on our business, operations, and financial condition.

The metals industry is cyclical and has been subject in the past to swings in market price and demand which could lead to volatility in our revenues.

Our business has historically been subject to fluctuations in the price of our products and market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors. The timing, magnitude and duration of these cycles and the resulting price fluctuations are difficult to predict. For example, we experienced a weakened economic environment in national and international metals markets, including a sharp decrease in silicon metal prices in all major markets, from late 2014 to late 2017. During the second half of 2018 and throughout 2019, we experienced the most dramatic decline in prevailing prices of our products, which adversely affected our results. In 2020, the business experienced a reduction in sales volumes as a result of lower customer demand and a decrease in prices variance.

Historically, Ferroglobe’s indirect subsidiary Globe Metallurgical Inc., has been affected by recessionary conditions in the end markets for its products, such as the automotive and construction industries. In April 2003, Globe Metallurgical Inc. sought protection under Chapter 11 of the U.S. Bankruptcy Code following its inability to restructure or refinance its indebtedness amidst a confluence of several negative economic and other factors, including an influx of low priced, dumped imports, which caused it to default on then outstanding indebtedness. A recurrence of such economic factors could have a material adverse effect on our business, results of operations and financial condition.

Additionally, as a result of unfavorable conditions in the end markets for its products, Globe Metales S.R.L. (“Globe Metales”) went through reorganization proceedings (“concurso preventivo”) in 1999, which ended in February 2019. While such reorganization proceedings were ongoing (until February 2019), Globe Metales could not dispose of or

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encumber its registered assets (including its real estate) or perform any action outside its ordinary course of business without prior court approval.

In addition to the deterioration of market conditions for several of our products in the second half of 2018 and the whole of 2019, we also saw a contraction in sales volumes during 2020 which was primarily driven by the COVID-19 pandemic. Throughout 2021, COVID -19 and its consequences continue 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. Moreover, our business is directly related to the production levels of our customers, whose businesses are dependent on highly cyclical markets, such as the automotive, residential and non-residential construction, consumer durables, polysilicon, steel, and chemical industries. In response to unfavourable market conditions, customers may request delays in contract shipment dates or other contract modifications. If we grant modifications, these could adversely affect our anticipated revenues and results of operations. Also, many of our products are traded internationally at prices that are significantly affected by worldwide supply and demand. Consequently, our financial performance will fluctuate with the general economic cycle, which 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. For example, at certain of our plants, production must be modulated to reduce consumption of energy in peak hours or in seasons with higher energy prices, in order for us to maintain profitability. Generation of electricity in France by our own hydroelectric power operations partially mitigates our exposure to price increases in that market. However, in the past we have pursued possibilities of disposing of those operations, and may do so in the future. Such a divestiture, if completed, may result in a greater exposure to increases in electricity prices. In 2021 the cost of electricity in Spain experienced extremely high volatility due to the fluctuations of natural gas in the European markets. Natural gas experienced a progressive increase in price since April 2021, due to the low level of stocks in gas storages in Europe, and the reduction of supply from Russia, following the growing demand for Natural Gas from China. The risk of natural gas shortages due to a possible cold winter in Europe, caused in December 2021 an unprecedented increase in the price of gas reaching record prices in the market, which led to record prices in the Spanish electricity market of up to 400 €/Mwh. Our Spanish plants have tried to mitigate price rises by reducing the furnace capacity during peak hours  and increasing production in more competitive furnaces. In the immediate aftermath of Russia’s invasion of Ukraine, European energy markets saw continued levels of volatility and the prices increased in line with those seen in late 2021.

The electrical power for our U.S. and Canadian facilities is supplied mostly by American Electric Power Co., Alabama Power Co., Brookfield Renewable Partners L.P. and Hydro-Québec, and the Tennessee Valley Authority through dedicated lines. Our Alloy, West Virginia facility obtains approximately 45% of its power needs under a fixed price power purchase agreement with a nearby hydroelectric facility owned by a Brookfield affiliate. This facility is over 70 years old and any breakdown could result in the Alloy facility having to purchase more grid power at higher rates. The hydropower contract with Brookfield for the Alloy plant was renewed in 2021 for a period of four years. The energy supply for our Mendoza, Argentina facility is supplied by the national network administrator Cammesa under a power agreement expiring in December 2024 with a special rate specifically approved for ultra electro intensive industries.

Energy supply to our facilities in South Africa is provided by Eskom (State-owned power utility) through rates that are approved annually by the national power regulator (NERSA). These rates have had an upward trend in the past years, due to the instability of available supply and are likely to continue increasing. Also, NERSA applies certain revisions to rates based on cost variances for Eskom that are not within our control.

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In Spain, power is purchased in a competitive wholesale market. Our facilities have to pay access tariffs to the national grid and get a small compensation for having been recognized as electro-intensive consumers. The volatile nature of the wholesale market in Spain results in price uncertainty that can be only partially offset by long term power purchase agreements. Also, the payment we receive for the services provided to the grid are a major component of our power supply arrangements in Spain, and regulation for such services has been altered several times during the past years and the economic benefits of such services vary significantly from one year to the next, affecting our production cost and results from our operations.

Additionally, our energy purchase arrangements depend to a certain extent on rebates or revenues that we get for providing different services to the grid (interruptibility, load shaving, off-peak consumption, etc.). These rebates may be significant, but such arrangements with relevant grid operators and/or regulators may vary over time, which may affect our production costs and results from our operations.

Losses caused by disruptions in the supply of power would reduce our profitability.

Large amounts of electricity are used to produce silicon metal, manganese and silicon-based alloys and other specialty alloys, and our operations are heavily dependent upon a reliable supply of electrical power. We may incur losses due to a temporary or prolonged interruption of the supply of electrical power to our facilities, which can be caused by unusually high demand, blackouts, equipment failure, natural disasters or other catastrophic events, including failure of the hydroelectric facilities that currently provide power under contract to our West Virginia, Québec and Argentina facilities. Additionally, on occasion, we have been instructed to suspend operations for several hours by the sole energy supplier in South Africa due to a general power shortage in the country. It is possible that this supplier may instruct us to suspend our operations for a similar or longer period in the future. Such interruptions or reductions in the supply of electrical power adversely affect production levels and may result in reduced profitability. Our insurance coverage does not cover all interruption events and may not be sufficient to cover losses incurred as a result.

In addition, investments in Argentina’s electricity generation and transmission systems have been lower than the increase in demand in recent years. If this trend is not reversed, there could be electricity supply shortages as the result of inadequate generation and transmission capacity. Given the heavy dependence on electricity of our manufacturing operations, any electricity shortages could adversely affect our financial results.

Government regulations of electricity in Argentina give priority of use of hydroelectric power to residential users and subject violators of these restrictions to significant penalties. This preference is particularly acute during Argentina’s winter months due to a lack of natural gas. We have previously successfully petitioned the government to exempt us from these restrictions given the demands of our business for continuous supply of electric power. If we are unsuccessful in our petitions or in any action we take to ensure a stable supply of electricity, our production levels may be adversely affected and our profitability reduced.

Any decrease in the availability, or increase in the cost, of raw materials or transportation could materially increase our costs.

Principal components in the production of silicon metal, silicon based alloys and manganese based alloys include coal, charcoal, graphite and carbon electrodes, manganese ore, quartzite, wood chips, steel scrap, and other metals. While we own certain sources of raw materials, we also buy raw materials on a spot or contracted basis. The availability of these raw materials and the prices at which we purchase them from third party suppliers depend on market supply and demand and may be volatile such as due to the COVID-19 pandemic or the Ukraine-Russia conflicts. Our ability to obtain these materials in a cost efficient and timely manner is dependent on certain suppliers, their labor union relationships, mining and lumbering regulations and output, pandemic, geopolitical and general local economic conditions.  

Over the previous years, certain raw materials (particularly graphite electrodes, coal, manganese ore, and other electrode components) have experienced significant price increases and quick price moves in relatively short periods of time, and the recent conflict in Ukraine and resulting sanctions on Russia have led to supply limitations and interruptions. In some cases, this has been combined with certain shortage in the availability of such raw materials. While we try to anticipate

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potential shortages in the supply of critical raw materials with longer term contracts and other purchasing strategies, these price swings and supply shortages may affect our cost of production or even cause interruptions in our operations, which may have a material adverse effect on our business, results of operations and financial condition.

We make extensive use of shipping by sea, rail and truck to obtain the raw materials used in our production and deliver our products to customers, depending on the geographic region and product or input. Raw materials and products often must be transported over long distances between mines and other production sites and the plants where raw materials are consumed, and between those sites and our customers. Any severe delay, interruption or other disruption in such transportation, any material damage to raw materials utilized by us or to our products while being transported, or a sharp rise in transportation prices, either relating to COVID-19, the Ukraine-Russia conflict or otherwise, could have a material adverse effect on our business, results of operations and financial condition. In addition, because we may not be able to obtain adequate supplies of raw materials from alternative sources on terms as favorable as our current arrangements, or at all, any disruption or shortfall in the production and delivery of raw materials could result in higher raw materials costs and likewise materially adversely affect our business, results of operations and financial condition.

Cost increases in raw material inputs may not be passed on to our customers, which could negatively impact our profitability.

The prices of our raw material inputs are determined by supply and demand, which may be influenced by, inter alia, economic growth and recession, changes in world politics, unstable governments in exporting nations, and inflation. The market prices of raw material inputs will thus fluctuate over time, and we may not be able to pass significant price increases on to our customers. If we do try to pass them on, we may lose sales and thereby revenue, in addition to having the higher costs. Additionally, decreases in the market prices of our products will not necessarily enable us to obtain lower prices from our suppliers.

Metallurgical manufacturing and mining are inherently dangerous activities and any accident resulting in injury or death of personnel or prolonged production shutdowns could adversely affect our business and operations.

Metallurgical manufacturing generally, and smelting in particular, is inherently dangerous and subject to risks of fire, explosion and sudden major equipment failure. Quartz and coal mining are also inherently dangerous and subject to numerous hazards, including collisions, equipment failure, accidents arising from the operation of large mining and rock transportation equipment, dust inhalation, flooding, collapse, blasting operations and operating in extreme climatic conditions. These hazards have led to accidents resulting in the serious injury and death of production personnel and prolonged production shutdowns in the past. We may experience fatal accidents or equipment malfunctions in the future, which could have a material adverse effect on our business and operations.

We are heavily dependent on our mining operations, which are subject to certain risks that are beyond our control and which could result in materially increased expenses and decreased production levels.

We mine quartz and quartzite at open pit mining operations and coal at underground and surface mining operations. We are heavily dependent on these mining operations for our quartz and coal supplies. Certain risks beyond our control could disrupt our mining operations, adversely affect production and shipments, and increase our operating costs, such as: the closure of operations as a result of the COVID-19 pandemic; a major incident at a mining site that causes all or part of the operations of the mine to cease for some period of time; mining, processing and plant equipment failures and unexpected maintenance problems; disruptions in the supply of fuel, power and/or water at the mine site; adverse changes in reclamation costs; the inability to renew mining concessions upon their expiration; the expropriation of territory subject to a valid concession without sufficient compensation; and adverse weather and natural disasters, such as heavy rains or snow, flooding and other natural events affecting operations, transportation or customers.

Regulatory agencies have the authority under certain circumstances following significant health and safety violations or incidents to order a mine to be temporarily or even permanently closed. If this occurs, we may be required to incur significant legal and capital expenditures to re-open the affected mine. In addition, environmental regulations and enforcement could impose unexpected costs on our mining operations, and future regulations could increase those costs

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or limit our ability to produce quartz and sell coal. A failure to obtain and renew permits necessary for our mining operations could limit our production and negatively affect our business. It is also possible that we have extracted or may in the future extract quartz from territory beyond the boundary of our mining concession or mining right, which could result in penalties or other regulatory action or liabilities.

We are subject to environmental, health and safety regulations, including laws that impose substantial costs and the risk of material liabilities.

Our operations are subject to extensive foreign, federal, national, state, provincial and local environmental, health and safety laws and regulations governing, among other things, the generation, discharge, emission, storage, handling, transportation, use, treatment and disposal of hazardous substances; land use, reclamation and remediation; waste management and pollution prevention measures; greenhouse gas emissions; and the health and safety of our employees. We are also required to obtain permits from governmental authorities for certain operations, and to comply with related laws and regulations. We may not have been and may not be at all times in full compliance with such permits and related laws and regulations. If we violate or fail to comply with these permits and related laws and regulations, we could be subject to penalties, restrictions on operations or other sanctions, obligations to install or upgrade pollution control equipment and legal claims, including for alleged personal injury or property or environmental damages. Such liability could adversely affect our reputation, business, results of operations and financial condition. In addition, in the context of an investigation, the government may impose obligations to make technology upgrades to our facilities that could result in our incurring material capital expenses. For example, in addition to notices received with respect to other plants, we have received two Notices and Findings of Violation (“NOV/FOV”) from the U.S. federal government, alleging numerous violations of the Clean Air Act relating to the Company’s Beverly, Ohio facility. Should the Company and the federal government be unable to reach a negotiated resolution of the NOV/FOVs, the U.S. government could file a formal lawsuit in U.S. federal court for injunctive relief, potentially requiring the Company to implement emission reduction measures, and for 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. See “Item 8.A.—Financial Information—Consolidated Financial Statements and Other Financial Information—Legal proceedings” for additional information. The Beverly facility also is located in an area currently designated as Non-Attainment for the one hour SO2 National Ambient Air Quality Standards (“NAAQS”). The Company has entered into an order with the Ohio Environmental Protection Agency (“OEPA”) to accept facility-wide SO2 emission limits to ensure that the facility is not causing exceedances of the one-hour NAAQS standard for SO2. The Company is working with OEPA to develop a model that demonstrates compliance with the SO2 NAAQS that will then require approval from the United States Environmental Protection Agency (“EPA”).

The metals and mining industry is generally subject to risks and hazards, including fire, explosion, toxic gas leaks, releases of other hazardous materials, rockfalls, and incidents involving mobile equipment, vehicles or machinery. These could occur by accident or by breach of operating and maintenance standards, and could result in personal injury, illness or death of employees or contractors, or in environmental damage, delays in production, monetary losses and possible legal liability.

Under certain environmental laws, we could be required to remediate or be held responsible for the costs relating to contamination at our or our antecessors’ past or present facilities and at third party waste disposal sites. We could also be held liable under these environmental laws for sending or arranging for hazardous substances to be sent to third party disposal or treatment facilities if such facilities are found to be contaminated. Under these laws we could be held liable even if we did not know of, or did not cause, such contamination, or even if we never owned or operated the contaminated disposal or treatment facility.

There are a variety of laws and regulations in place or being considered at the international, federal, regional, state and local levels of government that restrict or propose to restrict and impose costs on emissions of carbon dioxide and other greenhouse gases. These legislative and regulatory developments may cause us to incur material costs if we are required to reduce or offset greenhouse gas emissions, or to purchase emission credits or allowances, and may result in a material increase in our energy costs due to additional regulation of power generators. Environmental laws are complex, change frequently and are likely to become more stringent in the future. Because environmental laws and regulations are becoming more stringent and new environmental laws and regulations are continuously being enacted or proposed, such as those relating to greenhouse gas emissions and climate change, the level of expenditures required for environmental matters could increase in the future. Future legislative action and regulatory initiatives could result in changes to operating permits,

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additional remedial actions, material changes in operations, increased capital expenditures and operating costs, increased costs of the goods we sell, and decreased demand for our products that cannot be assessed with certainty at this time.

Therefore, our costs of complying with current and future environmental laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances may adversely affect our business, results of operations and financial condition.

Compliance with existing and proposed climate change laws and regulations could adversely affect our performance.

Under current European Union legislation, all industrial sites are subject to cap and trade programs, by which every facility with carbon emissions is required to purchase in the market emission rights for volumes of emission that exceed a certain allocated level. Until 2021, the allocated level of emissions had been practically sufficient for our business so the emissions rights purchases had a limited impact on our business. From 2022, new regulations reducing the allocation of free allowances require us to make significant purchases of emissions rights in the market. Also, certain Canadian provinces have implemented cap and trade programs. As a result, our facilities in Canada may be required to purchase emission credits in the future. The requirement to purchase emissions rights in the market could result in material costs to the Company, in addition to increased compliance costs, additional operating restrictions for our business, and an increase in the cost of the products we produce, which could have a material adverse effect on our financial position, results of operations, and liquidity.

In the United States, it is likely that the current administration will place a greater emphasis on regulating greenhouse gas emissions, although no proposed regulations have been outlined to date. However, carbon taxes, clean energy standards, carbon offsets, and/or the requirement to participate in a cap-and-trade program are being explored by the administration and US Congress. Although it is impossible to predict what form such action will take, any action may result in material increased compliance costs additional operating restrictions for our business, and an increase in the cost of the products we produce, which could have a material adverse effect on our financial position, results of operations and liquidity.

In 2022 Ferroglobe commenced work on assessing Climate Change Risks & Opportunities and its related financial impact across our operations. The evaluation is ongoing and will follow the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

We make a significant portion of our sales to a limited number of customers, and the loss of a portion of the sales to these customers could have a material adverse effect on our revenues and profits.

In the year ended December 31, 2022, our ten largest customers accounted for approximately 50.1% of Ferroglobe’s consolidated revenue. We expect that we will continue to derive a significant portion of our business from sales to these customers.

Some contracts with our customers do not entail commitments from the customer to purchase specified or minimum volumes of products over time. Accordingly, we face a risk of unexpected reduced demand for our products from such customers as a result of, for instance, downturns in the industries in which they operate or any other factor affecting their business, which could have a material adverse effect on our revenues and profits.

If we were to experience a significant reduction in the amount of sales we make to some or all of such customers and could not replace these sales with sales to other customers, this could have a material adverse effect on our revenues and profits.

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.

Ferroglobe benefits from antidumping and countervailing duty orders and laws that protect its business and products by imposing special duties on unfairly traded imports from certain countries.  See “Item 4.B.—Information on the Company—Business Overview—Regulatory Matters—Trade” for additional information.    

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These orders may be subject to revision, revocation or rescission at any time, including through periodic governmental reviews and proceedings.  Current antidumping and countervailing duty orders thus 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.

Similarly, export duties imposed by foreign governments that are currently in place may change. For example, duties on Chinese exports of types of ferroalloys produced by Ferroglobe could be reduced.

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.

Products we manufacture may be subject to unfair import competition that may affect our profitability.

A number of the products we manufacture, including silicon metal and ferrosilicon, are globally-traded commodities that are sold primarily on the basis of price. As a result, our sales volumes and prices may be adversely affected by influxes of imports of these products that are dumped or are subsidized by foreign governments. Our silicon metal and ferrosilicon operations have been injured by such unfair import competition in the past. Applicable antidumping and countervailing duty laws and regulations may provide a remedy for unfairly traded imports in the form of special duties imposed to offset the unfairly low pricing or subsidization. However, the process for obtaining such relief is complex and uncertain. As a result, while we have sought and obtained such relief in the past, in some cases we have not been successful. Thus, there is no assurance that such relief will be obtained, and if it is not, unfair import competition could have a material adverse effect on our business, results of operations and financial condition.

Competitive pressure from Chinese steel, aluminum, polysilicon and silicone producers may adversely affect the business of our customers, reducing demand for our products. Our customers may relocate to China, where they may not continue purchasing from us.

China’s aluminum, polysilicon and steel producing capacity exceeds local demand and has made China an increasingly large net exporter of aluminum and steel, and the Chinese silicone manufacturing industry is  growing. Chinese aluminum, polysilicon, steel and silicone producers — who are unlikely to purchase silicon metal, manganese  and silicon based alloys and other specialty metals from our subsidiaries outside of China due to the ample availability of domestic Chinese production — may gain global market share at the expense of our customers. An increase in Chinese aluminum, steel, polysilicon and silicone industry market share could adversely affect the production volumes, revenue and profits of our customers, resulting in reduced purchases of our products.

Moreover, our customers might seek to relocate or refocus their operations to China or other countries with lower labor costs and higher growth rates. Any that do so might thereafter choose to purchase from other suppliers of silicon metal, manganese- and silicon-based alloys and other specialty metals which in turn could have a material adverse effect on our business, results of operations and financial condition.

We are subject to the risk of union disputes and work stoppages at our facilities, which could have a material adverse effect on our business.

A majority of our employees are members of labor unions. We experience protracted negotiations with labor unions, strikes, work stoppages or other industrial actions from time to time. Strikes called by employees or unions have in the past and could in the future materially disrupt our operations, including productions schedules and delivery times. We have experienced strikes by our employees at several of our facilities from time to time and a certain number of these strikes have been protracted and have resulted in protracted amounts of business. Any such work stoppage could have a material adverse effect on our business, results of operations and financial condition.

New labor contracts have to be negotiated to replace expiring contracts from time to time. It is possible that future collective bargaining agreements will contain terms less favorable than the current agreements. Any failure to negotiate

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renewals of labor contracts on terms acceptable to us, with or without work stoppages, could have a material adverse effect on our business, results of operations and financial condition.

Many of our key customers or suppliers are similarly subject to union disputes and work stoppages, which may reduce their demand for our products or interrupt the supply of critical raw materials and impede their ability to fulfil their commitments under existing contracts, which could have a material adverse effect on our business, results of operations and financial condition.

We are dependent on key personnel.

Our success depends in part upon the retention of key employees. Competition for qualified personnel can be intense. Current and prospective employees may experience uncertainty about our business or industry, which may impair our ability to attract, retain and motivate key management, sales, technical and other personnel.

If key employees depart our overall business may be harmed. We also may have to incur significant costs in identifying, hiring and retaining replacements for departing employees, may lose significant expertise and talent relating to our business and our ability to further realize the anticipated benefits of the Business Combination may be adversely affected. In addition, the departure of key employees could cause disruption or distractions for management and other personnel. Furthermore, we cannot be certain that we will be able to attract and retain replacements of a similar caliber as departing key employees.

The long term success of our operations depends to a significant degree on the continued employment of our core senior management team. In particular, we are dependent on the skills, knowledge and experience of Javier López Madrid, our Executive Chairman, Marco Levi, our Chief Executive Officer, and Beatriz García-Cos, our Chief Financial Officer. If these employees are unable to continue in their respective roles, or if we are unable to attract and retain other skilled employees, our business, results of operations and financial condition could be adversely affected. We currently have employment agreements with Mr. López Madrid, Dr. Levi and Ms. García-Cos. These agreements contain certain non-compete provisions, which may not be fully enforceable by us. Additionally, we are substantially dependent upon key personnel among our legal, financial and information technology staff, who enable us to meet our regulatory, contractual and financial reporting obligations, including reporting requirements under our credit facilities.

Shortages of skilled labor could adversely affect our operations.

We depend on skilled labor for the operation of our submerged arc furnaces and other facilities. Some of our facilities are located in areas where demand for skilled personnel often exceeds supply. Shortages of skilled furnace technicians and other skilled workers, including as a result of deaths, work stoppages or quarantines resulting from the COVID-19 pandemic, could restrict our ability to maintain or increase production rates, lead to production inefficiencies and increase our labor costs.

In certain circumstances, the members of our Board may have interests that may conflict with yours as a holder of ordinary shares.

Our directors have no duty to us with respect to any information such directors may obtain (i) otherwise than as our directors and (ii) in respect of which directors owe a duty of confidentiality to another person, provided that where a director’s relationship with such other person gives rise to a conflict, such conflict has been authorized by our Board in accordance with our articles of association (“Articles”). Our Articles provide that a director shall not be in breach of the general duties directors owe to us pursuant to the UK Companies Act 2006 because such director:

fails to disclose any such information to our Board, directors or officers; or
fails to use or apply any such information in performing such director’s duties as a director.

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In such circumstances, certain interests of the members of our Board may not be aligned with your interests as a holder of ordinary shares and the members of our Board may engage in certain business and other transactions without any accountability or obligation to us.

We may not realize the cost savings and other benefits that we expect to achieve.

We are continuosly looking for opportunities to improve our operations through changes in processes, technology, information systems, and management of best practices. These initiatives are complex and require skilled management and the support of our workforce to implement them.

In our efforts to improve our business fully and successfully, we may encounter material unanticipated problems, expenses, liabilities, competitive responses, loss of client relationships, and a resulting diversion of management’s attention. The challenges include, among others:

managing change throughout the company;
coordinating geographically separate organizations;
potential diversion of management focus and resources from ordinary operational matters and future strategic opportunities;
retaining existing customers and attracting new customers;
maintaining employee morale and retaining key management and other employees;
integrating two unique business cultures that are not necessarily comapatible;
issues in achieving anticipated operating efficiencies, business opportunities and growth prospects;
issues in integrating information technology, communications and other systems;
changes in applicable laws and regulations;
changes in tax laws (including under applicable tax treaties) and regulations or to the interpretation of such tax laws or regulations by the governmental authorities; and
managing tax costs or inefficiencies associated with integrating our operations.

Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenues and diversion of management’s time and energy, which could materially impact our business, results of operations and financial condition.

Any failure to integrate acquired businesses successfully or to complete future acquisitions successfully could be disruptive of our business and limit our future growth.

From time to time, we have pursued acquisitions in support of our strategic goals. In connection with any such acquisition, we could face significant challenges in managing and integrating our expanded or combined operations, including acquired assets, operations and personnel. For example, we have faced challenges in integrating Globe and Ferroatlantica following the merger in 2015, and with the acquisitions of the Mo i Rana and Dunkirk plants. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all or that we will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. Our ability to succeed in implementing our strategy will depend to some degree upon the ability of our management to identify, complete and successfully integrate commercially viable

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acquisitions. Acquisition transactions may disrupt our ongoing business and distract management from other responsibilities.

Grupo VM, our principal shareholder, has significant voting power with respect to corporate matters considered by our shareholders.

Our principal shareholder, Grupo VM, owns shares representing approximately 43.7% of the aggregate voting power of our capital stock. By virtue of Grupo VM’s voting power, as well as Grupo VM’s representation on the Board, Grupo VM will have significant influence over the outcome of any corporate transaction or other matters submitted to our shareholders for approval. Grupo VM is likely to be able to block any such matter, including ordinary resolutions, which, under English law, require approval by a majority of outstanding shares cast in the vote. Grupo VM will also be able to block special resolutions, which, under English law, require approval by the holders of at least 75% of the outstanding shares entitled to vote and voting on the resolution, such as an amendment of the Articles or the exclusion of preemptive rights. Our principal shareholder has, and will continue to have, directly or indirectly, the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as the ability to elect and change our management and to approve other changes to our operations.

Grupo VM has pledged most of its shares in our company to secure a loan from Tyrus Capital.

Grupo VM has guaranteed its obligations pursuant to a credit agreement (the “GVM Credit Agreement”) with respect to a loan granted to GVM by Tyrus Capital (“GVM Loan”). In addition, Grupo VM has entered into a security and pledge agreement (the “GVM Pledge Agreement”), with Tyrus pursuant to which Grupo VM agreed to pledge most of its shares to Tyrus to secure the outstanding GVM Loan.

In the event Grupo VM defaults under the GVM Credit Agreement, Tyrus may foreclose on the shares subject to the pledge. The Reinstated Notes contains change of control definitions with significant exceptions compared with that contained in the indenture for the Old Notes.  Under the revised change of control definitions, no change of control shall occur or be deemed to occur by reason of, among other matters, any enforcement or exercise of remedies under the GVM Pledge Agreement or any disposal by Grupo VM of the Grupo VM shares for the purpose of repaying Grupo VM’s debt to Tyrus, provided that certain other conditions, as described below, are met.

A change of control will occur upon the acquisition of 35% or more of the total voting power of our shares by persons other than certain permitted holders including Grupo VM and such permitted holders “beneficially own” directly or indirectly in the aggregate the same or a lesser percentage of the total voting power of our shares than such other “person” or “group” of related persons. However, the Reinstated Notes Indenture states that no change of control shall occur or be deemed to occur by reason of:

any enforcement of rights or exercise of remedies under the GVM Share Pledge, including any sale, transfer or other disposal or disposition of the shares in Ferroglobe in connection therewith;
any disposal by Grupo VM of its shares in Ferroglobe where the purpose of that transaction is to facilitate the repayment or discharge (in full or in part) of the GVM Loan and the proceeds of sale are promptly applied towards such repayment or discharge; or
any mandatory offer (or analogous offer) required under the City Code on Takeovers and Mergers or any analogous regulation applied in any jurisdiction as a consequence of a transaction under limbs (1) or (2) above.

Provided that, if any transaction under paragraphs (1) to (3) above occurs which, but for such paragraph(s), would be a “Change of Control” as a consequence of any person or persons (other than Tyrus) (x) acquiring any voting stock of

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Ferroglobe PLC (or any other successor company) or (y) being or becoming the “beneficial owner” of the voting power of any voting stock of Ferroglobe PLC (or any other successor company) (such person(s), the “Controlling Shareholder”):

the Controlling Shareholder has within 60 days of that transaction and at its election:
opaid to the Holders, on a pro rata basis, a fee in an aggregate amount equal to the product of(i) the aggregate principal amount outstanding of the Notes, (ii) 0.02 and (iii) the number of years (or part-thereof, with any part of a year calculated on the basis of the number of days divided by 360) from the payment date of such fee to June 30, 2025; or
omade an offer to all Holders to purchase one-third of the Notes on a pro rata basis at a price equal to (A) in the first fifteen months after the Issue Date, 100% of the principal amount of such Notes plus accrued and unpaid interest or (B) at any time after the first fifteen months following the Issue Date, 101% of the principal amount of such Notes plus accrued and unpaid interest; or
either or both of the Issuers within 60 days of that transaction has made an offer to all Holders to repurchase or purchase (as applicable), or has otherwise redeemed, one-third of the Notes on a pro rata basis at a price equal to (A) in the first fifteen months after the Issue Date,100% of the principal amount of such Notes plus accrued and unpaid interest or (B) at anytime after the fifteen months following the Issue Date, 101% of the principal amount of such Notes plus accrued and unpaid interest, resulting in such repurchased, purchased or redeemed Notes being cancelled, and provided further that the Controlling Shareholder is not a Restricted Person.

Where:

“GVM Loan” means any financing provided by Tyrus to Grupo VM or owing by Grupo VM to Tyrus, from time to time.

“GVM Share Pledge” means any share pledge or charge or other similar security over the shares in Ferroglobe PLC held by Grupo VM granted by Grupo VM in support of or as collateral for its obligations under any Grupo VM Loan from time to time.

“Restricted Person” means any person that: (a) is listed on the United States Specifically Designated Nationals and Blocked Persons List; the European Union Consolidated List of Persons, Groups and Entities subject to EU Financial Sanctions; or the United Kingdom Consolidated List of Financial Sanctions Targets (each a “Sanctions List”); (b) is owned or controlled by a person identified on a Sanctions List, to the extent that such ownership or control results in such person being subject to the same restrictions as if such person were themselves identified on the corresponding Sanctions List; (c) is located in or incorporated under the laws of a country or territory that is the target of comprehensive sanctions imposed by the United States, which for the purposes of this Agreement, as at the date of signature of this Agreement by the last of its signatories are Iran, Syria, Cuba, the Crimea Region, and North Korea; (d) has, within the last five years, been prosecuted by a relevant authority in the United States, the United Kingdom or any member state of the European Union, in relation to a breach of securities laws (in so far as such prosecution relates to insider dealing, unlawful disclosure, market manipulation or prospectus liability) or criminal laws relating to fraud or anti-corruption, save for instances where the prosecution has concluded and did not result in any criminal or civil settlement or penalty being imposed in relation to such breaches; or (e) is a Subsidiary of a person described in (d) above.

If upon a change of control, we do not have sufficient funds available to repurchase the notes with our available cash, third party financing would be needed, yet may be impermissible under our other debt agreements. In addition, certain other contracts we are party to from time to time may contain change of control provisions. Upon a change in control, such provisions may be triggered, which could cause our contracts to be terminated or give rise to other obligations, each of which could have a material adverse effect on our business, results of operations and financial condition.

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We engage in related party transactions with affiliates of Grupo VM, our principal shareholder.

Conflicts of interest may arise between our principal shareholder and your interests as a shareholder. Our principal shareholder has, and will continue to have, directly or indirectly, the power, among other things, to affect our day-to-day operations, including the pursuit of related party transactions. We have entered, and may in the future enter, into agreements with companies who are affiliates of Grupo VM, our principal shareholder. Such agreements have been approved by, or would be subject to the approval of, the Board or the Audit Committee, as its delegate. The terms of such agreements may present material risks to our business and results of operations. For example, we have entered into a number of agreements with affiliates of Grupo VM with respect to, among other things, the provision of information technology and data processing services and energy-related services. See “Item 7.B.—Major Shareholders and Related Party Transactions—Related Party Transactions.”

We are exposed to significant risks in relation to compliance with anti-bribery and corruption laws, anti-money laundering laws and regulations, and economic sanctions programs.

Doing business on a worldwide basis requires us to comply with the laws and regulations of various jurisdictions. In particular, our international operations are subject to anti-corruption laws, most notably the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) and the UK Bribery Act of 2010 (the “Bribery Act”), international trade sanctions programs, most notably those administered by the U.N., U.S. and European Union, anti-money laundering laws and regulations, and laws against human trafficking and slavery, most notably the UK Modern Slavery Act 2015 (“Modern Slavery Act”).

The FCPA and Bribery Act prohibit offering or providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. We may deal from time to time with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of these laws. International trade sanctions programs restrict our business dealings with or relating to certain sanctioned countries and certain sanctioned entities and persons no matter where located.

As a result of doing business internationally, we are exposed to a risk of violating applicable anti-bribery and corruption (“ABC”) laws, international trade sanctions, and anti-money laundering (“AML”) laws and regulations. Some of our operations are located in developing countries that lack well-functioning legal systems and have high levels of corruption. Our worldwide operations and any expansion, including in developing countries, our development of joint venture relationships worldwide, and the engagement of local agents in the countries in which we operate tend to increase the risk of violations of such laws and regulations. Violations of ABC laws, AML laws and regulations, and trade sanctions are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal penalties including possible imprisonment. Moreover, any major violations could have a significant impact on our reputation and consequently on our ability to win future business.

For its part, the Modern Slavery Act requires any commercial organization that carries on a business or part of a business in the United Kingdom which (i) supplies goods or services and (ii) has an annual global turnover of £36 million to prepare a slavery and human trafficking statement for each financial year ending on or after March 31, 2016. In this statement, the commercial organization must set out the steps it has taken to ensure there is no modern slavery in its own business and its supply chain, or provide an appropriate negative statement. The UK Secretary of State may enforce this duty by means of civil proceedings. The nature of our operations and the regions in which we operate may make it difficult or impossible for us to detect all incidents of modern slavery in certain of our supply chains. Any failure in this regard would not violate the Modern Slavery Act per se, but could have a significant impact on our reputation and consequently on our ability to win future business.

We seek to build and continuously improve our systems of internal controls and to remedy any weaknesses identified. As part of our efforts to comply with all applicable law and regulation, we have introduced a global ethics and compliance program. We believe we are devoting appropriate time and resources to its implementation, related training, and to monitoring compliance. Despite these efforts, we cannot be certain that our policies and procedures will be followed at all times or that we will prevent or timely detect violations of applicable laws, regulations or policies by our personnel,

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partners or suppliers. Any actual or alleged failure to comply with applicable laws or regulations could lead to material liabilities not covered by insurance or other significant losses, which in turn could have a material adverse effect on our business, results of operations, and financial condition.

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.

Though we are not currently operating at full capacity, we have historically operated at near the maximum capacity of our operating facilities. Because the cost of increasing capacity may be prohibitively expensive, we may have difficulty increasing our production and profits.

Our facilities are able to manufacture, collectively, approximately 350,000 tons of silicon metal (including Dow’s portion of the capacity of our Alloy, West Virginia and Bécancour, Québec plants and the restarts at Selma and Polokwane, and excluding currently idled plants), 343,000 tons of silicon-based alloys and 562,000 tons of manganese-based alloys on an annual basis. Our ability to increase production and revenues will depend on expanding existing facilities, acquiring facilities or building new ones. Increasing capacity is difficult because:

adding 30,000 tons of new production capacity to an existing silicon manufacturing plant would cost approximately $120 million and take at least 12 to 18 months to complete once permits are obtained;
a greenfield development project would take at least three to five years to complete and would require significant capital expenditure and, regulatory compliance costs; and
obtaining sufficient and dependable electric power at competitive rates in areas near the required natural resources is extremely difficult.

We may not have sufficient funds to expand existing facilities, acquire new facilities, or open new ones and may be required to incur significant debt to do so, which could have a material adverse effect on our business and financial condition.

We are subject to restrictive covenants under our credit facilities and other financing agreements. These covenants could significantly affect the way in which we conduct our business. Our failure to comply with these covenants could lead to an acceleration of our debt.

Our ability to comply with applicable debt covenants may be affected by events beyond our control, potentially leading to future breaches. The breach of any of the covenants contained in our credit facilities, unless waived, would constitute an event of default, in turn permitting the lenders to terminate their commitments to extend credit under, and accelerate the maturity of, the credit facilities in question. If in such circumstances we were unable to repay lenders and holders, or obtain waivers from them on acceptable terms or at all, the lenders and holders could foreclose upon the collateral securing the credit facilities and exercise other rights. Such events, should they occur, could have a material adverse effect on our business, results of operations and financial condition. See “—Risks Related to Our Capital Structure—We are subject to restrictive covenants under our financing agreements, which could impair our ability to run our business” below.

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Our insurance costs may increase materially, and insurance coverages may not be adequate to protect us against all risks and potential losses to which we may be subject.

We maintain various forms of insurance covering a number of specified and consequential risks and losses arising from insured events under the policies, including securities claims, certain business interruptions and claims for damage and loss caused by certain natural disasters, such as earthquakes, floods and windstorms. Our existing property and liability insurance coverage contains various exclusions and limitations on coverage. In some previous insurance policy renewals, we have acceded to larger premiums, self-insured retentions and deductibles. For example, as a result of the explosion at our facility in Chateau Feuillet, France, the applicable property insurance premium increased. We may also be subject to additional exclusions and limitations on coverage in future insurance policy renewals. There can be no assurance that the insurance policies we have in place are or will be sufficient to cover all potential losses we may incur. In addition, due to changes in our circumstances and in the global insurance market, insurance coverage may not continue to be available to us on terms we consider commercially reasonable or be sufficient to cover multiple large claims.

We have operations and assets in the United States, Spain, France, Canada, China, South Africa, Norway, Venezuela, Argentina and may have operations and assets in other countries in the future. Our international operations and assets may be subject to various economic, social and governmental risks.

Our international operations and sales may expose us to risks that are more significant in developing markets than in developed markets and which could negatively impact future revenue and profitability. Operations in developing countries may not operate or develop in the same way or at the same rate as might be expected in a country with an economy, government and legal system similar to western countries. The additional risks that we may be exposed to in such cases include, but are not limited to:

tariffs and trade barriers;
sanctions and other restrictions in our ability to conduct business with certain countries, companies or individuals;
recessionary trends, inflation or instability of financial markets;
regulations related to customs and import/export matters;
tax issues, such as tax law changes, changes in tax treaties and variations in tax laws;
absence of a reliable legal or court system;
changes in regulations that affect our business, such as new or more stringent environmental requirements or sudden and unexpected raises in power rates;
limited access to qualified staff;
inadequate infrastructure;
cultural and language differences;
inadequate banking systems;
restrictions on the repatriation of profits or payment of dividends;
crime, strikes, riots, civil disturbances, terrorist attacks or wars;
nationalization or expropriation of property;
less access to urgent medical care for employees and key personnel in the case of severe illness;

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law enforcement authorities and courts that are weak or inexperienced in commercial matters; and
deterioration of political relations among countries.

In addition to the foregoing, exchange controls and restrictions on transfers abroad and capital inflow restrictions have limited, and can be expected to continue to limit, the availability of international credit.

The critical social, political and economic conditions in Venezuela have adversely affected, and may continue to adversely affect, our results of operations.

Among other policies in recent years, the Venezuelan government has continuously devalued the Bolívar. The resulting inflation has devastated the country, which is experiencing all manner of shortages of basic materials and other goods and difficulties in importing raw materials. In 2016, we idled our Venezuelan operations and sought to determine the recoverable value of the long lived assets there. We concluded that the costs to dispose of the facility exceeded the fair value of the assets, primarily due to political and financial instability in Venezuela. Accordingly, we wrote down the full value of our Venezuelan facilities. However, our inability to generate cash in that market may cause us to default on some of our obligations there in the future, which may result in administrative intervention or other consequences. In addition, in the recent past the Venezuelan government has threatened to nationalize certain businesses and industries, which could result in a loss of our Venezuelan facilities for no consideration. If the social, political and economic conditions in Venezuela continue as they are, or worsen, our business, results of operations and financial condition could be adversely affected. Venezuela net assets value as of December 31, 2022 was negative $10 thousand (positive $708 thousand as of December 31, 2021). Revenues during 2022 amounted to $18 thousand ($11 thousand during 2021).

We are exposed to foreign currency exchange risk and our business and results of operations may be negatively affected by the fluctuation of different currencies.

We transact business in numerous countries around the world and a significant portion of our business entails cross border purchasing and sales. Our sales made in a particular currency do not exactly match the amount of our purchases in such currency. We prepare our consolidated financial statements in U.S. Dollars, while the financial statements of each of our subsidiaries are prepared in the entities functional currency. Accordingly, our revenues and earnings are continuously affected by fluctuations in foreign currency exchange rates. For example, our sales made in U.S. Dollars exceed the amount of our purchases made in U.S. Dollars, such that the appreciation of certain currencies (like the Euro or the South African Rand) against the U.S. Dollar would tend to have an adverse effect on our costs. Such adverse movements in relevant exchange rates could have a material adverse effect on our business, results of operations and financial condition.

We depend on a limited number of suppliers for certain key raw materials. The loss of one of these suppliers or the failure of one of any of them to meet contractual obligations to us could have a material adverse effect on our business.

Colombia and the United States are among the preferred sources for the coal consumed in the production of silicon metal and silicon-based alloys, and the vast majority of producers source coal from these two countries. In the year ended December 31, 2022, approximately 65% of our coal was purchased from third parties. Of our third-party purchases, approximately 59% came from a single mine in Colombia.

Additionally, nearly all of the manganese ore we purchase comes from suppliers located in South Africa and Gabon. We do not control these third-party suppliers and must rely on them to perform in accordance with the terms of their contracts. If these suppliers fail to provide us with the required raw materials in a timely manner, or at all, or if the quantity or quality of the materials they provide is lower than that contractually agreed, we may not be able to procure adequate supplies of raw materials from alternative sources on comparable terms, or at all, which could have a material adverse effect on our business, results of operations and financial condition. In addition, since many suppliers of these raw materials are located in the same region, if a natural disaster or event affected one of these regions it is likely alternative sources would also be similarly affected.

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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.

Global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

Russia and Ukraine are meaningful producers of silicon metal, ferroalloys and manganese based alloys, and are also significant suppliers of raw materials for our business and industry.  The inability of Russian and Ukrainian producers to meet their customer obligations could potentially create tightness in the market. Likewise, we rely on a number of inputs from Russia and the CIS region, including metallurgical coke, anthracite and carbon and graphite electrodes. Our inability to procure these material can adversely impact our operations. 

Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system, expansive ban on imports and exports of products to and from Russia and ban on exportation of U.S denominated banknotes to Russia or persons located there. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.

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.

Planned investments in the expansion and improvement of existing facilities and in the construction of new facilities may not be successful.

We may engage in significant capital improvements to our existing facilities to upgrade and add capacity to those facilities. We also may engage in the development and construction of new facilities. Should any such efforts not be completed in a timely manner and within budget, or be unsuccessful otherwise, we may incur additional costs or impairments which could have a material adverse effect on our business, results of operations and financial condition.

Any delay or failure to procure, renew or maintain necessary governmental permits, including environmental permits and concessions to operate our hydropower plants would adversely affect our results of operations.

The operation of our hydropower plants is highly regulated, requires various governmental permits, including environmental permits and concessions, and may be subject to the imposition of conditions by government authorities. We cannot predict whether the conditions prescribed in such permits and concessions will be achievable. The denial of a permit essential to a hydropower plant or the imposition of impractical conditions would impair our ability to operate the plant. If we fail to satisfy the conditions or comply with the restrictions imposed by governmental permits or concessions, or restrictions imposed by other applicable statutory or regulatory requirements, we may face enforcement action and be subject to fines, penalties or additional costs or revocation of such permits or concessions. Any failure to procure, renew or abide by necessary permits and concessions would adversely affect the operation of our hydropower plants.

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Equipment failures may lead to production curtailments or shutdowns and repairing any failure could require us to incur capital expenditures and other costs.

Many of our business activities are characterized by substantial investments in complex production facilities and manufacturing equipment. Because of the complex nature of our production facilities, any interruption in manufacturing resulting from fire, explosion, industrial accidents, natural disaster, equipment failures or otherwise could cause significant losses in operational capacity and could materially and adversely affect our business, results of operations and financial condition.

Other equipment may not continue to perform as they have in the past or as they are expected. A major equipment failure due to wear and tear, latent defect, design error or operator error, early obsolescence, natural disaster or other force majeure event could cause significant losses in operational capacity. Repairs following such failures could require us to incur capital expenditures and other costs. Such major failures also could result in damage to the environment or damages and harm to third parties or the public, which could expose us to significant liability. Such costs and liabilities could adversely affect our business, results of operations and financial condition.

We depend on proprietary manufacturing processes and software. These processes may not yield the cost savings that we anticipate and our proprietary technology may be challenged.

We rely on proprietary technologies and technical capabilities in order to compete effectively and produce high quality silicon metal and silicon-based alloys, including:

computerized technology that monitors and controls production furnaces;
electrode technology and operational know-how;
metallurgical processes for the production of solar-grade silicon metal;
production software that monitors the introduction of additives to alloys, allowing the precise formulation of the chemical composition of products; and
flowcaster equipment, which maintains certain characteristics of silicon-based alloys as they are cast.

We are subject to a risk that:

we may not have sufficient funds to develop new technology and to implement effectively our technologies as competitors improve their processes;
if implemented, our technologies may not work as planned; and
our proprietary technologies may be challenged and we may not be able to protect our rights to these technologies.

Patent or other intellectual property infringement claims may be asserted against us by a competitor or others. Our intellectual property rights may not be enforceable and may not enable us to prevent others from developing and marketing competitive products or methods. An infringement action against us may require the diversion of substantial funds from our operations and may require management to expend efforts that might otherwise be devoted to operations. A successful challenge to the validity of any of our patents may subject us to a significant award of damages, and may oblige us to secure licenses of others’ intellectual property, which could have a material adverse effect on our business, results of operations and financial condition.

We also rely on trade secrets, know-how and continuing technological advancement to maintain our competitive position. We may not be able to effectively protect our rights to unpatented trade secrets and know-how.

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Ferroglobe PLC is a holding company whose principal source of revenue is the income received from its subsidiaries.

Ferroglobe PLC is dependent on the income generated by its subsidiaries in order to earn distributable profits and pay dividends to shareholders. The amounts of distributions and dividends, if any, to be paid to us by any operating subsidiary will depend on many factors, including such subsidiary’s results of operations and financial condition, limits on dividends under applicable law, its constitutional documents, documents governing any indebtedness, applicability of tax treaties and other factors which may be outside our control. If our operating subsidiaries do not generate sufficient cash flow, we may be unable to earn distributable profits and pay dividends on our shares.

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. See “Item 8.A.—Financial Information—Consolidated Statements and Other Financial Information—Legal proceedings” for additional information regarding legal proceedings to which we are party.

We are exposed to changes in economic and political conditions where we operate and globally that are beyond our control.

Our industry is affected by changing economic conditions, including changes in national, regional and local unemployment levels, changes in national, regional and local economic development plans and budgets, shifts in business investment and consumer spending patterns, credit availability, and business and consumer confidence. Disruptions in national economies and volatility in the financial markets may and often will reduce consumer confidence, negatively affecting business investment and consumer spending. The outlook for the global economy in the near to medium term is negative due to several factors, including the COVID-19 pandemic, geopolitical risks and concerns about global growth and stability.

Following the United Kingdom’s exit from the European Union, we may face risks associated with the current uncertainty and the consequences that may result from such exit, in particular with respect to tax, customs and duty laws and regulations, volatility in exchange rates and interest rates and our ability to sell and transport products from manufacturing facilities on the continent to our customers in the United Kingdom.

We are not able to predict the timing or duration of periods economic growth in the countries where we operate or sell products, nor are we able to predict the timing or duration of any economic downturn or recession that may occur in the future.

Cybersecurity breaches and threats could disrupt our business operations and result in the loss of critical and confidential information.

We rely on the effective functioning and availability of our information technology and communication systems and the security of such systems for the secure processing, storage and transmission of confidential information. The sophistication and magnitude of cybersecurity incidents are increasing and include, among other things, unauthorized access, computer viruses, deceptive communications and malware. We have experienced minor incidents in the past, and information technology security processes may not effectively detect or prevent cybersecurity breaches or threats and the measures we have taken to protect against such incidents may not be sufficient to anticipate or prevent rapidly evolving types of cyber-attacks. Breaches of the security of our information technology and communication systems could result in destruction or

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corruption of data, the misappropriation, corruption or loss of critical or confidential information, business disruption, reputational damage, litigation and remediation costs.

Possible new tariffs and duties that might be imposed by certain governments, including the United States, the European Union and others, could have a material adverse effect on our results of operations.

In March, 2018, the United States imposed import tariffs of 25 percent on steel and 10 percent on aluminum.  Exemptions from these tariffs were allowed for steel from Argentina, Australia, Brazil, Canada, Mexico, and South Korea, and aluminum from Argentina, Australia, Canada, and Mexico. These tariffs were expanded to apply to steel and aluminum derivatives from most countries. China, the EU, and other countries imposed retaliatory duties on products from the United States.

In January, 2022, the tariffs on steel and aluminum from the EU were replaced by “tariff-rate quotas”, which allow a certain volume of imports to enter without the additional tariffs, but impose a 25% tariff on steel imports and a 10% tariff on aluminum imports exceeding the quota amount.  Similar arrangements to replace the steel and aluminum tariffs are being negotiated with Japan and the UK.

Beginning in July 2018, the United States also imposed 25 percent tariffs on a wide array of Chinese products, including products produced and consumed by Ferroglobe, and 7.5 percent on a smaller range of products. In January 2020, the United States and China entered an initial “Phase 1” agreement to resolve the trade dispute between the two countries. The agreement resulted in the suspension of Chinese retaliatory duties on certain U.S. products and the commitment by China to purchase products from the United States. It is unclear whether and, if so, when the two countries will reach a Phase 2 agreement that would resolve the dispute more broadly.

There are indications that China has not fully complied with its Phase 1 commitments. If China were found to be in noncompliance, the United States could reimpose tariffs on Chinese products that are currently suspended or increase the existing tariffs.

Any “trade war” resulting from the imposition of tariffs could have a significant adverse effect on world trade and the world economy. To date, tariffs have not affected our business to a material degree.

Our suppliers, customers, agents or business partners may be subject to or affected by export controls or trade sanctions imposed by government authorities from time to time, which may restrict our ability to conduct business with them and potentially disrupt our production or our sales.

The United States, European Union, United Nations and other authorities have variously imposed export controls and trade sanctions on certain countries, companies, individuals and products, restricting our ability to trade normally with or in them. At present, compliance with such trade regulation is not affecting our business to a material degree. However, new trade regulations may be imposed at any time that target or otherwise affect our customers, suppliers, agents or business partners or their products. In particular, trade sanctions could be imposed that restrict our ability to do business with one or more critical suppliers and require special licenses to do so. Such events could potentially disrupt our production or sales and have a material adverse effect on our business, results of operations and financial condition.

We make significant investments in the development of new technologies and new products. The success of such technologies or products is inherently uncertain and the investments made may fail to render the desired increased in profitability.

In order to improve our processes and increase the margins in our products we have constantly invested significant amounts in the development of new technologies and in the development of new value added products. However, these developments are inherently uncertain, since they may fail to render the desired results when implemented at an industrial scale.

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Specifically, we have invested in the construction of a factory to produce high purity silicon metal through a technology developed and patented by the Company. We believe the technology presents several advantages when compared to competitor’s processes.  This high purity silicon could be used for several applications, including advanced ceramics, fillers for semiconductors, special alloys or li-ion batteries.  The most promising market is the silicon for the anode of batteries, whose development depends on the validation of the Si/C composites in the new generation of battery cells for EVs.  This is a long process and silicon might not deliver the expected results in terms of capacity, cyclability, fast-charging or safety.  There could also be new emerging technologies such as solid-state batteries with lithium metal anode that could phase out the use of silicon in the anode.  

Risks Related to Our Capital Structure

Our leverage may make it difficult for us to service our debt and operate our business.

We have significant outstanding indebtedness and debt service requirements. Our leverage has and in the future could have important consequences, including:

making it more difficult for us to satisfy our obligations to all creditors;
requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thus reducing the availability of our cash flow to fund internal growth through working capital and capital expenditures and for other general corporate purposes;
increasing our vulnerability to a downturn in our business or economic or industry conditions;
placing us at a competitive disadvantage compared to our competitors that have less indebtedness in relation to cash flow;
limiting our flexibility in planning for or reacting to changes in our business and our industry;
restricting us from investing in growing our business, pursuing strategic acquisitions and exploiting certain business opportunities; and
limiting, among other things, our and our subsidiaries’ ability to incur additional indebtedness, including refinancing, or raise equity capital in the future and increasing the costs of such additional financings.

Our ability to service our indebtedness will depend on our future performance, including an improvement on recent financial performance, and liquidity, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, including the COVID-19 pandemic and the military conflict between Russia and Ukraine. Many of these factors are beyond our control. We may not be able to generate enough cash flow from operations or obtain enough capital to service our indebtedness or fund our planned capital expenditures. If we cannot service our indebtedness and meet our other obligations and commitments, we might be required to refinance our indebtedness, obtain additional financing, delay planned capital expenditures or to dispose of assets to obtain funds for such purpose. We cannot assure you that any refinancing or asset dispositions could be effected on a timely basis or on satisfactory terms, if at all, or would be permitted by the terms of our outstanding debt instruments.

We have in the past experienced losses and cannot assure you that we will be profitable.

Our business has historically been subject to fluctuations in the prices of our products and the market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors. Throughout 2019 and 2020 we experienced a significant decline in prevailing prices of our products, which adversely affected our results. In early 2020, the outbreak of coronavirus disease (“COVID-19”) has been and continues to be a complex and evolving situation, with governments, public institutions and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or

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other actions to combat its spread, such as restrictions and bans on travel or transportation; limitations on the size of in-person gatherings, restrictions on freight transportations, closures of, or occupancy or other operating limitations on work facilities, and quarantines and lock-downs.

As a result of this pandemic and the strict confinement and other public health measures taken around the world, the demand for our products in the second and third quarters of 2020 was reduced significantly compared with the first and fourth quarters of the year. During the fourth quarter of 2020, demand level for our products increased to levels similar to those prior to the outbreak. During 2021, demand for our products has increased even further than in the fourth quarter of 2020. However, COVID-19 has negatively impacted, and will in the future negatively impact to an extent we are unable to predict, our revenues.

As a result, in part due to this pandemic and the strict confinement and other public health measures taken around the world, our sales decreased $470.8 million, or 29.1%, from $1,615.2 million for the year ended December 31, 2019 to $1,144.4 million for the year ended December 31 2020, resulting in a loss of $249.8 million for the year ended December 31, 2020. During 2021, our sales increased $634.5 million, or 55.4%, from $1,144.4 million for the year ended December 31, 2020 to $1,778.9 million for the year ended December 31 2021, resulting in a loss of $106.4 million for the year ended December 31, 2021.

We are subject to restrictive covenants under our financing agreements, which could impair our ability to run our business.

Restrictive covenants under our financing agreements, including relating to our outstanding notes and the agreements for our SEPI financing, may restrict our ability to operate our business. Our failure to comply with these covenants, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our business, results of operations and financial condition.

The restrictions contained in our financing agreements could affect our ability to operate our business and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise. For example, such restrictions could adversely affect our ability to finance our operations, make strategic acquisitions, investments or alliances, restructure our organization or finance our capital needs. Additionally, our ability to comply with these covenants and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If we breach any of these covenants or restrictions, we could be in default under our financing agreements.

If there were an event of default under any of our debt instruments that is not cured or waived, the holders of the defaulted debt could terminate their commitments thereunder and declare all amounts outstanding with respect to such indebtedness due and payable immediately, which, in turn, could result in cross-defaults under our other outstanding debt instruments. Any such actions could force us into bankruptcy or liquidation.

To service our indebtedness, we require a significant amount of cash, and our ability to generate cash will depend on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness, and to fund capital expenditures, depends in part on our ability to generate cash in the future, and increased cash flow than we have generated in recent periods. Debt service requirements due to increased debt and increased interest rates will increase our cash flow requirements. This depends on the success of our business strategy and on general economic, financial, competitive, legislative, regulatory and other factors, many of which are beyond our control.

The Restructuring has increased our leverage and so we will need to maintain our profitability and/or sustaine positive cash flows in order to be able to service our indebtedness. There can be no assurance that we will generate sufficient cash flow from operations, that we will realize operating improvements on schedule or that future borrowings will be available to us in an amount sufficient to enable us to service and repay our indebtedness or to fund our other liquidity needs. Furthermore, applicable law and future contractual arrangements may impose restrictions on certain of our subsidiaries’

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ability to make payments to Ferroglobe and other entities within the Group, which could impact our ability to service and pay our obligations as they mature or to fund our liquidity needs.

The Reinstated Notes mature in December 2025. Other debt instruments mature at various other dates. There can be no assurance that we will have the available liquidity or the ability to raise financing in order to repay these instruments at or ahead of their maturity.

If we are unable to satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or further restructuring our indebtedness, selling assets, reducing or delaying capital investments or seeking to raise additional capital. There can be no assurance that any refinancing or debt restructuring would be possible, or if possible, that it would be on similar terms to those of our debt instruments existing at that time, that any assets could be sold or that, if sold, the timing of the sales and the amount of proceeds realized from those sales would be favorable to us or that additional financing could be obtained on acceptable terms. As the Reinstated Notes will be secured by a significant portion of our assets that can be granted as collateral, our ability to refinance our existing debt or raise new debt may be limited to unsecured or lesser-secured debt. Disruptions in the capital and credit markets, as have been seen in recent years, could adversely affect our ability to meet our liquidity needs or to refinance our indebtedness.

We may not be able to repurchase the Notes upon a Change of Control.

The Reinstated Notes requires us to offer to repurchase all or any part of each holder’s notes upon the occurrence of a change of control, as defined in the respective indentures, at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon, to the date of purchase. If such an event were to occur, we may not have sufficient financial resources available to satisfy all of those obligations.

Risks Related to Our Ordinary Shares

The market price of our ordinary shares may be volatile and may decline.

Our ordinary shares are admitted for trading on the Nasdaq Capital Market under the symbol “GSM”. The market price of our ordinary shares is subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among other things, actual or anticipated variations in our costs of doing business, operating results and cash flow, the nature and content of our earnings releases and our competitors’ earnings releases, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for other financial stocks, changes in capital markets that affect the perceived availability of capital to companies in our industry, and governmental legislation or regulation, as well as general economic and market conditions, such as downturns in our economy and recessions.

In recent years, the stock market in general has experienced extreme price fluctuations that have often times been unrelated to the operating performance of the affected companies. Similarly, the market price of our ordinary shares may fluctuate significantly based upon factors unrelated or disproportionate to our operating performance.

These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our ordinary shares.

Significant sales of our ordinary shares, or the perception that significant sales thereof may occur in the future, could adversely affect the market price for our ordinary shares.

 The sale of substantial amounts of our ordinary shares could adversely affect the price of these securities. Sales of substantial amounts of our ordinary shares in the public market, and the availability of shares for future sale could adversely affect the prevailing market price of our ordinary shares and could cause the market price of our ordinary shares to remain low for a substantial amount of time.

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We do not anticipate paying cash dividends in the foreseeable future.

We currently intend to retain future earnings, if any, for use in our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. In addition, we are subject to financial covenants restriction the payment of dividends or repurchase of our shares. The payment of future dividends, if any, will depend, among other things, on our results of operations and financial condition and on such other factors as our Board of Directors may, in their discretion, consider relevant.

If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our ordinary shares, or if our operating results do not meet their expectations, the price of our ordinary shares could decline.

The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If there is limited or no securities or industry analyst coverage of us, the market price and trading volume of our ordinary shares would likely be negatively impacted. Moreover, if any of the analysts who may cover us downgrade our ordinary shares or provide relatively more favorable recommendations concerning our competitors, or as we experienced in 2019 and 2020, if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline. If any of the analysts who may cover us were to cease coverage or fail regularly to publish reports about our Company, we could lose visibility in the financial markets, which, in turn, could cause our share price or trading volume to decline.

As a foreign private issuer within the meaning of the rules of NASDAQ, we are subject to different U.S. securities laws and NASDAQ governance standards than domestic U.S. issuers of securities. These may afford relatively less protection to holders of our ordinary shares, who may not receive all corporate and company information and disclosures they are accustomed to receiving or in a manner to which they are accustomed.

As a foreign private issuer, the rules governing the information that we are required to disclose differ from those governing U.S. corporations pursuant to the U.S. Exchange Act. Although we intend to report periodic financial results and certain material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence. In addition, we are exempt from the SEC’s proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules requiring the reporting of beneficial ownership and sales of shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to this part of the U.S. Exchange Act and that our insiders are not subject to short-swing profit rules. As a result, in deciding whether to purchase our shares, you may not have all the data that you are accustomed to having when making investment decisions with respect to domestic U.S. public companies.

Furthermore, NASDAQ Rule 5615(a)(3) provides that a foreign private issuer, such as our Company, may rely on home country corporate governance practices in lieu of certain of the rules in the NASDAQ Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with NASDAQ’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an audit committee that satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). We are permitted to follow certain corporate governance rules that conform to U.K. requirements in lieu of many of the NASDAQ corporate governance rules, and we intend to comply with the NASDAQ corporate governance rules applicable to foreign private issuers. Accordingly, our shareholders will not have the same protections afforded to stockholders of U.S. companies that are subject to all of the corporate governance requirements of NASDAQ.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

We could cease to be a foreign private issuer if a majority of our outstanding voting securities are directly or indirectly held of record by U.S. residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. In that event, the regulatory and compliance costs we would incur as a domestic registrant may be

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significantly higher than we incur as a foreign private issuer, which could have a material adverse effect on our business, operating results and financial condition.

As an English public limited company, certain capital structure decisions require shareholder approval, which may limit our flexibility to manage our capital structure.

English law provides that a board of directors may only allot shares (or rights or convertible into shares) with the prior authorization of shareholders, such authorization being up to the aggregate nominal amount of shares and for a maximum period of five years, each as specified in the articles of association or relevant shareholder resolution. The Articles authorize the allotment of additional shares for a period of five years from October 26, 2017 (being the date of the adoption of the Articles), which authorization will need to be renewed upon expiration (i.e., at least every five years) but may be sought more frequently for additional five-year terms (or any shorter period). This authorization was renewed by the 2022 AGM for an additional five years.

English law also generally provides shareholders with preemptive rights when new shares are issued for cash. However, it is possible for the articles of association, or for shareholders acting in a general meeting, to exclude preemptive rights. Such an exclusion of preemptive rights may be for a maximum period of up to five years from the date of adoption of the articles of association, if the exclusion is contained in the articles of association, or from the date of the shareholder resolution, if the exclusion is by shareholder resolution. In either case, this exclusion would need to be renewed by our shareholders upon its expiration (i.e., at least every five years). The Articles exclude preemptive rights for a period of five years from October 26, 2017, which exclusion will need to be renewed upon expiration (i.e., at least every five years) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period). This exclusion was renewed by the 2022 AGM for an additional five years.

English law also generally prohibits a public company from repurchasing its own shares without the prior approval of shareholders by ordinary resolution, such being a resolution passed by a simple majority of votes cast, and other formalities. As an English company listed on NASDAQ, we may not make on-market purchases of our shares and may make off-market purchases only for the purposes of or pursuant to an employees’ share scheme where our shareholders have approved our doing so by ordinary resolution (and with a maximum duration of such approval of five years) or with the prior consent of our shareholders by ordinary resolution to the proposed contract for the purchase of our shares.

English law requires that we meet certain financial requirements before we declare dividends or repurchases.

Under English law, we may only declare dividends, make distributions or repurchase shares out of distributable reserves of the Company or distributable profits. “Distributable profits” are a company’s accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made, as reported to the Companies House. In addition, as a public company, we may only make a distribution if the amount of our net assets is not less than the aggregate amount of our called-up share capital and undistributable reserves and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate amount. The Articles permit declaration of dividends by ordinary resolution of the shareholders, provided that the directors have made a recommendation as to its amount. The dividend shall not exceed the amount recommended by the directors. The directors may also decide to pay interim dividends if it appears to them that the profits available for distribution justify the payment. When recommending or declaring the payment of a dividend, the directors will be required under English law to comply with their duties, including considering our future financial requirements.

The enforcement of shareholder judgments against us or certain of our directors may be more difficult.

Because we are a public limited company incorporated under English law, and because most of our directors and executive officers are non-residents of the United States and substantially all of the assets of such directors and executive officers are located outside of the United States, our shareholders could experience more difficulty enforcing judgments obtained against our Company or our directors in U.S. courts than would currently be the case for U.S. judgments obtained against a U.S. public company or U.S. resident directors. In addition, it may be more difficult (or impossible) to assert some types

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of claims against our Company or its directors in courts in England, or against certain of our directors in courts in Spain, than it would be to bring similar claims against a U.S. company or its directors in a U.S. court.

The United States is not currently bound by a treaty with Spain or the United Kingdom providing for reciprocal recognition and enforcement of judgments rendered in civil and commercial matters with Spain or the United Kingdom, other than arbitral awards. There is, therefore, doubt as to the enforceability of civil liabilities based upon U.S. federal securities laws in an action to enforce a U.S. judgment in Spain or the United Kingdom. In addition, the enforcement in Spain or the United Kingdom of any judgment obtained in a U.S. court based on civil liabilities, whether or not predicated solely upon U.S. federal securities laws, will be subject to certain conditions. There is also doubt that a court in Spain or the United Kingdom would have the requisite power or authority to grant remedies in an original action brought in Spain or the United Kingdom on the basis of U.S. federal securities laws violations.

Risks Related to Tax Matters

The application of Section 7874 of the Code, including under IRS guidance, and changes in law could affect our status as a foreign corporation for U.S. federal income tax purposes.

We believe that, under current law, we should be treated as a foreign corporation for U.S. federal income tax purposes. However, the U.S. Internal Revenue Service (the “IRS”) may assert that we should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”). Under Section 7874 of the Code, we would be treated as a U.S. corporation for U.S. federal income tax purposes if, after the Business Combination, (i) at least 80% of our ordinary shares (by vote or value) were considered to be held by former holders of common stock of Globe by reason of holding such common stock, as calculated for Section 7874 purposes, and (ii) our expanded affiliated group did not have substantial business activities in the United Kingdom (the “80% Test”). The percentage (by vote and value) of our ordinary shares considered to be held by former holders of common stock of Globe immediately after the Business Combination by reason of their holding common stock of Globe is referred to in this disclosure as the “Section 7874 Percentage.”

Determining the Section 7874 Percentage is complex and, with respect to the Business Combination, subject to legal uncertainties. In that regard, the IRS and U.S. Department of the Treasury (“U.S. Treasury”) issued temporary Regulations in April 2016 and finalized Regulations in July 2018 (collectively, the “Section 7874 Regulations”), which include a rule that applies to certain transactions in which the Section 7874 Percentage is at least 60% and the parent company is organized in a jurisdiction different from that of the foreign target corporation (the “Third Country Rule”). This rule applies to transactions occurring on or after November 19, 2015, which date is prior to the closing of the Business Combination. If the Third Country Rule were to apply to the Business Combination, the 80% Test would be deemed met and we would be treated as a U.S. corporation for U.S. federal income tax purposes. While we believe the Section 7874 Percentage is less than 60% such that the Third Country Rule does not apply to us, we cannot assure you that the IRS will agree with this position and would not successfully challenge our status as a foreign corporation. If the IRS successfully challenged our status as a foreign corporation, significant adverse tax consequences would result for us and could apply to our shareholders.

In addition, changes to Section 7874 of the Code, the U.S. Treasury Regulations promulgated thereunder, or to other relevant tax laws (including under applicable tax treaties) could adversely affect our status or treatment as a foreign corporation, and the tax consequences to our affiliates, for U.S. federal income tax purposes, and any such changes could have prospective or retroactive application. Recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, including by potentially causing us to be treated as a U.S. corporation if the management and control of us and our affiliates were determined to be located primarily in the United States, or by reducing the Section 7874 Percentage at or above which we would be treated as a U.S. corporation such that it would be lower than the threshold imposed under the 80% Test.

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IRS guidance and changes in law could affect our ability to engage in certain acquisition strategies and certain internal restructurings.

Even if we are treated as a foreign corporation for U.S. federal income tax purposes, the Section 7874 Regulations materially changed the manner in which the Section 7874 Percentage will be calculated in certain future acquisitions of U.S. businesses in exchange for our equity, which may affect the tax efficiencies that otherwise might be achieved in transactions with third parties. For example, the Section 7874 Regulations would impact certain acquisitions of U.S. companies for our Ordinary Shares (or other stock) in the 36-month period beginning December 23, 2015, by excluding from the Section 7874 Percentage the portion of Ordinary Shares that are allocable to former holders of common stock of Globe. This rule would generally have the effect of increasing the otherwise applicable Section 7874 Percentage with respect to our future acquisition of a U.S. business. The Section 7874 Regulations also may more generally limit the ability to restructure the non-U.S. members of our Company to achieve tax efficiencies, unless an exception applies. However, no such acquisition of a U.S. business was made during the 36 months period.

IRS proposed regulations and changes in laws or treaties could affect the expected financial synergies of the Business Combination.

The IRS and the U.S. Treasury also issued rules that provide that certain intercompany debt instruments issued on or after April 5, 2016, will be treated as equity for U.S. federal income tax purposes, therefore limiting U.S. tax benefits and resulting in possible U.S. withholding taxes. As a result of these rules, we may not be able to realize a portion of the financial synergies that were anticipated in connection with the Business Combination, and such rules may materially affect our future effective tax rate. While these new rules are not retroactive, they could impact our ability to engage in future restructurings if such transactions cause an existing debt instrument to be treated as reissued. Furthermore, under certain circumstances, recent treaty proposals by the U.S. Treasury, if ultimately adopted by the United States and relevant foreign jurisdictions, could reduce the potential tax benefits for us and our affiliates by imposing U.S. withholding taxes on certain payments from our U.S. affiliates to related and unrelated foreign persons.

We are subject to tax laws of numerous jurisdictions and our interpretation of those laws is subject to challenge by the relevant governmental authorities.

We and our subsidiaries are subject to tax laws and regulations in the United Kingdom, the United States, France, Spain, South Africa and the other jurisdictions in which we operate. These laws and regulations are inherently complex, and we and our subsidiaries are (and have been) obligated to make judgments and interpretations about the application of these laws and regulations to us and our subsidiaries and their operations and businesses. The interpretation and application of these laws and regulations could be challenged by the relevant governmental authority, which could result in administrative or judicial procedures, actions or sanctions, which could be material an effect our effective tax rate.

We intend to operate so as to be treated exclusively as a resident of the United Kingdom for tax purposes, but the relevant tax authorities may treat us as also being a resident of another jurisdiction for tax purposes.

We are a company incorporated in the United Kingdom. Current U.K. tax law provides that we will be regarded as being a U.K. resident for tax purposes from incorporation and shall remain so unless (i) we were concurrently resident of another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (ii) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.

Based upon our management and organizational structure, we believe that we should be regarded solely as resident in the United Kingdom from our incorporation for tax purposes. However, because this analysis is highly factual and may depend on changes in our management and organizational structure, there can be no assurance regarding the final determination of our tax residence. Should we be treated as resident in a country or jurisdiction other than the United Kingdom, we could be subject to taxation in that country or jurisdiction on our worldwide income and may be required to comply with a number of material and formal tax obligations, including withholding tax and reporting obligations provided under the relevant tax law, which could result in additional costs and expenses and an increase of our effective tax rate.

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We may not qualify for benefits under the tax treaties entered into between the United Kingdom and other countries.

We intend to operate in a manner such that, when relevant, we are eligible for benefits under tax treaties entered into between the United Kingdom and other countries. However, our ability to qualify and continue to qualify for such benefits will depend upon the requirements contained within each treaty and the applicable domestic laws, as the case may be, on the facts and circumstances surrounding our operations and management, and on the relevant interpretation of the tax authorities and courts.

Our or our subsidiaries’ failure to qualify for benefits under the tax treaties could result in adverse tax consequences to us and our subsidiaries and could result in certain tax consequences of owning or disposing of our ordinary shares differing from those discussed below.

Future changes to domestic or international tax laws or to the interpretation of these laws by the governmental authorities could adversely affect us and our subsidiaries.

The U.S. Congress, the U.K. Government, the European Union and the Organization for Economic Co-operation and Development and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting” (or “BEPS”), in which payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. Thus, the tax laws in the United States, the United Kingdom, the European Union or other countries in which we and our affiliates do business are changing and any such changes could adversely affect us, mostly those related to interest limitation rules. Furthermore, the interpretation and application of domestic or international tax laws made by us and our subsidiaries could differ from that of the relevant governmental authority, which could result in administrative or judicial procedures, actions or sanctions, which could be material. On July 1, 2018, OECD’s so-called “Multi-Lateral Instrument” entered into force covering 87 jurisdictions and impacting over 1,200 double tax treaties. The adoption and transposition into domestic legislations of the Anti-Tax Avoidance Directives (known as “ATAD 1 and 2”) by the European Union is another key development that is impacting us, mostly when it comes to interest deduction limitation. On December 2021, the European Commission published a proposal for a Directive “laying down rules to prevent the misuse of shell entities for improper tax purposes and amending Directive 2011/16/EU.” This Directive is also referred to as the ATAD 3 Directive. The implementation of this directive could affect us.

Further developments are to be seen in areas such as the “making tax digital - initiatives” allowing authorities to monitor multinationals’ tax position on a more real time basis and the contemplated introduction of new taxes, such as revenue-based digital services taxes aimed at technology companies, but which may impact traditional businesses as well in the sense of allocating a portion of the profitability of the given company to jurisdictions where it has significant sales even though it is not physically present. The latest developments by the OECD in this field are the so-called Pillar One and Pillar Two. Under Pillar One, the OECD intends to set up the foundations for allocating to the market jurisdiction (i) non-routine profit; (ii) a fixed remuneration based on the Arm´s length Principle for baseline distribution and marketing functions; and (iii) an additional profit where in-country functions exceed the base-line activity already compensated. In principle, our business is not in scope of this measure as it refers to raw materials and commodities and this kind of business is excluded under the current drafting of the paper. Additionally, the measure would apply to multinational entities with revenues exceeding EUR20 billion and a profitability greater than 10%, what would exclude our company from its application. Then, Pillar Two, also called the GloBE (Global Anti-Base Erosion proposal) consists of setting a minimum taxation, giving the countries the right to “tax back” profit that is currently taxed below the minimum 15% rate. This goal is reached through several avenues, that is, (i) the inclusion of foreign income when taxed below the minimum rate; (ii) an undertaxed payment rule to related parties to deny deduction or impose taxation when payment was not subject to tax; (iii) switch over rule in the double tax treaties to allow the residence jurisdiction to switch from exemption to credit method when profit of permanent establishment is taxed below the minimum rate; and (iv) a subject to tax rule to allow withholding tax or other taxation or adjust eligibility to treaty benefits on payments not subject to the minimum rate. GloBE could affect our effective tax rate when implemented. In December 2021 the OECD released a report containing further details about the implementation of Pillar I. Likewise, also in December 2021 the European Union released a proposed Directive on minimum taxation in line with the OECD report and in July 2022 the UK Government released a draft legislation in line with the OECD report. In all three cases, it is proposed a minimum taxation of 15% that, when implemented, most likely should not impact our organization since we are already based in high tax jurisdictions without significant tax

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exemptions or credits or permanent adjustments to reduce our effective tax rate. Additionally, the minimum taxation under the GloBE rules is increased by parameters like number of employees on the ground and fixed assets to conduct the relevant business activity. This kick out provision should apply to Ferroglobe due to its large workforce and significant tangible footprint in each jurisdiction where it is present.

We may become subject to income or other taxes in jurisdictions which would adversely affect our financial results.

We and our subsidiaries are subject to the income tax laws of the United Kingdom, the United States, France, Spain, South Africa and the other jurisdictions in which we operate. Our effective tax rate in any period is impacted by the source and the amount of earnings among our different tax jurisdictions. A change in the division of our earnings among our tax jurisdictions could have a material impact on our effective tax rate and our financial results. In addition, we or our subsidiaries may be subject to additional income or other taxes in these and other jurisdictions by reason of the management and control of our subsidiaries, our activities and operations, where our production facilities are located or changes in tax laws, regulations or accounting principles. Changes in tax treaties, the introduction of new legislation, updates to existing legislation, or changes to regulatory interpretations of existing legislation as a result of these or similar proposals could impose additional taxes on businesses and increase the complexity, burden and cost of tax compliance in countries where we operate.

Although we have adopted guidelines and operating procedures to ensure our subsidiaries are appropriately managed and controlled, we may be subject to such taxes in the future and such taxes may be substantial. The imposition of such taxes could have a material adverse effect on our financial results.

We may incur current tax liabilities in our primary operating jurisdictions in the future.

We expect to make current tax payments in some of the jurisdictions where we do business in the normal course of our operations. Our ability to defer the payment of some level of income taxes to future periods is dependent upon the continued benefit of accelerated tax depreciation on our plant and equipment in some jurisdictions, the continued deductibility of external and intercompany financing arrangements, the application of tax losses prior to their expiration in certain tax jurisdictions and the application of tax credits including R&D credits, among other factors. The level of current tax payments we make in any of our primary operating jurisdictions could adversely affect our cash flows and have a material adverse effect on our financial results.

Changes in tax laws may result in additional taxes for us.

We cannot assure you that tax laws in the jurisdictions in which we reside or in which we conduct activities or operations will not be changed in the future. Such changes in tax law could result in additional taxes for us. As mentioned above, changes in tax treaties, the introduction of new legislation, updates to existing legislation, or changes to regulatory interpretations of existing legislation as a result of future tax law changes could impose additional taxes on businesses and increase the complexity, burden and cost of tax compliance in countries where we operate.

U.S. federal income tax reform could adversely affect us.

Legislation commonly known as the Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017 in the United States. The TCJA made significant changes to the U.S. federal tax code, including a reduction in the U.S. federal corporate statutory tax rate from 35% to 21% as well as the introduction of a base erosion minimum tax (BEAT). The TCJA also made changes to the U.S. federal taxation of foreign earnings and to the timing of recognition of certain revenue and expenses and the deductibility of certain business expenses. We examined the impact the TCJA may have on our business in detail since enactment. Although further guidance continues to be released by the IRS, so far we have concluded that tax reform should not have a material adverse impact on the taxation of our U.S. business, as of December 31, 2022. This annual report does not discuss in detail the TCJA or the manner in which it might affect us or our stockholders. We urge you to consult with your own legal and tax advisors with respect to the Tax Reform Act and the potential tax consequences of investing in our shares.

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Our transfer pricing policies are open to challenge from taxation authorities internationally.

Tax authorities have become increasingly focused on transfer pricing in recent years. Due to our international operations and an increasing number of inter-company cross-border transactions, we are open to challenge from tax authorities with regards to the pricing of such transactions. A successful challenge by tax authorities may lead to a reallocation of taxable income to a different tax jurisdiction and may potentially lead to an increase of our effective tax rate.

ITEM 4.       INFORMATION ON THE COMPANY

A.    History and Development of the Company

Ferroglobe PLC

Ferroglobe PLC, initially named VeloNewco Limited, was incorporated under the U.K. Companies Act 2006 as a private limited liability company in the United Kingdom on February 5, 2015, as a wholly-owned subsidiary of Grupo VM. On October 16, 2015 VeloNewco Limited re-registered as a public limited company. As a result of the Business Combination, which was completed on December 23, 2015, FerroAtlántica and Globe merged through corporate transactions to create Ferroglobe PLC, one of the largest producers worldwide of silicon metal and silicon and manganese-based alloys. To effect the Business Combination, Ferroglobe acquired from Grupo VM all of the issued and outstanding ordinary shares, par value €1,000 per share, of Grupo FerroAtlántica, SAU in exchange for 98,078,161 newly issued Class A Ordinary Shares, nominal value $7.50 per share, of Ferroglobe, after which FerroAtlántica became a wholly-owned subsidiary of Ferroglobe. Immediately thereafter, Gordon Merger Sub, Inc., a wholly-owned subsidiary of Ferroglobe, merged with and into Globe Specialty Metals, Inc., and each outstanding share of common stock, par value $0.0001 per share, was converted into the right to receive one newly-issued ordinary share, nominal value $7.50 per share, of Ferroglobe. After these steps, Ferroglobe issued, in total, 171,838,153 shares, out of which 98,078,161 shares were issued to Grupo VM and 73,759,992 were issued to the former Globe shareholders. Our ordinary shares are currently traded on the NASDAQ under the symbol “GSM.”

On June 22, 2016, we completed a reduction of our share capital, as a result of which the nominal value of each share was reduced from $7.50 to $0.01, with the amount of the capital reduction being credited to distributable reserves.

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. See “Item 16.E.— Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”

On July 29, 2021, upon the closing of the Refinancing, 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, 1,900,000 shares as a work fee and 7,013,872 shares to bondholder’s related to the financing transactions.

On October 6, 2021, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with B. Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the ordinary shares of Ferroglobe PLC. 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. In 2021 The Company sold 186,053 ordinary shares under the Equity Distribution Agrement, for net proceeds of $1.4 million.

During the year under review, a small number of the ordinary shares held in treasury have been used to satisfy share awards made by the Company to its management team under the Ferroglobe PLC Equity Incentive Plan 2016. The number of ordinary shares held in Treasury as at December 31, 2022 was 1,448,771. See Note 13.

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Significant milestones in our history are as follows:

1996:  acquisition of the Spanish company Hidro Nitro Española, S.A. (“Hidro Nitro Española”), operating in the ferroalloys and hydroelectric power businesses, and start of the quartz mining operations through the acquisition of Cuarzos Industriales S.A. from Portuguese cement manufacturer Cimpor;
1998:  expansion of our manganese- and silicon-based alloy operations through the acquisition of 80% of the share capital of FerroAtlántica de Venezuela (currently FerroVen, S.A.) from the Government of Venezuela in a public auction;
2000:  acquisition of 67% of the share capital of quartz mining company Rocas, Arcillas y Minerales, S.A. from Elkem, a Norwegian silicon metal and manganese- and silicon-based alloy producer;
2005:  acquisition of Pechiney Electrométallurgie, S.A., now renamed FerroPem, S.A.S., a silicon metal and silicon-based alloys producer with operations in France, along with its affiliate Silicon Smelters (Pty) Ltd. in South Africa;
2005:  acquisition of the metallurgical manufacturing plant in Alloy, West Virginia, and Alabama Sand and Gravel, Inc. in Billingsly, Alabama, both in the U.S.;
2006:  acquisition of Globe Metallurgical Inc., the largest merchant manufacturer of silicon metal in North America and largest specialty ferroalloy manufacturer in the United States;
2006:  acquisition of Stein Ferroaleaciones S.A., an Argentine producer of silicon-based specialty alloys, and its Polish affiliate, Ultracore Polska;
2007:  creation of Grupo FerroAtlántica, S.A.U., the holding company of our FerroAtlántica Group;
2007:  acquisition of Camargo Correa Metais S.A., a major Brazilian silicon metal manufacturer;
2008:  acquisition of Rand Carbide PLC, a ferrosilicon plant in South Africa, from South African mining and steel company Evraz Highveld Steel and Vanadium Limited, and creation of Silicio FerroSolar, S.L., which conducts research and development activities in the solar grade silicon sector;
2008:  acquisition of 81% of Solsil, Inc., a producer of high-purity silicon for use in photovoltaic solar cells;
2008:  acquisition of a majority stake in Ningxia Yonvey Coal Industry Co., Ltd., a producer of carbon electrodes (the remaining stake subsequently purchased in 2012);
2009:  creation of French company Photosil Industries, S.A.S., which conducts research and development activities in the solar grade silicon sector;
2009:  sale of interest in Camargo Correa Metais S.A. in Brazil to Dow Corning Corporation and formation of a joint venture with Dow Corning at the Alloy, West Virginia facility;
2010:  acquisition of Core Metals Group LLC, one of North America’s largest and most efficient producers and marketers of high-purity ferrosilicon and other specialty metals;
2010:  acquisition of Chinese silicon metal producer Mangshi Sinice Silicon Industry Company Limited;
2011:  acquisition of Alden Resources LLC, North America’s leading miner, processor and supplier of specialty metallurgical coal to the silicon and silicon-based alloy industries;

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2012:  acquisition of SamQuarz (Pty) Ltd, a South African producer of silica, with quartz mining operations;
2012:  acquisition of a majority stake (51%) in Bécancour Silicon, Inc., a silicon metal producer in Canada, operated as a joint venture with Dow Corning as the holder of the minority stake of 49%;
2014:  acquisition of Silicon Technology (Pty) Ltd. (“Siltech”), a ferrosilicon producer in South Africa;
2018: acquisition from a subsidiary of Glencore PLC of a 100% interest in manganese alloys plants in Mo i Rana, Norway and Dunkirk, France, through newly-formed subsidiaries Ferroglobe Mangan Norge AS and Ferroglobe Manganèse France, SAS;
2018: sale of the majority interest in Hidro Nitro Española to an entity sponsored by a Spanish renewable energies fund;
2019: sale of 100% interest in FerroAtlántica, S.A.U. (“FAU”), to investment vehicles affiliated with TPG Sixth Street Partners;
2019: sale of 100% interest in Ultra Core Polska, z.o.o, to Cedie, S.A;
2021: Sale of Niagara Falls silicon metal facility.

Corporate and Other Information

Our registered office is located at 5 Fleet Place, London EC4M 7RD, our Board of Directors is based at our London Office at 13 Chesterfield Street, London W1J 5JN, United Kingdom and our management is based in London and also at Torre Emperador Castellana, Paseo de la Castellana, 259-D, P49, 28046 Madrid, Spain. The telephone number of our Spanish Office is +34 915 903 219. Our Internet address is http://www.ferroglobe.com. The information on our website is not a part of this document. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

B.    Business Overview

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.

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Industry and Market Data

The statements and other information contained below regarding Ferroglobe’s competitive position and market share are based on the reports periodically published by leading metals industry consultants and leading metals industry publications and information centers, as well as on the estimates of Ferroglobe’s management.

Competitive Strengths and Strategy of Ferroglobe

Competitive Strengths

Leading market positions in silicon metal, silicon-based alloys and manganese-based alloys

We are a leading global producer in our core products based on merchant production capacity and hold the leading market share in certain of our products. Specifically, in the case of silicon metal, with maximum global production capacity of approximately 328 thousand metric tons (which includes 51% of our attributable joint venture capacity, we have approximately 66% of the production capacity market share in North America and approximately 25% of the global market share (all of the world excluding China), according to management estimates for our industry. In the case of manganese-based alloys, following the acquisition of the Dunkirk, France and Mo i Rana, Norway plants in 2018, our market share is approximately 15% in Europe, and we are among the three largest global producers of manganese alloys excluding China.

Our scale and global presence across five continents allows us to offer a wide range of products to serve a variety of end-markets, including those which we consider to be dynamic, such as the solar, automotive, consumer electronic products, semiconductors, construction and energy industries. As a result of our market leadership and breadth of products, we possess critical insight into market demand allowing for more efficient use of our resources and operating capacity. Our ability to supply critical sources of high-quality raw materials from within our Company group promotes operational and financial stability and reduces the need for us to compete with our competitors for supply. We believe this also provides a competitive advantage, allowing us to deliver an enhanced product offering with consistent quality on a cost-efficient basis to our customers.

Global production footprint and reach

Our diversified production base consists of production facilities across North America, Europe, South America, South Africa and Asia. We have the capability to produce our core products at multiple facilities, providing a competitive advantage when reacting to changing global demand trends and customer requirements. Furthermore, this broad base ensures reliability to our customers that value timely delivery and consistent product quality. Our diverse production base also enables us to optimize our production plans and shift production to the lowest cost facilities. Most of our production facilities are located close to sources of principal raw materials, key customers or major transport hubs to facilitate delivery of raw materials and distribution of finished products. This enables us to service our customers globally, while optimizing our working capital, as well as enabling our customers to optimize their inventory levels.

Diverse base of high-quality customers across growing industries

We sell our products to customers in over 30 countries, with our largest customer concentration in North America and in Europe. Our products are used in end products spanning a broad range of industries, including solar, personal care and healthcare products, automobile parts, carbon and stainless steel, water pipe, solar, semiconductor, oil and gas, infrastructure and construction. Although some of these end-markets have growth drivers similar to our own, others are less correlated and offer the benefits of diversification. This wide range of products, customers and end-markets provides significant diversity and stability to our business.

Many of our customers, we believe, are leaders in their end-markets and fields. We have built long-lasting relationships with customers based on the breadth and quality of our product offerings and our ability to produce products that meet specific customer requirements. For the year ended December 31, 2022 and December 31, 2021, Ferroglobe’s ten largest customers accounted for approximately 50.1% and 48.1%, respectively, of Ferroglobe’s consolidated revenue. Our

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customer relationships provide us with stability and visibility into our future volumes and earnings, though we are not reliant on any individual customer or end-market. Our customer relationships, together with our diversified product portfolio, provide us with opportunities to cross sell new products; for example, by offering silicon-based or manganese-based alloys to existing steelmaking customers.

Flexible and low-cost structure

We believe we have an efficient cost structure, enhanced over time by vertical integration through strategic acquisitions. The largest components of our cost base are raw materials and power. Our relatively low operating costs are primarily a result of our ownership of, and proximity to, sources of raw materials, our access to attractively priced power supplies and skilled labor and our efficient production processes.

We believe our vertically integrated business model and ownership of sources of raw materials provides us with a cost advantage over our competitors. Moreover, such ownership and the fact that we are not reliant on any single supplier for the remainder of our raw materials needs generally ensures stable, long term supply of raw materials for our production processes, thereby enhancing operational and financial stability. Transportation costs can be significant in our business; our proximity to sources of raw materials and customers improves logistics and represents another cost advantage. The proximity of our facilities to our customers also allows us to provide just in time delivery of finished goods and reduces the need to store excess inventory, resulting in more efficient use of working capital.

We capture, recycle and sell most of the by-products generated in our production processes, which further reduces our costs.

We operate with a largely variable cost of production and our diversified production base allows us to shift our production and distribution between facilities and products in response to changes in market conditions over time. Additionally, the diversity of our currency and commodity exposures provides, to a degree, a natural hedge against foreign exchange and raw materials pricing volatility. Our production costs are mostly dependent on local factors while our product prices are influenced more by global factors. Depreciation of local, functional currencies relative to the U.S. Dollar, when it occurs, reduces the costs of our operations, offering an increased competitive edge in the international market.

We believe our scale and global presence enables us to sustain our operations throughout periods of economic downturn, volatile commodity prices and demand fluctuations.

Stable supply of critical, high quality raw materials

In order to ensure reliable supplies of high-quality raw materials for the production of our metallurgical products, we have invested in strategic acquisitions of sources that supply a meaningful portion of the inputs our manufacturing operations consume. Specifically, we own and operate specialty, low ash, metallurgical quality coal mines in the United States, high purity quartz quarries in the United States, Spain and South Africa, charcoal production units in South Africa, and our Yonvey production facility for carbon electrodes in Ningxia, China. For raw materials needs our subsidiaries cannot meet, we have qualified multiple suppliers in each operating region for each raw material, helping to ensure reliable access to high quality raw materials.

Efficient and environmentally friendly by-product usage

We utilize or sell most of the by-products of our manufacturing process, which reduces cost and the environmental impact of our operations. We have developed markets for the by-products generated by our production processes and have transformed our manufacturing operations so that little solid waste disposal is required. By-products not recycled in the manufacturing process are generally sold to companies, which process them for use in a variety of other applications. These materials include: silica fume (also known as microsilica), used as a concrete additive, refractory material and oil well conditioner; fines - the fine material resulting from crushing lumps; and dross, which results from the purification process during smelting.

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Pioneer in innovation with focus on technological advances and development of next generation products

Our talented workforce has historically developed proprietary technological capabilities and next generation products in-house, which we believe give us a competitive advantage. In addition to a dedicated R&D division, we have cooperation agreements in place with various universities and research institutes in Spain, France and other countries around the world. Our R&D achievements include:

ELSA electrode — Ferroglobe has internally developed a patented technology for electrodes used in silicon metal furnaces, which it has been able to sell to several major silicon producers globally. This technology, known as the ELSA electrode, improves the energy efficiency in the production process of silicon metal and eliminates contamination from iron. Ferroglobe has granted these producers the right to use the ELSA electrode against payment to Ferroglobe of royalties. Continuous improvements are made to keep this invention state of the art.
Solar Grade Silicon — Ferroglobe has sought to produce solar grade silicon metal with a purity above 99.9999% through a new, potentially cost effective, electrometallurgical process. The traditional chemical process tends to be costly and involves high energy consumption and potentially environmentally hazardous processes. The new technology entirely developed by Ferroglobe aims to reduce the costs, energy consumption and carbon footprint associated with the production of solar grade silicon. In connection with this project, FerroAtlántica obtained a loan, with a principal amount of approximately €45 million, from the Spanish Ministry of Industry and Energy for the purpose of building the UMG silicon plant. Due to the market environment for solar grade silicon (or polysilicon) worldwide, at the end of 2018 the Company suspended the investment in the project while preserving the technology and know-how in order to be able to finalize the construction of the factory when market circumstances change.
Silicon for Advanced Technologies — Ferroglobe has launched the Silicon for Advanced Technologies project, which aims at producing silicon-based, tailor-made products for high end applications. In this project we leveraged the purification technologies developed for the Solar Grade silicon project and which are patented.   These technologies are very industrial, cost effective and with low carbon footprint, which places Ferroglobe in an excellent in this new market.  . At the same time, new know-how linked to specific milling technologies has been developed in the last years, placing Ferroglobe in an excellent position in this new market. Among the various targeted applications, a specific project of Silicon for Li-ion batteries was launched.  Currently, we have the first demonstration milling unit in our Innovation Centre in Sabón (Spain) and we have several industrial purification units in Montricher (France) and Puertollano (Spain).
Li-ion batteries — The capacity of the anode in Li-ion batteries can be enhanced by adding silicon. This is a particularly attractive market because silicon not only can increase capacity of the Li-ion batteries but can contribute to reduce costs, to reduce carbon footprint and to ease fast charging. All these benefits will help to develop new mobility solutions. In this specific field, Ferroglobe has established several technical partnerships and collaborations in order to rapidly advance the research and development work that a market like this needs.

New R&D works are being carried out by the Ferroglobe Innovation team to develop new products that could fit in the requirements of next generations of batteries.

Experienced management team in the metals and mining industry

We have a seasoned and experienced management team with extensive knowledge of the global metals and mining industry, operational and financial expertise and a track record of developing and managing large-scale operations. Our management team is committed to responding quickly and effectively to macroeconomic and industry developments, to identifying and delivering growth opportunities and to improving our performance by way of a continuous focus on operational cost control and a disciplined, value-based approach to capital allocation. Our management team is complemented by a skilled operating team with solid technical knowledge of production processes and strong relationships with key customers.

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Environmental, Social and Governance (ESG) Strategy

In 2021 we defined Ferroglobe’s ESG Strategy 2022-2026, a roadmap that will enable us to benchmark and assess ourselves on ESG matters, in alignment with the demands of our stakeholders and our industry trends. The ESG Strategy brings us closer to our goal of becoming a relevant player in the development of a sustainable future.

It has been defined based on four strategic lines:

(i)Strengthening our governance framework
(ii)Promoting a solid & honest engagement with our people and local communities where we operate
(iii)Reinforcing the role of sustainability through our value chain
(iv)Improving our environmental footprint to enable materials which are vital for sustainable development.

The progress on ESG performance will be included in the ESG reports to be issued on a yearly basis. 2022 ESG report will be published in 2023.

Business Strategy

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 turnaround plan we developed essentially impacts all the functional areas of our Company as we seek to drive changes that ensure competitiveness throughout the cycle. In the last 2 years, the Company set a target of achieving $225 million in EBITDA improvement. We achieved $188 million in cost savings and met our commercial excellence target of $50M. The key value drivers of our strategic plan were 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.  

Continuous plant efficiency:  We will continue to build on the success of our existing key technical metrics (KTM) program, 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.  Moreover, we have implemented developing tools to track our key performance indicators in an ongoing effort to improve furnace level performance.

Commercial excellence: we have implemented commercial best practices to maximize profitable revenue, aiming at improving and reinforcing our pricing, account management, salesforce effectiveness, and product portfolio and customer focus. We have strengthened our customer relationships by developing a target portfolio prioritization, re-designing our commercial coverage and operating model, and structuring our account planning, with the definition of clear objectives for each of our customers and a sustained focus on long-term partnership building. We have implemented a range of digitally-enabled tools and processes across the entire commercial function, bringing our team’s performance to the next level. Through our new customer relationship management tool, we have reinforced our account management and front-line effectiveness, as well as our customer service and quality management. On pricing, we have redesigned our governance process and introduced new tools to maximize profitability and provide margin transparency for every sale. Furthermore, we have re-designed our product management function, empowering this role to create customer value and act as a consistent source of information and cross-functional coordination.

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Centralized purchasing: we have adapted our operating model such that the purchase of our key inputs is done centrally and to support a purchase 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 fost 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, we identified significant opportunities for further cost improvement through permanent cost cutting at our plants, as well as the corporate centers.  By tracking these costs vigorously and increasing accountability, we aim to bolster the overall cost structure at various levels. Through this, 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:  We have improved substantially our net working capital by establishing targets and improve our Supply Chain processes. This will allow us to sustain competitive levels of Working Capital throughout the cycle – and while we have recently witnessed a peak, given by slowdown of demand and margin compression, we are taking the measures to correct it and return to previous values.  

With our strategic plan we aim to:

Maintain and leverage industry leading position in core businesses and pursue long-term growth

We intend to maintain and leverage our position as a leading global producer of silicon metal and one of the leading global producers of ferroalloys based on production capacity. We believe we will achieve our goals through the execution of our current strategic plan, which focuses on expanding our asset footprint in the regions that present attractive opportunities and continuing driving continuous improvements to increase competitiveness of our assets – including continue to secure competitive and clean sources of energy, extend our existing sources of Quartz, all while continuing our ESG journey.

We also plan to achieve organic growth by developing new products to further diversify our portfolio and expand our customer base (such as silicon-based anodic materials for Li-ion batteries). We intend to focus our production and sales efforts on high-margin products and end-markets that we consider to have the highest potential for profitability and growth. We will continue to capitalize on our global reach and the diversity of our production base to adapt to changes in market demands, shifting our production and distribution across facilities and between different products as necessary in order to remain competitive and maximize profitability. We aim to obtain further direct control of key raw materials to secure our long-term access to scarce reserves, which we believe will allow us to continue delivering enhanced products while maintaining our low-cost position. Additionally, we will continue regularly to review our customer contracts in an effort to improve their terms and to optimize the balance between selling under long-term agreements and retaining some exposure to spot markets. We intent to maintain pricing that appropriately reflects the value of our products and our level of customer service and, in light of commodity prices and demand fluctuations, may decide to change the weighting of our mix of contracts that are set at fixed prices versus index-based prices, to capitalize on market opportunities and to ensure a profit throughout the cycles.

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Maintain low cost position while controlling inputs

We believe we have an efficient cost structure and, going forward, we will seek to further reduce costs and improve operational efficiency through a number of initiatives. We plan to focus on controlling the cost of our raw materials through our captive sources and long-term supply contracts and on lowering our fixed costs in order to reduce the unit costs of our silicon metal and ferroalloy production. We aim to improve our internal processes and further integrate our global footprint, such as benefits from value chain optimization, including enhancements in raw materials procurement and materials management; adoption of best practices and technical and operational know how across our platform; reduced freight costs from improved logistics as well as savings through the standardization of monitoring and reporting procedures, technology, systems and controls. We intend to enhance our production process through R&D and targeted capital expenditure and leverage our geographic footprint to shift production to the most cost effective and appropriate facilities and regions for such products. We will continue to regularly review our power supply contracts with a view to improving their terms and more competitive tariff structures. In addition, we will seek to maximize the value derived from the utilization and sale of by-products generated in our production processes and continue to focus on innovation to develop next generation products.

We believe we differentiate ourselves from our competitors on the basis of our technical expertise and innovation, which allow us to deliver new high-quality products to meet our customers’ needs. We intend to keep using these capabilities in the future to retain existing customers and cultivate new business. We plan to leverage the expertise of our dedicated team of specialists to advance and to develop next generation products and technologies that fuel organic growth. In particular, we intend develop high value powders for high end applications, including silicon-based anodic materials for Li-ion batteries. We also aim to further pilot EV Battery Cathodes and Test process to produce construction materials with high-thermal insulation properties, through non-recycled slag.

Maintain financial discipline to facilitate ongoing operations and support growth

We believe maintaining financial discipline will provide us with the ability to manage the volatility in our business resulting from changes in commodity prices and demand fluctuations. We intend to preserve a strong and conservative balance sheet, with sufficient liquidity and financial flexibility to facilitate all of our ongoing operations, to support organic and strategic growth and to finance prudent capital expenditure programs aimed at placing us in a better position to generate increased revenues and cash flows by delivering a more comprehensive product mix and optimized production in response to market circumstances. We plan to become even more efficient in our working capital management through various initiatives aimed at optimizing inventory levels and accounts receivable. We will also seek to repay indebtedness from free cash flow and retain low leverage for maximum free cash flow generation.

Pursue strategic opportunities

We have a proven track record of disciplined acquisitions of complementary businesses and successfully integrating them into existing operations while retaining a targeted approach through appropriate asset divestitures. Our past acquisitions have increased the vertical integration of our activities, allowing us to deliver an enhanced product offering on a cost-efficient basis. We regularly consider and evaluate strategic opportunities for our business and will continue to do so in the future with the objective of expanding our capabilities and leveraging our products and operations. In particular, we intend to pursue complementary acquisitions and other investments at appropriate valuations for the purpose of increasing our capacity, increasing our access to raw materials and other inputs, further refining existing products, broadening our product portfolio and entering new markets. We will consider such strategic opportunities in a disciplined fashion while maintaining a conservative leverage position and strong balance sheet.

We will also seek to evaluate our core business strategy on an ongoing basis and may divest certain non-core and lower margin businesses to improve our financial and operational results.

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Facilities and Production Capacity

The following chart shows, as of December 31, 2022, the location of our assets and our production capacity, including 51% of the capacity of our joint ventures (of which we own 51%), by geography, of silicon, silicon-based alloys and manganese-based alloys. It is important to note that certain facilities may and do switch from time to time among different families of products (for instance, from silicon metal to silicon-based alloys and vice-versa) or among different products within the same family (for instance from ferromanganese to silicomanganese). Such switches change the production capacity at each plant.

Our production facilities are strategically located throughout the world. We operate quartz mines located in Spain, South Africa, Canada, and the United States, and charcoal production in South Africa. Additionally, we operate low-ash, metallurgical grade coal mines in the United States.

From time to time, in response to market conditions and to manage operating expenses, facilities are fully or partially idled. As of December 31, 2021, certain production facilities in the United States, Spain, Venezuela and South Africa are partially or fully idled, as a result of current market conditions. Ferroglobe subsidiaries own a total of 18.9 megawatts of hydro production capacity in France.

Products

Graphic

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For the years ended December 31, 2022, 2021 and 2020, Ferroglobe’s consolidated sales by product were as follows:

Year ended December 31, 

($ thousands)

    

2022

    

2021

    

2020

Silicon metal

 

1,116,193

 

637,695

 

463,217

Manganese-based alloys

 

525,483

 

469,138

 

267,469

Ferrosilicon

 

561,539

 

337,833

 

176,447

Other silicon-based alloys

192,409

161,750

126,817

Silica fume

32,290

32,409

25,888

Other

170,002

140,083

84,596

Total Sales

2,597,916

 

1,778,908

 

1,144,434

Shipments in metric tons:

Silicon metal

209,342

253,991

207,332

Manganese-based alloys

295,589

314,439

261,605

Ferrosilicon

154,972

166,268

134,849

Other silicon-based alloys

49,105

76,498

65,362

Average Selling price ($/MT):

 

Silicon metal

 

5,332

2,511

2,234

Manganese-based alloys

1,778

1,492

1,022

Ferrosilicon

 

3,623

2,032

1,308

Other silicon-based alloys

 

3,918

2,114

1,940

Silicon metal

Ferroglobe is a leading global silicon metal producer with a total production capacity of approximately 328,160 tons (including our 51% share of Ferroglobe’s joint venture capacity). Ferroglobe’s silicon metal production is spread across facilities located in the United States, France, South Africa, Canada and Spain. For the years ended December 31, 2022, 2021 and 2020, Silicon metal sales accounted for 43.0%, 35.8% and 40.5% of Ferroglobe’s total consolidated revenues.

Silicon metal is used by primary and secondary aluminum producers, who require silicon metal with specific properties to produce aluminum alloys. The addition of silicon metal during production helps to reduce shrinkage and the hot cracking tendencies of cast aluminum and improves the castability, hardness, corrosion resistance, tensile strength, wear resistance and weldability of the aluminum end products. Aluminum is used to manufacture a variety of automotive components, including engine pistons, housings, and cast aluminum wheels and trim, as well as high tension electrical wire, aircraft parts, beverage containers and other products which require aluminum properties.For the year ended December 31, 2022, sales to aluminum producers represented approximately 29% of silicon metal revenues.

Silicon metal is also used by several major silicone chemical producers across a broad range of applications, including personal care items, construction-related products, healthcare and electronics. In construction and equipment applications, silicone chemicals promote adhesion, act as a sealer and provide insulating properties. In personal care and health care products, silicone chemicals add a smooth texture that protects against ultraviolet rays and provide moisturizing and cleansing properties. Silicon metal is an essential component in the production of silicone chemicals, accounting for approximately 20% of the cost of production. For the year ended December 31, 2022 sales to chemical producers represented approximately 66% of silicon metal revenues.

In addition, silicon metal is the primary ingredient in the production of polysilicon, which is most widely used to manufacture solar cells and semiconductors. Producers of polysilicon employ processes to further purify silicon metal and grow ingots from which wafers are cut. These wafers are the base material to produce solar cells, to convert sunlight to electricity. Individual solar cells are soldered together to make solar modules. For the year ended December 31, 2022 sales to polysilicon producers represented approximately 5% of silicon metal revenues.

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Silicon-based alloys

Ferrosilicon

Ferroglobe is among the leading global ferrosilicon producers based on production output in recent years. During the year ended December 31, 2022, Ferroglobe sold 147,725 tons of ferrosilicon. For the years ended December 31, 2022, 2021 and 2020, Ferroglobe’s revenues generated by ferrosilicon sales accounted for 21.6%, 19.0% and 15.4%, of Ferroglobe’s total consolidated revenues.

Ferrosilicon is an alloy of iron and silicon (normally approximately 75% silicon). Ferrosilicon products are used to produce stainless steel, carbon steel, and various other steel alloys and to manufacture electrodes and, to a lesser extent, in the production of aluminum. Approximately 88% of ferrosilicon produced is used in steel production.

Ferrosilicon is generally used to remove oxygen from the steel and as alloying element to improve the quality and strength of iron and steel products. Silicon increases steel’s strength and wear resistance, elasticity and scale resistance, and lowers the electrical conductivity and magnetostriction of steel.

Other silicon-based alloys

During the year ended December 31, 2022, Ferroglobe sold 56,630 tons of silicon-based alloys (excluding ferrosilicon). For the years ended December 31, 2022, 2021 and 2020, Ferroglobe’s revenues generated by silicon-based alloys (excluding ferrosilicon) accounted for 7.4%, 9.1% and 11.1% of Ferroglobe’s total consolidated revenues.

Ferroglobe produces various different silicon-based alloys, including calcium silicon and foundry products, which comprise inoculants and nodularizers. Ferroglobe produces more than 20 specialized varieties of foundry products, several of which are custom made for its customers. Demand for these specialty metals is increasing and, as such, they are becoming more important components of Ferroglobe’s product offering.

The primary use for calcium silicon is the deoxidation and desulfurization of liquid steel. In addition, calcium silicon is used to control the shape, size and distribution of oxide and sulfide inclusions, improving fluidity, ductility, and the transverse mechanical and impact properties of the final product. Calcium silicon is also used in the production of coatings for cast iron pipes, in the welding process of powder metal and in pyrotechnics.

The foundry products that Ferroglobe manufactures include nodularizers and inoculants, which are used in the production of iron to improve its tensile strength, ductility and impact properties, and to refine the homogeneity of the cast iron structure.

Silica fume

For the years ended December 31, 2022, 2021 and 2020, Ferroglobe’s revenues generated by silica fume sales accounted for 1.2%, 1.8% and 2.3% respectively, of Ferroglobe’s total consolidated sales.

Silica fume is a by-product of the electrometallurgical process of silicon metal and ferrosilicon. This dust-like material, collected through Ferroglobe factories’ air filtration systems, is mainly used in the production of high-performance concrete and mortar. The controlled addition of silica fume to these products results in increased durability, improving their impermeability from external agents, such as water. These types of concrete and mortar are used in large-scale projects such as bridges, viaducts, ports, skyscrapers and offshore platforms.

Manganese-based alloys

Ferroglobe is among the leading global manganese-based alloys producers based on production capacity. As of December 31, 2022, Ferroglobe maintained approximately 289,500 tons of annual silicomanganese production capacity and approximately 272,000 tons of annual ferromanganese production capacity across our factories in Spain, Norway and

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France. During the year ended December 31, 2022, Ferroglobe sold 295,590 tons of manganese-based alloys. For the years ended December 31, 2022, 2021 and 2020, Ferroglobe’s revenues generated by manganese-based alloys sales accounted for 20.2%, 26.4% and 23.4%,  of Ferroglobe’s total consolidated revenues. Over 90% of global manganese based alloys production is used in steel production, and all steelmakers use manganese and manganese alloys in their production processes.

Silicomanganese is used as deoxidizing agent in the steel manufacturing process. Silicomanganese is also produced in the form of refined silicomanganese, or silicomanganese AF, super-refined silicomanganese, and silicomanganese LC.

Ferromanganese is used as a deoxidizing, desulphurizing and degassing agent in steel to remove nitrogen and other harmful elements that are present in steel in the initial smelting process, and to improve the mechanical properties, hardenability and resistance to abrasion of steel. The three types of ferromanganese produced by Ferroglobe are:

high-carbon ferromanganese used to improve the durability of steel;

medium-carbon ferromanganese used to manufacture flat and other steel products; and

low-carbon ferromanganese used in the production of stainless steel, low-carbon steel, rolled steel plates and pipes utilized by the oil industry.

Raw Materials, Logistics and Power Supply

The primary raw materials used by Ferroglobe are carbon reductants (primarily coal, but also charcoal, metallurgical and petroleum coke, anthracite and wood) as well as minerals (manganese ore and quartz). Other raw materials used include electrodes (consisting of graphite and carbon electrodes and electrode paste), slag and limestone, as well as certain specialty additive metals. Ferroglobe procures coal, manganese ore, quartz, petroleum and metallurgical coke, electrodes and most additive metals centrally under the responsibility of the corporate purchasing department. Some locally sourced raw materials are purchased at a decentralized level (country specific purchasers) under close cooperation with the corporate purchasing department.  

Manganese ore

The global supply of manganese ore comprises standard to high-grade manganese ore, with a 35% to 56% manganese content, and low-grade manganese ore, with lower manganese content. Manganese ore production comes mainly from a limited number of countries including South Africa, Australia, China, Gabon, Brazil, Ukraine, India and Ghana. However, the production of high-grade manganese ore is concentrated in Australia, Gabon, South Africa and Brazil.

The vast majority of the manganese ore Ferroglobe purchased in 2022 came from suppliers located in South Africa (58% of total purchases) and Gabon (40% of total purchases). Global manganese ore prices are mainly driven by manganese demand from China and to a lower extent from India. Potential disruption of supply from South Africa, Australia, Brazil or Gabon due to logistical, labor or other reasons may have an impact on the availability and the pricing of manganese ore.

Coal

Coal is the most commonly used carbon reductant in silicon and silicon alloys production. Only washed and screened coal with ash content below 10% alongside other  specific physical properties, can be used in the production of silicon alloys. Colombia and the United States are the leading source for the required type of coal and the vast majority of the silicon alloys industry, including Ferroglobe, is dependent on supply from these two countries.

Approximately 65% of the coal Ferroglobe purchased externally in 2022 was sourced from one source in Colombia while the remaining 35% came from the United States as well as from Kazakhstan and South Africa. Ferroglobe has a long-standing relationship with the operators of coal washing plants who price coal using spot, quarterly, semi-annual or

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annual contracts, based on market outlook. European coal prices, which are denominated in U.S. Dollars, are mainly based on API 2, the benchmark price reference for coal imported into northwest Europe.

Ferroglobe also owns Alden Resources LLC (“Alden”) in the United States. Alden provides a stable and long-term supply of low ash metallurgical grade coal by fulfilling a substantial portion of the requirements of our North American operations.

See “—Mining Operations” below for further information.

Quartz

Quartz, also known as quartzite, is a key raw material in the production of silicon metal and silicon-based alloys.

Ferroglobe has secured exclusive access to quartz through its quartz mines in Spain, South Africa, the United States and Canada (see “—Mining Operations”). For the year ended December 31, 2022 60.7% of Ferroglobe’s total consumption of quartz was supplied from Ferroglobe’s own sources. To compliment this Ferroglobe purchases its remaining quartz requirements from third-party suppliers through annual contracts. Ferroglobe’s quartz suppliers typically have operations in the same countries where Ferroglobe factories are located, or in close proximity, which minimizes logistical costs and supply chain risks.

Ferroglobe controls quartzite mining operations located in Alabama and a concession to mine quartzite in Saint-Urbain, Québec (operated by a third-party). These mines supply our North American operations with a substantial portion of their quartz requirements.

Other raw materials

Wood is needed for the production of silicon metal and silicon-based alloys. It is used directly in furnaces as woodchips or to produce charcoal, which is the primary source of carbon reductant for Ferroglobe’s plants in South Africa. In South Africa, charcoal is a less expensive substitute for imported coal and provides desirable qualities to the silicon-based alloys it is used to produce. In other countries where Ferroglobe operates, Ferroglobe purchases wood chips locally or logs for on-site wood chipping operations from a variety of suppliers.

In 2022, Ferroglobe’s sources of metallurgical coke were predominantly Poland and Colombia, although certain quantities were sourced from Russia in the first half of the year.

Petroleum coke, electrode related products, slag, limestone and additive metals are important raw materials that Ferroglobe utilizes to manufacture electrometallurgy products. Procurement of these raw materials is either managed centrally or in certain cases, by the local raw materials procurement manager or plant manager with the materials purchased at spot prices or through contracts of up to one year.

In 2022, the sourcing of graphite electrodes came from Europe, India, Ukraine and China through a combination of spot and long-term agreements. Carbon electrodes supplies come from Russia, Poland and China, including from Ferroglobe´s own carbon electrode factory in Ningxia Province in China.

Cost of raw materials

The main raw materials sourced by Ferroglobe are quartz, manganese ore, coal, metallurgical coke, wood and charcoal. Manganese ore is the largest component of the cost base for manganese-based alloys. In 2022, more than 33% of Ferroglobe’s total expenditure on  manganese ore was $187,75 million through an annual commitment, whilst the remaining was purchased on a spot basis. Coal is used as a major carbon reductant in silicon-based alloy production. In 2022, coal represented a $179.5 million expense for Ferroglobe. Metallurgical coke, used for Mn Alloys production, represented a total purchase volume of $72.9 million in 2022.

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Wood is an important element for the production of both silicon alloys and charcoal, which is used as a carbon reductant at Ferroglobe’s South African subsidiary Silicon Smelters (Pty.), Ltd. Ferroglobe’s wood expense amounted to 37.8 million 2022.

The FerroAtlántica subsidiaries of Ferroglobe sourced approximately 63% of their quartz needs from FerroAtlántica’s mines in Spain and South Africa, with Globe subsidiaries sourcing approximately 64% of their quartz needs from Globe’s mines in the United States and Canada. Total quartz consumption in 2022 represented an expense of $ 90.4 million.

Logistics

Logistical operations are managed centrally where possible. Sea-freight operations are centralized at corporate level, while rail logistics are centralized at country level. Road transportation is managed at plant level with centralized coordination in countries multiple sites. Contractual commitments in respect of transportation and logistics match, to the extent possible, Ferroglobe’s commitments for raw materials and customer contracts.

Power

In Spain, energy is purchased through a supply contract with trading companies. The final energy price is subject to daily market volatility. In 2022, Spanish power prices initially exceeded the general power price increases seen across Europe, with and prices moving significantly above the five-year average Spain. In June 2022, and in response to the impact of gas prices on electricity tariffs, a compensation mechanism was introduced by the Spanish Government for a duration of one year.  The European Union provided additional support by capping prices in Spain. Due to the persistent high energy prices in Spain, Ferroglobe took the decision to reduce production in the country during the second half of 2022. To achieve the most competitive energy costs, production is adjusted to align with the to the hourly scheme under the tariffs alongside  energy management systems implemented across all plants. All Spanish plants are classified as electro-intensive power consumers giving access to discounts  on certain cost components of the electrical grid. In 2022, the Spanish government applied an 80 % rebate on distribution costs in addition to indirect CO2 compensation which helped to alleviate rate increases. See also “Item 7.—Major Shareholders and Related Party Transactions—Related Party Transactions”.

Ferroglobe has negotiated a supply contract in France based on ARENH (Nuclear electricity at a fixed tariff) and market prices for three years from 2020 until 2022. A similar contract was executed in 2022 covering 2023 until 2025. Regulation enacted in 2015 enables FerroPem SAS and FMF to benefit from reduced transmission tariffs, interruptibility compensation (an agreement whereby the companies agree to interrupt production in response to surges in demand across the French electricity grid), as well as receiving compensation for indirect CO2 costs under the EU Emission Trading System (ETS) regulation. These arrangements allow FerroPem SAS and FMF to operate competitively over a 12-month basis, but also allows our plants to concentrate production during periods when energy prices are lower, as and when required. Ferroglobe’s production of energy in France through its hydro-electric power plants provides some mitigation to its exposure to volatility in energy price.

In the United States, we favour long term electric supply contracts that provide the ability to interrupt load and achieve reasonable rates. Our power supply contracts have, in the past, resulted in stable price structures. In West Virginia, we have a contract with Brookfield Renewable Partners, LP to provide, on average, 45% of our power needs, from a dedicated hydro-electric facility, through December 2025 at a fixed rate. Our needs for non-hydroelectric power in West Virginia and Alabama are primarily sourced through special contracts that provide competitive rates.  In Ohio, electricity is sourced at market-based rates.

In South Africa, we have an “evergreen” supply agreement with Eskom, the local electricity supplier, for our Polokwane, eMalahleni, Newcastle (Siltech) and Thaba Chueu mining facilities. Eskom’s energy prices are regulated by the National Energy Regulator (NERSA) and price changes are publicly announced in advance and implemented on the 1st of April every year. Operational smelters in South Africa were operating on normal tariffs for the year 2022, with eMalahleni participating in a curtailment program. The Polokwane smelter was taken out of Care & Maintenance in November 2022 and a new Electricity Supply Agreement was signed with Eskom. The Newcastle smelter remained in Care & Maintenance for the full year. In eMalahleni, focus remained on ferrosilicon production. Profitability was very good with positive

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EBITDA figures for the plant, and as a result, we are evaluating the potential to start exporting ferrosilicon. The eMalahleni plant continued to participate in an interruptibility program where power curtailments are compensated on an hourly basis. This has a positive effect on the overall price paid for electricity. As a result, we look to insure production  during the summer months when power is cheaper. Conversely, we look to reduce our output during the winter months (June, July and August), when power is more expensive.  

Independent power production from private power producers increased during 2022 and helped to improve supply within the country, this is expected to continue to grow over the next 2 to4 years and will help alleviate the amount Load Shedding Events undertaken by Eskom. We are currently engaging with  green energy producers to diversify our power supply from  2024. This will be on a power wheeling basis through Eskom’s grid, allowing consumption at any of our plants.

In Norway, we have a long-term contract with Statkraft to provide 75% of our energy needs at a fix price. Ferroglobe Manganese Norway is also benefiting from a reduction of distribution tariff, whilst also receiving compensation for indirect CO2 costs under the EU Emission Trading System (ETS) regulation, allowing FMF to produce very competitively.

The level of power consumption of our submerged electric arc furnaces is highly dependent on which products are being produced and typically fall in the following ranges: (i) manganese based alloys require between 1.5 and 5.5 megawatt hours to produce one ton of product, (ii) silicon based alloys require between 7 and 8 megawatt hours to produce one ton of product and (iii) silicon metal requires approximately 12 megawatt hours to produce one ton of product. As a result, consistent access to low cost, reliable sources of electricity is essential to our business.

Mining Operations

Reserves

The Securities and Exchange Commission (“SEC”) amendments to its disclosure rules modernizing the mineral property disclosure requirements for mining registrants became effective on January 1, 2021. The amendments include the adoption of S-K 1300, which governs disclosure for mining registrants (the “SEC Mining Modernization Rules”). The SEC Mining Modernization Rules replaced the historical property disclosure requirements for mining registrants that were included in the SEC’s Industry Guide 7 and better align disclosure with international industry and regulatory practices.

A Mineral reserve is defined by S-K 1300 as an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted. A proven mineral reserve is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource. A probable mineral reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource. Reserve estimates were made by independent third party consultants (qualified person), based primarily on dimensions revealed in outcrops, trenches, detailed sampling and drilling studies performed. For a probable mineral reserve, the qualified person’s confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality is lower than what is sufficient for a classification as a proven mineral reserve, but is still sufficient to demonstrate that, at the time of reporting, extraction of the mineral reserve is economically viable under reasonable investment and market assumptions. For a proven mineral reserve, the qualified person has a high degree of confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality. These estimates are reviewed and reassessed from time to time. Reserve estimates are based on various assumptions, and any material changes in these assumptions could have a material impact on the accuracy of Ferroglobe’s reserve estimates.

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The following table sets forth summary information on Ferroglobe’s mines as of December 31, 2022.

  

Annual

Production

Production

Production

Mining

Mine

Location

Mineral

capacity kt

in 2022 kt

in 2021 kt

in 2020 kt

Recovery

Sonia

 

Spain (Mañón)

 

Quartz

 

150

 

141

 

125

 

89

0,4

Esmeralda

 

Spain (Val do Dubra)

 

Quartz

 

50

 

22

 

25

 

19

0,4

Serrabal.

 

Spain (Vedra & Boqueixón)

 

Quartz

 

330

 

288

 

300

 

184

0,2

Thaba Chueu Mining

 

South Africa (Delmas)

 

Quartzite

 

1,000

 

553

 

601

 

586

0,7

Mahale

 

South Africa (Limpopo)

 

Quartz

 

80

 

23

 

24

 

25

0,5

Roodepoort

 

South Africa (Limpopo)

 

Quartz

 

50

 

 

 

0,5

Fort Klipdam

 

South Africa (Limpopo)

 

Quartz

 

50

 

43

 

30

 

34

0,6

AS&G Meadows Pit

 

United States (Alabama)

 

Quartzite

 

300

 

115

 

242

 

257

0,4

 

  

 

  

 

2,010

 

1,185

 

1,346

 

1,194

  

Mosely Gap

 

United States (Kentucky)

 

Coal (active)

 

400

 

379.5

 

 

0,7

Davis Creek

 

United States (Kentucky)

 

Coal (inactive)

 

240

 

7.2

 

3

 

3

0,7

Log Cabin No. 5

 

United States (Kentucky)

 

Coal (active)

 

168

 

170.2

 

156

 

156

0,6

Hubbs Hollow

United States (Kentucky)

Coal (active)

200

84

0,7

Kimberly

United States (Kentucky)

Coal (inactive)

100

0,6

Bennett's Branch

United States (Kentucky)

Coal (inactive)

100

0,7

Bain Branch No. 3

United States (Kentucky)

Coal (inactive)

60

0,5

Harpes Creek 4A

United States (Kentucky)

Coal (active)

100

32.7

0,6

 

  

 

  

 

1,368

 

673.60

 

159

 

159

  

Proven

Probable

 reserves

 reserves

Mining

Btus per

Expiry

Mine

Mt(1)

Mt(1)

Method

Reserve grade

lb.

Life(2)

date(3)

Sonia

1.58

 

0.8

Open-pit

 

Metallurgical

 

N/A

 

16

 

2069

Esmeralda

0.03

 

0.12

Open-pit

 

Metallurgical

 

N/A

 

7

 

2029

Serrabal.

3.11

 

1.6

Open-pit

 

Metallurgical

 

N/A

 

16

 

2038

Thaba Chueu Mining

7.03

 

19.5

Open-pit

 

Metallurgical & Glass

 

N/A

 

37

 

2039

Mahale

 

3.0

Open-pit

 

Metallurgical

 

N/A

 

30

 

2035

Roodepoort

 

0.02

Open-pit

 

Metallurgical

 

N/A

 

2

 

2028

Fort Klipdam

 

1.0

Open-pit

 

Metallurgical

 

N/A

 

5

 

2022 (4)

AS&G Meadows Pit

3.00

 

Surface

 

Metallurgical

 

N/A

 

9

 

2031

14.75

 

26.04

 

  

 

  

 

  

Mosely Gap

1.5

 

Surface

 

Metallurgical

 

14,000

 

3

 

2025

Hubbs Hollow

2.5

 

Surface

 

Metallurgical

 

14,000

 

4

 

2026

Log Cabin No. 5

0.6

 

Underground

 

Metallurgical

 

14,000

 

2

 

2024

Buffalo Creek

0.5

Surface

Metallurgical

14,000

2

2027

Kimberly

0.5

Surface

Metallurgical

14,000

5

2026

Bennett's Branch

1.7

Underground

Metallurgical

14,000

15

2036

Bain Branch No. 3

3.6

2.9

Underground

Metallurgical

14,000

25

2042

Harpes Creek 4A

1.2

1.3

Underground

Metallurgical

14,000

10

2032

12.10

4.20

(1)The estimated recoverable proven and probable reserves represent the tons of product that can be used internally or sold to metallurgical or glass grade customers. The mining recovery is based on historical yields at each particular site. We estimate our permitted mining life based on the number of years we can sustain average production rates under current circumstances.
(2)Current estimated mine life in years.
(3)Expiry date of Ferroglobe’s mining concession.
(4)The expiry date relates to last approved mining permit relating to an area within Fort Klipdam farm. The application for a new Mining Right has not yet been approved and the last mining permit has been submitted for a 1-year renewal period until end 2022.

Ferroglobe considers its Conchitina and Conchitina Segunda mines as a single mining project legally supported by the formation of Coto Minero, formally approved by the Mining Authority in March 2018. In addition, Ferroglobe currently holds all necessary permits to start production at its  Conchitina mines. Although Ferroglobe has not received formal approval from the Spanish Mining Authority over its 2023 Annual Mining Plan, we are not legally prevented from commencing mining operations in the area based on the fully-authorized 2022 Annual Mining Plan.

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Reserves for the Conchitina mine are, accordingly, considered to be probable reserves, and the following table sets forth summary information on the Conchitina and Conchitina Segunda mines:

Recoverable Reserves

    

    

    

Mining

    

Proven

    

Probable

    

    

Mining

Mine

Location

Mineralization

Recovery

MT(1)

MT(1)

Reserve Grade

Method

Conchitina and Conchitina Segunda

 

Spain (O Vicedo)

 

Quartz

 

0.35

 

 

0.80

 

Metallurgical

 

Open-pit

(1)Estimates of recoverable probable reserves represent the tons of product that can be used internally or which are of metallurgical grade and can be delivered to Ferroglobe’s customers.

Ferroglobe has additional mining rights in Spain (Cristina and Merlán), but none of these mines are currently producing or undergoing mine development activities as the Spanish Mining Authority started cancelling mining rights for Merlán and Cristina in September 2015 and December 2017, respectively. The Spanish Mining Authority concluded the cancellation process for our mining rights for Trasmonte. Ferroglobe does not consider classify its Venezuelan mines as mining assets (La Candelaria, El Manteco and El Merey) as the minerals are fully-depleted and due to the difficulty in obtaining new mining rights at these locations given the current economic and political environment.

Spanish mining concessions

Conchitina

The Conchitina mining concession previously belonged to Cuarzos Industriales S.A.U., which acquired the mining concession in 1979. Ferroglobe acquired this company, along with Conchitina mining concession, in 1996 from the Portuguese cement manufacturer Cimpor. The Conchitina Segunda mining concession was granted to Cuarzos Industriales S.A.U. in 1997 for a 30-year term after the necessary mining research had been conducted and the mining potential of the area had been demonstrated. The Conchitina concession expired in 2009 and Cuarzos Industriales S.A.U. subsequently applied for its renewal, whilst also requesting the competent authority to consolidate the concession with that of Conchitina Segunda. Legal support for the consolidation request was that both mining rights apply over a unique quartz deposit. Approval was formally granted in March 2018. Cuarzos Industriales S.A.U. is the owner of the properties currently mined at Conchitina. The surface area covered by Conchitina concessions is 497 hectares.

Sonia

The Sonia mining concession previously belonged to Cuarzos Industriales S.A.U., which acquired the mining concession in 1979. Ferroglobe acquired Cuarzos Industriales S.A.U., which is the owner of the properties currently mined at Sonia, along with the Sonia mining concession, in 1996 from the Portuguese cement manufacturer Cimpor. The surface area covered by the Sonia mining concession is 387 hectares. The concession is due to expire in 2069.

Esmeralda

The original Esmeralda mining concession was granted in 1999 to Cuarzos Industriales, S.A.U., the owner of the properties currently mined at Esmeralda, after proper mining research had been conducted and the mining potential of the area had been demonstrated to the relevant public authority. The surface area covered by the Esmeralda mining concession is 84 hectares. The concession is due to expire in 2029.

Serrabal

The Serrabal mining concession was originally granted in 1978 to Rocas, Arcillas y Minerales S.A. Ferroglobe acquired control of this company, which is the owner of the properties currently mined at Serrabal, along with the Serrabal mining concession, in 2000. Rocas, Arcillas y Minerales, S.A. has applied for the renewal of the concession. Pursuant to an interim measure approved by the applicable mining authority, Rocas Arcillas y Minerales S.A. is permitted to continue mining

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operations in Serrabal indefinitely until a final decision on the renewal of the concession has been made. If the renewal is granted, the concession will expire in 2038. The surface area covered by Serrabal mining concession is 861 hectares.

Cabanetas

The mining right granting process and tax regulations applicable to the Cabanetas limestone quarry differ slightly from those applicable to other Ferroglobe mines in Spain due to Cabanetas  classification as a quarry, as opposed to  a mine. Ferroglobe is currently operating the Cabanetas quarry pursuant to a permit resolution, which authorized the extension of the original mining concession, issued in 2013 by the competent mining authority. The extension is for a period of 30 years and, consequently, the concession will expire in 2043. Limestone extracted from the Cabanetas quarry was intended to be used by the FerroAtlántica del Cinca S.L. Monzón electrometallurgy plant. However, because new metallurgical techniques require low consumption of this product, most of the Cabanetas limestone is generally sold to the civil engineering and construction industries. The production level of the Cabanetas quarry has fallen considerably in recent years, mainly due to difficulties in the local construction industry.

The land on which the mining property is located is owned by Mancomunidad de Propietarios de Fincas Las Sierras and the plot containing the mining property is leased to FerroAtlantica del Cinca S.L. pursuant to a lease agreement entered into in 1950, which was subsequently restated in 2000 and is due to expire in 2020. The lease agreement has been extended to 2050. To retain the lease, FerroAtlantica del Cinca S.L. pays the landlord an annual fee currently equal to €0.15 per ton of limestone quarried out of the mine. The quarry covers a surface area of approximately 180 hectares. The area affected by the planned exploitation during the current extension of the concession area is 6.9 hectares.

For further information regarding Spanish regulations applicable to mining concessions, as well as environmental and other regulations, see “—Laws and regulations applicable to Ferroglobe’s mining operations—Spain.

South African mining rights

Thaba Chueu Mining Delmas Operation

The SamQuarz mining rights were transferred from the original owners, Glass South Africa Holdings (Pty) Ltd and Samancor Limited, to SamQuarz (Pty) Ltd. (“SamQuarz”) in 1997. In 2009, the Minister of Mineral Resources converted the then existing SamQuarz mining rights into new order mining rights due to expire after 30 years in 2039. In 2012, FerroAtlántica acquired control of SamQuarz along with the mining rights. At the end of 2014, SamQuarz mining rights were transferred from SamQuarz to its sole shareholder, Thaba Chueu Mining (Pty) Ltd (“TCM”). During 2017, ownership of the properties currently mined in Delmas were transferred from SamQuarz to TCM. The total surface area covered by TCM Delmas mine is 118.1 hectares. The mine supplies some of its material to Ferroglobe’s eMalahleni smelter, but the majority of its production, mainly Flint Sand, is sold to South African Glass Manufacturing Industry and other local Metallurgical customers.

Mahale

Mahale is state-owned land, lawfully occupied by the Mahale community. Thaba Chueue Mining currently leases the land pursuant to an agreement with the Majeje Traditional Authority and runs mining operations on the area with mining rights owned by Thaba Chueue Mining and licensed to it. The latest mining right license was granted by the Department of Mineral Resources in December 2014 and registered at the mining titles deeds office in early 2016. The license is for a 20-year period and will expire in 2035. The total surface area covered by Mahale mine is 329.7 hectares. The lease agreement between Thaba Chueue Mining and the Majeje Traditional Authority will be in force for the entire duration of the mining right or as long as it is economically viable for the lessee to mine. Under the lease agreement, a monthly rent of ZAR 10 per Ton is paid to the lessor in the form of a Royalty. Mining volumes reduced significantly at the Mahale mine through the stoppage of the Polokwane smelter in July 2019, but activities are continuing at minimum viable production volumes to supply the eMalahleni smelter with low alkaline quartz. Activity at this mine is expected to be restored during 2023 through the restart of the Polokwane smelter in November 2022. Options are also under investigation to target export

52

High Purity Quartz to the EU in order to act as a counter measure to local mining costs to improve production costs at the smelters going forward.

Roodepoort

The Roodepoort mining right is held by Ferroglobe’s subsidiary, Silicon Smelters (Pty.), Ltd. (“Silicon Smelters”), and will expire in 2028. In 2009, Silicon Smelters applied for a conversion of the mining right into a new mining right under the South African Mineral and Petroleum Resources Development Act (the “MPRDA”), which came into force in 2004. The new mining right has been granted and is valid for the continuation of our mining activities at the Roodeport mine until. Silicon Smelters is currently in the process of transferring this mining right to its mining subsidiary, Thaba Chueue Mining, in order that all licenses and permits in South Africa are held under this entity.

The total surface area covered by Roodepoort mine is 17.6 hectares. The mining area covers the cobble and block areas. The land in which Roodepoort mine is located is owned by Alpha Sand, which also conducts all mining operations as a contractor for Silicon Smelters. An agreement is in place whereby Alpha Sand operates the mine and Silicon Smelters purchases the quartz mined from Alpha Sand based on the quartz requirements of Silicon Smelters and at prices that are reviewed annually on the basis of increases in production costs and diesel fuel. The agreement with Alpha Sand will terminate at the expiry of the mining right or when it is no longer economically viable to mine quartz in the area. Mining activities were suspended in July 2019 when a decision was taken to stop production at the Polokwane smelter and agreement was reached with the authorities to suspend activities legally until such time when the silicon metal market recovers significantly in order to allow the restart of the Polokwane smelter. With the restart of the Polokwane smelter in November 2022, it is expected that operations at this mine could be restored towards the second half of 2023.

Fort Klipdam

The land on which Fort Klipdam is located is owned by Silicon Smelters. The mining rights application filed by Silicon Smelters was rejected. Mining operations have been limited to mining permits that were approved for quartz mining, which includes block mine areas. As substantial block reserves have been established, a new application was launched in 2021 for a mining right and the current mining permit was extended to December 2022. Negotiations are continuing with local mining authorities in order to secure a new mining right during the year 2023, but no mining activities can be performed until this has been granted. An important quantity of block material was mined during Q4 of 2022 in order to secure a minimum of 6-months supply to the Polokwane smelter. This was done in anticipation of the expiry of the current mining permit.

For further information regarding South African regulations applicable to mining concessions, as well as environmental and other regulations, see “—Laws and regulations applicable to Ferroglobe’s mining operations—South Africa.”

French mining rights

Soleyron

FerroPem, SAS, a subsidiary of Ferroglobe, previously owned 12.2 hectares of the overall Soleyron quartz mine area. The Saint-Hippolyte de Montaigu Municipality owns the remaining part. In February 2015, FerroPem, SA, entered into a new lease and royalty agreement with the municipality, which is valid for five years. The effective date of the agreement and the relevant term coincide with the effective date and term of the prefectural authorization renewal, which was granted to FerroPem, SAS in March 2015. With the end of the reachable reserves, operation at the mine was terminated on December 2016 and no extension of the permit was requested. The lease and royalty agreement with the municipality was terminated on December 2016. Rehabilitation of the site was performed during the first quarter of 2022. Validation of the realized rehabilitation by the French administration was obtained in April 2022. The 12.2 hectares of land were sold to the Saint-Hippolyte de Montaigu Municipality in May 2022.

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United States and Canadian mining rights

Coal

As of December 31, 2022, we have four active coal mines (two surface mines and two underground mines) located in Knox, and Whitley County, Kentucky. We also have five inactive permitted coal mines available for extraction located in Kentucky and Alabama. All of our coal mines are leased and the remaining term of the leases range from 2 to 40 years. The majority of the coal production is consumed by the Company’s facilities in the production of silicon metal and silicon-based alloys. As of December 31, 2022, we estimate our proven and probable reserves to be approximately 12,100,000 tons with an average permitted life of approximately 34 years at present operating levels. Present operating levels are determined based on a three-year annual average production rate. Reserve estimates were made by our geologists, engineers and third parties based primarily on drilling studies performed. These estimates are reviewed and reassessed from time to time. Reserve estimates are based on various assumptions, and any material changes in these assumptions could have a material impact on the accuracy of our reserve estimates.

We currently have two coal processing facilities in Kentucky, one of which is inactive. The active facility processes approximately 500,000 tons of coal annually, with a capacity of 2,500,000 tons. The average coal processing recovery rate is approximately 65%.

Quartzite

We have an open-pit quartz mining operation in Lowndesboro, Alabama, with accompanying wash facilities. We also have a concession to mine quartzite in Saint-Urbain, Québec (operated by a third party miner). These mines supply our North American operations with a substantial portion of their requirements for quartzite.

Laws and regulations applicable to Ferroglobe’s mining operations

Spain

In Spain, mining concessions have an average term of 30 years and are extendable for additional 30-year terms, up to a maximum of 90 years. In order to extend the concession term, the concessionaire must file an application with the competent public authority. The application, which must be filed three years prior to the expiration of the concession term, must be accompanied by a detailed report demonstrating the continuity of mineral deposits and the technical ability to extract such deposits, as well as reserve estimates, an overall mining plan for the term of the concession and a detailed description of extraction and treatment techniques. The renewal process is straightforward for a mining company that has been mining the concession regularly. The main impediments to renewal are a lack of mining activity and legal conflicts. Every year in January, in order to maintain the validity of the mining concession, we are required to submit an annual mining plan to the competent public authority. This document must detail the work to be developed during the coming year.

Regarding the environmental requirements applicable to Ferroglobe’s mining operations in Spain, each of Serrabal, Esmeralda, Conchitina and Conchitina Segunda is subject to an “environmental impact statement” (or “EIS”), issued by the relevant environmental authority and specifically tailored to the environmental features of the relevant mine. The EIS requires compliance with high environmental standards and is based on the environmental impact study performed by the mining concession applicant in connection with each mining project. It is the result of a consultation process involving several public administrations, including cultural, archaeology, landscape, urbanistic, health, agriculture, water and industrial administrations. The EIS sets forth all conditions to be fulfilled by the applicant, including in connection with the protection of air, water, soil, flora and fauna, landscape, cultural heritage, restoration and the interaction of such elements. The EIS covers mining activities, auxiliary facilities and heaps carried out in a determined perimeter of each mine and includes a program of surveillance and environmental monitoring. The relevant authority regularly verifies compliance with it.

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Sonia is subject to a “restoration plan” which provides for less stringent environmental requirements than an EIS and is mainly aimed at ensuring that the new areas generated as a result of the mining activity are properly restored in an environmentally friendly manner. The restoration plan is submitted by the mining concession applicant for the approval of the relevant authority together with the mining project for the area. Information about the exploitation project, including area of operation, annual production, method and operating system, and designed top and bottom level of the pit is included in the restoration plan.

All mines, with the exception of Cabanetas, also need to obtain from the relevant public administration an authorization for the discharge of the water used at the mine. This authorization is subject to certain conditions, including analyzing the water before any such discharge is made. In addition, when presenting to the competent mining authorities its annual mining plans, Ferroglobe must include an environmental report describing all environmental actions carried out during the year. Authorities are able to oversee such actions upon their annual inspections. Because Cabanetas is classified as a quarry and not as a mine, environmental requirements are generally less stringent and an environmental report is not required. The environmental license for Cabanetas is included in the mining permit and is formalized in the annual work plan and the annual restoration plan approved by the mining authority.

The main recurring payment obligation in connection with Ferroglobe’s mines in Spain relates to a tax payable annually, calculated on the basis of the budget included in the relevant annual mining plan provided to the authority. In addition, with the exception of Cabanetas, a small surface tax is paid annually to the administration on the basis of the mine property extension. A levy also applies to water consumption at each mine property, which is paid at irregular intervals whenever the relevant public administration requires it.

South Africa

In South Africa, mining rights are valid for a maximum of 30 years and may be renewed for further periods of up to 30 years per renewal. Prior to granting and renewing a mining right, the competent authority must be satisfied with the technical and financial capacity of the intended mining operator and the mining work program according to which the operator intends to mine. In addition, a species rescue, relocation and re-introduction plan must be developed and implemented by a qualified person prior to the commencement of excavation, a detailed vegetation and habitat and rehabilitation plan must be developed by a qualified person and a permit must be obtained from the South African Heritage Resource Agency prior to the commencement of excavations. The mining right holder must also compile a labor and social plan for its mining operations and comply with certain additional regulatory requirements relating to, among other things, human resource development, employment equity, housing and living conditions and health and safety of employees, and the usage of water, which must be licensed.

It is a condition of the mining right that the holder disposes of all minerals and products derived from exploitation of the mineral at competitive market prices, which means, in all cases, non-discriminatory prices or non-export parity prices. If the minerals are sold to any entity which is an affiliate or non-affiliate agent or subsidy of the mining right holder, or is directly or indirectly controlled by the holder, such purchaser must unconditionally undertake in writing to dispose of the minerals and any products from the minerals and any products produced from the minerals, at competitive market prices. The mining right, a shareholding, an equity, an interest or participation in the right or joint venture, or a controlling interest in a company, close corporation or joint venture, may not be encumbered, ceded, transferred, mortgaged, let, sublet, assigned, alienated or otherwise disposed of without the written consent of the Minister of Mineral Resources, except in the case of a change of controlling interest in listed companies.

Environmental requirements applicable to mining operations in South Africa are mostly set out in the MPRDA. Pursuant to the MPRDA, in order to obtain reconnaissance permissions as well as actual mining rights, applicants must have in place an approved environmental management plan, pursuant to which, among other things, all boreholes, excavations and openings sunk or made during the duration of the mining right must be sealed, closed, fenced and made safe by the mining operator. Further environmental requirements apply in connection with health and safety matters, waste management and water usage. The MPRDA further requires mining right applicants to conduct an environmental impact assessment on the area of interest and submit an environmental management program setting forth, among other things, baseline information concerning the affected environment to determine protection, remedial measures and environmental management objectives, and describing the manner in which the applicant intends to modify, remedy, control or stop any action, activity

55

or process which causes pollution or environmental degradation, contain or remedy the cause of pollution or degradation and migration of pollutants and comply with any prescribed waste standard or management standards or practices. In addition, applicants must provide sufficient insurance, bank guarantees, trust funds or cash to ensure the availability of sufficient funds to undertake the agreed work programs and for the rehabilitation, management and remediation of any negative environmental impact on the interested areas. Holders of a mining right must conduct continuous monitoring of the environmental management plan, conduct performance assessments of the plan and compile and submit a performance assessment report to the competent authority, the frequency of which must be as approved in the environmental management program, or every two years or as otherwise agreed by the authority in writing. Mine closure costs are evaluated and reported on an annual basis, but are typically only incurred at mine closure, but guarantees are increased based on the extent of completed mining activity.

The mining right holder must also be in compliance with an important governmental regulation called Black Economic Empowerment (“BEE”), a program launched by the South African government to redress certain racial inequalities. In order for a mining right to be granted, a mining company must agree on certain BEE-related conditions with the Department of Mineral and Petroleum Resources. Such conditions relate to, among other things, the company’s ownership and employment equity and require the submission of a social and labor plan. Failure to comply with any of these BEE conditions may have an impact on, among other things, the ability of the mining company to retain the mining right or obtain its renewal upon expiry. In addition, companies subject to BEE must conduct, on an annual basis, a BEE rating audit on several aspects of the business, including black ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development. Poor performance on the BEE rating audit may have a negative impact on the company’s ability to do business with other companies, to the extent that a company’s low rating is likely to reduce the rating of its business partners.

Mining rights are subject to payments of royalties to the tax authority, the South African Revenue Services. Such payments are generally made by June 30 and December 31 each year and upon the approval of the concessionaire’s annual financial statements.

France

In France, mining rights are subject to a prefectural authorization. The authorization provides details of all requirements, including environmental requirements, which the mining operator and its subcontractors must comply with to operate the mine. Such requirements mainly concern archaeology, water protection, air pollution, control of noise, visual impact and safety matters. The authorization also contains the requirements relating to the remediation of the land after the end of the mining operations, including the provision of adequate financial guarantees by the mining operator. Mines are regularly inspected by the administration and local environmental commissions, comprising representatives of the relevant municipality, administration, several associations and the mining operator, which must meet at least once a year.

United States

The Coal Mine Health and Safety Act of 1969 and the Federal Mine Safety and Health Act of 1977 impose stringent safety and health standards on all aspects of mining operations. Also, the state of Kentucky, in which we operate underground and surface coal mines, has state mine safety and health regulations. The Mine Safety and Health Administration (the “MSHA”) inspects mine sites and enforces safety regulations and the Company must comply with ongoing regulatory reporting to the MSHA. Numerous governmental permits, licenses or approvals are required for mining operations. In order to obtain mining permits and approvals from state regulatory authorities, we must submit a reclamation plan for restoring, upon the completion of mining operations, the mined property to its prior or better condition, productive use or other permitted condition. We are also required to establish performance bonds, consistent with state requirements, to secure our financial obligations for reclamation, including removal of mining structures and ponds, backfilling and regrading and revegetation.

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Customers and Markets

The following table details the breakdown of Ferroglobe’s revenues by geographic end market for the years ended December 31, 2022, 2021 and 2020.

Year ended December 31, 

($ thousands)

    

2022

    

2021

    

2020

United States of America

966,161

515,095

404,633

Europe

  

  

  

Spain

282,387

251,528

133,370

Germany

442,331

292,774

191,107

France

148,741

130,811

79,491

Italy

111,887

76,721

42,067

Other EU Countries

162,374

176,046

88,443

Total revenues in Europe

1,147,720

927,880

534,478

Rest of the World

484,035

335,933

205,323

Total

2,597,916

1,778,908

1,144,434

Customer base

We have a diversified customer base across our key product categories. Over our business tenure, we have built long-lasting relationships with our customers based on the breadth and quality of our product offerings, as well as our ability to frequently offer lower-cost and more reliable supply options than our competitors who do not have production facilities located near the customers’ facilities or production capabilities to meet specific customer requirements. We sell our products to customers in over 30 countries across six continents, though our largest customer concentration is in the United States and Europe. The average length of our relationships with our top 30 customers exceeds ten years and, in some cases, such relationships go back as far as 30 years.

For the year ended December 31, 2022, Ferroglobe’s ten largest customers accounted for approximately 50.9% of Ferroglobe’s consolidated sales. During the year ending December 31, 2021, Ferroglobe’s ten largest customers accounted for approximately 48.1% of Ferroglobe’s consolidated sales.

Customer contracts

Our contracting strategy seeks to lock in significant revenue while remaining flexible to benefit from any movement in market pricing and operating efficiencies. Our silicon metal, manganese-based ferroalloys and silicon-based ferroalloys are typically sold under annual and quarterly contracts. Historically, we have targeted to contract approximately 50-65% of our silicon metal, manganese-based ferroalloys production and silicon-based ferroalloy production in the fourth quarter for the following calendar year. In 2022, the majority of our contracts were indexed, to market related benchmarks.

The remaining balance of our silicon metal, manganese-based ferroalloys and our silicon-based ferroalloy production are sold under quarterly contracts or on a spot basis. By selling on a spot basis, we are able to take advantage of premiums for prompt delivery. We believe that our diversified contract portfolio allows us to lock in a significant amount of revenues while also allowing us to remain flexible and benefit from unexpected price and demand upticks. Given current spot price and current market dynamics, we are looking to enter into contracts for 2023 with shorter terms as we anticipate the market price to improve, in particular over the second half of the year.

Sales and Marketing Activities

Ferroglobe generally sells the majority of its silicon products under annual or longer-term contracts for silicone producers, and mainly between one month to three months for aluminum producing customers. All contracts generally include a volume framework and price formula based on the spot market price and other elements, including expected production costs and premiums. Ferroglobe also makes spot sales to customers with whom it does not have a contract as well as

57

through quarterly agreements at prices that generally reflect market spot prices. In addition, Ferroglobe sells certain high-quality products at prices that are not directly correlated with the market prices for the metals or alloys from which they are composed.

With the exception of the manganese-based business, the vast majority of Ferroglobe’s products are sold in Europe and United states directly by its own sales force located in Spain, France, the United States and Germany whereas sales in other regions are done via agents in general. For the manganese-based business, Glencore and Ferroglobe operates under exclusive agency agreements for the marketing of Ferroglobe's manganese alloys products worldwide, and for the procurement of manganese ores to supply Ferrogloble’s plants.

Competition

The most significant competitive factor in the silicon metal, manganese and silicon-based alloys and specialty metals markets is price. Other factors include consistency of the chemical and physical specifications over time and reliability of supply.

The silicon metal, manganese- and silicon-based alloys and specialty metals markets are highly competitive, global markets, in which suppliers are able to reach customers across different geographies, and in which local presence is generally a minor advantage. In the silicon metal market, Ferroglobe’s primary competitors include Chinese producers, which have production capacity that exceeds total worldwide demand. Aside from Chinese producers, Ferroglobe’s competitors include Elkem, a Norwegian manufacturer of silicon metal, ferrosilicon, foundry products, silica fumes, carbon products and energy, Dow Inc., an American company specializing, in silicone and silicon-based technology, Rima, a Brazilian silicon metal and ferrosilicon producer, Liasa and Minas Ligas, Brazilian producers of silicon, Wacker, a German chemical business which manufactures silicon in Norway, Simcoa, in Australia which belongs to the Japanese chemical company Shin-Etsu, a consumer of silicon, as well as several other smaller producers in Bosnia Herzegovina, Iceland, Germany, Malaysia, Russia and Thailand.

In the manganese and silicon alloys market, Ferroglobe’s competitors include Privat Group, a Ukrainian company with operations in Australia, Ghana and Ukraine, Eramet, a French mining and metallurgical group, CHEMK Industrial Group, a Russian conglomerate which is one of the largest silicon-based alloy producers in the world, South 32 (formerly BHP Billiton), a global mining company with operations in Australia and South Africa and Vale, a mining and metals group based in Brazil, Asia Minerals and OM Holdings in Malaysia and Elkem in Norway.

In the silica fumes market, Ferroglobe’s main competitor is Elkem.

Ferroglobe strives to be a highly efficient, low-cost producer, offering competitive pricing and engaging in manufacturing processes that capture most of its production of by-products for reuse or resale. Additionally, through the vertical integration of its quartz mines in Spain, the United States, Canada and South Africa and its metallurgical coal mines in the United States, Ferroglobe has ensured access to some of the highest quality raw materials that are essential in silicon metal, manganese- and silicon-based alloys and specialty metals production processes and has been able to gain a competitive advantage over some of its competitors by it has reducing the contribution of these raw materials and associated due to its cost.

Research and Development (R&D)

Ferroglobe focuses on developing new products, production processes and continuous improvement to create further value for our stakeholders and to follow global megatrends, including the green energy transition.  Ferroglobe has dedicated teams for R&D and continuous improvement, but it also has cooperation agreements in place with various universities and research institutes in Spain, France and other countries around the world. Set forth below is a description of Ferroglobe’s significant ongoing research and development projects.

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ELSA electrode

Ferroglobe has developed a patented technology for electrodes used in silicon metal furnaces, which it has been able to sell to several major silicon producers globally. This technology, known as the ELSA electrode, improves the energy efficiency in the production process of silicon metal and eliminates contamination with iron. Ferroglobe has granted these producers the right to use the ELSA electrode against payment to Ferroglobe of royalties. Continuous improvements are made in an effort to maintain ELSA’s  status as cutting edge.

Solar grade silicon

Ferroglobe has sought to produce solar grade silicon metal with a purity above 99.9999% through a new, potentially cost-effective, electrometallurgical process. The traditional chemical process tends to be costly and involves high energy consumption and potentially environmentally hazardous processes. The new technology, entirely developed by Ferroglobe  aims to reduce the costs, energy consumption and carbon footprint associated with the production of solar grade silicon.

In 2016, FerroAtlántica entered into a project with Aurinka Photovoltaic Group, S.L. (“Aurinka”) for a feasibility study and basic engineering for an upgraded metallurgical grade (“UMG”) solar silicon manufacturing plant. On December 20, 2016, Grupo FerroAtlántica, S.A.U., along with certain of its subsidiaries, entered into a joint venture agreement (the “Solar JV Agreement”) with Blue Power Corporation, S.L. (“Blue Power”) and Aurinka providing for the formation and operation of a joint venture with the purpose of producing UMG solar silicon. In furtherance of this project, FerroAtlántica obtained a loan, with a principal amount of approximately €45 million, from the Spanish Ministry of Industry and Energy for the purpose of building the UMG silicon plant. Due to the market environment for solar grade silicon (or polysilicon) worldwide, at the end of 2018 the Company  suspended the investment in the project while preserving the technology and know-how in order to be able to finalize the construction of the factory when market circumstances change. In July 2019, the Solar JV Agreement was terminated. See “Item 7.B – Related Party Transactions – Aurinka and the Solar JV, below.

Silicon for Advanced technologies– Li-ion batteries

Ferroglobe has launched the Silicon for Advanced Technologies project, which aims at producing silicon-based, tailor made products for high end applications. Among the various targeted applications, the most attractive market is the anodic materials for Li-ion batteries. In this specific field, Ferroglobe has developed several partnerships and technical collaborations to develop high purity silicon powder raw material for Si/C composites and SiOx.  In a more innovative approach, we are also working on special high purity micrometric silicon for pure silicon anodes.

In this project we leveraged the purification technologies developed for the Solar Grade silicon project and which are patented.   These technologies are industrial, cost effective and with low carbon footprint, and places Ferroglobe at the forefront of this this new market.  

We currently have the first demonstration milling unit in our Innovation Centre in Sabón (Spain) and we have several industrial purification units in Montricher (France) and Puertollano (Spain).

High Purity Manganese Sulphate – Battery grade

This is a new addition to our portfolio of projects, based on the R&D work done some years ago to develop Electrolytic Manganese, Ferroglobe aims to produce high purity Manganese Sulphate from off-specification materials in Mn alloy production.  Manganese is the next cathodic material due to its abundance, lower cost in comparison to Co and Ni, possibility of higher voltages and higher energy density.

Proprietary Rights and Licensing

The majority of Ferroglobe’s intellectual property consists of proprietary know-how and trade secrets. Ferroglobe’s intellectual property strategy is focused on developing and protecting proprietary know-how and trade secrets, which are maintained through employee and third-party confidentiality agreements and physical security measures. Although

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Ferroglobe owns some patented technology, we believe that the Company’s businesses and profitability do not rely fundamentally upon patented technology and that the publication implicit in the patenting process may in certain instances be detrimental to Ferroglobe’s ability to protect its proprietary information.

Regulatory Matters

Environmental and health and safety

Ferroglobe operates facilities worldwide, which are subject to foreign, national, regional, provincial and local environmental, health and safety laws and regulations, including, among others, those requirements governing the discharge of materials into the environment, the generation, use, storage and disposal of hazardous substances, the extraction and use of water, land use, reclamation and remediation and the health and safety of Ferroglobe’s employees. These laws and regulations require Ferroglobe to obtain from governmental authorities permits to conduct its regulated activities, which permits may be subject to modification or revocation by such authorities.

Ferroglobe may not be at all times in full compliance with such laws, regulations and permits, although Ferroglobe is not aware of any material past or current noncompliance. Failure to comply with these laws, regulations and permits may result in the assessment of administrative, civil and criminal penalties or other sanctions by regulators, the imposition of obligations to conduct remediation or upgrade or install pollution or dust control equipment, the issuance of injunctions limiting or preventing Ferroglobe’s activities, legal claims for personal injury or property damages, and other liabilities.

Under these laws, regulations and permits, Ferroglobe could also be held liable for any consequences arising out of an industrial incident, human exposure to hazardous substances or environmental damage that relates to Ferroglobe’s current or former operations or properties. Environmental, health and safety laws are likely to become more stringent in the future. Ferroglobe purchases insurance to cover these potential liabilities, but the costs of complying with current and future environmental, health and safety laws, and its liabilities arising from past or future releases of, or exposure to, hazardous substances, may exceed insured, budgeted or reserved amounts and adversely affect Ferroglobe’s business, results of operations and financial condition. Several corporate standards and procedures are being deployed to ensure a proactive approach in the compliance management.

Some environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. In addition to cleanup, cost recovery or compensatory actions brought by foreign, national, provincial and local agencies, neighbors, employees or other third parties could make personal injury, property damage or other private claims relating to the presence or release of hazardous substances. Environmental laws often impose liability even if the owner or operator did not know of, or did not cause, the release of hazardous substances. Persons who arrange for the disposal or treatment of hazardous substances also may be responsible for the cost of removal or remediation of these substances. Such persons can be responsible for removal and remediation costs even if they never owned or operated the disposal or treatment facility. In addition, such owners or operators of real property and persons who arrange for the disposal or treatment of hazardous substances can be held responsible for damages to natural resources.

There are a variety of laws and regulations in place or being considered at the international, national, regional, provincial and local levels of government that restrict or are reasonably likely to result in limitations on, or additional costs related to, emissions of carbon dioxide and other greenhouse gases. These legislative and regulatory developments may cause Ferroglobe to incur material costs to reduce the greenhouse gas emissions from its operations (through additional environmental control equipment or retiring and replacing existing equipment) or to obtain emission allowance or credits, or result in the incurrence of material taxes, fees or other governmental impositions on account of such emissions. In addition, such developments may have indirect impacts on Ferroglobe’s operations, which could be material. For example, they may impose significant additional costs or limitations on electricity generators, which could result in a material increase in energy costs. Restrictions in water usage are also expected in the near future. Open cooling systems will be less tolerated by the regulators.

For a summary of regulatory matters applicable to Ferroglobe’s mining operations, see “—Laws and regulations applicable to Ferroglobe’s mining operations.”

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Energy and electricity generation

Ferroglobe operates hydro-electric plants in France under a concession system, which are subject to energy, environmental, health and safety laws and regulations, including those governing the generation of electricity and the use of water and river basins. These laws and regulations require Ferroglobe to obtain from the French State a Prefectural decree granting the operation to Ferroglobe according to the specifications of the concession.

Trade

Ferroglobe benefits from antidumping and countervailing duty orders and laws that protect its products by imposing special duties on unfairly traded imports from certain countries. These orders may be subject to revision, revocation or rescission as a result of periodic and five-year reviews.

In the United States, antidumping or countervailing duty orders are in effect covering silicon metal imports from China, Russia, Bosnia and Herzegovina, Iceland, Kazakhstan, and Malaysia.

In June 2020, Globe Specialty Metals, Inc. (“GSM”) petitioned the U.S. Department of Commerce (“Commerce”) and the U.S. International Trade Commission (“ITC”) to stop silicon metal producers in Bosnia and Herzegovina, Iceland, Malaysia and Kazakhstan from selling dumped and unfairly subsidized silicon metal imports into the United States. These cases were successful, and in April 2021, Commerce issued formal antidumping orders on all imports from Bosnia and Herzegovina and Iceland, and a formal countervailing duty order on all imports from Kazakhstan.  A formal antidumping duty order was issued with respect to all imports from Malaysia in August 2021.  These orders will remain in place for at least five years.  

In June 2020, the Russia antidumping duty order was renewed for another five years after Commerce and the ITC determined that revocation of the order would lead to continued or recurrent dumping and injury to the U.S. industry.  Similarly, in June 2018, the China antidumping duty order was renewed for another five years after the ITC and Commerce determined that revocation of the order on Chinese silicon metal imports would lead to continued or recurrent dumping and injury to the U.S. industry.  

Currently, an appeal of the 2021 Kazakhstan determination is pending before the United States Court of Appeals for the Federal Circuit.  Additionally, periodic reviews are underway concerning imports from Kazakhstan and from Malaysia.

In Canada, antidumping and countervailing duties covering silicon metal imports from China are in effect. A five-year expiry review of the Canadian antidumping/countervailing duty order covering silicon metal imports from China will begin in the first half of 2024.

In the European Union, antidumping duties are in place covering silicon metal and calcium silicon imports from China, and ferrosilicon imports from China and Russia. In June 2020, the European Commission renewed the antidumping orders on ferrosilicon from China and Russia for five years.  In August 2022, following an expiry review the European Commission extended the antidumping duties on silicon metal imports from China for another five-year period.  On March 23, 2022, the European Commission imposed definitive antidumping duties on calcium silicon imports from China for a 5-year period.

Seasonality

Electrometallurgy

Due to the cyclicality of energy prices and the energy-intensive nature of the production processes for silicon metal, manganese- and silicon-based alloys and specialty metals, Ferroglobe does not operate its electrometallurgy plants during certain periods or times of day when energy prices are at their peak. Demand for Ferroglobe’s manganese- and silicon-based alloy and specialty metals products is lower during these periods as its customers also suspend their

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energy-intensive production processes involving Ferroglobe’s products. As a result, sales within particular geographic regions are subject to seasonality.

C.    Organizational structure.

The organizational structure remains as follows as of December 31, 2022:

Graphic

For a list of subsidiaries and ownership structure see Note 2 in the Consolidated Financial Statements.

D.    Property, Plant and Equipment.

See “Item 4.B.—Information on the Company—Business Overview.”

ITEM 4A.     UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.      OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.    Operating Results

Introduction

The following “management’s discussion and analysis” should be read in conjunction with the Consolidated Financial Statements of Ferroglobe as of  December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020, which are included in this annual report. This discussion includes forward-looking statements, which, although based on assumptions that Ferroglobe considers reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. See “Cautionary Statements Regarding Forward-Looking Statements.” For a discussion of risks and uncertainties facing Ferroglobe, see “Item 3.D.—Key Information—Risk Factors.”

In accordance with IAS 21 — The Effects of Changes in Foreign Exchange Rates, Ferroglobe’s consolidated income statements and consolidated statement of financial position have been translated from the functional currency of each subsidiary, which is determined by the primary economic environment in which each subsidiary operates, into the reporting currency of the Company that is U.S. Dollars.

Principal Factors Affecting Our Results of Operations

Sale prices

Ferroglobe’s operating performance is highly correlated to the demand for our products, market prices and cost to serve, in a global competitive environment. Ferroglobe follows a pricing policy aimed at maintaining balance between exposures to termed contracts, based on formula pricing, and exposure to the spot market. This approach allows Ferroglobe to remain flexible in adjusting its production and sales footprint depending on changing market conditions, which traditionally have been volatile.

During 2022, demand across our segments was positively impacted due to the re-filling of value chains to pre-COVID levels and a recovery in the market demand across our core need markets.  Furthermore, disruptions along the global chain,

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coupled with changes in supply channels, due to the Russia/Ukraine crisis impacted global supply for our products.  Collectively these factors resulted in peak demand and pricing in mid-2022, which quickly normalized in the second half of the year as demand concerns from end-use markets crept in. 

Silicon metal pricing rallied until late second quarter, due to premiums placed on supply security into key sectors, like chemicals, along with increased demand in the aluminum and other commodity sectors. This normalized in the second half of the year, with US pricing lagging in the rate of correction versus Europe.

Historically, manganese-based alloy prices have shown a significant correlation with the price of manganese ore, but from 2018 up to middle 2020, the correlation was disrupted, causing a margin squeeze for Ferroglobe as a non-integrated producer. Since 2020, alloy pricing spreads over ore have recovered. In 2022, further improvements in the spread of ore continued to increase due to the recovery in steel demand and interruptions cause by the onset of the Russia/Ukraine crisis, but then normalizing in the fourth quarter. We anticipate these dynamics in the second half of 2022, driven by stable demand in the European steel sector and the supply availability of manganese ore.

Our ferrosilicon business pricing improved year over year from the historical lows of 2020. We expect these dynamics to sustain in 2023, supported by demand from the steel industry, stimulated by the construction and automotive sectors.

Cost of raw materials

The main raw materials sourced by Ferroglobe are quartz, manganese ore, coal, metallurgical coke, wood and charcoal. Manganese ore is the largest component of the cost base for manganese-based alloys. In 2022, more than 33% of Ferroglobe’s total  $187.75 million expense with respect to manganese ore fell under an annual commitment, whilst the remaining was purchased on spot basis. Special coal is used as a major carbon reductant in silicon-based alloy production. In 2022, coal represented a $179.5 million expense for Ferroglobe. Metallurgical coke, used for Mn Alloys production, represented a total purchase volume of $72.9 million in 2022. Wood is both an important element for the production of silicon alloys and used to produce charcoal, which is used as a carbon reductant at Ferroglobe’s South African subsidiary Silicon Smelters (Pty.), Ltd. Ferroglobe’s wood expense amounted to 37.8 million 2022. In 2022, the FerroAtlántica subsidiaries of Ferroglobe sourced, approximately 63% of their quartz needs from FerroAtlántica’s mines in Spain and South Africa, and Globe subsidiaries sourced approximately 64% of their quartz needs from Globe’s mines in the United States and Canada. Total quartz consumption in 2022 from both external purchases and own mines represented an expense of $ 90.4 million.

Power

Power constitutes one of the single largest expenses for most of Ferroglobe’s products. Ferroglobe focuses on minimizing energy prices and unit consumption throughout its operations by concentrating its silicon and manganese-based alloy production during periods when energy prices are lower. In 2022, Ferroglobe’s total power consumption was 6,431 gigawatt-hours, with power contracts that vary across its operations.

Energy availability was heavily challenged in all geographies due to the war in Ukraine. Power supply was heavily challenged with an evolution of the consumption matrix in European countries and particularly changes in the sources of gas supplies. Other factors, such as climate change impact, nuclear power generation decline for maintenance in France and South Africa, coal-plants performance in South Africa also reduced power availability, pushing prices higher.  

In Europe, power prices climbed to unprecedented levels during the summer of 2022 forcing production adjustments in some of our plants.

In the United States, fuel price increase impacted some of our plants and translated in to prices which were higher than expected.

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Foreign currency fluctuation

Ferroglobe has a diversified production base consisting of production facilities across the United States, Europe, South America, South Africa and Asia. Ferroglobe production costs are mostly dependent on local factors, with the exception of the cost of manganese ore and coal, which are dependent on global commodity prices. The relative strength of the functional currencies of Ferroglobe’s subsidiaries influences its competitiveness in the international market, most notably in the case of Ferroglobe’s South African operations, which have historically exported a majority of their production to the U.S. and the European Union. For additional information see “Item 11.—Quantitative and Qualitative Disclosures About Market Risk—Foreign Exchange Rate Risk.”

Regulatory changes

See “Item 4.B.—Business Overview—Regulatory Matters.”

Results of Operations — Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

2,597,916

 

1,778,908

Raw materials and energy consumption for production

 

(1,285,086)

 

(1,184,896)

Other operating income

 

147,356

 

110,085

Staff costs

 

(314,810)

 

(280,917)

Other operating expense

 

(346,252)

 

(296,809)

Depreciation and amortization charges, operating allowances and write-downs

 

(81,559)

 

(97,328)

Impairment (loss) gain

 

(56,999)

 

137

Net gain due to changes in the value of assets

 

349

 

758

(Loss) gain on disposal of non-current assets

 

(459)

 

1,386

Other gain

 

91

 

62

Operating profit

 

660,547

 

31,386

Finance income

 

2,274

 

253

Finance costs

 

(61,015)

 

(149,189)

Financial derivative gain

Exchange differences

 

(9,995)

 

(2,386)

(Loss) Profit before tax

 

591,811

 

(119,936)

Income tax (expense) benefit

 

(147,983)

 

4,562

(Loss) Profit for the year from continuing operations

 

443,828

 

(115,374)

(Loss) for the year from discontinued operations

(Loss) Profit for the year

443,828

(115,374)

Loss attributable to non-controlling interests

 

(2,952)

 

(4,750)

(Loss) Profit attributable to the Parent

 

440,314

 

(110,624)

Sales

Sales increased $819,008 thousand, or 46.0%, from $1,778,908 thousand for the year ended December 31, 2021 to $2,597,916 thousand for the year ended December 31, 2022. The increase in sales revenue is primarily attributed to the increase in average realized price across all our products portfolio despite a drop in tonnes sold.

Sales revenue increased across all major products in 2022. Silicon metal sales revenue increased 75% and average selling prices of silicon metal increased by 112.3% to $5,332/MT in 2022, and  $2,511/MT in 2021.  Total shipments of silicon metal decreased in 17.6% due to weak demand in chemicals and aluminum in Europe.

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Silicon-Based Alloys sales revenue increased 50.9% and average selling prices increased by 79.5% to $3,694/MT in 2022, and $2,058/MT in 2021. Total shipments decreased in 15.9% driven by weak demand from steel manufacturers.

Manganese-Based Alloys sales revenue increased 12% and average selling prices increased by 19.2% to $1,778/MT in 2022, compared to $1,492/MT in 2021. Total shipments decreased by 6% due to production adjustments in Spain as a result of high energy prices, and low-cost imports higher pressure from Asia.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $100,190 thousand, or 8.5%, from $1,184,896 thousand for the year ended December 31, 2021 to $1,285,086 thousand for the year ended December 31, 2022, primarily due to higher energy costs, higher raw material costs and lower fixed cost absorption as a result of  lower production in France from July 2022. During 2022, raw materials and energy consumption for production as a percentage of sales was 49%, compared to 67% in 2021. The increase was driven by operating leverage as a result of higher pricing.  

Other operating income

Other operating income increased $37,271 thousand, or 33.9%, from $110,085 thousand for the year ended December 31, 2021 to $147,356 thousand for the year ended December 31, 2022, mainly due to the energy compensation received in December from our French energy provider EDF.

Staff costs

Staff costs increased $33,893 thousand, or 12.1%, from $280,917 thousand for the year ended December 31, 2021 to $314,810 thousand for the year ended December 31, 2022. This increase is primarily due to restart of our facility in Selma, Alabama at the beginning of 2022. This resulted in higher variable remuneration driven by the improved results in 2022 and the recording of the“participation salarie” in FerroPem,S.A.S. This increase was partially offset by our reduced production in Spain as a result of high energy prices.

Other operating expense

Other operating expense increased $49,443 thousand, or 16.7%, from $296,809 thousand for the year ended December 31, 2021 to $346,252 thousand for the year ended December 31, 2022, driven by an increase in distribution costs.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $15,769 thousand or 16.2%, from $97,328 thousand for the year ended December 31, 2021 to $81,559 thousand for the year ended December 31, 2022. The decrease in depreciation is driven by a number of assets being fully depreciated and the effect of the  EUR/USD exchange rate.

Impairment (loss) gain

Impairment losses increased $57,136 thousand, from a profit of $137 thousand for the year ended December 31, 2021 to a loss of $56,999 thousand for the year ended December 31, 2022.

During year ended December 31, 2022 the Company recognized an impairment of $56,999 thousand in relation to; our an impairment of $5,994 thousand relating to our Château Feuillet facility in France, an impairment of $11,559 thousand relating to our Boo facility in Spain, an impairment of $5,915 thousand relating to our Cinca facility in Spain, an impairment of $20,034 thousand relating to our Cee facility in Spain, an impairment of $15,749 thousand relating to our Mo I Rana facility in Norway, impairment amounting to $5,514 thousand relating to our asset in Puertollano, Spain, an impairment reversal of $2,750 thousand relating to our mining business in  South Africa alongside, an impairment reversal of $5,017 thousand relating to our Polokwane facility also located in South Africa.

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In 2021, the Company recorded a reversal of the impairment recorded at the Polokwane facility, amounting to $2,681 thousand, an additional impairment at the Château Feuillet facility, amounting to $441 thousand, and an impairment in relation to our quartz mine in Mauritania amounting to $1,726 thousand.

Net loss (gain) due to changes in the value of assets

In 2022, the Company had a net gain of $349 thousand in the value of assets attributable to a higher valuation of shares in Pampa Energy in Argentina. This compares to a net gain of $758 thousand in 2021.

Loss (gain) on disposal of non-current assets

The loss on the disposal of non-current assets of $459 thousand for the year ended December 31, 2022 is mainly due to a  loss of assets in the United States. The gain on disposal of non-current assets of $1,386 thousand for the year ended December 31, 2021 relates to the sale of the former Niagara plant and certain assets in France.

Finance income

Finance income increased $2,021 thousand, or 798.8%, from $253 thousand for the year ended December 31, 2021 to $2,274 thousand for the year ended December 31, 2022. The increase is driven by the interest received on the repurchased notes.

Finance costs

Finance costs decreased $88,174 thousand, or 59.1%, from $149,189 thousand for the year ended December 31, 2021 to $61.015 thousand for the year ended December 31, 2022. The decrease is primarily due to the an accounting charge related to the Senior Notes refinancing, amounting to $90.8 million in 2021.

Exchange differences

Exchange differences increased $7,609 thousand, or 318.9% from $2,386 thousand for the year ended December 31, 2021 to $9,995 thousand for the year ended December 31, 2022, primarily due to the EURO/U.S. Dollar exchange rate.

Income tax (expense) benefit

Income tax expense increased $152,545 thousand, from an income tax benefit of  $4,562 thousand for the year ended December 31, 2021 to an income tax expense of $147,983 thousand for the year ended December 31, 2022. The variance is primarily due to income tax recorded in 2022, in the United States totaling $55,580 thousand, in France $46,148 thousand and in Canada $50,871 thousand.

Segment operations

In 2022, the company revised its operating segments to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business.

Operating segments are based upon the Company’s management reporting structure. As such, we report our results in accordance with the following segments since 2022:

North America – Silicon Metals
North America – Silicon Alloys
Europe – Manganese
Europe – Silicon Metals
Europe – Silicon Alloys

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South Africa – Silicon Metals
South Africa – Silicon Alloys
Other segments

North America – Silicon Metals

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

671,290

 

370,109

Raw materials and energy consumption for production

 

(305,545)

 

(265,653)

Other operating income

 

6,464

 

5,089

Staff costs

 

(61,378)

 

(51,163)

Other operating expense

 

(33,708)

 

(22,222)

Depreciation and amortization charges, operating allowances and write-downs

 

(33,708)

 

(40,489)

(Loss) on disposal of non-current assets

(522)

(347)

Operating (loss) profit

 

242,893

 

(4,676)

Sales

Sales increased $301,181 thousand, or 81.4%, from $370,109 thousand for the year ended December 31, 2021 to $671,290 thousand for the year ended December 31, 2022. The increase is primarily due to an increase in the average realized  selling price, resulting from a combination of higher market prices, and a different product and customer mix. In addition, 2022 saw the restart of our facility in Selma, Alabama.

Raw materials and energy consumption for production

Raw materials and energy consumption increased $39,892 thousand, or 15.0%, from $265,653 thousand for the year ended December 31, 2021 to $305,545 thousand for the year ended December 31, 2022. The increase in our raw materials and energy consumption for production is due to higher raw material costs.

Other operating income

Other operating income increased $1,375 thousand, or 27.0%, from $5,089 thousand for the year ended December 31, 2021 to $6,464 thousand for the year ended December 31, 2022, primarily due to a gain from the free CO2 emission rights regulatory period settlement in Canada and an increase in scrap sales.

Staff costs

Staff costs increased $10,215 thousand, or 20.0%, from $51,163 thousand for the year ended December 31, 2021 to $61,378 thousand for the year ended December 31, 2022. The increase is primarly due to the start-up of Selma in December 2021, as well as higher medical insurance expenses following an increase in claims during 2022.

Other operating expense

Other operating expense increased $11,486 thousand, or 51.7%, from $22,222 thousand for the year ended December 31, 2021 to $33,708 thousand for the year ended December 31, 2022 primarily due to inflationary pressure on prices and the restart of our facility in Selma, Alabama.

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Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $6,781 thousand, or 16.7%, from $40,489 thousand for the year ended December 31, 2021 to $33,708 thousand for the year ended December 31, 2022, primarily due to assets becoming fully depreciated at the beginning of 2022, combined with the termination of the purchase price allocation recorded in WVA, Manufacturing, LLC during 2022.

Loss on disposal of non-current assets

The loss on disposal of non-current assets relates primarily to the disposal of fixed assets at our facility in Selma, Alabama

North America – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

339,414

 

154,699

Raw materials and energy consumption for production

 

(68,490)

 

(57,663)

Other operating income

 

122

 

296

Staff costs

 

(41,923)

 

(31,300)

Other operating expense

 

(37,859)

 

(20,848)

Depreciation and amortization charges, operating allowances and write-downs

 

(15,135)

 

(15,281)

(Loss) gain on disposal of non-current assets

(126)

741

Operating profit

 

176,003

 

30,644

Sales

Sales increased $184,715 thousand, or 119.4%, from $154,699 thousand for the year ended December 31, 2021 to $339,414 thousand for the year ended December 31, 2022. The increase in sales is attributed to an increase in the average realized selling price, resulting from a combination of higher market prices, and a different product and customer mix.

Raw materials and energy consumption for production

Raw materials and energy consumption increased $10,827 thousand, or 18.8%, from $57,663 thousand for the year ended December 31, 2021 to $68,490 thousand for the year ended December 31, 2022. The increase in our raw materials and energy consumption for production is due to higher raw material prices.

Other operating income

Other operating income decreased $174 thousand, or 58.8%, from $296 thousand for the year ended December 31, 2021 to $122 thousand for the year ended December 31, 2022. This income relates primarily to the sale of scrap.

Staff costs

Staff costs increased $10,623 thousand, or 33.9%, from $31,300 thousand for the year ended December 31, 2021 to $41,923 thousand for the year ended December 31, 2022. The increase is primarily due to higher variable remuneration driven by our improved results in 2022.

Other operating expense

Other operating expense increased $17,011 thousand, or 81.6%, from $20,848 thousand for the year ended December 31, 2021 to $37,859 thousand for the year ended December 31, 2022. The increase is primarily due to management fee charges that are eliminated during the consolidation process.

68

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $146 thousand, or 1.0%, from $15,281 thousand for the year ended December 31, 2021 to $15,135 thousand for the year ended December 31, 2022, primarily due to the disposal of certain assets at our facility in Bridgeport, Alabama during 2022.

(Loss) gain on disposal of non-current assets

The loss on disposal of non-current assets relates mainly to the disposal of fixed assets at our facility in Bridgeport, Alabama.

Europe - Manganese

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

701,140

476,287

Raw materials and energy consumption for production

 

(541,034)

 

(326,257)

Other operating income

 

42,882

 

34,142

Staff costs

 

(28,996)

 

(33,696)

Other operating expense

 

(111,741)

 

(105,290)

Depreciation and amortization charges, operating allowances and write-downs

 

(13,005)

 

(18,634)

Impairment (loss)

(33,222)

(376)

(Loss) on disposal of non-current assets

(189)

Other gain

11

Operating profit

 

15,846

 

26,176

Sales

Sales increased $224,853 thousand or 47.2%, from $476,287 thousand for the year ended December 31, 2021 to $701,140 thousand for the year ended December 31, 2022, primarily due to an increase in average selling prices of 19.2%, partially offset by a decrease in overall shipments of 6%.

Raw materials and energy consumption for production

Raw materials and energy consumption increased $214,777 thousand, or 65.8%, from $326,257 thousand for the year ended December 31, 2021 to $541,034 thousand for the year ended December 31, 2022. The increase is primarily driven by higher raw material and energy consumption in addition to higher raw material prices.

Other operating income

Other operating income increased $8,740 thousand, or 25.6%, from $34,142 thousand for the year ended December 31, 2021 to $42,882 thousand for the year ended December 31, 2022, primarily driven by energy compensation received in France.

Staff costs

Staff costs decreased $4,700 thousand or 13.9%, from $33,696 thousand for the year ended December 31, 2021 to $28,996 thousand for the year ended December 31, 2022. This decrease is mainly due to the recognition of restructuring costs during Spain in 2021 in respect of our facility in Monzón.

69

Other operating expense

Other operating expense increased $6,451 thousand, or 6.1%, from $105,290 thousand for the year ended December 31, 2021 to $111,741 thousand for the year ended December 31, 2022, primarily driven by a decrease in distribution costs linked to lower volumes in 2022 compared to 2021.

Depreciation and amortization charges, operating allowances and write downs

Depreciation and amortization charges, operating provisions and write-downs decreased $5,629 thousand, or 30.2%, from $18,634 thousand for the year ended 31 December 2021 to $13,005 thousand for the year ended 31 December 2022, primarily due to an increase in the number of assets fully depreciated in Spain.

Impairment (loss)

Impairment losses increased by $32,846 thousand, from a loss of $376 thousand for the year ended 31 December 2021 to a loss of $33,222 thousand for the year ended 31 2022. During 2022, the Company recorded impairments our facilities in Boo (Spain), Monzón (Spain), and Mo I Rana (Norway) of $11,559 thousand and $5,915 thousand of $15,749 thousand respectively.

Europe – Silicon Metals

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

536,753

437,533

Raw materials and energy consumption for production

 

(241,936)

 

(303,811)

Other operating income

 

76,255

 

48,828

Staff costs

 

(81,175)

 

(77,608)

Other operating expense

 

(99,513)

 

(105,712)

Depreciation and amortization charges, operating allowances and write-downs

 

(4,605)

 

(7,330)

Impairment (loss) gain

14

Gain on disposal of non-current assets

230

733

Operating (loss) profit

 

186,009

 

(7,353)

Sales

Sales increased $99,220 thousand or 22.7%, from $437,533 thousand for the year ended December 31, 2021 to $536,753 thousand for the year ended December 31, 2022, primarily due to an increase in the average selling price, which was partially offset by lower product volumes during the year.

Raw materials and energy consumption for production

Raw materials and energy consumption decreased $61,875 thousand, or 20.4%, from $303,811 thousand for the year ended December 31, 2021 to $241,936 thousand for the year ended December 31, 2022. Raw materials and energy consumption decreased driven by lower product volumes during the year.

Other operating income

Other operating income increased $27,427 thousand, or 56.2%, from $48,828 thousand for the year ended December 31, 2021 to $76,255 thousand for the year ended December 31, 2022, due primarily to energy compensation received in France.

70

Staff costs

Staff costs increased $3,567 thousand or 4.6%, from $77,608 thousand for the year ended December 31, 2021 to $81,175 thousand for the year ended December 31, 2022. The increase is primarily due to a higher variable remuneration driven by our improved results during 2022.

Other operating expense

Other operating expense decreased $6,199 thousand, or 5,9%, from $105,712 thousand for the year ended December 31, 2021 to $99,513 thousand for the year ended December 31, 2022, primarily driven by a decrease in distribution costs due to lower product volumes in 2022 compared to 2021.

Depreciation and amortization charges, operating allowances and write downs

Depreciation and amortization charges, operating provisions and write-downs decreased $2,725 thousand, or 37.2%, from $7,330 thousand for the year ended December 31, 2021 to $4,605 thousand for the year ended December 31, 2022, primarily due to the increase in the number of French assets fully depreciated.  

Gain on disposal of non-current assets

Gain (loss) on disposal of non-current assets decreased $503 thousand, or 68.6%, from a gain of $733 thousand for the year ended December 31, 2021 to $230 thousand for the year ended December 31, 2022, driven by the disposal of buildings and other assets in France during 2021 and 2022.

Europe – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

259,419

227,804

Raw materials and energy consumption for production

 

(139,687)

(170,073)

Other operating income

 

23,622

16,924

Staff costs

 

(50,467)

(42,679)

Other operating expense

 

(33,265)

(23,043)

Depreciation and amortization charges, operating allowances and write-downs

 

(8,086)

(9,522)

Impairment (loss)

(26,028)

(455)

Gain on disposal of non-current assets

82

296

Other (loss)

Operating (loss) profit

 

25,590

 

(748)

Sales

Sales increased $31,615 thousand or 13.9%, from $227,804 thousand for the year ended December 31, 2021 to $259,419 thousand for the year ended December 31, 2022, primarily due to an increase in both domestic sales and average selling prices, partially offset by lower product volumes.

Raw Materials and energy consumption for production

Raw Materials and energy consumption decreased $30,386 thousand, or 17.9%, from $170,073 thousand for the year ended December 31, 2021 to $139,687 thousand for the year ended December 31, 2022. Raw materials and energy consumption for production decreased due to lower volumes in 2022.

71

Other operating income

Other operating income increased $6,698 thousand, or 39.6%, from $16,924 thousand for the year ended December 31, 2021 to $23,622 thousand for the year ended December 31, 2022, primarily due to energy compensation received in France.

Staff costs

Staff costs increased $7,788 thousand or 18.2%, from $42,679 thousand for the year ended December 31, 2021 to $50,467 thousand for the year ended December 31, 2022. The increase is due to higher variable remuneration driven by the improved results in 2022.

Other operating expense

Other operating expense increased $10,222 thousand, or 44.4%, from $23,043 thousand for the year ended December 31, 2021 to $33,265 thousand for the year ended December 31, 2022, primarily attributable to the increase in distribution cost and management fees.

Depreciation and amortization charges, operating allowances and write downs

Depreciation and amortization charges, operating provisions and write-downs decreased $1,436 thousand, or 15.1%, from $9,522 thousand for the year ended December 31, 2021 to $8,086 thousand for the year ended December 31, 2022.

Impairment (loss)

Impairment loss increased by $25,573 thousand, from a loss of  $455 thousand for the year ended December 31, 2021 to a loss of $26,028 thousand for the year ended December 31, 2022. During the year ended December 31, 2022, the Company recognized an impairment of $5,994 thousand at the Château Feuillet facility in France and an impairment of $20,034 thousand in relation to our tolling agreement with the plant in Cee, Spain.

South Africa – Silicon Metals

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

17,337

 

12,604

Raw materials and energy consumption for production

 

(9,270)

 

(8,240)

Other operating income

 

156

 

278

Staff costs

 

(1,736)

 

(1,542)

Other operating expense

 

(2,649)

 

(1,904)

Depreciation and amortization charges, operating allowances and write-downs

 

(748)

 

(546)

Impairment gain

5,357

288

Operating profit

 

8,447

 

938

Sales

Sales increased $4,733 thousand, or 37.6%, from $12,604 thousand for the year ended December 31, 2021 to $17,337 thousand for the year ended December 31, 2022. Our sales in South Africa were positively impacted by improved demand and market conditions, leading to an increase in both average selling price and sales volumes.

72

Raw materials and energy consumption for production

Raw materials and energy consumption increased $1,030 thousand, or 12.5%, from $8,240 thousand for the year ended December 31, 2021 to $9,270 thousand for the year ended December 31, 2022, driven by higher energy cost as well as the increase in product volumes sold during 2022.

Other operating income

Other operating income decreased $122 thousand, or 43.9%, from $278 thousand for the year ended December 31, 2021 to $156 thousand for the year ended December 31, 2022.

Staff costs

Staff costs increased $194 thousand, or 12.6%, from $1,542 thousand for the year ended December 31, 2021 to $1,736 thousand for the year ended December 31, 2022. The increase in staff costs are primarily due to a higher number of employees on payroll as of December 31, 2022 resulting from the restart of our Polokwane facility.

Other operating expense

Other operating expense increased $745 thousand, or 39.1%, from $1,904 thousand for the year ended December 31, 2021 to $2,649 thousand for the year ended December 31, 2022, mainly due to the increase in activity as well as the restart of our Polokwane facility.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs increased $202 thousand, or 37.0%, from $546 thousand for the year ended December 31, 2021 to $748 thousand for the year ended December 31, 2022.

Impairment gain

Impairment gain increased $5,069 thousand, from $288 thousand for the year ended December 31, 2021 to  $5,357 thousand for the year ended December 31, 2022. This variance is mainly due to the partial reversal of the Polokwane impairment in the year ended December 2022.

South Africa – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

122,262

 

104,591

Raw materials and energy consumption for production

 

(65,373)

 

(68,377)

Other operating income

 

66

 

485

Staff costs

 

(11,652)

 

(11,726)

Other operating expense

 

(13,193)

 

(11,352)

Depreciation and amortization charges, operating allowances and write-downs

 

(5,278)

 

(4,535)

Impairment gain

2,408

2,396

Operating profit

 

29,240

 

11,482

Sales

Sales increased $17,671 thousand, or 16.9%, from $104,591 thousand for the year ended December 31, 2021 to $122,262 thousand for the year ended December 31, 2022. Our sales in South Africa were positively impacted by improved demand and market conditions, increasing both average selling price and sales volumes.

73

Raw materials and energy consumption for production

Raw materials and energy consumption for decreased $3,004 thousand, or 4.4%, from $68,377 thousand for the year ended December 31, 2021 to $65,373 thousand for the year ended December 31, 2022. The decrease is attributed to the increase in energy cost which were partially offset by lower volumes during 2022.

Other operating income

Other operating income decreased $419 thousand, or 86.4%, from $485 thousand for the year ended December 31, 2021 to $66 thousand for the year ended December 31, 2022, primarily due to sundry sales from the idle Polokwane plant reported in other income during 2021.

Staff costs

Staff costs decreased $74 thousand, from $11,726 thousand for the year ended December 31, 2021 to $11,652 thousand for the year ended December 31, 2022. The decrease is due to the impact of the ZAR/USD exchange rate, across both periods.

Other operating expense

Other operating expense increased $1,841 thousand, or 16.2%, from $11,352 thousand for the year ended December 31, 2021 to $13,193 thousand for the year ended December 31, 2022, primarily due to increased activity in addition to the restart of our Polokwane facility.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs increased $743 thousand, or 16.4%, from $4,535 thousand for the year ended December 31, 2021 to $5,278 thousand for the year ended December 31, 2022. The increase is a result of  higher depreciation in leases during 2022.

Impairment  gain

Impairment gain increased $12 thousand, or 0.5%, from $2,396 thousand for the year ended December 31, 2021 to $2,408 thousand for the year ended December 31, 2022. This variance is primarily due to the reversal of the Thaba Chueu Mining, Ltd impairment in 2022.

Other segments

Year ended December 31, 

($ thousands)

    

2022

    

2021

Sales

 

81,560

 

43,568

Raw materials and energy consumption for production

 

(46,759)

 

(33,445)

Other operating income

 

59,840

 

49,901

Staff costs

 

(37,483)

 

(31,203)

Other operating expense

 

(74,626)

 

(51,960)

Depreciation and amortization charges, operating allowances and write-downs

 

(994)

 

(991)

Impairment (loss)

(5,514)

(1,730)

Net gain due to changes in the value of assets

349

758

(Loss) gain on disposal of non-current assets

66

(37)

Other gain

80

Operating (loss)

 

(23,481)

 

(25,076)

74

Sales

Sales increased $37,992 thousand, or 87.2%, from $43,568 thousand for the year ended December 31, 2021 to $81,560 for the year ended December 31, 2022, primarily due to an increase in selling prices for our products.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $13,314 thousand, or 39.8%, from $33,445 thousand for the year ended December 31, 2021 to $46,759 thousand for the year ended December 31, 2022, primarily due to higher costs  as consequence of the higher production volumes.

Other operating income

Other operating income increased $9,939 thousand, or 19.9%, from $49,901 thousand for the year ended December 31, 2021 to $59,840 thousand for the year ended December 31, 2022, primarily due to the allocation of management fee charges that are eliminated during the consolidation process.

Staff costs

Staff costs increased $6,280 thousand, or 20,1%, from $31,203 thousand for the year ended December 31, 2021 to $37,483 thousand for the year ended December 31, 2022, primarily due increased staff numbers as a result of the restart of the second furnace at our facility in Mendoza, Argentina at the end of 2021. The increase was also attributable to the impact of the AR$/USD exchange rate.

Other operating expense

Other operating expense increased $22,666 thousand, or 43.6%, from $51,960 thousand for the year ended December 31, 2021 to $74,626 for the year ended December 31, 2022, primarily due to intercompany charges and higher cost related to an increase in sales in Argentina and China.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs were, $991 thousand for the year ended December 31, 2021 and $994 thousand for the year ended December 31,2022.

Impairment (loss)

Impairment losses increased $3,784 or 218.7%, from $1,730 thousand for the year ended 31 December 2021 to $5,514 thousand for the year ended 31 December 2022, primarily due to our solar-grade silicon metal project in Puertollano, Spain, amounting to $5,514 thousand (5,743 thousand in 2022).

Net gain due to changes in the value of assets

The gain due to changes in the value of assets in 2022 is primarily due to the valuation of  Pampa Energy shares in Argentina.

75

Results of Operations — Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

1,778,908

 

1,144,434

Raw materials and energy consumption for production

 

(1,184,896)

 

(835,486)

Other operating income

 

110,085

 

33,627

Staff costs

 

(280,917)

 

(214,782)

Other operating expense

 

(296,809)

 

(132,059)

Depreciation and amortization charges, operating allowances and write-downs

 

(97,328)

 

(108,189)

Impairment loss

 

137

 

(73,344)

Net gain due to changes in the value of assets

 

758

 

158

Gain on disposal of non-current assets

 

1,386

 

1,292

Other losses

 

62

 

(1)

Operating profit (loss)

 

31,386

 

(184,350)

Finance income

 

253

 

177

Finance costs

 

(149,189)

 

(66,968)

Financial derivative gain

3,168

Exchange differences

 

(2,386)

 

25,553

(Loss) before tax

 

(119,936)

 

(222,420)

Income tax (expense) benefit

 

4,562

 

(21,939)

(Loss) for the year from continuing operations

 

(115,374)

 

(244,359)

(Loss) for the year from discontinued operations

(5,399)

(Loss) for the year

(115,374)

(249,758)

Loss attributable to non-controlling interests

 

(4,750)

 

(3,419)

(Loss) attributable to the Parent

 

(110,624)

 

(246,339)

Sales

Sales increased $634,474 thousand, or 55.4%, from $1,144,434 thousand for the year ended December 31, 2020 to $1,778,908 thousand for the year ended December 31, 2021. The increase in sales is attributed to an increase in volumes and average realized selling prices across our product portfolio.

Sales volumes increased across all major product categories. Silicon metal sales volume increased 22.5% and average selling prices of silicon metal increased by 12.4% to $2,511/MT in 2021, compared to $2,234/MT in 2020.  Total shipments of silicon metal increased primarily as a result of continued strength in chemicals and to a lesser extent, the aluminum market in Europe which continues to lag due to continued supply chain issues.  Overall tightness in the market, attributable to strong end market demand and ongoing reforms in China, propelled U.S. and European index prices to unprecedented levels mainly during the fourth quarter.

Silicon-Based Alloys sales volume increased 21.3% and average selling prices increased by 35.8% to $2,058/MT in 2021, as compared to $1,899/MT in 2020. Total shipments increased due to the continued recovery in global steel production.  Strong demand for ferrosilicon, coupled with low levels of inventory, sent the index higher in the US and Europe, contributing significantly to the increase in average realized prices across silicon-based alloy.

Manganese-Based Alloys sales volume increased 20.2% and average selling prices increased by 46% to $1,492/MT in 2021, as compared to $1,022/MT in 2020. Total shipments increased due to continued recovery in global steel production, and some seasonal spillover of orders.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $349,410 thousand, or 41.8%, from $835,486 thousand for the year ended December 31, 2020 to $1,184,896 thousand for the year ended December 31, 2021, primarily due to an

76

increase in sales volumes across all three product categories. For the full year 2021, raw materials and energy consumption for production as a percentage of sales was 66.6%, compared to 73.0% during full year 2020. In addition to the increase in sales, the improvement in the raw materials and energy consumption for production was primarily driven by improved utilization of our asset base, reallocation of orders to optimize economics, stronger operational performance at the furnace level, and continued cost cutting.

Other operating income

Other operating income increased $76,458 thousand, or 227.4%, from $33,627 thousand for the year ended December 31, 2020 to $110,085 thousand for the year ended December 31, 2021, primarily due to free CO2 emissions allowances (“rights held emit greenhouse gasses”).  The Company has recognized emission rights (allowances) received at market value.  Market value of the allowances has increased 130.5% from $39.3/allowance for the year ended December 31, 2020 to $90.6/allowance as of December 31, 2021.

Staff costs

Staff costs increased $66,135 thousand, or 30.8%, from $214,782 thousand for the year ended December 31, 2020 to $280,917 thousand for the year ended December 31, 2021. This increase is mainly due to the recording of the restructuring provision in Spain and France amounting $27,367 thousand and higher variable consideration driven by the improved results in 2021 compared to 2020.

Other operating expense

Other operating expense increased $164,750 thousand, or 124.8%, from $132,059 thousand for the year ended December 31, 2020 to $296,809 thousand for the year ended December 31, 2021, mainly due to CO2 emissions. 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 at the end of each reporting period at market value. Market value of the allowances increased 130.4% from $39.3/allowance for the year ended December 31, 2020 to $90.6/allowance as of December 31, 2021.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $10,861 thousand or 10.0%, from $108,189 thousand for the year ended December 31, 2020 to $97,328 thousand for the year ended December 31, 2021. The decrease in depreciation is driven by a relevant number of our assets becoming fully depreciated.

Impairment (loss) gain

Impairment losses decreased $73,481 thousand, or 100.2%, from a loss of $73,344 thousand for the year ended December 31, 2020 to a gain of $137 thousand for the year ended December 31, 2021. In 2020, the Company recognized an impairment of $73,344 thousand in relation to; our idled capacity at the Niagara facilities in the United States $35,685 thousand, our Polokwane facility in South Africa of $8,677 thousand, our Château Feuillet facility in France of $17,941 thousand and an impairment of $11,041 thousand in relation to our solar-grade silicon metal project in Puertollano, Spain. In 2021, the Company recorded a reversal of the impairment recorded at Polokwane facilities, amounting to $2,681 thousand, an additional impairment at our Château Feuillet facility, amounting to $441 thousand, an impairment in relation to our quartz mine in Mauritania amounting to $1,726 thousand.

Net gain due to changes in the value of assets

In 2021, the Company had a net gain of $758 thousand in the value of assets attributable to a higher valuation of shares in Pampa Energy in Argentina. The net loss of $158 thousand in 2020 was due to a lower valuation.

77

Gain on disposal of non-current assets

The gain on disposal of non-current assets of $1,386 thousand for the year ended December 31, 2021 relates to the sale of the Niagara plant (fully impaired as of December 31, 2020) and certain assets located in France.

Finance income

Finance income increased $76 thousand, or 42.9%, from $177 thousand for the year ended December 31, 2020 to $253 thousand for the year ended December 31, 2021. The increase is driven by higher earnings in our collateral account balance held by the South African subsidiary.

Finance costs

Finance costs increased $82,221 thousand, or 122.8%, from $66,968 thousand for the year ended December 31, 2020 to $149,189 thousand for the year ended December 31, 2021. The increase is due to an accounting charge relating to the Senior Notes refinancing, totaling $90.8 million.

For accounting purposes the refinancing of the Senior Notes has been considered a debt extinguishment. As a consequence:

(i) The accounting rules do not allow the company to capitalize the fees incurred during the exchange of the notes, amounting to $31.7 million

(ii) The shares issued to bondholders and the work fee paid were recognized as one-off expenses, totaling $51.6 million at market value.

(iii) In the case of an extinguishment, any outstanding upfront fees that have been capitalized upon issuance of the original notes musts to be recycled through our profit and account. This amounted to $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 was recognized as an expense in the income statement. After the exchange the Senior notes were accounted for under the amortized cost method.

The transaction fees incurred in the issuance of the Super Senior Notes have been capitalized as required by the accounting rules (IFRS).

Financial derivative gain

Gains on financial derivatives declined from $3,168 thousand in 2020 to $0 in 2021. The currency swap hedging the senior unsecured bonds was terminated in 2020.

Exchange differences

Exchange differences decreased $27,939 thousand, from income of $25,553 thousand for the year ended December 31, 2020 to a loss of $2,386 thousand for the year ended December 31, 2021, primarily due to the Euro and U.S. Dollar exchange rate.

Income tax (expense) benefit

Income tax expense variation amounted to $26,501 thousand, or 120.8%, from an income tax expense of $21,939 thousand for the year ended December 31, 2020 to an income tax benefit of $4,562 thousand for the year ended December 31, 2021. The variance is mainly due to the tax assets recorded in 2021 relating to a carryback credit of $ 6,408 thousand in our French subsidiary. In France, when a company incurs a loss during a given fiscal year, they may carry it back to reduce

78

the tax liability of the immediately previous fiscal year. This generates a deferred tax asset that can be offset against the corporate income tax for the following five fiscal years or claimed to the French Treasury at the end of that period.

Profit (loss) for the year from discontinued operations

The result from discontinued operations decreased from $5,399 thousand in 2020 to $0 in 2021, due to the adjustment of the sales price of assets in Spain registered in 2020.

Segment operations

Our operating segments were revised in 2022 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2021 and 2020 have been restated to report results according to the revision of operating segments in 2022.

As such, we report our results in accordance with the following segments:

North America – Silicon Metal
North America – Silicon Alloys
Europe – Manganese
Europe – Silicon Metals
Europe – Silicon Alloys
South Africa – Silicon Metal
South Africa – Silicon Alloys
Other segments

North America – Silicon Metals

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

370,109

 

289,485

Raw materials and energy consumption for production

 

(265,653)

 

(205,260)

Other operating income

 

5,089

 

2,804

Staff costs

 

(51,163)

 

(48,219)

Other operating expense

 

(22,222)

 

(18,990)

Depreciation and amortization charges, operating allowances and write-downs

 

(40,489)

 

(48,691)

Impairment (loss)

(26,861)

Loss on disposal of non-current assets

(347)

(641)

Operating (loss)

 

(4,676)

 

(56,373)

Sales

Sales increased $80,624 thousand, or 27.9%, from $289,485 thousand for the year ended December 31, 2020 to $370,109 thousand for the year ended December 31, 2021, the increase in sales is attributed to higher average realized prices, resulting from a combination of higher market prices, alog with a different product and customer mix. Additionally, there was an increase in volumes resulting from strong customer demand.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $60,393 thousand, or 29.4%, from $205,260 thousand for the year ended December 31, 2020 to $265,653 thousand for the year ended December 31, 2021, primarily due to an increase in volumes.

79

Other operating income

Other operating income increased $2,285 thousand, or 81.5%, from $2,804 thousand for the year ended December 31, 2020 to $5,089 thousand for the year ended December 31, 2021, primarily due a gain on the free CO2 emission rights regulatory period settlement for Canada, and an increase in scrap sales.

Staff costs

Staff costs increased $2,944 thousand, or 6.1%, from $48,219 thousand for the year ended December 31, 2020 to $51,163 thousand for the year ended December 31, 2021. The increase is primarily due to a higher number of employees on payroll in 2021 as a result of an increase in production, adjustments to the Pension Plan as part of the buyout in 2021, and an increase in employee health insurance claims.

Other operating expense

Other operating expense increased $3,232 thousand, or 17.0%, from $18,990 thousand for the year ended December 31, 2020 to $22,222 thousand for the year ended December 31, 2021, This increase is attributable mainly to higher freight costs resulting from increased in the sales volumes; an increase in the property and liability insurance premium; and an increase in the royalty rate for the right fork surface mine royalty agreement.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $8,202 thousand, or 16.8%, from $48,691 thousand for the year ended December 31, 2020 to $40,489 thousand for the year ended December 31, 2021, primarily due to the impairment of the Niagara plant write-off in 2020.

Impairment losses

There were no impairment losses for the year ended December 31, 2021. During the year ended December 2020, the Company recognized an impairment related to the permanent shutdown of the Niagara plant.

North America – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

154,699

 

135,792

Raw materials and energy consumption for production

 

(57,663)

 

(75,597)

Other operating income

 

296

 

113

Staff costs

 

(31,300)

 

(25,769)

Other operating expense

 

(20,848)

 

(15,325)

Depreciation and amortization charges, operating allowances and write-downs

 

(15,281)

 

(12,973)

Impairment (loss)

(8,824)

(Loss) gain on disposal of non-current assets

741

(227)

Operating (loss) profit

 

30,644

 

(2,810)

Sales

Sales increased $18,907 thousand, or 13.9%, from $135,792 thousand for the year ended December 31, 2020 to $154,699 thousand for the year ended December 31, 2021. The increase in sales is attributed to higher average realized price, resulting from a combination of higher market selling prices, and a different product and customer mix.

80

Raw materials and energy consumption for production

Raw materials and energy consumption decreased $17,934 thousand, or 23.7%, from $75,597 thousand for the year ended December 31, 2020 to $57,663 thousand for the year ended December 31, 2021. The decrease is primarily to a reduction in product volumes sold from 2020 to 2021.

Other operating income

Other operating income increased $183 thousand, or 161.9%, from $113 thousand for the year ended December 31, 2020 to $296 thousand for the year ended December 31, 2021, due to the increase in scrap sales.

Staff costs

Staff costs increased $5,531 thousand, or 21.5%, from $25,769 thousand for the year ended December 31, 2020 to $31,300 thousand for the year ended December 31, 2021. The increase is primarly due to a higher number of employees on payroll in 2021 as a result of an increase in production, adjustments to the Pension Plan as part of the buyout in 2021, and an increase in employee health insurance claims.

Other operating expense

Other operating expense increased $5,523 thousand, or 36.0%, from $15,325 thousand for the year ended December 31, 2020 to $20,848 thousand for the year ended December 31, 2021. This increase is attributable mainly to higher freight cost due to the higher sales volume; an increase in the property and liability insurance premium; and an increase in the royalty rate for the Right Fork surface mine royalty agreement.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs increased by $2,308 thousand, or 17.8%, from $12,973 thousand for the year ended December 31, 2020 to $15,281 thousand for the year ended December 31, 2021.

Impairment (loss)

There were no impairment losses for the year ended December 31, 2021. During the year ended December 2020, the Company recognized an impairment related to the permanent closure of the Niagara plant.

Europe – Manganese

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

476,287

 

240,142

Raw materials and energy consumption for production

 

(326,257)

 

(204,063)

Other operating income

 

34,142

 

9,199

Staff costs

 

(33,696)

 

(28,337)

Other operating expense

 

(105,290)

 

(33,884)

Depreciation and amortization charges, operating allowances and write-downs

 

(18,634)

 

(19,086)

Impairment (loss) gain

(376)

305

Gain on disposal of non-current assets

1,154

Other gain

4

Operating (loss) profit

 

26,176

 

(34,562)

81

Sales

Sales increased $236,145 thousand or 98.3%, from $240,142 thousand for the year ended December 31, 2020 to $476,287 thousand for the year ended December 31, 2021, mainly due to the increase of 20.2% in both domestic sales and exports. In addition, the increase of 46% in the average price has contributed higher sales in the year.

Raw materials and energy consumption for production

Raw materials and energy consumption increased $122,194 thousand, or 59.9%, from $204,063 thousand for the year ended December 31, 2020 to $326,257 thousand for the year ended December 31, 2021. Raw materials and energy consumption for production increased due to higher volumes, as well as higher raw material costs and energy prices.

Other operating income

Other operating income increased $24,943 thousand, or 271.1%, from $9,199 thousand for the year ended December 31, 2020 to $34,142 thousand for the year ended December 31, 2021, primarily attributable to the freely granted CO2 emission rights. Market value of the allowances has increased 130.4% from $39.3/allowance for the year ended December 31, 2020 to $90.6/allowance as of December 31, 2021.

Staff costs

Staff costs increased $5,359 thousand or 18.9%, from $28,337 thousand for the year ended December 31, 2020 to $33,696 thousand for the year ended December 31, 2021. This increase is mainly due to the recognition of the restructuring costs in Spain and a higher variable consideration driven by the improved results in 2021 compared to 2020.

Other operating expense

Other operating expense increased $71,406 thousand, or 210.7%, from $33,884 thousand for the year ended December 31, 2020 to $105,290 thousand for the year ended December 31, 2021, primarily attributable to the freely granted CO2 emission rights. As commented in the Other operating income section the market value of the allowances has increased significantly in 2021.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating provisions and write-downs decreased $452 thousand, or 2.4%, from $19,086 thousand for the year ended 31 December 2020 to $18,634 thousand for the year ended 31 December 2021, due to an increase in the number of assets fully depreciated.

Impairment (loss) gain

Impairment gains decreased by $681 thousand, or 223.3%, from a gain of $305 thousand for the year ended 31 December 2020 to a loss of $376 thousand for the year ended 31 2021.

Gain on disposal of non-current assets

The amount reflected during the year ended December 31, 2020 was driven by the sale of excess CO2 rights.

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Europe – Silicon Metals

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

437,533

 

321,632

Raw materials and energy consumption for production

 

(303,811)

 

(255,798)

Other operating income

 

48,828

 

19,971

Staff costs

 

(77,608)

 

(52,236)

Other operating expense

 

(105,712)

 

(35,415)

Depreciation and amortization charges, operating allowances and write-downs

 

(7,330)

 

(8,900)

Impairment (loss) gain

14

Gain on disposal of non-current assets

733

682

Operating (loss)

 

(7,353)

 

(10,064)

Sales

Sales increased $115,901 thousand or 36.0%, from $321,632 thousand for the year ended December 31, 2020 to $437,533 thousand for the year ended December 31, 2021. The increase in sales is attributed to the increase in volumes and average realized selling prices across the products.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $48,013 thousand, or 18.8%, from $255,798 thousand for the year ended December 31, 2020 to $303,811 thousand for the year ended December 31, 2021. Raw materials and energy consumption for production increased with higher volumes, as well as higher raw material costs.

Other operating income

Other operating income increased $28,857 thousand, or 144.5%, from $19,971 thousand for the year ended December 31, 2020 to $48,828 thousand for the year ended December 31, 2021, primarily attributable to the freely granted CO2 emission rights. Market value of the allowances has increased 130.4% from $39.3/allowance for the year ended December 31, 2020 to $90.6/allowance as of December 31, 2021

Staff costs

Staff costs increased $25,372 thousand or 48.6%, from $52,236 thousand for the year ended December 31, 2020 to $77,608 thousand for the year ended December 31, 2021.  This increase is mainly due to the recognition of the restructuring provision in France amounting $23,798 thousand and a higher variable consideration driven by the improved results in 2021 compared to 2020.

Other operating expense

Other operating expense increased $70,297 thousand, or 198.5%, from $35,415 thousand for the year ended December 31, 2020 to $105,712 thousand for the year ended December 31, 2021. The increase is primarily attributable to the freely granted CO2 emission rights. As described in the Other operating income section the market value of the allowances  increased significantly in 2021.  

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write downs decreased $1,570 thousand, or 17.6%, from $8,900 thousand for the year ended December 31, 2020 to $7,330 thousand for the year ended December 31, 2021 due to an increase in the number of assets fully depreciated.

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Europe – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

227,804

146,096

Raw materials and energy consumption for production

 

(170,073)

(113,332)

Other operating income

 

16,924

5,078

Staff costs

 

(42,679)

(32,064)

Other operating expense

 

(23,043)

(16,397)

Depreciation and amortization charges, operating allowances and write-downs

 

(9,522)

(10,352)

Impairment (loss)

(455)

(17,942)

(Loss) gain on disposal of non-current assets

296

319

Other (loss)

Operating (loss)

 

(748)

 

(38,594)

Sales

Sales increased $81,708 thousand or 55.9%, from $146,096 thousand for the year ended December 31, 2020 to $227,804 thousand for the year ended December 31, 2021, primarily due to an increase in both domestic sales and exports.

Raw materials and energy consumption for production

Raw materials and energy consumption increased $56,741 thousand, or 50.1%, from $113,332 thousand for the year ended December 31, 2020 to $170,073 thousand for the year ended December 31, 2021. Raw materials and energy consumption for production increased with the higher sales volumes, in addition to higher raw material costs.

Other operating income

Other operating income increased $11,846 thousand, or 233.3%, from $5,078 thousand for the year ended December 31, 2020 to $16,924 thousand for the year ended December 31, 2021, primarily attributable to the freely granted CO2 emission rights. The market value of allowances has increased 130.4% from $39.3/allowance for the year ended December 31, 2020 to $90.6/allowance as of December 31, 2021.  

Staff costs

Staff costs increased $10,615 thousand or 33.1%, from $32,064 thousand for the year ended December 31, 2020 to $42,679 thousand for the year ended December 31, 2021. This increase is due to higher performance related pay, driven by the improved results in 2021 compared to 2020.

Other operating expense

Other operating expense increased $6,646 thousand, or 40.5%, from $16,397 thousand for the year ended December 31, 2020 to $23,043 thousand for the year ended December 31, 2021, primarily attributable to the freely granted CO2 emission rights. As described in the Other operating income section the market value of the allowances increased significantly in 2021.  

84

Depreciation and amortization charges, operating allowances and write downs

Depreciation and amortization charges, operating allowances and write downs decreased $830 thousand, or 8.0%, from $10,352 thousand for the year ended December 31, 2020 to $9,522 thousand for the year ended December 31, 2021 due to an increase in the number of assets fully depreciated.

Impairment (loss) gain

Impairment loss decreased by $17,487 thousand, or 97.5%, from a loss of $17,942 thousand for the year ended 31 December 2020 to a loss of $455 thousand for the year ended 31 2021. During the year ended 31 December 2020, the Company recognized an impairment of $17,942 thousand at our Château Feuillet facility in France.

South Africa – Silicon Metals

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

12,604

 

17,631

Raw materials and energy consumption for production

 

(8,240)

 

(12,267)

Other operating income

 

278

 

127

Staff costs

 

(1,542)

 

(2,497)

Other operating expense

 

(1,904)

 

(3,515)

Depreciation and amortization charges, operating allowances and write-downs

 

(546)

 

(1,563)

Impairment (loss) gain

288

(1,899)

Operating (loss) profit

 

938

 

(3,983)

Sales

Sales decreased $5,027 thousand, or 28,5%, from $17,631 thousand for the year ended December 31, 2020 to $12,604 thousand for the year ended December 31, 2021. Sales in South Africa were adversely impacted by the temporary shutdown of the Polokwane facility.

Raw materials and energy consumption for production

Raw materials and energy consumption for production decreased $4,027 thousand, or 32.8%, from $12,267 thousand for the year ended December 31, 2020 to $8,240 thousand for the year ended December 31, 2021, in-line with the decrease in sales volumes.

Other operating income

Other operating income increased $151 thousand, or 118.9%, from $127 thousand for the year ended December 31, 2020 to $278 thousand for the year ended December 31, 2021.

Staff costs

Staff costs decreased $955 thousand, or 38.2%, from $2,497 thousand for the year ended December 31, 2020 to $1,542 thousand for the year ended December 31, 2021, due to staffing adjustments and employee separation costs in connection with the shutdown of Polokwane plant during 2020. Furthermore, foreign exchange differences favorably impacted staff costs.

Other operating expense

Other operating expense decreased $1,611 thousand, or 45.8%, from $3,515 thousand for the year ended December 31, 2020 to $1,904 thousand for the year ended December 31, 2021, primarily due to the recovery of operating, selling and

85

administrative expenses assumed in the 2020 financial year following the closure of the Polokwane facility in August 2019.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $1,017 thousand, or 65.1%, from $1,563 thousand for the year ended December 31, 2020 to $546 thousand for the year ended December 31, 2021. The impairment of the Polokwane plant at the end of 2020 resulted in a lower depreciation charge at the end of 2021.

Impairment loss (gain)

Impairment decreased $2,187 thousand, or 115.2%, from a loss of $1,899 thousand for the year ended December 31, 2020 to a gain of $288 thousand for the year ended December 31, 2021. This effect is a result of the partial reversal of the 2020 impairment in the year ended December 2021.

South Africa – Silicon Alloys

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

104,591

 

62,941

Raw materials and energy consumption for production

 

(68,377)

 

(43,796)

Other operating income

 

485

 

3

Staff costs

 

(11,726)

 

(8,516)

Other operating expense

 

(11,352)

 

(10,583)

Depreciation and amortization charges, operating allowances and write-downs

 

(4,535)

 

(5,578)

Impairment (loss) gain

2,396

(6,777)

Operating (loss) profit

 

11,482

 

(12,306)

Sales

Sales increased $41,650 thousand, or 66.2%, from $62,941 thousand for the year ended December 31, 2020 to $104,591 thousand for the year ended December 31, 2021. Our sales in South Africa were positively impacted by improved demand and market conditions, increasing both average selling price and sales volumes. In addition, this increase translates into the recovery of sales following the impact of Covid-19 in 2020.

Raw materials and energy consumption for production

Raw materials and energy consumption for increased $24,581 thousand, or 56.1%, from $43,796 thousand for the year ended December 31, 2020 to $68,377 thousand for the year ended December 31, 2021. Such variation is attributed to the increase in electricity price alongside the improvement in sales volume.

Other operating income

Other operating income increased $482 thousand, from $3 thousand for the year ended December 31, 2020 to $485 thousand for the year ended December 31, 2021, mainly, due to all sundry sales from the idle Polokwane plant reported in other income.

Staff costs

Staff costs increased $3,210 thousand, or 37.7%, from $8,516 thousand for the year ended December 31, 2020 to $11,726 thousand for the year ended December 31, 2021. The increase in staff cost is primarily due to an inflationary adjustment made in 2021, and the incentive bonus accrued as of December 31, 2021.

86

Other operating expense

Other operating expense increased $769 thousand, or 7.3%, from $10,583 thousand for the year ended December 31, 2020 to $11,352 thousand for the year ended December 31, 2021, primarily due to operating, selling and administrative expenses during 2021.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased by $1,043 thousand, or 18.7%, from $5,578 thousand for the year ended December 31, 2020 to $4,535 thousand for the year ended December 31, 2021. The impairment of the Polokwane plant at the end of 2020 resulted in a lower depreciation charge at the end of 2021.

Impairment (loss) gain

Impairment losses decreased $9,173 thousand, or 135.4%, from a loss of $6.777 thousand for the year ended December 31, 2020 to a gain of $2,396 thousand for the year ended December 31, 2021. This effect is a result of due to the partial reversal of the 2020 impairment in the year ended December 2021.

Other segments

Year ended December 31, 

($ thousands)

    

2021

    

2020

Sales

 

43,568

 

25,334

Raw materials and energy consumption for production

 

(33,445)

 

(19,518)

Other operating income

 

49,901

 

24,587

Staff costs

 

(31,203)

 

(17,144)

Other operating expense

 

(51,960)

 

(26,679)

Depreciation and amortization charges, operating allowances and write-downs

 

(991)

 

(1,046)

Impairment (loss)

(1,730)

(11,346)

Net gain due to changes in the value of assets

758

158

(Loss) gain on disposal of non-current assets

(37)

5

Other losses

(5)

Operating (loss)

 

(25,076)

 

(25,654)

Sales

Sales increased $18,234 thousand, or 72.0%, from $25,334 thousand for the year ended December 31, 2020 to $43,568 for the year ended December 31, 2021, mainly due to an increase in demand and prices for all our products. Additonally, sales have increased by the restart of the second furnace in our plant in Argentina.

Raw materials and energy consumption for production

Raw materials and energy consumption for production increased $13,927 thousand, or 71.4%, from $19,518 thousand for the year ended December 31, 2020 to $33,445 thousand for the year ended December 31, 2021, mainly due to increases in sales volumes. This increase is also due to an increase in the power tariff and price increases in both local and imported raw materials.

Other operating income

Other operating income increased $25,314 thousand, or 103.0%, from $24,587 thousand for the year ended December 31, 2020 to $49,901 thousand for the year ended December 31, 2021, primarily due to intercompany charges.

87

Staff costs

Staff costs increased $14,059 thousand, or 82.0%, from $17,144 thousand for the year ended December 31, 2020 to $31,203 thousand for the year ended December 31, 2021, primarily due to additional personnel requirements for the reastart of the second furnace in Argentina. The increase was also attributable to wage adjustments in 2021, and a higher variable consideration driven by the improved results in 2021 compared to 2020.

Other operating expense

Other operating expense increased $25,281 thousand, or 94.8%, from $26,679 thousand for the year ended December 31, 2020 to $51,960 for the year ended December 31, 2021, primarily due to intercompany charges.

Depreciation and amortization charges, operating allowances and write-downs

Depreciation and amortization charges, operating allowances and write-downs decreased $55 thousand, or 5.3%, from $1,046 thousand for the year ended December 31, 2020 to $991 thousand for the year ended December 31, 2021.

Impairment (loss)

Impairment losses decreases $9,616 or 84.8%, from a loss of $11,346 thousand for the year ended 31 December 2020 to a loss of $1,730 thousand for the year ended 31 December 2021, mainly due to impaired intercompany loans. These items are eliminated in the consolidation. During 2021 the Company recorded an impairment related to quarz mine in Mauritania amounting $1,726 thousand.

Net gain due to changes in the value of assets

The gain due to changes in the value of assets in 2021 is mainly due to the increase in the valuation of Pampa Energy shares in Argentina.

(Loss) gain on disposal of non-current assets

Loss of disposal of non-current assets increased by $42 thousand, or 840.0%, from a gain of $5 thousand for the year ended 31 December 2020 to a loss of $37 thousand for the year ended 31 December 2021, mainly due to the loss on the sale of fixed assets at the facility in Puertollano, Spain.

Effect of Inflation

In 2022, inflation reached unprecedented levels in most countries where Ferroglobe operates and sources products. Inflation led to higher pressure on costs, with unusual surcharges being applied by suppliers on some product categories. Energy and fuel surcharges impacted specifically some supplies during the second and third quarter.

Management believes that the impact of inflation was not material to Ferroglobe’s results of operations in the years ended December 31, 2021 and 2020.

Cyclical Nature of the Industry and Movement in Market Prices, Raw Materials and Input Costs

Our business has historically been subject to fluctuations in the price of our products and market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors. The timing, magnitude and duration of these cycles and the resulting price fluctuations are difficult to predict. For example, we experienced a weakened economic environment in national and international metals markets, including a sharp decrease in silicon metal prices in all major markets from late 2014 to late 2017. Throughout 2019 and 2020, we experienced the most dramatic decline in prevailing prices of our products, which adversely affected our results. During the fourth quarter of 2020, demand for our products increased to levels similar to those prior to the pandemic. During

88

2021, demand for our products has further increased; however, COVID-19 and the Ukraine-Russia conflict have negatively impacted, and will in the future negatively impact our business.  The COVID pandemic and the Ukraine-Russia conflict have also impacted international logistics costs and have significantly impacted raw materials and commodities prices, external and unforeseeable factors have also contributed to extremely volatile and high spot electricity prices, in particular in Europe.

B.    Liquidity and Capital Resources

Sources of Liquidity

Ferroglobe’s primary sources of long-term liquidity are its senior secured notes with a $345,058 thousand aggregate principal at an interest rate of 9.375%, due on June 30, 2025, (“the Reinstated Senior Notes”) and its primary source of short-term liquidity is its factoring agreements with a Leasing and Factoring Agent and with Bankinter, for anticipating the collection of receivables of the Company’s European entities, which in 2022 provided upfront cash consideration of approximately $895,264. The Company also signed in 2022 a $100 million ABL Revolver, which is currently undrawn.

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.

On October 2, 2020, the Company signed a factoring agreement with a financial institution, to anticipate the collection of receivables issued by the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS). See Note 16.

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;
-a 0.18% to 0.25%  fee charged on the total of invoices and credit notes sold to the Agent;
-a financing commission set at IBOR +1% charged on the drawdowns;

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.

On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with Bankinter. This program offers the possibility to sell the receivables corresponding to ten customers pre-approved by the bank and its credit insurer. Receivables are pre-financed at 100% of their face value.

The main characteristics of this program are the following:

-the maximum cash consideration advanced for the financing facility is up to €30,000 thousand;

89

-a service fee set at 0.25% of the receivable face value;
-a cost of financing set at Euribor 12-month +1%;
-a closing fee set at 0.25% of the financing;
-an annual renewal fee set at 0.25% of the financing.

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 a loan agreements under which the Ministry made available to the borrower a loan in aggregate principal amount of €44.9 million, in connection with the industrial development projects relating to our solar grade silicon project. FAU transferred the loan to OPCO before its sale. See “Item 4.B.—Information on the Company—Business Overview—Research and Development (R&D)—Solar grade silicon.” The loan of €44.9 million is to be repaid in seven installments starting on 2023 and completed by 2030. On January 25, 2022, the Ministry opened a procedure to decide about the potential reimbursement of the loan. The company presented its allegations on February 15, 2022. Based on those allegations, the Ministry closed the reimbursement procedure. As a result of this procedure, a partial early repayment of €16.3 million has been made on February 10, 2023. In March 2023, we have received from the Ministry the new repayment schedule. Interest on outstanding amounts under each loan accrues at an annual rate of 3.55%. See Note 19.

On June 2, 2020, Ferroglobe subsidiary, Silicium Québec, as borrower, agreed 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 July 23, 2020, Ferroglobe subsidiary, Ferropem, S.A.S., as borrower, entered into a loan with BNP Paribas, as lender, amounting to €4,300 thousand, to finance Company’s activities in France. The loan is guaranteed by French government following special measurements taken on COVID-19 impact on businesses. Repayment of principal and payment of interest and accessories shall be made with the possibility for the Borrower to request 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 shall be liable to pay a fee equal to 0.50% equal to an amount of €22 thousand calculated on the total borrowed capital.

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 €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 secured by corporate joint guarantees from Ferroglobe, Ferroglobe Holding Company and Ferroglobe Finance Company and certain share pledges, bank account pledges, intercompany receivables pledges, inventory pledges and security over certain real property, and other assets from Grupo FerroAtlántica and certain of its subsidiaries.

Until the loans have been fully repaid, the Beneficiaries are subject to several restrictions, including the following prohibited payments: (1) payment of dividends; (2) payment of management fee; (3) repayment of intra-group loans; (4) payment of intercompany net commercial balances as of June 30, 2021 (denominated “legacy”), with an exception of $20M of those balances. (Intercompany commercial balances generated after Jun-21 are permitted); and (5) payment of interest on intercompany loans corresponding to the years 2021 and 2022.

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In 2022, The Company closed a new, five-year $100 million North American asset-based revolving credit facility (the “ABL Revolver”), involving Ferroglobe’s subsidiary, Globe Specialty Metals, Inc. (“Globe”), and its wholly owned North American subsidiaries, as borrowers, and Bank of Montreal (“BMO”), as lender and agent.The ABL Revolver is secured by North America inventories and receivables. At December 31, 2022, the ABL Revolver was undrawn.

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 and working capital. Ferroglobe’s long-term liquidity needs primarily relate to debt repayment. Ferroglobe’s core objective with respect to capital management is to maintain a balanced and sustainable capital structure through the economic cycles of the industries in which it participates, while keeping the cost of capital at competitive levels.  

For the year ended December 31, 2022, operating activities generated a cash flow of $405,018 thousand, compared to $(1,341) thousand in 2021 and $154,268 thousand in 2020, mainly due to the 2022 results, as a result of favourable pricing, commercial excellence, operational agility and cost discipline. Investing activities resulted in a total outflow of $51,774 thousand of cash in 2022, compared to an outflow of $23,848 thousand in 2021 and an outflow of $$31,940 thousand in 2020. Financing activities resulted in a total inflow of $140,458 thousand in cash in 2021, compared to an inflow of $10,452 thousand in 2021 and an outflow of $113,333 thousand in 2020. See “Cash Flow Analysis” below for additional information.

As of December 31, 2022 and 2021, Ferroglobe had cash, restricted cash and cash equivalents of $322,943 thousand (of which $5,008 thousand is restricted cash) and $116,663 thousand (of which $2,272 thousand is restricted cash), respectively. Cash and cash equivalents are primarily held in U.S. Dollars and Euros.

We believe our working capital is sufficient for our present requirements, and we anticipate generating sufficient cash to satisfy our short and long-term liquidity needs.

Availability of funds

At December 31, 2022, we had cash and cash equivalents, restricted cash and other restricted funds amounted to $322,943  thousand ($116,663 thousand at December 31,2021). This amount includes non-current restricted cash in relation to the guarantees taken over escrow amounting $2,133 thousand. The escrow was constituted in August 30, 2019, in consideration of previous FerroAtlántica. The restricted cash also includes current-restricted cash in relation to the NMTC program amounting 2,875 (See Note 10).

The Company also has certain restrictions for the disposal of the cash in the joint ventures with Dow Corning amounting as of December 31, 2022.

Ferroglobe PLC is the parent company of Ferroglobe Group and receives funding from its subsidiaries in the form of intercompany loans. Consequently, certain restrictions on the ability of the Group’s subsidiaries to transfer funds to Ferroglobe PLC would negatively affect our liquidity and thus our business.

Grupo Ferroatlántica also has restrictions coming from the SEPI loans. Until the loans have been fully repaid, the company is subject to several restrictions, including the following prohibited payments: (1) payment of dividends; (2) payment of management fee; (3) repayment of intra-group loans; (4) payment of intercompany net commercial balances as of June 30, 2021 (denominated “legacy”), with an exception of $20M of those balances. (Intercompany commercial balances generated after Jun-21 are permitted); and (5) payment of interest on intercompany loans corresponding to the years 2021 and 2022 (see Note 19).

Under the ABL credit agreement, the borrowers commit to respect usual affirmative covenants, among others communicating any default or event of default, a change of control, the creation of acquisition of subsidiaries, a casualty or damage to any material used as a collateral, maintenance of the insurance, the compliance with ERISA and the Canadian Pension Laws, the compliance with environmental laws. The borrowers also commit not to create or incur any indebtedness, capital leases in excess of a $7.5m, create liens, merge, dissolve, divide any borrowers, change the nature of

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the business, pay dividends, repay indebtedness for the account of holder of Equity Interests of any Loan Party or its affiliates, maintain a financial covenant consolidated fixed charge coverage ratio to be less than 1.00 to 1.00.

Working Capital Position

As of December 31, 2022, Ferroglobe’s working capital position (defined as inventories and trade and other receivables less trade and other payables) was $705,888 thousand as compared to $464,870 thousand as of December 31, 2021, mainly due to an increase in inventories by $210,283 thousand and receivables by $44,401 thousand partially offset for an increase in payables by $13,666 thousand.

Capital Expenditures

Ferroglobe incurs capital expenditures in connection with expansion and productivity improvements, production plants maintenance and research and development projects. Capital expenditures are funded through cash generated from operations and financing activities. Ferroglobe’s capital expenditures for the years ended December 31, 2022, 2021 and 2020 were $52,153 thousand, $27,597 thousand and $30,257 thousand, respectively.

Contractual Obligations

The following table sets forth Ferroglobe’s contractual obligations and commercial commitments with definitive payment terms that will require significant cash outlays in the future, as of December 31, 2022.

Payments Due by Period

Less
than

More
than

($ thousands)

    

Total

    

1 year

    

1 - 3 years

    

3 - 5 years

    

5 years

Long and short term debt obligations

 

643,499

 

156,123

466,106

5,248

16,022

Capital expenditures

 

16,607

 

16,607

Leases

 

23,166

 

8,928

7,349

3,246

3,643

Power purchase commitments (1)

526,841

155,374

320,872

37,946

12,649

Purchase obligations (2)

32,432

32,432

Other Long-Term Liabilities Reflected on the Company's Balance Sheet (3)

142,221

5,500

14,595

8,367

113,759

Total

 

1,384,766

 

374,964

 

808,922

 

54,807

 

146,073

(1)Represents minimum charges that are enforceable and legally binding, and do not represent total anticipated purchases. Minimum charges requirements expire after providing one year notice of contract cancellation.
(2)The Company has outstanding purchase obligations with suppliers for raw materials in the normal course of business. The disclosed purchase obligation amount represents commitments to suppliers that are enforceable and legally binding and do not represent total anticipated purchases of raw materials in the future.
(3)Included tolling agreement with Cee-Dumbria facility and contingent consideration with Glencore.

The table above also excludes certain other obligations reflected in our consolidated balance sheet, including estimated funding for pension obligations, for which the timing of payments may vary based on changes in the fair value of pension plan assets and actuarial assumptions. We expect to contribute approximately $648 thousand to our pension plans for the year ended December 31, 2022.

Further information regarding Ferrogloble’s contractual obligations and commercial commitments as of December 31, 2022, is set forth in note 28 to the consolidated financial statements.

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Cash Flow Analysis — Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table summarizes Ferroglobe’s primary sources (uses) of cash for the years ended December 31, 2022 and 2021:

Year ended December 31, 

($ thousands)

    

2022

    

2021

Cash and cash equivalents at beginning of period

 

116,663

 

131,557

Cash flows from operating activities

 

405,018

 

(1,341)

Cash flows from investing activities

 

(51,774)

 

(23,848)

Cash flows from financing activities

 

(140,458)

 

10,452

Exchange differences on cash and cash equivalents in foreign currencies

 

(6,506)

 

(157)

Cash, restricted cash and cash equivalents at end of period

 

322,943

 

116,663

Cash, restricted cash and cash equivalents at end of period from statement of financial position

 

322,943

 

116,663

Ferroglobe PLC paid nil dividends during the year ended December 31, 2022 and the year ended December 31, 2021.

Cash flows from operating activities

Cash flows from operating activities increased $406,359 thousand, from a negative cash generated of $1,341 thousand for the year ended December 31, 2021, to a positive $405,018 thousand for the year ended December 31, 2022, mainly due to the 2022 results, as a result of sales prices increase in 2022 compared to 2021, commercial excellence and cost discipline.

Cash flows from investing activities

Cash flows from investing activities increased $37,835 thousand from an outflow of $23,848 thousand for the year ended December 31, 2021, to an outflow of $61,683 thousand for the year ended December 31, 2022. Capital expenditures increased during the year ended December 31, 2022 to $52,153 thousand from $27,597 thousand during the year ended December 31, 2021.

Cash flows from financing activities

Cash flows from financing activities decreased $141,001 thousand, from a net inflow of $10,452 thousand for the year ended December 31, 2021 to a net outflow of $130,549 thousand for the year ended December 31, 2022. The decrease is mainly due to the repayment of the principal of the Super Senior Notes amounting $60 million and the Old Notes amounting $4.9 million, the repurchase of 19.05 million of the Reinstated Notes and the payment of the interests accrued under amounting to $52.3 million.

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Cash Flow Analysis — Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following table summarizes Ferroglobe’s primary sources (uses) of cash for the years ended December 31, 2021 and 2020:

Year ended December 31, 

($ thousands)

    

2021

    

2020

Cash and cash equivalents at beginning of period

 

131,557

 

123,175

Cash flows from operating activities

 

(1,341)

 

154,268

Cash flows from investing activities

 

(23,848)

 

(31,940)

Cash flows from financing activities

 

10,452

 

(113,333)

Exchange differences on cash and cash equivalents in foreign currencies

 

(157)

 

(613)

Cash, restricted cash and cash equivalents at end of period

 

116,663

 

131,557

Cash, restricted cash and cash equivalents at end of period from statement of financial position

116,663

131,557

Ferroglobe paid nil dividends during the year ended December 31, 2021 and the year ended December 31, 2020.

Cash flows from operating activities

Cash flows from operating activities decreased $155,609 thousand, from a positive cash generated of $154,268 thousand for the year ended December 31, 2020, to a negative $1,341 thousand for the year ended December 31, 2021. The decrease is mainly due to the bad result in 2021, tightness in the market drove pricing to unprecedented levels primarily silicon metal and ferrosilicon.

Cash flows from investing activities

Cash flows from investing activities increased $8,092 thousand from an outflow of $31,940 thousand for the year ended December 31, 2020 to an outflow of $23,848 thousand for the year ended December 31, 2021. Capital expenditures decreased during the year ended December 31, 2021 to $27,597 thousand from $30,257 thousand during the year ended December 31, 2020. Additionally, during the year ended December 31, 2021, cash inflows were the proceeds from the disposal of certain assets, including $1,370 thousand from the sale of Niagara assets.

Cash flows from financing activities

Cash flows from financing activities increased $123,785 thousand, from a net outflow of $113,333 thousand for the year ended December 31, 2020 to a net inflow of $10,452 thousand for the year ended December 31, 2021. The increase is mainly due to the refinancing process, the issuance of the Super Senior notes amounting $60 million and $40 million of new equity.

Capital resources

Ferroglobe’s core objective is to maintain a balanced and sustainable capital structure through the economic cycles of the industries in which it operates, while keeping the cost of capital at competitive levels. In addition to cash flows from continuing operations, the Company’s main sources of capital resources are its Reinstated Senior Notes with an aggregate principal value of $345,058 thousand and the factoring agreements with a maximum cash consideration advanced up to €90,000 thousand.

Capital Raising and Extension of the Maturity of the Senior Notes

Details and description of Ferroglobe’s debt instrument and factoring agreement are described in Notes 16 and 18 of the Consolidated Financial Statements.

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For additional information see also “Item 10.C.— Material Contracts”.

C.    Research and Development, Patents and Licenses, etc.

For additional information see “Item 4.B.—Information on the Company—Business Overview—Research and Development (R&D).”

D.    Trend Information

We discuss in Item 5.A. above and elsewhere in this annual report, trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that we believe are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources or to cause the disclosed financial information not to be necessarily indicative of future operating results or financial conditions.

E.    Critical Accounting Estimates

The discussion and analysis of Ferroglobe’s financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with IFRS. The preparation of those financial statements requires Ferroglobe to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, the disclosure of contingent assets and liabilities and related disclosure at the date of its financial statements. The estimates and related assumptions are based on available information at the date of preparation of the financial statements, on historical experience and on other relevant factors. Actual results may differ from these estimates under different assumptions and conditions. Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. The principal items affected by estimates are business combinations, impairment of long-lived assets, inventories and income taxes. The following are Ferroglobe’s most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of all of Ferroglobe’s principal accounting policies, see Note 4 to the Consolidated Financial Statements of Ferroglobe included elsewhere in this annual report.

Business combinations

Ferroglobe subsidiaries have completed a number of significant business acquisitions over the past several years. Our business strategy contemplates that we may pursue additional acquisitions in the future. When we acquire a business, the purchase price is allocated based on the value of tangible assets and identifiable intangible assets acquired and liabilities assumed. 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. Goodwill as of the acquisition date is measured as the residual of the excess of the consideration transferred, plus the fair value of any non-controlling interest in the acquiree at the acquisition date, over the fair value of the identifiable net assets acquired. 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. We generally engage independent third-party appraisal firms to assist in determining the fair value of assets acquired and liabilities assumed. Such a valuation requires management to make significant estimates, especially with respect to intangible assets. These estimates are based on historical experience and information obtained from the management of the acquired companies. These estimates are inherently uncertain and may impact reported depreciation and amortization in future periods, as well as any related impairment of goodwill or other long lived assets.

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

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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.

See Note 5 to the accompanying audited Consolidated Financial Statements for detailed disclosures related to our acquisitions.

Goodwill

Goodwill represents the excess purchase price of acquired businesses over fair values attributed to underlying net tangible assets and identifiable intangible assets. For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups of cash generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the cash-generating unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The valuation of the Company’s cash generating units requires significant judgment in evaluation of, among other things, recent indicators of market activity and estimated future cash flows, discount rates and other factors. The estimates of cash flows, future earnings, and discount rate are subject to change due to the economic environment and business trends, including such factors as raw material and product pricing, interest rates, expected market returns and volatility of markets served, as well as our future manufacturing capabilities, government regulation, technological change and operational improvements and cost efficiencies driven by the implementation of the new strategy.

We believe that the estimates of future cash flows, future earnings, and fair value are reasonable; however, changes in estimates such as volumes, pricing, costs, discount rate, circumstances or conditions could have a significant impact on our fair valuation estimation, which could then result in an impairment charge in the future.

During the years ended December 31, 2021 and December 31, 2020, the Company has concluded that there is no impairment of goodwill.

Ferroglobe operates in a cyclical market, and silicon and silicon-based alloy index pricing and foreign import pressure into the U.S. and Canadian markets impact the future projected cash flows used in our impairment analysis.

Long-lived assets (excluding goodwill)

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 cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value 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. 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 is recognized as “impairment gain (losses)” in the consolidated income statement.

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

During year ended December 31, 2022 the Company recognized an impairment of $56,999 thousand in relation to; our  idled capacity at the Polokwane facility in South Africa impairment reversal of $5,017 thousand, at Château Feuillet facility in Europe impairment of $5,994 thousand, at Boo facility in Europe impairment of $11,559 thousand, at Cinca facility in Europe impairment of $5,915 thousand, at Cee facility in Europe impairment of $20,034 thousand, at Moi Rana facility in Europe impairment of $15,749 thousand, at South Africa mines an impairment reversal of $2,750 thousand and in our assets in Puertollano impairment amounting $5,515 thousand. During year ended December 31, 2021 the Company recognized an impairment reversal of $137 thousand in relation to; our  idled capacity at the Polokwane facility in South Africa impairment reversal of $2,681 thousand, at Château Feuillet facility in Europe impairment of $441 thousand and in our quartz mine in Mauritania amounting $1,726 thousand.

Inventories

Cost of inventories is determined by the average cost method. Inventories are valued at the lower of cost or Net Realizable Value. Circumstances may arise (e.g., reductions in market pricing, obsolete, slow moving or defective inventory) that require the carrying amount of our inventory to be written down to net realizable value. We estimate market and net realizable value based on current and future expected selling prices, as well as expected costs to complete, including utilization of parts and supplies in our manufacturing process. We believe that these estimates are reasonable; however, future market price decreases caused by changing economic conditions, customer demand, or other factors could result in future inventory write-downs that could be material.

Determination of income taxes provision

The current income tax expense incurred by Ferroglobe subsidiaries on an individual basis is determined by applying the applicable tax rate to the taxable profit for the year, calculated on the basis of accounting profit before tax, increased or decreased, as appropriate, by the permanent differences arising from the application of tax legislation and by the elimination of any tax consolidation adjustments, taking into account tax relief and tax credits. The consolidated income tax expense is calculated by adding together the expense recognized by each of the consolidated subsidiaries, increased or decreased, as appropriate, as a result of the tax effect of consolidation adjustments for accounting purposes.

Ferroglobe’s deferred tax assets and liabilities include temporary differences measured at the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled. Deferred tax liabilities are recognized for all taxable temporary differences, except for those arising from the initial recognition of goodwill. Deferred tax assets are recognized to the extent that it is considered probable that Ferroglobe will have taxable profits in the future against which the deferred tax assets can be utilized. The deferred tax assets and liabilities recognized are reassessed at each reporting date in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.

Significant judgment is required in determining income tax provisions and tax positions. Ferroglobe may be challenged upon review by the applicable taxing authorities, and positions taken may not be sustained. The accounting for uncertain income tax positions requires consideration of timing and judgments about tax issues and potential outcomes and is a subjective estimate. In certain circumstances, the ultimate outcome of exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on Ferroglobe’s results of operations and financial condition. Interest and penalties related to uncertain tax positions are recognized in income tax expense.

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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.

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.

G.    Safe Harbor

This annual report contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act and Section 21E of the U.S. Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statements Regarding Forward-Looking Statements.”

ITEM 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    Directors and senior Management

The following table lists each of our executive officers and directors, their respective ages and positions as of the date of this annual report and their respective dates of appointment. The business address of all our directors and senior management is our business address as set forth in “Item 4.A.—Information on the Company—History and Development of the Company.”

Name

    

Age

    

Position

Date of appointment

Javier López Madrid

58

Director and Executive Chairman

February 5, 2015

Marco Levi

63

Director and Chief Executive Officer

January 10, 2020

Beatriz García-Cos Muntañola

59

Chief Financial Officer and Principal Accounting Officer

October 17, 2019

Bruce L. Crockett

79

Director

December 23, 2015

Stuart E. Eizenstat

80

Director

December 23, 2015

Manuel Garrido y Ruano

57

Director

May 30, 2017

Marta de Amusategui y Vergara

58

Director

Jun 12, 2020

Juan Villar-Mir de Fuentes

61

Director

December 23, 2015

Belén Villalonga Morenés

54

Director

May 13, 2021

Silvia Villar-Mir de Fuentes

57

Director

May 13, 2021

Nicolas de Santis

57

Director

May 13, 2021

Rafael Barrilero Yarnoz

60

Director

May 13, 2021

Other than employment agreements between Ferroglobe and each of Javier López Madrid, Marco Levi and Beatriz García-Cos Muntañola, there are no service contracts between the officers and directors listed in the table above, on the one hand, and us or any of our subsidiaries on the other, providing for benefits upon termination of employment.

There are no family relationships between our executive officers and directors, except that Javier López Madrid is married to Silvia Villar-Mir de Fuentes, who is also the sister of Juan Villar-Mir de Fuentes.

Set forth below is a brief biography of each of our executive officers and directors.

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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 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 Mativ Holdings, 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.

Beatriz García-Cos Muntañola

Beatriz García-Cos Muntañola was appointed as Chief Financial Officer and Principal Accounting Officer on October 17, 2019.

Before joining Ferroglobe, Ms. García-Cos served as Group CFO at Bekaert NV, a leading, global steel wire transformation company, listed on the Brussels Stock Exchange, where she focused on setting and executing financial strategy, as well as leading numerous strategic projects centered on business growth and enhanced operational efficiency. Prior to Bekaert NV, she was the Chief Financial Officer of the mining division of Trafigura Beheer BV, one of the largest physical commodities trading groups. Before that, she was Finance Director, EMEA and LATAM, for Vestas Wind Systems A.S, the Danish publicly-listed multinational and world’s largest wind turbine manufacturer. Prior to that role, she was Finance Manager for PPG Industries Inc, a leading diversified manufacturing company listed on the New York Stock Exchange. On March, 2023, the Board of Directors of Bodycote plc announced the nomination of Ms. Garcia-Cos Muntañola as a Non-Executive Director effective 1 September 2023, subject to election by the shareholders of Bodycote at its annual general meeting. If elected, Ms. Garcia-Cos Muntañola is expected to join the Remuneration, Nomination and Audit committees of the Board as well.

Ms García-Cos holds an M.A. in Economics and Business Administration from the University of Barcelona and graduated from the Advanced Management Program of IESE, in Spain.

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.

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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. In 2021 he was appointed  as a member  of the Board of Advisors of the Western Colorado University Graduate Business School.

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.

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 headed its international practice for many years after joining the firm in 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  from colleges and universities, high honors  from the United States, French (Legion of Honor), German, Austrian, Belgian and Israeli governments, and over 75 awards from various organizations.

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.

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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 honors from the Universidad Politécnica de Madrid and an MBA from INSEAD, Fontainebleau, France.

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 has held 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 is currently Chairman of Inmobiliaria Espacio, S.A and Grupo Villar Mir, S.A.U. In both companies he served as Vice Chairman since 1996 and since 1999 respectively. He is currently Second Vice Chairman of Obrascon Huarte Lain, S.A and has been serving as a member of the Board of Directors since 1996, first as a member of the Audit Committee and, later, as a  member of its Compensation Committee. 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.

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

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. During 2018-2019 she was a Visiting Professor at Oxford University’s Said 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 17,000 times in scholarly articles and international media outlets.

Professor Villalonga is an independent director at Banco Santander International (Santander group’s private banking subsidiary in the United States), as well as at Mapfre USA (insurance). She was also an independent director for many years at three global companies publicly listed in Spain: Acciona (renewable energy and infrastructure), Grifols (biopharma), and Talgo (high-speed trains).

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 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 Compensation Committee and Nominations Committee member 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 the Chief Executive Officer of De Santis Corporate Vision, a strategy and innovation consultancy and incubator. De Santis advises multinational corporations and start-ups on business visioning strategy, global 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 sits on the board of several foundations, including, The World Law Foundation, The Moniker Art Foundation and the IWSC Foundation for oenology.

Mr. De Santis is a regular lecturer at business schools and universities on disruptive innovation, business strategy, global branding, business model innovation and culture transformation, including IE Business School, Madrid and the University

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of Wyoming. He is the author of Futurising Companies® - A systematic approach to winning the future by managing culture as the operating system of organizations.

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. In January 2022 he joined the board of directors of AltamarCAM and Grupo Hedima, as a permanent Senior Advisor. He collaborates with the HAZ foundation, whose mission is to ensure transparency and good corporate governance.

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.

Board Diversity Matrix

On August 6, 2021 the SEC approved Nasdaq’s Board Diversity Rule, requiring Nasdaq-listed companies to, subject to certain transition periods and exceptions (1) publicly disclose board-level diversity statistics in its annual report or on its website and in an aggregated form, using a standardized template and (2) have or explain why they do not have at least two diverse directors.

 Ferroglobe, as a listed foreign private issuer, is required to have, or explain why it does not have, at least two diverse directors, including one who self-identifies as female, and one who self-identifies as either female, LGBTQ+ or an underrepresented individual. Foreign private issuers shall, starting by the later of (i) August 8, 2022, or (ii) the date when the annual report for the year ended 2022 is filed with the SEC, publish board level diversity statistics annually using either the U.S. domestic issuers prescribed matrix or the foreign private issuers prescribed matrix, and have, or explain why they do not have, one diverse director in 2023, and two diverse directors in 2025.

 As a foreign private issuer, Ferroglobe reports board diversity information following the foreign private issuers prescribed matrix. The Company believes that it is presently in compliance with the diversity requirements pursuant to Nasdaq’s listing rules.

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 The information provided below is based on the voluntary self-identification of each member of the Company’s Board of Directors as of December 31, 2022:

Board Diversity Matrix (As of December 31, 2022)

Country of Principal Executive Offices

United Kingdom

Foreign Private Issuer

Yes

Disclosure Prohibited under Home Country Law

No

Total Number of Directors

11

Female

Male

Non-Binary

Did Not Disclose Gender

Part I: Gender Identity

Directors

3

8

Part II: Demographic Background

Underrepresented Individual in Home Country Jurisdiction

LGBTQ+

Did Not Disclose Demographic Background

B.    Compensation

Compensation of executive officers and directors

The table below sets out the remuneration earned by our directors during the year ended December 31, 2022:

Long - Term

($ units)

    

Salary & Fees

    

Benefits

    

Pension

    

Annual Bonus

    

Incentives

    

Total

Executive Directors

 

  

 

  

 

  

 

  

 

  

 

  

Javier López Madrid

685,321

181,562

137,064

1,000,543

1,808,735

3,813,224

Marco Levi

842,400

27,667

168,480

1,279,920

1,716,251

4,034,718

Non-Executive Directors

  

  

  

  

  

Rafael Barrilero Yarnoz

128,112

9,261

137,373

Bruce L. Crockett

204,053

21,609

225,662

Stuart E. Eizenstat

106,503

8,644

115,147

Manuel Garrido y Ruano

102,798

5,557

108,355

Nicolas de Santis

110,825

110,825

Marta Amusategui

128,729

9,261

137,990

Juan Villar-Mir de Fuentes

87,980

3,704

91,684

Silvia Villar-Mir de Fuentes

107,120

7,409

114,529

Belén Villalonga Morenés

124,408

21,509

145,917

Javier López Madrid holds 28,117 options granted on November 24, 2016 and vested in 2019, 70,464 options granted on June 1, 2017 and vested in 2020, and 46,777 options granted on March 21, 2018 (at target performance in each case). On March 14, 2019 Javier López Madrid was granted 342,329 options (at target performance). As with prior grants, the maximum opportunity for each award is twice target. The awards granted in 2019 were discounted by a significant percentage to take account of the fall in the Company’s share price in 2018 and 2019, with a discount of 50% applied to awards granted to executive directors, and a cap at 400% of each of the above participants’ “normal” award level was also introduced for all 2019 awards. On December 16, 2020, Javier López Madrid was granted 1,355,915 options and Marco Levi was granted 1,279,544 options (at maximum performance in each case). On September 9, 2021, Javier López Madrid was granted 385,611 options and Marco Levi was granted 359,105 options (at maximum performance in each case). On September 22, 2022 Javier Lopez Madrid was grated 184,461 options and Marco Levi was grated 233,236 options at maximum performance in each case

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All of these options were granted under the rules of the Company’s Equity Incentive Plan 2016, are over ordinary shares in the capital of the Company and have a strike price of nil, except the options granted in 2021 which have a strike of 0.01. The options vest and become exercisable three years from the date of grant in the case of the options granted in 2017, 2018 and 2019, and four years from the date of grant in the case of the options granted in 2020, in each case to the extent that performance conditions are satisfied, and subject to continued service with the Company, remain exercisable until the tenth anniversary of their grant date. In the case of the options granted in 2021 the options vest on January 1, 2024.

Remuneration policy

In June 2020, our shareholders approved the remuneration policy applicable to executive directors and non-executive directors of the Company as set out in the directors’ remuneration report within our U.K. annual report for the year ended December 31, 2019 (the “Policy”), as required by the UK Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Policy was approved on June 30, 2020 and applied with immediate effect.

The overall aim of our remuneration strategy is to provide appropriate incentives that reflect our high-performance culture and values to maximize returns for our shareholders. In summary, we aim to:

attract, retain and motivate high-caliber, high-performing employees;
encourage strong performance and engagement, both in the short and the long term, to enable us to achieve our strategic objectives;
link a very significant proportion of pay to performance conditions measured over both 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 directors.

Consistent with this remuneration strategy, in relation to the Company’s executive directors, the Policy provides, in summary, that:

executive director salaries are set at a rate commensurate with the individual’s role, responsibilities and experience, having regard to broader market rates. Salaries are reviewed annually, when Company performance, individual performance, changes in responsibility, levels of increase for the broader employee population and market salary levels will be taken into account. No maximum salary is set under the Policy;
executive directors may receive a cash allowance in lieu of contribution to a pension, up to a maximum of 20% of base salary per annum, which may include contributions to a U.S. tax-qualified defined contribution 401(k) plan;
executive directors may receive other market competitive benefits such as medical cover, life assurance and income protection insurance and, where appropriate, relocation allowances (with the Compensation Committee to review relocation allowances annually);
executive directors are provided with directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the UK Companies Act 2006;
executive directors are eligible for an annual bonus, which normally has a maximum bonus opportunity of 200% of annual base salary but could have a maximum bonus opportunity of up to 500% of annual base salary in

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exceptional circumstances. No more than 25% of the maximum bonus payable for each performance condition will be payable for threshold performance. Any bonus award will be subject to the achievement of quantitative and qualitative performance conditions as determined by the Compensation Committee each year (at least two-thirds of the bonus will be based on financial metrics with the balance based on non-financial metrics). Normally any bonus earned in excess of the target amount will be deferred for three years into shares in the Company and the executive director may be granted an additional long-term incentive award of equal value (at maximum) to the amount of annual bonus deferred. Recovery and recoupment provisions apply to all bonus awards for misstatement, error or gross misconduct. The Company may also award retention bonuses, payable in addition to or instead of any annual bonus, if it considers it necessary to retain key executives in situations where the individual might otherwise leave and his or her retention is critical. The grant, terms and payment of any retention bonus are at the discretion of the Committee. Any retention bonus would normally count towards the 500% salary limit referred to above;
executive directors are eligible to be granted an award under the Company’s long-term incentive plan, at the discretion of the Compensation Committee. Any awards granted would normally vest three years after the date of grant. All long-term incentive awards granted are subject to the achievement of performance targets, determined by the Compensation Committee for each grant. If an award is granted, the annual target award limit will not normally be higher than 300% of salary (save that, in recruitment, appointment and retention situations, it could be up to 500% of salary) and maximum vesting is normally 200% of target (both measures based on the face value of shares at the date of grant). Recovery and recoupment provisions apply to all long-term incentive awards for misstatement, error or gross misconduct;
the Company has share ownership guidelines in place under which it recommends that executive directors hold a number of shares in the Company equivalent to 200% of base salary; and
when determining the remuneration package for a new executive director, the Compensation Committee expects to apply the Policy set out above but may, in some circumstances, need to take account of other relevant factors, such as that individual’s existing employment and their personal circumstances.

The Company’s executive directors are Mr. López Madrid, who has served as Executive Chairman since December 2017 and as a Director since December 2015, and receives a base salary of £555,000 per annum, and Dr. Marco Levi who serves as Chief Executive Officer and Director and receives a base salary of €800,000 per annum. The salary of Mr. López Madrid has remained unchanged since his executive appointment. Effective April 1, 2023, the base salary of Mr. López Madrid was increased 8% in light of the turnaround of the company and the fact that his base salary had not increased since assuming the role of Executive Chairman. Effective April 1, 2023 the base salary of Dr. Levi was increased 2%

In relation to the Company’s non-executive directors, the Policy provides, in summary, that:

Non-executive directors are paid a basic fee. Supplementary fees are paid for additional responsibilities and activities such as membership of a main Board committee or assuming chairmanship of a committee. Travel fees may be paid to reflect additional time incurred in travelling to meetings;
Currently, non-executive directors receive a base fee of £70 thousand per annum, with supplemental fees being payable if that non-executive director is also the senior independent director (£35,000 per annum), a member of the Audit Committee (£17,500 per annum), a member of the Compensation Committee (£15,500 per annum), a member of the Corporate Governance Committee (£12,000 per annum) or a Committee Chairman (two times membership fee). Non-executive directors receive a travel fee of either £3,500 (for intercontinental travel) or £1,500 (for continental travel) per meeting. Members of the Nominations Committee receive a fee of £1,500 for each meeting, with a maximum set at £10,000 per annum. Extraordinary meetings are paid at £2,500 for in person meetings and £1,250 by videocoference or telephone. Where the Chair of the Nominations Committee is also an executive director, he or she is paid no fee for their chairmanship. Non-executive director fee levels are reviewed periodically, with reference to time commitment, knowledge, experience and responsibilities of the role as well

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as market levels in comparable companies both in terms of size and sector. No maximum fee level or prescribed annual increase is set under the Policy;
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 director as a result of reimbursement of those expenses. The Company may also pay an allowance in lieu of expenses if it deems this appropriate;
non-executive directors are provided with directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the UK Companies Act 2006.

C.    Board Practices

Board composition and election of Directors

As of the date of this annual report, our Board of Directors consists of eleven directors, of whom two are executive directors and nine are non-executive directors. The maximum and minimum number of directors is eleven and two respectively. Subject to the approval of the Nominations Committee, the Chief Executive Officer is nominated as a director by the Board of Directors. Of the directors, Javier López Madrid, Manuel Garrido y Ruano and Juan Villar Mir  de Fuentes are Grupo VM nominees. Silvia Villar-Mir de Fuentes was appointed to the Board on May 13, 2021 as a non-executive director who is affiliated with Grupo VM.  The remaining non-executive directors are independent.  

All directors will stand for re-election at the Company’s annual general meeting in June, 2023. Any director not so elected or re-elected will stand down. No new executive directors may be appointed without the approval of a majority of Grupo VM nominees and a majority of independent directors.

Director independence

Under the Articles of Association, as in effect since October 26, 2017, a director is considered independent if he or she is “independent” as defined in the NASDAQ rules and, while Grupo VM and its Affiliates own 10% or more of the Company’s shares, is independent from Grupo VM and its Affiliates.  The Board reviewed the independence of its then directors in December 2015 and concluded that each of Messrs. Crockett and Eizenstat met the independence requirements of the NASDAQ rules.  Messrs. López Madrid, Garrido y Ruano and Villar Mir are GVM Nominees and are not considered to be independent. Ms. Villar Mir is associated with Grupo VM and is not considered to be independent. The independence of Ms. Amusategui was confirmed by the Nominations Committee in 2020 and the independence of Ms. Villalonga, Mr. de Santis and Mr. Barrilero was confirmed by the Nominations Committee in 2021 prior to their recommendation to the Board for appointment.

Certain approvals of the Board of Directors

Pursuant to the Articles of Association, as in effect since October 26, 2017, the approval of certain matters by our Board of Directors requires the approval of more than a simple majority of directors present.

So long as Grupo VM or its Affiliates owns 10% or more of our outstanding shares, any transaction, agreement or arrangement between Grupo VM or any of its Affiliates or Connected Persons (as defined in the articles of association)

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and the Company or any of its Affiliates (or any amendment, waiver or repeal of any such transaction, agreement or arrangement) requires the approval of a majority of independent, non-conflicted directors.

No new executive directors may be appointed without the approval of a majority of GVM Nominees and a majority of independent directors.

Committees of the Board of Directors

During the year ended December 31, 2022, our Board of Directors had four standing committees: an Audit Committee, a Compensation Committee, a Corporate Governance Committee and a Nominations Committee.

Audit Committee

During the year ended December 31, 2022, our Audit Committee consisted of three directors:Mses. Amusategui and Villalonga and Mr. Crockett (as Chair). Mr. Crockett serves as Chairman of the Committee from May 31, 2020 and he meets the requirements as an “audit committee financial expert” under the rules of the SEC and qualifies as a financially sophisticated audit committee member as required by the NASDAQ rules relating to audit committees. Our Board has determined that each of these directors satisfies the enhanced independence requirements for audit committee members required by Rule 10A-3 under the U.S. Exchange Act, and is financially literate as that phrase is used in the additional audit committee requirements of the NASDAQ rules.

Our Audit Committee has responsibility to: (1) oversee our accounting and financial reporting processes and the audits of our financial statements; (2) monitor and make recommendations to the Board regarding the auditing and integrity of our consolidated financial statements; (3) be directly responsible for the qualification, selection, retention, independence, performance and compensation of our independent auditors, including resolution of disagreements between management and the auditors regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, and have the auditors report directly to the Committee; and (4) provide oversight in respect of our internal audit and accounting and financial reporting processes. The Audit Committee meets at least four times a year. Additional meetings may occur as the Audit Committee or its chair deem advisable.

Compensation Committee

During the year ended December 31, 2022, our Compensation Committee consisted of of four directors: Mses. Amusategui and Villar-Mir de Fuentes and Messrs. Barrilero (Chair) and De Santis. With the exception of Ms. Villar-Mir de Fuentes, our Board has determined that each of these directors meets the heightened independence requirements of compensation committee members under SEC rules.

Our Compensation Committee has responsibility to: (1) evaluate and recommend to the Board for approval the compensation of our directors, executive officers and key employees; (2) oversee directly or indirectly all compensation programs involving the use of our stock; (3) produce a report annually on executive compensation for inclusion in our proxy statement for our annual meeting of shareholders; (4) produce a report annually in compliance with remuneration reporting requirements (i.e., a directors’ remuneration report), in each case in accordance with applicable rules and regulations; and (5) produce, review on an ongoing basis and update as needed, a directors’ remuneration policy. The Compensation Committee meets with such frequency, and at such times, and places and whether in person or electronically/telephonically as it determines is necessary to carry out its duties and responsibilities, but shall meet at least four times annually.

Nominations Committee

During the year ended December 31, 2022 our Nominations Committee consisted of four directors: Messrs. López Madrid (as Chair), Eizenstat, Barrilero and De Santis.

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Our Nominations Committee has responsibility to review and provide guidance to the Board about the composition of the Board as follows: (a) subject to the provisions of the Articles of Association where a different arrangement may be prescribed, identifying and recommending to the Board for nomination individuals qualified to become Board members, consistent with qualification standards and other criteria approved by the Board for selecting directors; (b) reviewing and providing guidance on the independence of nominees, consistent with applicable laws, NASDAQ requirements and the Articles of Association, and monitoring and ensuring that independent non-executive directors continue to meet these applicable independence requirements; and (c) reviewing and providing guidance on other nominating issues that the Board desires to have reviewed by the Committee.

Corporate Governance Committee

During the year ended December 31, 2022, our Corporate Governance Committee consisted of four directors: Ms Villar-Mir de Fuentes and Messrs. Crockett (as Chair), Eizenstat and Garrido y Ruano.

Our Corporate Governance Committee has responsibility to review and provide guidance to the Board and respond to the Board’s requests about governance related matters including: (a) reviewing and providing guidance on the organization of the Board and its committee structure; (b) reviewing and providing guidance on the self-evaluation procedures of the Board and its committees; (c) reviewing and providing guidance on a conflicts register; (d) reviewing and providing guidance on the Company’s code of conduct; (e) reviewing and providing guidance on the Company’s insider trading policy; (f) reviewing and providing guidance on proposed changes to the Articles; (g) reviewing and making recommendations to the Board on non-executive directors’ compensation reviewing and agreeing the terms of non-executive directors’ letters of appointment; and (h) considering succession planning, taking into account the challenges and opportunities facing the Company and the skills and expertise needed on the Board in the future, recommending to the Board plans for succession for both executive and non-executive directors.

Senior Independent Director

In October 2017, the Board established the role of Senior Independent Director, to provide a sounding board for the Chairman and to serve as intermediary for the other directors where necessary. During the year ended December 31, 2022, Mr. Crockett has served as Senior Independent Director.

Corporate governance policy

In October 2017, the Board adopted a corporate governance policy (“the Corporate Governance Policy”) under which, while Grupo VM has the right under the shareholders agreement in place between it and the Company to require that at least three members of the Board shall be persons proposed by it to the Nominations Committee, there shall be at least five directors on the Board who are independent within the meaning of the Company’s Articles of Association. Under this policy the number of independent directors reduces as Grupo VM’s rights to propose persons for nomination to the Board also reduce, it being the Board’s policy that at all times, there is a majority of directors on the Board who are independent as so defined.  The Corporate Governance Policy was most recently reviewed by the Board in November 2021 and renewed until 11 November 2023.

Board policy

In 2015, we adopted a Board policy which provides certain practical principles relating to (i) the functioning of the Board; and (ii) the principles under which we will undertake our core management and overall supervision tasks from our London headquarters (the “Board Policy”).  As set out in the Board Policy, we provide management and other services (including, but not limited to, administration, financial, commercial and technical services) to Globe, FerroAtlántica and any other subsidiaries from time to time.

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D.    Employees

As of  December 31, 2022, 2021 and 2020, on a consolidated basis, the number of employees, across the Ferroglobe Group was 3,265, 3,425 and 3,270 respectively, excluding temporary employees. We believe our relations with our employees are generally good and we have not experienced any significant labor disputes or work stoppages due to industrial action in recent years.

The following table shows the number of our full-time employees as of December 31, 2022, 2021 and 2020 on a consolidated basis, broken down by region:

    

2022

    

2021

    

2020

North America

 

980

 

924

 

820

Spain

 

551

 

578

 

574

France

 

921

 

1,075

 

1,041

South Africa

 

293

 

306

 

314

Rest of the world

 

520

 

542

 

521

Total number of employees

 

3,265

 

3,425

 

3,270

Collective bargaining agreements (“CBAs”) are applicable to our operations in Spain, France, South Africa, Argentina, Norway, the United States, Canada and Venezuela. We have experienced union activity and strikes in the past. For example, in France from time to time. In France there have been several strikes in 2021 mainly against the restructuring plan, but none in 2022. See “Item 3.D.—Key Information—Risk Factors—We are subject to the risk of union disputes and work stoppages at our facilities, which could have a material adverse effect on our business.”

To improve the structure of our labor relations in Spain, a national collective agreement (“NCA”) was entered into on February 2, 2018 with four out of the five trade unions representing over 70% of our workforce at the plants of Boo, Sabón, Monzón, the mining facilities in Spain and the Madrid office. The NCA provides a labor relations framework which establishes common parameters for all the work sites and is complementary to the site-specific Collective Bargaining Agreements. This NCA regulates matters such as wage increases, annual working time, professional training, gender equality and disciplinary actions. During 2022 negotiations took place to renew the NCA and the site CBAs, and determine annual salary increases for staff under their jurisdiction. Agreements were reached during the last quarter.  A renewal of the NCA and the various CBAs will need to be undertaken in 2023. In the meantime, all the clauses remain in force, except those that related to salary increases.

The production stoppages at the three manufacturing facilities in Spain (Boo, Sabón and Monzón) which were initiated during the 4th quarter 2022 due to unsustainable energy costs meant that employees were placed on furlough arrangements while the plants remain idled. The measures which regulate the furlough arrangements were the result of negotiated agreements with the employee representatives at each plant. These agreements have an expiry date of end 2023 and may be extended if necessary.

In France, all employees of the FerroPem SAS plants in Anglefort, Château Feuillet, Clavaux, Laudun, Montricher, Pierrefitte, the Saint-Béron plant and the Chambéry head office are covered by the Convention Collective Nationale de la Chimie. This agreement does not have an expiration date.

The "Incentive Agreement", which is an employee incentive bonus plan based on a profit-sharing formula defined in the agreement, was signed on June 23, 2022 and the "Profit Sharing Agreement", which is  mandatory under French law, was signed on December 13, 2017. No profit-sharing amounts were paid for 2019, 2020 and 2021. For the fiscal year 2022, the economic results have generated both profit-sharing and incentive payments.

In France, there is a mandatory annual negotiation with the central works council (CSEC), primarily to set salary increases, but other matters are also addressed by this negotiation such as professional equality, employment of disabled staff, quality of life at work, employment and skills, and working hours. The 2022 salary negotiation meetings took place in May. The next mandatory negotiations are scheduled for first half of 2023.

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In April 2021, a restructuring plan was announced, and a social plan was agreed with the unions in April 2022. The plan to close the Château-Feuillet plant and transfer the central laboratory from Chambéry to Anglefort resulted in the proposal of 35 job transfers and 195 job cuts.

The employees of Ferroglobe Manganese France SAS are also covered by the French national collective agreement for the chemical industrys. A "profit-sharing agreement" was signed in January 2021, for a period of three years until December 2023. Employees also benefit from an individual bonus system (called PN10) negotiated each year, alongside the salary increases as part of the annual mandatory negotiation process. A new agreement has been negotiated for 2022. Finally, the plant benefits from a mandatory profit-sharing agreement signed in 2007, with three amendments signed in 2009, 2010 and 2020, with no expiry date.

At Ferroglobe Mangan Norge AS (“FMN”) in Norward, three trade unions are represented among the employees. There is a collective bargaining agreement in place for all trade unions. This agreement has been renegotiated in April 2022.  The unions represented at FMN are Industry and Energy (IE – for operators), Tekna (an engineers´ union), and FLT (a supervisors union).

In South Africa, the wage agreement for the TCM Delmas mine expired on 28 February 2023 and a new two-year wage agreement was concluded for the period 1 March 2023 to 28 February 2025. A two-year wage agreement was concluded for the eMalahleni plant in 2022 and the agreement will expire on 30 June 2024.  Both agreements were concluded without any dispute. The Polokwane plant was restarted in October 2022 and most of the employees in the bargaining unit were appointed in September 2022. The compensation and benefits for these employees will be reviewed in September 2023. Currently there is no recognized trade union at the plant, but it is anticipated that the situation will change as the plant returns to full production.

In the United States, hourly employees at the Selma, Alabama facility are covered by a collective bargaining agreement with the Industrial Division of the Communications Workers of America under a contract that will expire on April 30, 2023. Hourly employees at the Alloy, West Virginia and Bridgeport, Alabama facilities are covered by collective bargaining agreements with The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union under contracts running through April 3 2024 and February 28, 2024, respectively. In 2021 the Niagara Facility was sold. In 2022 the Selma facility was restarted.

Union employees in Argentina work under an annual National contract valid from May 2021 to April 30, 2022. Renewal is now underway.

In Canada, union employees at the Bécancour plant in Québec are covered by a Union Certification held by CEP, Local 184. The corresponding collective bargaining agreement at the Bécancour facility runs through April 30, 2024, following negotiations completed in 2021.

In the People’s Republic of China (“PRC”), at our Yonvey plant, where operations were restarted in 2017, there is a labor union committee, supervised by the local labor union and required by it to enter into annual agreements on matters such as collective representation, collective salary negotiation and the protection of women’s rights. The collective salary agreement in force at Yonvey remained in effect until March 2021, a new agreement was negotiated in March 2022.  

E.    Share Ownership

The following table and accompanying footnotes show information regarding the beneficial ownership of our shares as of March 8, 2022 by:

each named executive officer;
each of our directors; and
all executive officers and directors as a group.

Shares that may be acquired by an individual or group within 60 days of March 11, 2021, pursuant to the exercise of options, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group,

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but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

    

Number of Shares

    

Percentage of

Beneficially Owned

Outstanding Shares

Directors and Executive Officers:

 

 

  

Javier López Madrid (1)

 

304,537

 

*

Marco Levi

 

100,000

 

*

Beatriz Garcia Cos Muntanola

 

Bruce L. Crockett

 

46,000

 

*

Stuart E. Eizenstat

 

60,779

 

*

Manuel Garrido y Ruano

 

870

 

*

Marta de Amusategui y Vergara

 

78,220

 

*

Juan Villar-Mir de Fuentes

 

 

Rafael Barrilero Yarnoz

Nicolas De Santis

Belen Villalonga

Silvia Villar-Mir de Fuentes

49,400

*

Directors and Executive Officers as a Group

 

639,806

 

*

Less than one percent (1%)

(1)  Includes (a) 28,117 shares issuable upon exercise of options over ordinary shares which options which expire on November 24, 2026; (b) 70,464 shares issuable upon exercise of options over ordinary shares which options which expire on June 11, 2027; (c) 46,777 shares issuable upon exercise of options over ordinary shares which options which expire on March 20, 2028; (d) 23,066 shares issuable in concept of deferred bonus which is exercisable until June 24, 2028; or (e) 110,113 shares issuable upon exercise of options over ordinary shares which options expire on March 13, 2029.  The options referred to above were issued under the Ferroglobe PLC Equity Incentive Plan (EIP) under which awards may be made to selected employees of the Company. Awards under the EIP have been made to members of senior management, including to Mr. López Madrid on the terms set out in “– Compensation” above.

ITEM 7.       MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.    Major Shareholders

The following table sets forth certain information regarding beneficial ownership of shares by each stockholder known by us to be the beneficial owner of more than 5% of our shares.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Percentage of ownership is based on 187,433,543 shares outstanding (excluding those held in Treasury).

    

Number of Shares

    

Percentage of

Beneficially Owned

Outstanding Shares

Grupo Villar Mir, S.A.U.

 

76,265,434

 

40.7

Cooper Creek Partners Management LLC

11,144,337

5.9

As of December 31, 2021 and 2020, the percentage of ownership of Grupo Villar Mir, S.A.U was 48.6% and 53.8% respectively.

The Company’s shareholders do not have different voting rights.

As of  May 1, 2023, Ferroglobe had four record holders in the United States, holding all of our outstanding shares. One of these shareholders is Cede & Co. The shares held by Cede & Co as record holder are held for underlying beneficial holders holding in ‘street name’.

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B.    Related Party Transactions

The following includes a summary of material transactions with any: (i) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with us, (ii) associates, (iii) individuals owning, directly or indirectly, an interest in the voting power of the Company, that gives them significant influence over us, and close members of any such individual’s family, (iv) key management personnel, including directors and senior management of such companies and close members of such individuals’ families or (v) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (iii) or (iv) or over which such person is able to exercise significant influence.

Grupo VM shareholder agreement

On November 21, 2017, we entered into an amended and restated shareholder agreement with Grupo VM (the “Grupo VM Shareholder Agreement”), as amended on January 13, 2021, and July 29, 2021 that contains various rights and obligations with respect to Grupo VM’s Ordinary Shares, including in relation to the appointment of directors and dealings in the Company’s shares. It sets out a maximum number of directors (the “Maximum Number”) designated by Grupo VM (each, a “Grupo VM Director”) dependent on the percentage of share capital in the Company held by Grupo VM. The Maximum Number is three, if Grupo VM’s percentage of the Company’s shares is greater than 25%; two if the percentage is greater than 15% but less than 25%; and one if the percentage is greater than 10% but less than 15%. As at the date of the Grupo VM Shareholder Agreement, the Board of Directors of the Company has three Grupo VM Directors.

Under the Grupo VM Shareholder Agreement, Grupo VM has the right to submit the names of one or more director candidates (a “Grupo VM Nominee”) to the Nominations Committee for consideration to be nominated or appointed as a director as long as it holds 10% or more of Company’s shares. If the Nominations Committee does not recommend a Grupo VM Nominee for nomination or appointment or if the requisite approval of the Board of Directors is not obtained in accordance with the Articles, Grupo VM shall, in good faith, and as promptly as possible but in all cases within thirty days, submit the names of one or more additional (but not the same) Grupo VM Nominees for approval. Grupo VM shall continue to submit the names of additional (but not the same) Grupo VM Nominees until such time as the favorable recommendation of the Nominations Committee and requisite approval of the Board of Directors are obtained. On December 23, 2015, Grupo VM designated Javier López Madrid to serve as the Executive Vice-Chairman of the Board in connection with the closing of the Business Combination. Upon the resignation of Alan Kestenbaum as Executive Chairman of the Board, Mr. López Madrid was appointed as Executive Chairman of the Board effective December 31, 2016. Mr. López Madrid is also the Chairman of the Nominations Committee.

The Board of Directors are prohibited from filling a vacancy created by the death, resignation, removal or failure to win re-election (a “Casual Vacancy”) of a Grupo VM Director other than with a Grupo VM Nominee. Grupo VM shall have the right to submit a Grupo VM Nominee for appointment to fill a Casual Vacancy only if the Casual Vacancy was created by the death, resignation, removal or failure to win re-election of a Grupo VM Director. Grupo VM does not have the right to submit a Grupo VM Nominee for appointment to fill a Casual Vacancy if the number of Grupo VM Directors equals or exceeds the Maximum Number. In connection with any meeting of shareholders to elect directors, the number of Grupo VM Nominees in the slate of nominees recommended by the Board of Directors must not exceed the Maximum Number.

Subject to certain exceptions, Grupo VM has preemptive rights to subscribe for up to its proportionate share of any shares issued in connection with any primary offerings. The Grupo VM Shareholder Agreement (i) also restricts the ability of Grupo VM and its affiliates to acquire additional shares and (ii) contains a standstill provision that limits certain proposals and other actions that can be taken by Grupo VM or its affiliates with respect to the Company, in each case, subject to certain exceptions, including prior Board approval. The Grupo VM Shareholder Agreement also restricts the manner by which, and persons to whom, Grupo VM or its affiliates may transfer shares. On February 3, 2016, during an in person meeting of our Board, the Board approved the purchase of up to 1% of the shares by Javier López Madrid in the open market pursuant to Section 5.01(b)(vi) of the Grupo VM Shareholder Agreement.

The Grupo VM Shareholder Agreement will terminate on the first date on which Grupo VM and its affiliates hold less than 10% of the outstanding Shares.

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Agreements with executive officers and key employees

We have entered into agreements with our executive officers and key employees. See “Item 6.A.—Directors, Senior Management and Employees—Directors, Senior Management and Employees.”

VM Energía and Energya VM

Under contracts entered into with FerroAtlántica S.A.U., (“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 (FAU Boo or FAU Sabon, as appropriate) and Hidro Nitro Española (now FerroAtlántica del Cinca) in the wholesale power market. The contracts allow FAU (FAU Boo or FAU Sabon, as appropriate) 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. The contracts have a term of one year, which can be extended by the mutual consent of the parties to the contract. The contracts were renewed in January 2019 and will renew annually for up to three years unless terminated. The contracts were again renewed in January 2020. In January 2021, the contracts were renewed for two years with the possibility to extend it for additional one-year periods unless terminated with thirty days’ notice. On September 30, 2021 Grupo FerroAtlántica, S.A.U absorbed its subsidiaries FAU Boo and FAU Sabón assuming all the rights and obligations derived from those contracts. Those contracts were assigned from Villar Mir Energía SLU to Energya VM Gestión de Energía, SLU (“Energya VM”) on October 15, 2022. The relevant contracting party within the Ferroglobe group pays VM Energía a service charge in addition to paying for the cost of energy purchase from the market. For the fiscal year ended December 31, 2022, Grupo Ferroatlantica S.A.U and FerroAtlantica del Cinca’s obligations to make payments to VM Energía or Energya VM under their respective agreements for the purchase of energy plus the service charge amounted to   $95,401 thousand and $37,317 thousand, respectively.  For the fiscal year ended December 31, 2021, Grupo Ferroatlantica S.A.U 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 $102,065 thousand and $30,501 thousand, respectively. For the fiscal year ended December 31, 2020, FAU Boo, FAU Sabon 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 $16,924 thousand, $14,334 thousand and $8,643 thousand, respectively. These contracts are similar to contracts FerroAtlántica signs with other third-party brokers.

Under contracts entered into with Rocas, Arcillas y Minerales SA (“RAMSA”) on December 3, 2010 and with Cuarzos Industriales SA (“CISA”) on April 27, 2012, VM Energía supplied the energy needs of the mining facilities operated by those companies, as a broker for RAMSA and CISA in the wholesale power market. RAMSA and CISA are both subsidiaries of the Company operating in the mining sector. These agreements superseded in 2019 by agreements entered into as of 15 March 2019 between VM Energía and each of RAMSA and CISA pursuant to which VM Energía provides equivalent intermediary services for term of one year, renewing annually. Those contracts were assigned from Villar Mir Energía SLU to Energya VM Gestión de Energía, SLU (“Energya VM”) on September 27, 2022. For the fiscal year ended December 31, 2022, RAMSA and CISA’s obligations to make payments to VM Energía or Energya VM under their respective agreements amounted to $1,152 thousand and $459 thousand respectively. For the fiscal year ended December 31, 2022, RAMSA and CISA’s obligations to make payments to VM Energía under their respective agreements amounted to $1,152 thousand and $460 thousand respectively. For the fiscal year ended December 31, 2021, RAMSA was obliged to make payments to VM Energía of $1,012 thousand under its agreements then in force with VM Energía and CISA was obliged to make payments to VM Energía of $353 thousand under its agreements then in force with VM Energía.  For the fiscal year ended December 31, 2020, RAMSA was obliged to make payments to VM Energía of $427 thousand under its agreements then in force with VM Energía and CISA was obliged to make payments to VM Energía of $220 thousand under its agreements then in force with VM Energía.

Additionally, for the fiscal year ended December 31, 2022, 2021 and  2020, Enérgya VM invoiced other subsidiaries of FerroAtlántica for a total amount of $ 647 thousand, $120  thousand and $79  thousand, respectively.

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On June 2020, FerroAtlántica del Cinca and VM Energía entered into a collaboration agreement by virtue of which VM Energía is allowed to use Monzon’s grid connection point and high voltage electrical assets for a PV installation project, electricity from which will be supplied to FerroAtlántica del Cinca.

On February 24, 2021, FerroAtlántica de Sabón and VM Energía entered into a collaboration agreement by virtue of which VM Energía is allowed to use Sabón’s grid connection point and high voltage electrical assets for a PV installation project, electricity from which will be supplied to FerroAtlántica de Sabón.  

On November 10, 2021 Grupo FerroAtlántica entered into an agreement with VM Energía and Parque Eólico A Picota, S.L.U. (a VM Energía subsidiary) for a free assignment of 10% of the Guarantees of Origin of the total energy consumed by Grupo FerroAtlántica for five (5) years when the wind farms start to produce (in 2023 according to the estimation).

On December 14, 2021, Grupo FerroAtlántica entered into an agreement with VM Energía to assist in the identification of counterparties and intermediation for the closing of long-term power purchase agreements. The agreement extended for a new three-months period and automatic renewals with a thirty day prior notice for its termination.

On December 22, 2022, Grupo FerroAtlántica and VM Energía entered into a Power Purchase Agreement (PPA). Under this PPA, VM Energía will supply to Sabón plant 65 GW on a pay as produced basis during 10 years from the commencement of operation of the Plants. This PPA will cover 10% of the total power consumption of the Sabón plant. In January 2023, VME was denied authorization to construct the plants, so the PPA was amicably terminated.

Anook, S.L

On April 2022, Grupo VM sold its interest in Espacio I.T. so those transactions do not involve a Grupo VM subsidiary and therefore as of that date should no longer be considered as related party transactions. The company was renamed Anook, S.L., shortly after the adquisition.

Espacio Information Technology, S.A. (“Espacio I.T.”), a Spanish company wholly-owned by Grupo VM, 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.

Under a contract entered into on January 1, 2004, Espacio I.T. provided FAU with information processing, data management, data security, communications, systems control and customer support services. The contract was assigned to Servicios shortly prior to the FAU Disposal; it has a one-year term, subject to automatic yearly renewal, unless terminated with notice provided three months prior to the scheduled renewal. The base yearly amount due under the contract for these services is $641 thousand, exclusive of VAT and subject to inflation adjustment. For the years 2021  and 2022 , Servicios’s obligations to make payments to Espacio IT under this agreement amounted to $1,427  thousand and $618 thousand respectively.

Under a contract entered into on January 1, 2006, Espacio I.T. provides FerroPem, SAS with information processing, data management, data security, communications, systems control and customer support services. The contract has a one-year term, subject to automatic yearly renewal, unless terminated with notice provided three months prior to the scheduled renewal. The base yearly amount due under the contract for these services is $826 thousand, exclusive of VAT and subject to inflation adjustment. For the fiscal years 2022 , 2021 , and 2020 , FerroPem, SAS’s obligations to make payments to Espacio I.T. under this agreement amounted to $215 thousand, $860  thousand and $823  thousand, respectively.

Under a contract entered into on January 1, 2009, Espacio I.T. provides Silicon Smelters (Pty), Ltd. with services including the maintenance and monitoring of the company’s network, servers, applications, and user workstations, as well as standard software licenses. The contract has a one-year term, subject to automatic yearly renewal, unless terminated with notice three months prior to the scheduled renewal. The base yearly amount due under the contact is $266 thousand, subject

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to inflation adjustment. For the fiscal years 2022, 2021 and 2020 Silicon Smelters (Pty), Ltd.’s obligations to make payments to Espacio I.T. under this agreement amounted to $65 thousand, $274 thousand, and $264 thousand, respectively.

Under a contract entered into on May 2, 2016, Espacio I.T. provides Quebec Silicon with services including the maintenance and monitoring of its network, servers, applications, and user workstations, as well as standard software licenses at Quebec Silicon. The contract has a one-year term, subject to automatic yearly renewal, unless terminated with notice three months prior to the scheduled renewal. The base yearly amount due under the contract is $148 thousand, subject to inflation adjustment. For the fiscal years 2022, 2021 and 2020 payments made under this contract to Espacio I.T. were $37 thousand, $147  thousand and $141  thousand, respectively.

Espacio I.T. also provides Grupo FerroAtlántica with IT outsourcing services in connection with the Mangshi facility in China and provided Hidro Nitro Española (FerroAtlántica del Cinca) with IT services, for neither of which is there a formal contract in place. The amounts invoiced in connection with these services for the fiscal years 2022, 2021 and 2020, $59 thousand, $30 thousand and $41 thousand, respectively paid by Grupo FerroAtlántica, $62 thousand, $240 thousand, and $232 thousand, respectively paid by FerroAtlántica del Cinca.

For the fiscal years 2022, 2021, and 2020, Espacio I.T. and other subsidiaries of Grupo VM involved in the provision of IT services invoiced FAU and other subsidiaries of Grupo FerroAtlántica and Ferroglobe PLC in a total amount of $59 thousand, $190  thousand, and $161  thousand, respectively.

On March 24, 2021, Servicios entered into an agreement with Espacio I.T., effective as from January 1, 2021, for the maintenance of the network electronics equipment (switches) that allow interconnection between all the user devices (computers and printers) on each of Ferroglobe floors (49th and 45th floors). The services include monitoring in order to detect eventual incidents in the network, 24x7 support, maintenance service, and spares to replace devices in the event of a breakdown.

Other agreements with other related parties

Under the terms of a loan agreement entered into on 24 July 2015 between FerroAtlántica and Inmobiliaria Espacio, S.A. (“IESA”), the ultimate parent of Grupo VM, FerroAtlántica extended to IESA a credit line for treasury purposes of up to $20 million, of which $3.1 million (the “Loan”) remains outstanding. The credit line runs year on year for a maximum period of 10 years and amounts outstanding under it (including the Loan) bear interest annually at the rate equal to the EURIBOR three month rate plus 2.75 percentage points. The availability of the credit line may be cancelled at the end of any year or at any time by IESA.

Additionally, as a result of a tax audit of the IESA tax group, a reassessment of its net operating losses (NOLs) was made within the members of the tax group with respect to fiscal years 2008 through 2012.  In particular, additional NOLs were attributed to Grupo Ferroatlántica, S.A.U. (GFAT) and Ferroatlántica, S.A.U. (FAT). GFAT, as top parent company of a tax group to which FAT belonged to until fiscal year 2019, filed an amending corporate income tax (CIT) return of fiscal years 2016 and 2017. By way of this amending returns, the reassigned NOLs of FAT have been partially applied and consequently partial refund of the CIT paid in such fiscal years has been in the amount of $592,378. To the extent that the negative results obtained by GFAT and FAT when forming part of the IESA tax group were duly paid each year, this refund corresponds to IESA. GFAT has granted to IESA a loan in the amount of the CIT refund requested (the CIT loan). Therefore, upon receiving the CIT refund, the CIT loan will be canceled under an assignment and offsetting agreement between GFAT and IESA. The CIT loan bears interest annually at 5.25% fix rate for one-year loan under Ferroglobe transfer pricing policy.  

Calatrava RE, a Luxembourg affiliate of Grupo VM, is a reinsurer of the Company’s global marine and property insurance programs. The property and marine cargo insurances are placed with Mapfre Global Risks S.A. with whom the Company contracts for the provision of this insurance. There are no contracts directly in place between the Company and Calatrava RE.

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Torre Espacio Gestión SLU, a wholly owned subsidiary of Grupo VM, manages the premises which are the subject of the leases on behalf of Torre Espacio, including collecting rents and other payments under the terms of the leases from FerroAtlántica on behalf of Torre Espacio. On September 30, 2020 the contract between Torre Espacio Gestión, SLU and the owner of the premises was terminated so this transaction does not involve a Grupo VM subsidiary and should therefore not be considered a related-parties transaction anymore. For the period from January 1, 2020 to September 30, 2020, Servicios’ obligations to make payments under those agreements amounted to $1,235 thousand.

Aurinka and the Solar JV

Javier López Madrid, the Company’s Executive Chairman and a member of the Board, currently owns approximately 100% of the outstanding share capital of Financiera Siacapital which, in turn, holds a 31.33% interest in Aurinka International, S.L. (“Aurinka Int”) and a 31.33% interest in Blue Power. Blue Power is a party to the Solar JV entered into by FerroAtlántica group with Aurinka Photovoltaic Group, S.L. (“Aurinka PV”). Aurinka PV is almost 100% owned by Aurinka Value, S.L., a company which also owns a 31.66% interest in Aurinka Int. Blue Power owns certain intellectual property contributed to the joint venture and provided certain technology consulting services to it, as summarized below.

The remaining equity interests in Blue Power and Aurinka Value, S.L. are owned by third party outside investors. In July 2019 certain changes were made to the terms of the Solar JV to effect its unwinding, as a result of which FerroAtlántica group acquired 100% of the share capital of the operating company set up as part of the joint venture to build and operate the pilot plant for the Solar JV (“OpCo”) and FerroAtlántica group’s wholly owned subsidiary, Silicio Ferrosolar, S.L.U. (now renamed as Ferroglobe Innovation, S.L.) (“SFS”) disposed of 1% of its interest in the research and development company (“R&DCo”) formed to license or develop and own certain intellectual property used in connection with the Solar JV. These changes are described further below.

In 2016, FAU entered into a project with Aurinka PV for a feasibility study and basic engineering for a UMG solar silicon manufacturing plant. Purchases under this project were approximately $3.4 million for 2016.

On December 20, 2016, FerroAtlántica and its wholly owned subsidiaries, FAU and SFS entered into the Solar JV Agreement with Blue Power and Aurinka PV providing for the formation and operation of a joint venture with the purpose of producing UMG solar silicon. The entry into the joint venture pursuant to the Solar JV Agreement was subject to certain conditions precedent, including the satisfactory completion of an ex-ante verification procedure in relation to the ability of the technology to be contributed to the joint venture by Blue Power to meet certain technical and cost parameters and the authorization of the joint venture by Ferroglobe PLC, Blue Power and Aurinka PV’s management bodies. All these conditions precedent were met during 2017 and the Solar JV Agreement became fully binding.

Under the Solar JV Agreement, FerroAtlántica indirectly owned 75% of OpCo , which owns certain assets comprising, among others, constructions at Sabón and a UMG solar silicon plant at Puertollano, Spain. SFS owned 51% of R&DCo, the company formed as part of the joint venture to hold certain intellectual property rights and know-how contributed by Blue Power and SFS. R&DCo licensed such intellectual property rights and know-how to OpCo. Pursuant to the Solar JV Agreement, FerroAtlántica and other subsidiaries committed to incur capital expenditure, subject to the approval of the joint venture board, in connection with the joint venture of up to a maximum of $133,000 thousand over an initial phase of up to 2 years. During the fiscal years ended December 31, 2018 and 2017, FerroAtlántica and other subsidiaries paid Aurinka PV $4,252 thousand and $3,611 thousand, respectively, in connection with the project. Further investment in the joint venture was to be determined as the joint venture progressed. In connection with the Solar JV Agreement, FAU obtained a loan of approximately $50,000 thousand (“the REINDUS Loan”) from the Spanish Ministry of Industry and Energy (“the Ministry”) for the purpose of building and operating the UMG solar silicon plant. 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. The request for this novation was formally submitted to the Ministry in November 2018. On September 25, 2017, OpCo entered into an agreement with Caiz Salceda SLU (“Salceda”), a company ultimately owned by members of the Villar Mir family (who are related to Javier Lopez Madrid by marriage), under which Salceda agrees to construct on its land and lease to the OpCo and to operate and maintain for a term of 25 years a pilot plant for power generation from photovoltaic panels produced with UMG solar silicon, in return for ownership of all power generated at the plant. On June 13, 2016, SFS entered into a loan agreement with Blue Power under which SFS advanced a principal sum of over $9,000

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thousand to Blue Power in connection with the project. As at December 31, 2016 the amount outstanding under the loan agreement was $9,845 thousand. On February 24, 2017, the loan was novated to OpCo as part of a capital injection by Blue Power to OpCo and on August 1, 2019 the loan was novated to FerroAtlantica.

In July 2019, the Solar JV was unwound on the following terms:

FerroAtlántica acquired the whole of the share capital of OpCo for €1;
Aurinka PV acquired 1% of SFS’s interest in the share capital of R&DCo for €1, such that, following such disposal, R&DCo is owned as to 50% by SFS and, following the disposal of its 49% shareholding by Blue Power to Aurinka PV, 50% by Aurinka PV;
SFS agreed to sell certain patents to R&DCo for €1;
arrangements were made between;
oAurinka PV and OpCo pursuant to which Aurinka PV will continue to maintain the Puertollano plant for a monthly fee of $33.6 thousand and for a maximum term expiring on December 31, 2020. Amounts paid pursuant to these arrangements in the fiscal year ended December 31, 2019 totalled $404;
oAurinka PV and FerroAtlántica, FAU and Opco for the payment by the latter of the sum of $2,800 thousand and the grant by Opco to Aurinka of an option to purchase  certain  equipment with a book value of approximately $6,721 thousand for the sum of $1,120 thousand, in satisfaction of any claim Aurinka PV might otherwise have in relation to the termination of the Solar JV. In April 2022, Aurinka PV exercised its option to purchase certain equipment with a book value of 1,771,725€. Eventually, Aurinka has only exercised the purchase option in time for a book value of 1,000,000€;
oAurinka PV and FerroAtlántica, SFS and Opco for the marketing and promotion of the sale of the OpCo and SFS’s rights in R&DCo, including a right of first refusal to Aurinka PV to purchase the 50% shares in R&DCo owned by SFS and  a right of first refusal to Aurinka PV to acquire assets owned by Opco. This agreement was extended until June 30, 2021 and the purchase option was exercised on February 24, 2021. On March 10, 2021 the Parties partially executed the purchase option $111 Thousand.
save as set out above, all arrangements in place with Blue Power or Aurinka PV in relation to OpCo or R&DCo and any rights or claims which Aurinka PV or Blue Power might have in relation thereto were brought to an end.

Corporate Vision Strategists Ltd.

On September 20, 2020 Ferroglobe entered into a lease agreement with Corporate Vision Strategists Ltd for the provision of corporate and head office services for 13 Chesterfield Street, Mayfair, London, W1J 5JN. Nicolas de Santis, a Ferroglobe Director, became a director of the Company on May 13, 2021 and  exercises significant influence over Corporate Vision Strategists Ltd as the company is wholly owned by him. For the years ended December 31, 2022 and 2021, Ferroglobe’s obligations to make payments to Corporate Vision Strategists Ltd under this agreement amounted to $99 thousand, and $68 thousand.

C.    Interests of Experts and Counsel

Not applicable.

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ITEM 8.       FINANCIAL INFORMATION

A.    Consolidated Statements and Other Financial Information

We have included the Consolidated Financial Statements as part of this annual report. See “Item 18.—Financial Statements.”

Legal proceedings

In the ordinary course of our 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, we do not believe any currently-pending legal proceeding to which Ferroglobe is a party will have a material adverse effect on our business, results of operations, or financial condition.

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, 2022, approximately 100 such employees “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, 2022 at an estimated amount of $955 thousand.

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 arose 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. To resolve the NOV/FOVs, GMI likely will be required to install additional pollution control equipment, implement other measures to reduce emissions from the facility, as well as pay a civil penalty.  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

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penalties. The statutory maximum penalty is $93,750 per day per violation, from April, 2013 to December 2021, and $109,024 per day thereafter.

Information Requests

In early 2023 we received information requests to provide certain information to assist the Department of Justice in connection with their investigation of a suspected crime.  As of the date of this report, the Company has received no indication from any authority that any Group company is under investigation.  The Company is fully cooperating with these requests.

Other legal procedures

In the first quarter of 2023, the Company reached full and final settlements of civil lawsuits arising out of 2018 incident at Globe Metallurgical Inc.’s Selma, Alabama, facility in which two employees were injured, one of whom later died.  The Company’s insurer settled those claims for $18m and paid the amounts directly.    

Matters pertaining to Mr. López Madrid

The legal proceedings described below are pending in Spain in which Mr. López Madrid has been called as “investigado” by a Spanish criminal investigative court. At the conclusion of criminal investigatory proceedings, the relevant Spanish court may determine to withdraw the investigation without issuing formal charges, excuse certain parties previously called “investigado” on the basis that there is insufficient evidence to issue formal charges, or issue formal charges or indictments against specific named parties.

In February 2016, Mr. López Madrid was called as “investigado” by a Spanish investigative court in connection with the “Púnica” investigation into possible bribery relating to awards of public contracts. This matter is comprised of two related investigations.  The court for the “Pieza 9” investigation has dismissed Mr. López Madrid. In the “Pieza 8” investigation, the court is pending resolution of a motion to dismiss filed by Mr. López Madrid.

In connection with this matter, a further investigation (the “Lezo” investigation) was initiated and, in April 2017, Mr. López Madrid was questioned in relation to an alleged payment in 2007 of €1.4 million in favor of public officials by Obrascón Huarte Lain, S.A. (“OHL”), a company listed in Spain and at the time partially owned by Grupo VM. Mr. López Madrid was a non-executive director of OHL at the time of the alleged payment and has never held executive responsibility at OHL. Charges have been filed in connection with the “Lezo” investigation, and Mr. López Madrid has filed his defense brief vehemently denying the allegations against him. A trial date is pending to be set for this matter.

In June 2014, Mr. López Madrid filed a criminal complaint in a Spanish court against a Dermatologist who had previously treated his family, alleging that she had harassed Mr. López Madrid, his family and associates through anonymous phone calls and messages making false accusations and serious threats, which were received daily over a period of several months. The Dermatologist was called as “investigado” and this case is currently in judicial proceedings.

In September 2014, the Dermatologist filed a criminal complaint in another Spanish court against Mr. López Madrid for harassment and in connection with which he was called as “investigado”. A trial date is pending to be set for this matter. In a subsequent expansion of the claim, the investigative court is investigating an accusation that Mr. López Madrid hired a former police commissioner to harass and physically assault the Dermatologist. Following a determination by the Public Prosecutor’s office that no crime was committed, Mr. López Madrid filed a motion to dismiss the matter. The case is in the intermediate phase, and Mr. López Madrid vehemently denies the allegations against him.

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Dividend policy

Our Board intends to declare annual (or final) dividends and interim dividends, payable quarterly, to be reviewed each year, but this will depend upon many factors, including the amount of our distributable profits as defined below. Pursuant to the Articles, and subject to applicable law, the Company may by ordinary resolution declare dividends (which shall not exceed the amounts recommended by the Board), and the Board may decide to pay interim dividends. The Articles provide that the Board may pay any dividend if it appears to them that the profits available for distribution permit the payment. Under English law, dividends may only be paid out of distributable reserves of the Company or distributable profits, defined as accumulated realized profits not previously utilized by distribution or capitalization less accumulated realized losses to the extent not previously written off in a reduction or reorganization of capital duly made, as reported to Companies House, and not out of share capital, which includes the share premium account. Further, a U.K. public company may only make a distribution if the amount of its net assets is not less than the aggregate of its called-up share capital and undistributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than such aggregate. Distributable profits are determined in accordance with generally accepted accounting principles at the time the relevant accounts are prepared. The amount of Ferroglobe’s distributable profits is thus a cumulative calculation. Ferroglobe may be profitable in a single year but unable to pay a dividend if the profits of that year do not offset all the previous years’ accumulated losses. The shareholders of Ferroglobe may by ordinary resolution on the recommendation of the Board decide that the payment of all or any part of a dividend shall be satisfied by transferring non-cash assets of equivalent value, including shares or securities in any corporation.

The declaration and payment of future dividends to holders of our shares will be at the discretion of our Board and will depend upon many factors, including, in addition to the amount of our distributable profits, our financial condition, earnings, legal requirements, and restrictions in our debt agreements and other factors deemed relevant by our Board of Directors. In addition, as a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, the payment which may be restricted by the laws of their respective jurisdictions of organization, their respective agreements, and/or covenants under future indebtedness that we or they may incur.

B.    Significant Changes

Reindus Loan

In January 25, 2022, the Ministry opened a procedure to decide about the potential reimbursement of the loan. The company presented its allegations in February 15, 2022. Based on those allegations, in January 19, 2023, a new resolution was signed by the Ministry terminating the total reimbursement procedure initiated in January 2022. Once that procedure was definitively closed, the company decided to proceed with the foreseen partial early repayment of €16.3 million in February 10, 2023.

ITEM 9.       THE OFFER AND LISTING

Our ordinary shares are listed for trading on the NASDAQ Global Selected Market in U.S. Dollars under the symbol “GSM.”

ITEM 10.     ADDITIONAL INFORMATION

A.    Share Capital.

Not applicable.

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B.    Memorandum and Articles of Association.

Composition and Nomination of the Board

Pursuant to the Articles, the Board will consist of at least two directors and no more than eleven directors. The directors are nominated by the Board, after being recommended to the Board by the Nominations Committee, for appointment at a general meeting or appointed by the Board where permitted to do so by law. When a person has been approved by the Board for nomination for election as a director at a general meeting of the Company, prior to the first date after the date of adoption of the Articles on which Grupo VM and its affiliates in the aggregate beneficially own less than 10% of the issued ordinary shares of the Company (the “Sunset Day”), Grupo VM and its affiliates shall not vote against the election of that director at the general meeting unless a majority of its nominees on the Board have voted against such nomination. At every annual general meeting, all the directors shall retire from office and will be eligible, subject to applicable law, for nomination for re-appointment in accordance with the Articles.

The board shall constitute a committee (the “Nominations Committee”) to perform the function of recommending a person for director. The Nominations Committee shall consist of three directors, a majority of whom shall be independent directors, as such term is defined in the NASDAQ rules and applicable law. While Grupo VM and its Affiliates own at least 30% of the shares of the Company, the Grupo VM nominees will be entitled to nominate not more than two-fifths of the members of the Nominations Committee.

On December 23, 2015, Grupo VM designated Javier López Madrid to serve as the Executive Vice-Chairman of the Board in connection with the closing of the Business Combination. Upon the resignation of Alan Kestenbaum as Executive Chairman of the Board, Mr. López Madrid was appointed as Executive Chairman of the Board effective December 31, 2016. Mr. López Madrid is also the Chairman of the Nominations Committee.

Board Powers and Function

The members of the Board, subject to the restrictions contained in the Articles, are responsible for the management of the Company’s business, for which purpose they may exercise all our powers whether relating to the management of the business or not. In exercising their powers, the members of the Board must perform their duties to us under English law. These duties include, among others:

 

 

to act within their powers and in accordance with the Articles;

 

 

 

to act in a way that the directors consider, in good faith, would be most likely to promote our success for the benefit of its members as a whole (having regard to a list of non-exhaustive factors);

 

 

 

to exercise independent judgment;

 

 

 

to exercise reasonable care, skill and diligence;

 

 

 

to avoid conflicts of interest;

 

 

 

not to accept benefits from third parties; and

 

 

 

to declare interests in proposed transactions/arrangements.

The Articles provide that the members of the Board may delegate any of the powers which are conferred on them under the Articles to such committee or person, by such means (including by power of attorney), to such an extent and on such terms and conditions, as they think fit.

Share Qualification of Directors

A director is not required to hold any Shares by way of qualification.

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Board and Decision Making

The Articles provide that any director may call a meeting of the Board. Subject to the provisions of the U.K. Companies Act 2006, the Executive Chairman may also call general meetings on behalf of the Board. The quorum for such a meeting will be at least a majority of the directors then in office.

Except as otherwise provided in the Articles, a decision may be taken at a duly convened Board meeting with the vote of a majority of the directors present at such meeting who are entitled to vote on such question and each director will have one vote.

A director shall not be counted in the quorum present in relation to a matter or resolution on which he is not entitled to vote (or when his vote cannot be counted) but shall be counted in the quorum present in relation to all other matters or resolutions considered or voted on at the meeting. Except as otherwise provided by the Articles, a director shall not vote at a meeting of the Board or a committee of the Board on any resolution concerning a matter in which he has, directly or indirectly, an interest (other than an interest in shares, debentures or other securities of, or otherwise in or through, us) which could reasonably be regarded as likely to give rise to a conflict with our interests.

Unless otherwise determined by us by ordinary resolution, the remuneration of the non-executive directors for their services in the office of director shall be as the Board may from time to time determine. Any director who holds any executive office or who serves on any committee of the Board or who performs services which the Board considers go beyond the ordinary duties of a director may be paid such special remuneration (by way of bonus, commission, participation in profits or otherwise) as the Board may determine. However, the U.K. Companies Act 2006 requires “quoted” companies, such as the Company, to obtain a binding vote of shareholders on the directors’ remuneration policy at least once every three years and an annual advisory (non-binding) shareholders’ vote on an on the directors’ remuneration in the financial year being reported on and how the directors’ remuneration policy will be implemented in the following financial year.

Directors’ Borrowing Powers

Under our Board’s general power to manage our business, our Board may exercise all the powers to borrow money.

Matters Requiring Majority of Independent Directors Approval

Prior to the Sunset Date, the approval of a majority of the independent directors (who are not conflicted in relation to the relevant matter) shall be required to authorize any transaction agreement or arrangement between Grupo VM or any of its affiliates or connected persons and the Company or any of its Affiliates, or the alteration amendment, repeal or waiver of any such agreement, including any shareholders’ agreement between the Company and Grupo VM.

Director Liability

Under English law, members of the Board may be liable to us for negligence, default, breach of duty or breach of trust in relation to us. Any provision that purports to exempt a director from such liability is void. Subject to certain exceptions, English law does not permit us to indemnify a director against any liability attaching to him in connection with any negligence, default, breach of duty or breach of trust in relation to us. The exceptions allow us to:

purchase and maintain director and officer insurance against any liability attaching in connection with any negligence, default, breach of duty or breach of trust owed to us;
provide a qualifying third party indemnity provision which permits us to indemnify its directors (and directors of an “associated company” (i.e., a company that is a parent, subsidiary or sister company of Ferroglobe) in respect of proceedings brought by third parties (covering both legal costs and the amount of any adverse judgment), except for: (i) the legal costs of an unsuccessful defense of criminal proceedings or civil proceedings brought by us an associated company, or the legal costs incurred in connection with certain specified applications by the

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director for relief where the court refuses to grant the relief; (ii) fines imposed in criminal proceedings; and (iii) penalties imposed by regulatory bodies;
loan funds to a director to meet expenditure incurred in defending civil and criminal proceedings against him or her (even if the action is brought by us), or expenditure incurred applying for certain specified relief, but subject to the requirement for the director or officer to reimburse us if the defense is unsuccessful; and
provide a qualifying pension scheme indemnity provision, (which allows us to indemnify a director of a company that is a trustee of an occupational pension scheme against liability incurred in connection with such company’s activities as a trustee of the scheme (subject to certain exceptions).

Indemnification Matters

Under the Articles, subject to the provisions of the U.K. Companies Act 2006 and applicable law, we will exercise all of our powers to (i) indemnify any person who is or was a director (including by funding any expenditure incurred or to be incurred by him or her) against any loss or liability, whether in connection with any proven or alleged negligence, default, breach of duty or breach of trust by him or her or otherwise, in relation to us or any associated company; and/or (ii) indemnify to any extent any person who is or was a director of an associated company that is a trustee of an occupational pension scheme (including by funding any expenditure incurred or to be incurred by him or her) against any liability, incurred by him or her in connection with our activities as trustee of an occupational pension scheme; including insurance against any loss or liability or any expenditure he or she may incur, whether in connection with any proven or alleged act or omission in the actual or purported execution or discharge of his or her duties or in the exercise or purported exercise of his or her powers or otherwise in relation to his or her duties, power or offices, whether comprising negligence, default, breach of duty, breach of trust or otherwise, in relation to the relevant body or fund.

Under the Articles and subject to the provisions of the U.K. Companies Act 2006, we may exercise all of our powers to purchase and maintain insurance for or for the benefit of any person who is or was a director, officer or employee of, or a trustee of any pension fund in which our employees are or have been interested, including insurance against any loss or liability or any expenditure he or she may incur, whether in connection with any proven or alleged act or omission in the actual or purported execution or discharge of his or her duties or in the exercise or purported exercise of his or her powers or otherwise in relation to his or her duties, power or offices, whether comprising negligence, default, breach of duty, breach of trust or otherwise, in relation to the relevant body or fund.

No director or former director shall be accountable to us or the members for any benefit provided pursuant to the Articles. The receipt of any such benefit shall not disqualify any person from being or becoming a director.

Director Removal or Termination of Appointment

The general meeting of shareholders will, at all times, have the power to remove a member of the Board by an ordinary resolution, being a resolution passed by a simple majority of votes cast. The Articles also provide that a member of the Board will cease to be a director as soon as:

the director ceases to be a director by virtue of any provision of the U.K. Companies Act 2006 (including, without limitation, section 168) or he becomes prohibited by applicable law from being a director;

the director becomes bankrupt or makes any arrangement or composition with the director’s creditors generally;

a registered medical practitioner who is treating that person gives a written opinion to us stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months;

by reason of the director’s mental health a court makes an order which wholly or partly prevents the director from personally exercising any powers or rights he would otherwise have;

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the director resigns from office by notice in writing to us;

in the case of a director who holds any executive office, the director’s appointment as such is terminated or expires and the Board resolves that he should cease to be a director;

the director is absent for more than six consecutive months, without permission of the Board, from meetings of the Board held during that period and the Board resolves that the director should cease to be a director; or

the director dies.

Committees

Subject to the provisions of the Articles, the directors may delegate any of the powers which are conferred on them under the Articles:

to a committee consisting of one or more directors and (if thought fit) one or more other persons, to such an extent and on such terms and conditions as the Board thinks fit (and such ability of the directors to delegate applies to all powers and discretions and will not be limited because certain articles refer to powers and discretions being exercised by committees authorized by directors while other articles do not);
to such person by such means (including by power of attorney), to such an extent, and on such terms and conditions, as they think fit including delegation to any director holding any executive office, any manager or agent such of its powers as the Board considers desirable to be exercised by him; or
to any specific director or directors (with power to sub-delegate). These powers can be given on terms and conditions decided on by the directors either in parallel with, or in place of, the powers of the directors acting jointly.

Any such delegation shall, in the absence of express provision to the contrary in the terms of delegation, be deemed to include authority to sub-delegate to one or more directors (whether or not acting as a committee) or to any employee or agent all or any of the powers delegated and may be made subject to such conditions as the Board may specify, and may be revoked or altered. The directors can remove any people they have appointed in any of these ways and cancel or change anything that they have delegated, although this will not affect anybody who acts in good faith who has not has any notice of any cancellation or change.

General Meeting

The Board shall convene and the Company shall hold general meetings as annual general meetings in accordance with the U.K. Companies Act 2006. The Board may call general meetings whenever and at such times and places as it shall determine. Subject to the provisions of the U.K. Companies Act 2006, the executive chairman of the Company may also call general meetings on behalf of the Board. On requisition of members pursuant to the provisions of the U.K. Companies Act 2006, the Board shall promptly convene a general meeting in accordance with the requirements of the U.K. Companies Act 2006.

Subject to the provisions of the U.K. Companies Act 2006, an annual general meeting and all other general meetings shall be called by at least such minimum period of notice as is prescribed or permitted under the U.K. Companies Act 2006.

All provisions of the Articles relating to general meetings of the Company shall apply, mutatis mutandis, to every separate general meeting of the holders of any class of shares in the capital of the Company.

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C.    Material Contracts

Asset-Based Lending Facility

On June 30, 2022, Ferroglobe subsidiaries Globe Specialty Metals, Inc., and QSIP Canada ULC entered into a Credit and Security Agreement for a new, five-year $100 million North American asset-based revolving credit facility with Bank of Montreal as lender and agent (the “BMO ABL Revolver”). The maximum amount available under the ABL Revolver is subject to a borrowing base test comprising North American inventory and accounts receivable of Globe and QSIP.

The credit agreement contains, inter-alia, certain covenants which are customary for transactions of this nature relating to additional indebtedness, liens, investments, dispositions. Furthermore, the credit agreement contains no leverage-based or financial ratio-based covenants.

Interest expense under the ABL Revolver is equal to SOFR plus 10 bps for 30-day SOFR’s applicable margin, or Prime Spread for drawdowns outstanding for less than 30 days. The company did not make an initial drawing upon closing and the facility remains undrawn as of the date of this report.

Prior ABL

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 “PNC ABL Revolver”), with PNC Bank, N.A., as lender. On March 16, 2021, the Company repaid in its entirety the remaining balance in an amount equal to $39,476 thousand, cancelling its obligations derived from the contract.

Super Senior Notes

On May 17, 2021, Ferroglobe Finance Company, plc (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, in an offering that was not subject to the registration requirements of the Securities Act. 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 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.

At any time from July 29, 2021, the UK Issuer may redeem all or, from time to time, part of the Super Senior Notes upon not less than 10 nor more than 60 days’ notice to the holders, at the following redemption prices: (i) commencing on July 29, 2021 to the date falling 15 months after July 29, 2021, at a redemption price of 100% of the principal amount of the Super Senior Notes being redeemed plus accrued and unpaid interest and additional amounts, (ii) commencing after the date falling 15 months after July 29, 2021 to the date falling nine (9) months after such date, at a redemption price of 100% of the principal amount of the Super Senior Notes being redeemed plus the “make-whole” premium, plus accrued and unpaid interest and additional amounts, (iii) commencing after the date falling 24 months after July 29, 2021 to the date falling 36 months after July 29, 2021, at a redemption price of 104.5% of the principal amount of the Super Senior Notes being redeemed plus accrued and unpaid interest and additional amounts and (iv) commencing after the date falling 36 months after July 29, 2021 and thereafter, at a redemption price of 100% of the principal amount of the Super Senior Notes being redeemed plus accrued and unpaid interest and additional amounts.

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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. A change of control will occur upon the acquisition of 35% or more of the total voting power of our shares by persons other than certain permitted holders including Grupo VM and such permitted holders “beneficially own” directly or indirectly in the aggregate the same or a lesser percentage of the total voting power of our shares than such other “person” or “group” of related persons. However, the Super Senior Notes Indenture states that no change of control shall occur or be deemed to occur by reason of:

1.any enforcement of rights or exercise of remedies under the GVM Share Pledge, including any sale, transfer or other disposal or disposition of the shares in Ferroglobe in connection there with;
2.any disposal by Grupo VM of its shares in Ferroglobe where the purpose of that transaction is to facilitate the repayment or discharge (in full or in part) of the GVM Loan and the proceeds of sale are promptly applied towards such repayment or discharge; or
3.any mandatory offer (or analogous offer) required under the City Code on Takeovers and Mergers or any analogous regulation applied in any jurisdiction as a consequence of a transaction under limbs (1) or (2) above,

provided that, if any transaction under paragraphs (1) to (3) above occurs which, but for such paragraph(s), would be a “Change of Control” as a consequence of any person or persons (other than Tyrus) (x) acquiring any voting stock of Ferroglobe PLC (or any other successor company) or (y) being or becoming the “beneficial owner” of the voting power of any voting stock of Ferroglobe PLC (or any other successor company) (such person(s), the “Controlling Shareholder”):

the Controlling Shareholder has within 60 days of that transaction and at its election:
opaid to the Holders, on a pro rata basis, a fee in an aggregate amount equal to the product of(i) the aggregate principal amount outstanding of the Notes, (ii) 0.02 and (iii) the number of years (or part-thereof, with any part of a year calculated on the basis of the number of days divided by 360) from the payment date of such fee to June 30, 2025; or
omade an offer to all Holders to purchase one-third of the Notes on a pro rata basis at a price equal to (A) in the first fifteen months after the Issue Date, 100% of the principal amount of such Notes plus accrued and unpaid interest or (B) at any time after the first fifteen months following the Issue Date, 101% of the principal amount of such Notes plus accrued and unpaid interest; or
either or both of the Issuers within 60 days of that transaction has made an offer to all Holders to repurchase or purchase (as applicable), or has otherwise redeemed, one-third of the Notes on a pro rata basis at a price equal to (A) in the first fifteen months after the Issue Date,100% of the principal amount of such Notes plus accrued and unpaid interest or (B) at anytime after the fifteen months following the Issue Date, 101% of the principal amount of such Notes plus accrued and unpaid interest, resulting in such repurchased, purchased or redeemed Notes being cancelled, and provided further that the Controlling Shareholder is not a Restricted Person.

Where:

“GVM Loan” means any financing provided by Tyrus to Grupo VM or owing by Grupo VM to Tyrus, from time to time.

“GVM Share Pledge” means any share pledge or charge or other similar security over the shares in Ferroglobe PLC held by Grupo VM granted by Grupo VM in support of or as collateral for its obligations under any Grupo VM Loan from time to time.

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“Restricted Person” means any person that: (a) is listed on the United States Specifically Designated Nationals and Blocked Persons List; the European Union Consolidated List of Persons, Groups and Entities subject to EU Financial Sanctions; or the United Kingdom Consolidated List of Financial Sanctions Targets (each a “Sanctions List”); (b) is owned or controlled by a person identified on a Sanctions List, to the extent that such ownership or control results in such person being subject to the same restrictions as if such person were themselves identified on the corresponding Sanctions List; (c) is located in or incorporated under the laws of a country or territory that is the target of comprehensive sanctions imposed by the United States, which for the purposes of this Agreement, as at the date of signature of this Agreement by the last of its signatories are Iran, Syria, Cuba, the Crimea Region, and North Korea; (d) has, within the last five years, been prosecuted by a relevant authority in the United States, the United Kingdom or any member state of the European Union, in relation to a breach of securities laws (in so far as such prosecution relates to insider dealing, unlawful disclosure, market manipulation or prospectus liability) or criminal laws relating to fraud or anti-corruption, save for instances where the prosecution has concluded and did not result in any criminal or civil settlement or penalty being imposed in relation to such breaches; or (e) is a Subsidiary of a person described in (d) above.

The Super Senior Notes Indenture restricts, among other things, the ability of Ferroglobe and its restricted subsidiaries to:

borrow or guarantee additional indebtedness;
pay dividends, repurchase shares and make distributions of certain other payments;
make certain investments;
create certain liens;
merge or consolidate with other entities;
Enter into certain transactions with affiliates;
sell,lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and
guarantee certain types of other indebtedness of Ferroglobe and its restricted subsidiaries withoutalso guaranteeing the Super Senior Notes.

On July 21, 2022, Ferroglobe Finance Company, PLC redeemed of all the 9.0% Super Senior Notes due 2025 issued at 100% of the principal amount thereof plus accrued interest. 

Old Notes

On February 15, 2017, Ferroglobe PLC and Globe issued the Old Notes, comprising $350 million 9⅜% senior notes due 2022, in an offering that was not subject to the registration requirements of the Securities Act. Pursuant to a consent solicitation completed on July 29, 2021 relating to the exchange of the Old Notes, the proposed amendments eliminated substantially all of the restrictive covenants, all of the reporting covenants and certain of the events of default in the Old Notes Indenture. As of July 29, 2021 $4.9 million in aggregate principal amount of the Old Notes was outstanding.

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.

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Ferroglobe and Globe may redeem all or, from time to time, part of the Old Notes upon not less than 10 nor more than 60 days’ notice to the holders, 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.

On March 1, 2022, Ferroglobe repaid in its entirety the old notes for an amount equal to $5,175 thousand cancelling its obligations derived from the old notes indenture.

Reinstated 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 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 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.

Ferroglobe and Globe may redeem all or, from time to time, part of the Reinstated Notes upon not less than 10 nor more than 60 days’ notice to the holders, at the following redemption prices: (i) at any time prior to July 31, 2022, Ferroglobe and Globe may redeem all or part of the Reinstated Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the date of redemption, plus a “make whole” premium, (ii) during the twelve-month period beginning on July 31, 2022, at a redemption price of 104.6875% of the principal amount of the Reinstated Notes being redeemed plus accrued and unpaid interest and additional amounts, (iii) during the twelve-month period beginning on July 31, 2023, at a redemption price of 102.34375% of the principal amount of the Reinstated Notes being redeemed plus accrued and unpaid interest and additional amounts, (iv) during the twelve-month period beginning on July 31, 2024, at a redemption price of 101% of the principal amount of the Reinstated Notes being redeemed plus accrued and unpaid interest and additional amounts, and (v) from July 31, 2025, at a redemption price of 100% of the principal amount of the Reinstated Notes being redeemed plus accrued and unpaid interest and additional amounts.

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. A change of control will occur upon the acquisition of 35% or more of the total voting power of our shares by persons other than certain permitted holders including Grupo VM and such permitted holders “beneficially own” directly or indirectly in the aggregate the same or a lesser percentage of the total voting power of our shares than such other “person” or “group” of related persons. However, the Reinstated Notes Indenture states that no change of control shall occur or be deemed to occur by reason of:

1.any enforcement of rights or exerciseof remedies under the GVM Share Pledge, including any sale, transfer or other disposal ordisposition of the shares in Ferroglobe in connection there with;
2.any disposal by Grupo VM of its sharesin Ferroglobe where the purpose of that transaction is to facilitate the repayment or discharge(in full or in part) of the GVM Loan and the proceeds of sale are promptly applied towardssuch repayment or discharge; or

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3.any mandatory offer (or analogous offer) required under the City Code on Takeovers and Mergers or any analogous regulation applied in any jurisdiction as a consequence of a transaction under limb (1) or (2) above,

provided that, if any transaction under paragraphs (1) to (3) above occurs which, but for such paragraph(s), would be a “Change of Control” as a consequence of any person or persons (other than Tyrus) (x) acquiring any voting stock of Ferroglobe PLC (or any other successor company) or (y) being or becoming the “beneficial owner” of the voting power of any voting stock of Ferroglobe PLC (or any other successor company) (such person(s), the “Controlling Shareholder”):

the Controlling Shareholder has within 60 days of that transaction and at its election:
opaid to the Holders, on a pro rata basis, a fee in an aggregate amount equal to the product of(i) the aggregate principal amount outstanding of the Reinstated Notes, (ii) 0.02 and (iii)the number of years (or part-thereof, with any part of a year calculated on the basis of the number of days divided by 360) from the payment date of such fee to December 31, 2025; or
omade an offer to all Holders to purchase one-third of the Notes on a pro rata basis at a price equal to 101% of the principal amount of such Notes plus accrued and unpaid interest; or
either or both of the Issuers within 60 days of that transaction has made an offer to all Holders to repurchase or purchase (as applicable), or has otherwise redeemed, one-third of the Note son a pro rata basis at a price equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, resulting in such repurchased, purchased or redeemed Notes being cancelled, and provided further that the Controlling Shareholder is not a Restricted Person.

Where:

“GVM Loan” means any financing provided by Tyrus to Grupo VM or owing by Grupo VM to Tyrus, from time to time.

“GVM Share Pledge” means any share pledge or charge or other similar security over the shares in Ferroglobe PLC held by Grupo VM granted by Grupo VM in support of or as collateral for its obligations under any Grupo VM Loan from time to time.

“Restricted Person” means any person that: (a) is listed on the United States Specifically Designated Nationals and Blocked Persons List; the European Union Consolidated List of Persons, Groups and Entities subject to EU Financial Sanctions; or the United Kingdom Consolidated List of Financial Sanctions Targets (each a “Sanctions List”); (b) is owned or controlled by a person identified on a Sanctions List, to the extent that such ownership or control results in such person being subject to the same restrictions as if such person were themselves identified on the corresponding Sanctions List; (c) is located in or incorporated under the laws of a country or territory that is the target of comprehensive sanctions imposed by the United States, which for the purposes of this Agreement, as at the date of signature of this Agreement by the last of its signatories are Iran, Syria, Cuba, the Crimea Region, and North Korea; (d) has, within the last five years, been prosecuted by a relevant authority in the United States, the United Kingdom or any member state of the European Union, in relation to a breach of securities laws (in so far as such prosecution relates to insider dealing, unlawful disclosure, market manipulation or prospectus liability) or criminal laws relating to fraud or anti-corruption, save for instances where the prosecution has concluded and did not result in any criminal or civil settlement or penalty being imposed in relation to such breaches; or (e) is a Subsidiary of a person described in (d) above.

The Reinstated Notes Indenture restricts, among other things, the ability of Ferroglobe and its restricted subsidiaries to:

borrow or guarantee additional indebtedness;
pay dividends, repurchase shares and make distributions of certain other payments;
make certain investments;

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create certain liens;
merge or consolidate with other entities;
enter into certain transactions with affiliates;
sell, lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and
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:

the elimination of baskets or a reduction of basket sizes in the debt covenant, restricted payment covenant, permitted investments, permitted liens and asset disposition;
the addition of a net leverage test in the debt covenant and reduced flexibility in financial calculations;
requirement to apply certain excess proceeds to repay debt in accordance with the applicable intercreditor agreement;
lower event of default thresholds; and
a 90% guarantor coverage test.

Intercreditor Agreement

In connection with the issuance of the Super Senior Notes, the UK Issuer, the Company and certain of its restricted subsidiaries entered into an intercreditor agreement (the “Intercreditor Agreement”) on May 17, 2021. Under the terms of the Intercreditor Agreement, in the event of enforcement of certain collateral the holders of Reinstated Notes will receive proceeds from such collateral only after obligations under the Super Senior Notes have been repaid in full.

REINDUS Loan

On September 8, 2016, FerroAtlántica, S.A.U. (“FAU”), as borrower, and the Spanish Ministry of Industry, Tourism and Commerce (the “Ministry”), as lender, entered into a loan agreement under which the Ministry made available to the borrower a loan in aggregate principal amount of €44.9 million, in connection with the industrial development projects relating silicon purification project. FAU transferred the loan to OPCO before its sale. See “Item 4.B.—Information on the Company—Business Overview—Research and Development (R&D)—Solar grade silicon.” The loan of €44.9 million was scheduled to be repaid in seven installments starting in 2023 and completing by 2030.  Interest on outstanding amounts under the loan accrues at an annual rate of 3.55%. As of December 31, 2022, the balance of the remaining loan has been presented within Current liabilities.

Use of the proceeds of the outstanding loan was limited to the period between January 1, 2016 and May 24, 2019. On May 24, 2019, a report on uses of the loan was presented to the Ministry. In January 25, 2022, the Ministry opened a procedure to decide about the potential reimbursement of the loan. The company presented its allegations in February 15, 2022. Based on those allegations, in January 2023, a new resolution was signed by the Ministry terminating the total reimbursement procedure initiated in January 2022. Once that procedure was definitively closed, the company decided to proceed with the foreseen partial early repayment of €16.3 million in February 10, 2023.

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SEPI loan

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 €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 secured by corporate joint guarantees from Ferroglobe, Ferroglobe Holding Company and Ferroglobe Finance Company and certain share pledges, bank account pledges, intercompany receivables pledges, inventory pledges and security over certain real property, and other assets from Grupo FerroAtlántica and certain of its subsidiaries.

Until the loans have been fully repaid, the Beneficiaries are subject to several restrictions, including the following prohibited payments: (1) payment of dividends; (2) payment of management fee; (3) repayment of intra-group loans; (4) payment of intercompany net commercial balances if they exceed the required threshold of €163 million for the net intercompany commercial balances (denominated “legacy”); and (5) payment of interest on intercompany loans corresponding to the years 2021 and 2022.

NMTC Program

The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private capital by providing investors with a federal tax credit. Investments made through the NMTC Program are used to finance businesses, breathing new life into neglected, underserved low-income communities. The reactivation of the plant in Selma, Alabama, has been granted with a $13.5 million allocation by the end of fiscal year 2022 under the NMTC Program. This allocation has been subscribed by Globe Metallurgical, Inc. (GMI) as owner of the plant and United Bank as investor and beneficiary of the tax credit resulting from this grant. As a result of the structure implemented for the NMTC, (i) Globe Specialty Metals, Inc. (GSM) has granted a loan to a special purpose vehicle (SPV I) (Leveraged Loan) and (ii) GMI has received two qualify low-income community investment loans (QLICI Loans) from another special purposes vehicle (SPV II) wholly owned by SPV I. Leverage loan is in the amount of $9.9 million, a 26 years term and an interest rate of 4.27%. QLICI Loan A is in the amount of $9.9 million, with a 30 years term and 3.57% interest rate. QLICI Loan B is in the amount of $3.3 million, with a 30 years term and 3.57% interest rate. Out of this investment-funding structure,  GMI receives a federal grant of approximately $2.8 million, out of which, all the expenses related to the investment-funding structure are to be detracted, resulting in a net subsidy of approximately $1.8 million. This subsidy must be invested in in CAPEX in the Selma plant throughout fiscal year 2023 as per the investment plan of the group.

The net subsidy is deposited in a restricted account held by GMI. Drawing from this restricted account requires filing a disbursement request vis a vis United Bank, submitting invoices from suppliers relating to CAPEX invested in the Selma plant.

After seven years, the NMTC structure set up will be wound up, as a result of which (ii) SPV II will cancel the QLICI B loan, resulting in cancellation of debt income (CODI) for GMI; (ii) GSM will become the owner of SPV I and SPV II. Upon liquidation and dissolution of these two entities, the Leverage loan will void by confusion. QLICI A loan will be capitalized by GSM into GMI.

Other material contracts

See also “Item 7.B.—Major Shareholders and Related Party Transactions—Related Party Transactions.” and  “Item 5.B.—Liquidity and Capital Resources”.

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D.    Exchange Controls

See “Item 3.D.—Key Information—Risk Factors—Risks Related to Our Ordinary Shares.”

E.    Taxation.

U.S. federal income taxation

The following is a discussion of the material U.S. federal income tax consequences to U.S. shareholders (as defined below) of the ownership and disposition of ordinary shares. The discussion is based on and subject to the Internal Revenue Code, the U.S. Treasury Regulations promulgated thereunder, administrative rulings and court decisions in effect on the date hereof, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. The discussion applies only to U.S. shareholders that acquire ordinary shares in exchange for cash in this offering and hold ordinary shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). The discussion also assumes that we will not be treated as a U.S. corporation under Section 7874 of the Code. The discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular U.S. shareholders in light of their personal circumstances, including any tax consequences arising under the Medicare contribution tax on net investment income, or to such shareholders subject to special treatment under the Code, such as:

banks, thrifts, mutual funds, insurance companies, and other financial institutions,
real estate investment trusts (REITs) and regulated investment companies (RICs),
traders in securities who elect to apply a mark-to-market method of accounting,
brokers or dealers in securities or foreign currency,
tax-exempt organizations or governmental organizations,
individual retirement and other deferred accounts,
U.S. shareholders whose functional currency is not the U.S. Dollar,
U.S. expatriates and former citizens or long-term residents of the United States,
“passive foreign investment companies,” “controlled foreign corporations,” and corporations that accumulate earnings to avoid U.S. federal income tax,
persons subject to the alternative minimum tax,
shareholders who hold ordinary shares as part of a straddle, hedging, conversion, constructive sale or other risk reduction transaction,
“S corporations,” partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors therein),
persons that actually or constructively own 10% or more of our voting stock, and
shareholders who received their ordinary shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.

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The discussion does not address any non-income tax consequences or any foreign, state or local tax consequences. For purposes of this discussion, a U.S. shareholder means a beneficial owner of ordinary shares who is:

an individual who is a citizen or resident of the United States;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any subdivision thereof, or that is otherwise treated as a U.S. tax resident under the Code;
an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.

If a partnership, including for this purpose any entity that is treated as a partnership for U.S. federal income tax purposes, holds ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A U.S. holder that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the ownership and disposition of ordinary shares.

Prospective purchasers are urged to consult their tax advisors with respect to the U.S. federal income tax consequences to them of the purchase, ownership and disposition of ordinary shares, as well as the tax consequences to them arising under U.S. federal tax laws other than those pertaining to income tax (including estate or gift tax laws), state, local and non-U.S. tax laws, as well as any applicable income tax treaty.

Dividends and other distributions on ordinary shares

Dividends will generally be taxed as ordinary income to U.S. shareholders to the extent that they are paid out of current or accumulated earnings and profits, as determined under U.S. federal income tax principles. As such, subject to the following discussion of special rules applicable to PFICs (as defined below) and, assuming that ordinary shares continue to be listed on the NASDAQ and certain holding-period requirements are met, the gross amount of the dividends paid to U.S. shareholders may be eligible to be taxed at lower rates applicable to dividends paid by a “qualified foreign corporation.” Dividends paid by us will not qualify for the dividends received deduction under Section 243 of the Code otherwise available to corporate shareholders. In general, and subject to the discussion below, the dividend income will be treated as foreign source passive income for U.S. federal foreign tax credit limitation purposes. The rules relating to the determination of the U.S. foreign tax credit are complex and U.S. shareholders should consult their tax advisors to determine whether and to what extent a credit would be available.

To the extent that the amount of any dividend exceeds our current and accumulated earnings and profits for a taxable year, the excess will first be treated as a tax-free return of capital, causing a reduction in the U.S. shareholder’s adjusted basis in ordinary shares. The balance of any excess will be taxed as capital gain, which would be long-term capital gain if the U.S. shareholder has held the ordinary shares for more than one year at the time the dividend is received.

It is possible that we are, or at some future time will be, at least 50% owned by U.S. persons. Dividends paid by a foreign corporation that is at least 50% owned by U.S. persons may be treated as U.S. source income (rather than foreign source passive income) for foreign tax credit purposes to the extent the foreign corporation has more than an insignificant amount of U.S. source income. The effect of this rule may be to treat a portion of any dividends paid by us as U.S. source income, which may limit a U.S. shareholder’s ability to claim a foreign tax credit with respect to foreign taxes payable or deemed payable in respect of the dividends or other foreign source passive income. The Code permits a U.S. shareholder entitled to benefits under the United Kingdom-United States Income Tax Treaty to elect to treat any dividends paid by us as foreign source income for foreign tax credit purposes if the dividend income is separated from other income items for purposes of

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calculating the U.S. shareholder’s foreign tax credit with respect to U.K. taxes withheld, if any, on the distribution of such dividend income. U.S. shareholders should consult their own tax advisors about the desirability and method of making such an election.

We generally intend to pay dividends in U.S. Dollars. If we were to pay dividends in a foreign currency or other property, the amount of any such dividend will be the U.S. Dollar equivalent value of the foreign currency or other property distributed by us, calculated, in the case of foreign currency, by reference to the exchange rate on the date the dividend is includible in the U.S. shareholder’s income, regardless of whether the payment is in fact converted into U.S. Dollars on the date of receipt. Generally, a U.S. shareholder should not recognize any foreign currency gain or loss if the foreign currency is converted into U.S. Dollars on the date the payment is received. However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. shareholder includes the dividend payment in income to the date such U.S. shareholder actually converts the payment into U.S. Dollars will be treated as ordinary income or loss. That currency exchange or loss (if any) generally will be income or loss from U.S. sources for foreign tax credit purposes.

Sale, exchange or other taxable disposition of ordinary shares

Subject to the following discussion of special rules applicable to PFICs, a U.S. shareholder will generally recognize taxable gain or loss on the sale, exchange or other taxable disposition of ordinary shares in an amount equal to the difference between the amount realized on such taxable disposition and the U.S. shareholder’s tax basis in the ordinary shares. A U.S. shareholder’s initial tax basis in ordinary shares generally will equal the cost of such ordinary shares.

The source of any such gain or loss is generally determined by reference to the residence of the shareholder such that it generally will be treated as U.S. source income for foreign tax credit limitation purposes in the case of a sale, exchange or other taxable disposition by a U.S. shareholder. However, the Code permits a U.S. shareholder entitled to benefits under the United Kingdom-United States Income Tax Treaty to elect to treat any gain or loss on the sale, exchange or other taxable disposition of ordinary shares as foreign source income for foreign tax credit purposes if the gain or loss is sourced outside of the United States under the United Kingdom-United States Income Tax Treaty and such gain or loss is separated from other income items for purposes of calculating the U.S. shareholder’s foreign tax credit. U.S. shareholders should consult their own tax advisors about the desirability and method of making such an election.

Gain or loss realized on the sale, exchange or other taxable disposition of ordinary shares generally will be capital gain or loss and will be long-term capital gain or loss if the ordinary shares have been held for more than one year. Non-corporate U.S. shareholders (including individuals) generally will be subject to U.S. federal income tax on long-term capital gain at preferential rates. The deduction of capital losses is subject to limitations.

Passive foreign investment company considerations

A foreign corporation is a “passive foreign investment company” (a “PFIC”) if, after the application of certain “look-through” rules, (1) at least 75% of its gross income is “passive income” as that term is defined in the relevant provisions of the Code, or (2) at least 50% of the value of its assets (determined on the basis of a quarterly average) produce “passive income” or are held for the production of “passive income.” The determination as to PFIC status is made annually. If a U.S. shareholder is treated as owning PFIC stock, the U.S. shareholder will be subject to special rules generally intended to reduce or eliminate the benefit of the deferral of U.S. federal income tax that results from investing in a foreign corporation that does not distribute all of its earnings on a current basis. These rules may adversely affect the tax treatment to a U.S. shareholder of dividends paid by us and of sales, exchanges and other dispositions of ordinary shares, and may result in other adverse U.S. federal income tax consequences.

We do not expect to be treated as a PFIC for the current taxable year, and we do not expect to become a PFIC in the future. However, there can be no assurance that the IRS will not successfully challenge this position or that we will not become a PFIC at some future time as a result of changes in our assets, income or business operations. U.S. shareholders should consult their own tax advisors about the determination of our PFIC status and the U.S. federal income tax consequences of holding ordinary shares if we are considered a PFIC in any taxable year.

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Information reporting and backup withholding

In general, information reporting requirements may apply to dividends received by U.S. shareholders of ordinary shares and the proceeds received on the disposition of ordinary shares effected within the United States (and, in certain cases, outside the United States), paid to U.S. shareholders other than certain exempt recipients (such as corporations). Backup withholding may apply to such amounts if the U.S. shareholder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9) or is otherwise subject to backup withholding. The amount of any backup withholding from a payment to a U.S. shareholder will be allowed as a refund or credit against the U.S. shareholder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

Individuals that own “specified foreign financial assets” with an aggregate value of more than $50,000 (or higher threshold for some married individuals and individuals living abroad) may be required to file an information report (IRS Form 8938) with respect to such assets with their US tax returns. Ordinary shares generally will constitute specified foreign financial assets subject to these reporting requirements, unless the ordinary shares are held in an account at a financial institution (which, in the case of a foreign financial account, may also be subject to reporting). Additionally, under recently finalized regulations, a domestic corporation, domestic partnership, or trust (as described in Section 7701(a)(30)(E) of the Code) which is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets may be treated as an individual for purposes of these rules. U.S. shareholders should consult their own tax advisors regarding information reporting requirements relating to their ownership of ordinary shares, and the significant penalties to which they may be subject for failure to comply.

United Kingdom taxation

The following paragraphs are intended as a general guide to current U.K. tax law and HM Revenue & Customs published practice applying as at the date of this annual report (both of which are subject to change at any time, possibly with retrospective effect) relating to the holding of ordinary shares. They do not constitute legal or tax advice and do not purport to be a complete analysis of all U.K. tax considerations relating to the holding of ordinary shares. They relate only to persons who are absolute beneficial owners of ordinary shares (and where the ordinary shares are not held through an Individual Savings Account or a Self-Invested Personal Pension) and who are resident for tax purposes in (and only in) the U.K. (except to the extent that the position of non-U.K. resident persons is expressly referred to).

These paragraphs may not relate to certain classes of holders of ordinary shares, such as (but not limited to):

persons who are connected with the Company;
insurance companies;
charities;
collective investment schemes;
pension schemes;
brokers or dealers in securities or persons who hold ordinary shares otherwise than as an investment;
persons who have (or are deemed to have) acquired their ordinary shares by virtue of an office or employment or who are or have been officers or employees of the Company or any of its affiliates; and
individuals who are subject to U.K. taxation on a remittance basis.

These paragraphs do not describe all of the circumstances in which holders of ordinary shares may benefit from an exemption or relief from U.K. taxation. It is recommended that all holders of ordinary shares obtain their own tax advice.

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In particular, non-U.K. resident or domiciled persons are advised to consider the potential impact of any relevant double tax agreements.

Dividends

Withholding tax

Dividends paid by the Company will not be subject to any withholding or deduction for or on account of U.K. tax, irrespective of the residence or particular circumstances of the shareholders.

Income tax

An individual holder of ordinary shares who is resident for tax purposes in the U.K. may, depending on his or her particular circumstances, be subject to U.K. tax on dividends received from the Company. An individual holder of ordinary shares who is not resident for tax purposes in the U.K. should not be chargeable to U.K. income tax on dividends received from the Company unless he or she carries on (whether solely or in partnership) any trade, profession or vocation in the U.K. through a branch or agency to which the ordinary shares are attributable (subject to certain exceptions for trading through independent agents, such as some brokers and investment managers).

A nil rate of income tax will currently apply to the first £2 thousand of dividend income received by an individual shareholder in a tax year (the “Nil Rate Amount”), regardless of what tax rate would otherwise apply to that dividend income. This will reduce to £1 thousand from 6 April 2023 and to £500 from 6 April 2024. Any dividend income received by an individual shareholder in a tax year in excess of the Nil Rate Amount will be subject to income tax at dividend rates determined by thresholds of income, as follows:

at the rate of 8.5%, to the extent that the relevant dividend income falls below the threshold for the higher rate of income tax;
at the rate of 33.5%, to the extent that the relevant dividend income falls above the threshold for the higher rate of income tax but below the threshold for the additional rate of income tax; and
at the rate of 39.35%, to the extent that the relevant dividend income falls above the threshold for the additional rate of income tax.

Dividend income that is within the dividend Nil Rate Amount counts towards an individual’s basic or higher rate limits and will therefore potentially affect the level of savings allowance to which an individual is entitled, and the rate of tax that is due on any dividend income in excess of the Nil Rate Amount. In calculating into which tax band any dividend income over the nil rate falls, savings and dividend income are treated as the highest part of an individual’s income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.

Corporation tax

Corporate holders of ordinary shares which are resident for tax purposes in the U.K. should not be subject to U.K. corporation tax on any dividend received from the Company so long as the dividends qualify for exemption (as is likely) and certain conditions are met (including anti-avoidance conditions).

Chargeable gains

A disposal of ordinary shares by a shareholder resident for tax purposes in the U.K. may, depending on the shareholder’s circumstances and subject to any available exemptions or reliefs, give rise to a chargeable gain or an allowable loss for the purposes of U.K. capital gains tax and corporation tax on chargeable gains.

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If an individual holder of ordinary shares who is subject to U.K. income tax at either the higher or the additional rate becomes liable to U.K. capital gains tax on the disposal of ordinary shares, the applicable rate will be 20%. For an individual holder of ordinary shares who is subject to U.K. income tax at the basic rate and liable to U.K. capital gains tax on such disposal, the applicable rate would be 10%, save to the extent that any capital gains exceed the unused basic rate tax band. In that case, the rate applicable to the excess would be 20%. No indexation allowance will be available to an individual holder of ordinary shares in respect of any disposal of such shares. However, the capital gains tax annual exempt amount (which is £12,300 (2022/23) for individuals (2021/22: £12,300) reducing to £6,000 from 6 April 2023) may be available to exempt any chargeable gain, to the extent that the exemption has not already been utilized.

If a corporate holder of ordinary shares becomes liable to U.K. corporation tax on the disposal of ordinary shares, the main rate of U.K. corporation tax (currently 19%, rising to 25% on 1 April 2023) would apply. An indexation allowance may be available to such a holder to give an additional deduction based on the indexation of its base cost in the shares by reference to U.K. retail price inflation over its holding period (if the shares were acquired before December 2017). An indexation allowance can only reduce a gain on a future disposal, and cannot create a loss.

A holder of ordinary shares which is not resident for tax purposes in the U.K. should not normally be liable to U.K. capital gains tax or corporation tax on chargeable gains on a disposal of ordinary shares. However, an individual holder of ordinary shares who has ceased to be resident for tax purposes in the U.K. for a period of less than five years and who disposes of ordinary shares during that period may be liable on his or her return to the U.K. to U.K. tax on any capital gain realized (subject to any available exemption or relief).

Stamp duty and Stamp Duty Reserve Tax (“SDRT”)

The discussion below relates to holders of ordinary shares wherever resident.

Transfers of interest in ordinary shares within a clearance service or depositary receipt system should not give rise to a liability to U.K. stamp duty or SDRT, provided that no instrument of transfer is entered into and that no election that applies to the ordinary shares is or has been made by the clearance service under Section 97A of the U.K. Finance Act 1986.

Transfers of ordinary shares within a clearance service where an election has been made by the clearance service under Section 97A of the U.K. Finance Act 1986 will generally be subject to SDRT (rather than U.K. stamp duty) at the rate of 0.5% of the amount or value of the consideration.

Transfers of ordinary shares that are held in certificated form will generally be subject to U.K. stamp duty at the rate of 0.5% of the consideration given (rounded up to the nearest £5). An exemption from U.K. stamp duty is available for a written instrument transferring an interest in ordinary shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000. SDRT may be payable on an agreement to transfer such ordinary shares, generally at the rate of 0.5% of the consideration given in money or money’s worth under the agreement to transfer the ordinary shares. This charge to SDRT would be discharged if an instrument of transfer is executed pursuant to the agreement which gave rise to SDRT and U.K. stamp duty is duly paid on the instrument transferring the ordinary shares within six years of the date on which the agreement was made or, if the agreement was conditional, the date on which the agreement became unconditional. The stamp duty would be duly accounted for if it is paid, an appropriate relief is claimed or the instrument is otherwise certified as exempt.

If ordinary shares (or interests therein) are subsequently transferred into a clearance service or depositary receipt system, under Sections 93 and 96 of the U.K. Finance Act 1986 a U.K. stamp duty or SDRT charge will generally apply at the rate of 1.5% of the amount or value of the consideration given (rounded up in the case of U.K. stamp duty to the nearest £5) or, in certain circumstances, the value of the shares (save to the extent that an election has been made under Section 97A of the U.K. Finance Act 1986). This liability for U.K. stamp duty or SDRT will strictly be accountable by the clearance service or depositary receipt system, as the case may be, but will, in practice, generally be reimbursed by participants in the clearance service or depositary receipt system. However, following recent EU judicial decisions, HMRC has published

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guidance that they will no longer seek to enforce such charge in certain circumstances (mainly where the transaction is in connection with the raising of capital). Specific tax advice should be sought in such circumstances.

F.    Dividends and Paying Agents.

Not applicable.

G.    Statements by Experts.

Not applicable.

H.    Documents on Display.

We previously filed with the SEC our registration statement on Form F-1 on March 15, 2016 with file number 333-209595.

We have filed this annual report on Form 20-F with the SEC under the U.S. Exchange Act. Statements made in this annual report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this annual report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the U.S. Exchange Act and file reports and other information with the SEC.

Electronic copies of this material may be obtained from the SEC’s Internet site at http://www.sec.gov. The Commission’s telephone number is 1-800-SEC-0330.

As a foreign private issuer, we are exempt from the rules under the U.S. Exchange Act prescribing the furnishing and content of proxy statements and will not be required to file proxy statements with the SEC, and its officers, directors and principal shareholders will be exempt from the reporting and “short swing” profit recovery provisions contained in Section 16 of the U.S. Exchange Act.

I.     Subsidiary Information.

Not applicable.

ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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.

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 (principally coal and manganese ore) and power.

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Foreign exchange rate 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.

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 they 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).

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 and leases commitments for lease agreements following IFRS 16 implementation.

At December 31, the Company’s interest-bearing financial liabilities were as follows:

2022

Fixed rate

Floating rate

Total

US$'000

US$'000

US$'000

Bank borrowings

16,857

60,976

77,833

Obligations under leases

21,872

21,872

Debt instruments

343,443

343,443

Other financial liabilities (*)

80,388

18,273

98,661

440,688

101,121

541,809

(*)  Other financial liabilities comprise loans from government agencies (see Note 19 of the Consolidated Financial Statements).

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 (see Note 19 of the Consolidated Financial Statements).

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 trade and other receivables.

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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  advanced pursuant to a factoring arrangement. On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with Bankinter.

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.

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 December 31, 2025 (the “Reinstated Senior Notes”). The proceeds from the Reinstated Notes, issued by Ferroglobe and Globe (together, the “Issuers”) on July 30, 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.
$60,000 thousand aggregate principal amount of 9.300% super senior secured notes due June 30, 2025 (the “Super Senior Notes”). The proceeds from the Notes, issued by Ferroglobe on May 17, 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. On July 21, 2022, the Super Senior Notes were redeemed at 100% of the principal amount thereof plus accrued interest.
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 a loan agreement under which the Ministry made available to the borrower a loan in aggregate principal amount of €44,999 thousand, in connection with with the industrial development projects relating silicon purification project. FAU transferred the loan to OPCO before its sale. The loan of €44.9 million was scheduled to be repaid in seven installments starting in 2023 and completing by 2030.  Interest on outstanding amounts under the loan accrues at an annual rate of 3.55%. As of December 31, 2022, the amortized cost of the loan was €54,989 thousand (equivalent to $58,651 thousand) (2021: €54,578 thousand and $61,815 thousand), see Note 19. A partial early repayment of €16.3 million has been made on February 10, 2023.
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.  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. 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.
On October 2, 2020, the Company ended the receivables funding agreement and cancelled the securitization program, signing a new factoring agreement with a financial institution, for anticipating the collection of receivables of the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS). On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with Bankinter. This program offers the possibility to sell the receivables corresponding to ten customers pre-approved by the bank and its credit insurer. During 2022, the factoring agreements provided upfront cash consideration of approximately $895,264

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thousand ($659,083 thousand in 2021). The Company has repaid $ 918,070 thousand ($640,168 thousand in 2021), showing at December 31, 2022, an on-balance sheet bank borrowing debt of $60,976 thousand (2021: $93,090 thousand) (see Note 10 and 16).
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.

ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

A.    Debt Securities.

Not applicable.

B.    Warrants and Rights.

Not applicable.

C.    Other Securities.

Not applicable.

D.    American Depositary Shares.

Not applicable.

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PART II

ITEM 13.     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None of these events occurred in any of the years ended December 31, 2022, 2021 and 2020.

ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

Not applicable.

ITEM 15.     CONTROLS AND PROCEDURES.

A.Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer (Chief Executive Officer) and principal financial officer (Chief Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, we have concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective due to the existence of certain material weaknesses in our internal control over financial reporting, as described below.

Notwithstanding the conclusion by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures as of December 31, 2022 were ineffective, and notwithstanding the material weaknesses in our internal control over financial reporting described below, management has concluded that the consolidated financial statements included in this Annual Report fairly present in all material respects our financial position, results of operations and cash flows as of the dates presented and for the periods ended on such dates in accordance with IFRS-IASB.

B.Previously disclosed material weaknesses

During fiscal years 2021 and 2022, with the oversight of the Audit Committee of the Board of Directors, the Company began implementing a remediation plan to address the material weaknesses identified as of December 31, 2021. The following remedial actions were taken to enhance the Company’s control framework, including:

Expanding the finance, accounting and internal control departments, including hiring additional individuals to assist in the enhancement and implementation of internal control policies and procedures related to accounting matters in our business.
Engaged external consultants with extensive expertise in internal control to assist management in implementing its internal control framework, performing a gap analysis and designing enhanced business and IT processes and controls.

These dedicated resources have allowed us to implement improvements in our internal control framework, including a) design and implementing process-level controls at certain locations, b) design and implementing certain general information technology controls over our information technology system and c) improvement of the processes and controls to obtain certain key inputs used by management in accounting for significant estimates.

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Management has determined that these enhancements to our internal control framework mainly processes and controls to obtain certain key inputs used by management in accounting for significant estimates are operating effectively and consider the previously disclosed material weaknesses over Information and Communication identified in the prior year to be remediated as of December 31, 2022.

Despite the progress discussed above, there were several matters that hindered our ability to remediate all of the material weaknesses that were identified in the prior year.

While we have put a significant effort into expanding and enhancing our finance, accounting and internal control departments, the significant effort of onboarding additional personnel resulted in delays in the timeliness of executing controls, or control activities were performed without sufficiently documented supporting evidence of their operating effectiveness.  We believe that these added resources and the implementation of newly designed controls require additional time to demonstrate operating effectiveness.

While we believe that our efforts have improved our internal control over financial reporting and resulted in the remediation of certain of the material weaknesses identified as of December 31, 2020, and 2021, remediation of the material weaknesses remaining as of December 31, 2022 will require further validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.

C.  Management’s annual report on internal control over financial reporting

Management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed by management to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our consolidated financial statements.

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, or fraud.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on those criteria, management concluded that our internal control over financial reporting was not effective due to the existence of the material weaknesses described below.

Material weaknesses in internal control over financial reporting

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

We have identified and disclosed in our Annual Report for the year ended December 31, 2022, the following material weaknesses in internal control over financial reporting.

-Control environment

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. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to the following principles: (i) our commitment to attract, develop, and retain competent individuals in alignment with objectives, and (ii) holding individuals accountable for their internal control related responsibilities in the pursuit of objectives.

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-Control Activities

We did not design and implement effective control activities based on the criteria established in the COSO framework. We have identified deficiencies in the principles associated with the control activities component of the COSO framework. Specifically, these control deficiencies constitute a material weakness either individually or in the aggregate, relating to the following principles: (i) selects and develops control activities (ii) deploys control activities through policies that establish what is expected and procedures that put policies into action.

We have also identified a significant number of deficiencies in the design and operating effectiveness of our internal controls which constitute a material weakness, either individually or in the aggregate, including:

Financial Closing and Reporting process: controls over the oversight of the financial closing and reporting process, and controls over the review of manual journal entries, which did not operate effectively due in part to limited resources within our accounting and reporting team.

Impairment of Long-Lived Assets: controls over the assumptions and external valuations used in our impairment evaluation of long-lived assets, which were not designed and/ or did not operate effectively.

C.Attestation report of the registered public accounting firm

The Company’s independent registered public accounting firm, Deloitte, S.L., who audited the consolidated financial statements included in this Annual Report issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. Deloitte, S.L.’s report is included herein.

D.Remediation of material weaknesses in internal control over financial reporting for 2022

During 2022, Management continued implementing the corrective actions already initiated in 2021 and 2020 to remediate the material weaknesses identified, either by creating new controls or enhancing the existing ones, reinforcing the specific training, and paying attention to an adequate documentation of the activities done.

Although the Company has dedicated a substantial effort to improve the internal control over financial reporting, our remediation efforts are ongoing. We will continue the process of designing corrective actions to remediate the material weaknesses identified, and we will test the design and ongoing operating effectiveness of the new and existing controls in future periods.

We plan to continue with the implementation of the steps initiated in 2021 to remediate the material weaknesses described above, including:

Design and implement more robust control over the review of the work done by the external experts.

Enhancement and standardization of the financial closing and reporting process and the consideration of prior year adjustments.

Remediating the deficiencies identified in the impairment of long-lived assets process.

We believe these actions will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting; however, there can be no guarantee that such remediation will be sufficient.

We will continue to monitor the effectiveness of our controls and will make any further changes management determines appropriate. The planned improvements will be subject of the Company’s annual evaluation and assessment of internal control over financial reporting. As we cannot consider the material weaknesses remediated until the controls described above have operated for a sufficient period of time, we will evaluate the results of our control assessments to determine

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whether these controls are operating effectively and whether the material weaknesses above have been remediated as of December 31, 2023.

E.Changes in internal control over financial reporting

Except for the changes in connection with our implementation of the remediation plan discussed above, there have been no other changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16.     [RESERVED]

ITEM 16A.   AUDIT COMMITTEE FINANCIAL EXPERT.

See “Item 6.C.—Directors, Senior Management and Employees—Board Practices—Committees of board of directors—Audit Committee.” Our Board of Directors has determined that Mr. Bruce Crockett qualifies as an “audit committee financial expert” under applicable SEC rules.

ITEM 16B.   CODE OF ETHICS.

Our Board of Directors has adopted a Code of Conduct for our employees, officers and directors to govern their relations with current and potential customers, fellow employees, competitors, government and regulatory agencies, the media, and anyone else with whom Ferroglobe PLC has contact. Our Code of Conduct is publicly available on our website at www.ferroglobe.com.

ITEM 16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table provides information on the aggregate fees billed by our principal accountant Deloitte or by other firms, to Ferroglobe PLC and subsidiaries, classified by type of service rendered for the periods indicated, in thousands of U.S. Dollars:

($ thousands)

    

2022

    

2021

Audit Fees

 

6,735

 

5,296

Audit-Related Fees

 

59

 

770

Tax Fees

 

34

 

37

All Other Fees

4

13

Total

 

6,832

 

6,116

Audit Fees are the aggregate fees billed for professional services in connection with the audit of our consolidated annual financial statements and statutory audits of our subsidiaries’ financial statements under the rules in which our subsidiaries are organized. Also included are quarterly limited reviews, audits of non-recurring transactions, consents and any audit services required for SEC or other regulatory filings.

Audit-Related Fees are fees charged for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, and are not restricted to those that can only be provided by the auditor signing the audit report. This category comprises fees billed for comfort letters and agreed upon procedures for grants and other financial compliance.

Tax Fees are fees billed for tax compliance, tax review and tax advice on actual or contemplated transactions.

All Other Fees comprises fees billed in relation to financial advisory services and other services not accounted for under other categories.

146

Audit Committee’s policy on pre-approval of audit and permissible non-audit services of the independent auditor

Subject to shareholder approval of the independent auditor, the Audit Committee has the sole authority to appoint, retain or replace the independent auditor. The Audit Committee is also directly responsible for the compensation and oversight of the work of the independent auditor. These policies generally provide that we will not engage our independent auditors to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee. The Audit Committee’s pre-approval policy, which covers audit and non-audit services provided to us or to any of our subsidiaries, is as follows:

The Audit Committee shall review and approve in advance the annual plan and scope of work of the independent external auditor, including staffing of the audit, and shall (i) review with the independent external auditor any audit-related concerns and management’s response and (ii) confirm that any examination is performed in accordance with the relevant accounting standards.
The Audit Committee shall pre-approve all audit services and all permitted non-audit services (including the fees and terms thereof) to be performed for us by the independent auditors, to the extent required by law. The Audit Committee may delegate to one or more Committee members the authority to grant pre-approvals for audit and permitted non-audit services to be performed for us by the independent auditor, provided that decisions of such members to grant pre-approvals shall be presented to the full Audit Committee at its next regularly scheduled meeting.

ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not applicable.

ITEM 16G.  CORPORATE GOVERNANCE.

As a “foreign private issuer,” as defined by the SEC, although we are permitted to follow certain corporate governance practices of England and Wales, instead of those otherwise required under NASDAQ rules for domestic issuers, we intend to follow the NASDAQ corporate governance rules applicable to foreign private issuers. While we voluntarily follow most NASDAQ corporate governance rules, we intend to take advantage of the following limited exemptions:

Exemption from filing quarterly reports on Form 10-Q or providing current reports on Form 8-K disclosing significant events within four days of their occurrence;
Exemption from Section 16 rules regarding sales of ordinary shares by insiders, which will provide less data in this regard than shareholders of U.S. companies that are subject to the U.S. Exchange Act;
Exemption from the NASDAQ rules applicable to domestic issuers requiring disclosure within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers. Although we will require board approval of any such waiver, we may choose not to disclose the waiver in the manner set forth in the NASDAQ rules, as permitted by the foreign private issuer exemption;

147

Exemption from the requirement that our Board have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Currently, our Compensation Committee is composed of a majority of independent directors; and
Exemption from the requirements that director nominees are selected, or recommended for selection by our Board, either by (1) independent directors constituting a majority of our Board’s independent directors in a vote in which only independent directors participate, or (2) a nominations committee composed solely of independent directors, and that a formal written charter or board resolution, as applicable, addressing the nominations process is adopted.

Furthermore, NASDAQ Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on home country corporate governance practices in lieu of certain of the rules in the NASDAQ Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with NASDAQ’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an audit committee that satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). Although we are permitted to follow certain corporate governance rules that conform to England and Wales requirements in lieu of many of the NASDAQ corporate governance rules, we intend to comply with the NASDAQ corporate governance rules applicable to foreign private issuers. Accordingly, our shareholders will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of NASDAQ. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.

For additional information see “Item 6.C.—Directors, Senior Management and Employees—Board Practices.”

ITEM 16H.  MINE SAFETY DISCLOSURE

The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 16.1 to this annual report.

148

PART III

ITEM 17.     FINANCIAL STATEMENTS.

We have elected to provide financial statements pursuant to Item 18.

ITEM 18.     FINANCIAL STATEMENTS.

Our Consolidated Financial Statements are included at the end of this annual report.

ITEM 19.     EXHIBITS.

Exhibit No.

    

Exhibit Description

1.1

Articles of Association of Ferroglobe PLC, dated as of October 26, 2017 (incorporated by reference to Exhibit 1.1 to the annual report on Form 20-F filed by the Company on April 30, 2018)

2.1

Description of securities (incorporated by reference to Exhibit 2.1 to the annual report on Form 20-F filed by the Company on April 30, 2021)

3.1

Amended and Restated Shareholder Agreement, dated as of November 21, 2017, between Grupo VM and Ferroglobe (incorporated by reference to Exhibit 3.1 to the annual report on Form 20-F filed by the Company on April 30, 2018)

3.2

Amendment No. 3, to the amended and restated shareholder agreement

4.1†

Service Agreement, dated June 21, 2016, between Ferroglobe and Javier López Madrid (incorporated by reference to Exhibit 4.10 to the annual report on Form 20-F filed by the Company on May 1, 2017)

4.2†

Amendment, dated February 7, 2017, to the Service Agreement, dated June 21, 2016, between Ferroglobe and Javier López Madrid (incorporated by reference to Exhibit 4.11 to the annual report on Form 20-F filed by the Company on May 1, 2017)

4.3†

2016 Equity Incentive Plan (incorporated by reference to Exhibit 4.14 to the annual report on Form 20-F filed by the Company on April 30, 2018)

4.4

Indenture governing the $345,058 thousand exchanged old notes of 9⅜% for new 9⅜% senior secured notes due 2025 issued by the UK Issuer and Globe dated as of July 29, 2021, among Ferroglobe Finance Company, PLC, a public limited company incorporated under the laws of England and Wales (the “UK Issuer”), and Globe Specialty Metals, Inc., a corporation incorporated under the laws of the State of Delaware (the “US Co-Issuer” and, together with the UK Issuer, the “Issuers”), Ferroglobe PLC, a public limited company incorporated under the laws of England and Wales as the parent guarantor (the “Parent”), the Guarantors (as defined herein) from time to time party hereto, and GLAS Trustees Limited, as trustee (in such capacity, the “Trustee”), GLAS Trust Corporation Limited as security agent (in such capacity, the “Security Agent”), Global Loan Agency Services Limited as paying agent (in such capacity, the “Paying Agent”) and GLAS Americas LLC as registrar (in such capacity, the “Registrar”) and transfer agent (in such capacity, the “Transfer Agent”)

5.1

Asset based loan agreement, dated 30 June 2022, among Globe Specialty Metals, Inc., QSIP Canada ULC and the Bank of Montreal

8.1

List of Significant Subsidiaries

149

Exhibit No.

    

Exhibit Description

12.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2

Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1

Certification of the Principal Executive Officers and Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1

Consent of Deloitte, S.L., Independent Registered Public Accounting Firm for Ferroglobe PLC

16.1

Mine Safety and Health Administration Safety Data

101

Interactive Data Files formatted in iXBRL (Extensible Business Reporting Language)

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101)

Management contract or compensatory plan or arrangement

150

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: May 1, 2023

Ferroglobe PLC

(Registrant)

By:

/s/ Marco Levi

Marco Levi

Principal Executive Officer

By:

/s/ Beatriz García-Cos

Beatriz García-Cos

Principal Accounting Officer

151

FERROGLOBE PLC

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements as of December 31, 2022 and 2021 and for each of the three years ended December 31, 2022, 2021 and 2020

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022, 2021 and 2020 (Auditor Firm ID 1223)

F-2

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting as of December 31, 2022

F-5

Consolidated Statements of Financial Position as of December 31, 2022 and 2021

F-7

Consolidated Income Statements for the year ended December December 31, 2022 and 2021

F-8

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

F-9

Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020

F-10

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

F-11

Notes to the Consolidated Financial Statements

F-12

Appendix to the Consolidated Financial Statements

F-102

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ferroglobe PLC

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Ferroglobe PLC and subsidiaries (the "Company") as of December 31, 2022 and 2021, and the related consolidated income statements, the consolidated statements of comprehensive income (loss), the consolidated statements of changes in equity, and the consolidated statements of cash flows for each of the three years in the period ended December 31, 2022, the related notes and the schedule I (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 1, 2023, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventory Valuation – Refer to Notes 3.5, 4.8 and 11 to the financial statements

Critical Audit Matter Description

As described in Notes 4.8 and 11 to the consolidated financial statements, the Company´s consolidated inventory balance was $500 million as of December 31, 2022, compared to $290 million in prior year. As disclosed in Note 3.5, inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The decreasing market prices and demand for the Company´s products experienced in the second half of the year exposes the Company´s inventory to valuation risk, and write-downs amounting to approximately $29 million were recorded at year end.

F-2

We identified the estimate of net realizable value of inventories as a critical audit matter because of the judgments involved. This required an increased extent of audit effort when performing audit procedures to evaluate the reasonableness of management's estimation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimated net realizable value of inventories included the following, among others:

We evaluated the reasonableness of the valuation methodologies and assumptions applied by management in their estimate.
We tested the accuracy and completeness of the underlying data that served as the basis for the calculation of inventory valuation allowance, and the mathematical accuracy of management's calculation of inventory valuation allowance.
We performed inquiries with appropriate finance and operations personnel, and reviewed the sales subsequent to December 31, 2022, to assess whether the selling price, net of selling costs, was greater than the carrying amount of the inventories sold.

Impairment of property, plant and equipment (PP&E) —Refer to Notes 3.5, 4.4, 9 and 26.5 to the financial statements

Critical Audit Matter Description

As described in Notes 3.5, 4.4, and 9 to the financial statements, the Company´s consolidated PP&E balance was $486 million as of December 31, 2022. As mentioned in Note 9, impairments amounting to approximately $57 million were recorded during 2022 relating to certain assets in the Europe - Manganese segment and other assets in Spain that are affected by increased energy costs. The Company’s evaluation of 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, operating margins 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.

We identified impairment of PP&E relating to certain assets in the Europe - Manganese segment and other assets in Spain as a critical 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.

F-3

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management´s assessment of 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 2023-2027 using historical data and 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 operating margins and 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 performed sensitivity analysis over PP&E 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 to estimate the fair value with the assistance of our fair value specialists.

/s/ Deloitte, S.L.

Madrid, Spain

May 1, 2023

We have served as the Company's auditor since 1992.

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ferroglobe PLC

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Ferroglobe PLC and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated May 1, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion  

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment:

F-5

Control Environment: The Company identified deficiencies in the principles associated with the control environment component of the COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to the following principles: (i) the organization demonstrates a commitment to attract, develop, and retain competent individuals in alignment with objectives, and (ii) the organization holds individuals accountable for their internal control related responsibilities in the pursuit of objectives.

Control Activities: The Company identified deficiencies in the principles associated with the control activities component of the COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to the following principles: (i) the organization selects and develops control activities that contribute to the mitigation of risks to acceptable levels and (ii) the organization deploys control activities through policies that establish what is expected and procedures that put policies into action.

The COSO component material weaknesses described above contributed to the following material weaknesses within the Company’s system of internal control over financial reporting at the control activity level.

-Financial Closing and Reporting process: The Company did not design and operate effectively controls over the oversight of the financial closing and reporting process, and controls over the review of manual journal entries, due to limited resources within its accounting and reporting team.
-Impairment of Long-Lived Assets: controls over the assumptions and external valuations used in our impairment evaluation of long-lived assets, which were not designed and/or did not operate effectively.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such consolidated financial statements.

/s/ Deloitte, S.L.

Madrid, Spain

May 1, 2023

F-6

FERROGLOBE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2022 AND 2021

Thousands of U.S. Dollars

    

    

2022

    

2021

Notes

US$'000

US$'000

ASSETS

Non-current assets

 

  

 

  

 

  

Goodwill

 

Note 7

 

29,702

 

29,702

Other intangible assets

 

Note 8

 

111,797

 

100,642

Property, plant and equipment

 

Note 9

 

486,247

 

554,914

Other non-current financial assets

 

Note 10

 

14,186

 

4,091

Deferred tax assets

 

Note 23

 

7,136

 

7,010

Non-current receivables from related parties

 

Note 24

 

1,600

 

1,699

Other non-current assets

 

Note 12

 

18,218

 

18,734

Non-current restricted cash and cash equivalents

Note 10

2,133

2,272

Total non-current assets

 

  

 

671,019

 

719,064

Current assets

 

  

 

  

 

  

Inventories

 

Note 11

 

500,080

 

289,797

Trade and other receivables

 

Note 10

 

425,474

 

381,073

Current receivables from related parties

 

Note 24

 

2,675

 

2,841

Current income tax assets

 

Note 23

 

6,104

 

7,660

Other current financial assets

 

Note 10

 

3

 

104

Other current assets

 

Note 12

 

30,608

 

8,408

Assets and disposal groups classified as held for sale

Note 30

1,067

Current restricted cash and cash equivalents

Note 10

2,875

Cash and cash equivalents

 

Note 10

 

317,935

 

114,391

Total current assets

 

  

 

1,286,821

 

804,274

Total assets

 

  

 

1,957,840

 

1,523,338

EQUITY AND LIABILITIES

Equity

 

  

 

  

 

  

Share capital

 

  

 

1,962

 

1,962

Reserves

 

  

 

439,674

 

544,433

Translation differences

 

  

 

(242,623)

 

(227,318)

Valuation adjustments

 

  

 

10,735

 

5,525

Result attributable to the Parent

 

  

 

440,314

 

(110,624)

Non-controlling interests

 

  

 

106,751

 

106,053

Total equity

 

Note 13

 

756,813

 

320,031

Non-current liabilities

 

  

 

  

 

  

Deferred income

 

  

 

3,842

 

895

Provisions

 

Note 15

 

47,670

 

60,958

Bank borrowings

 

Note 16

 

15,774

 

3,670

Lease liabilities

 

Note 17

 

12,942

 

9,968

Debt instruments

Note 18

330,655

404,938

Other financial liabilities

 

Note 19

 

38,279

 

4,549

Other obligations

Note 21

37,502

38,082

Other non-current liabilities

 

Note 22

 

12

 

1,476

Deferred tax liabilities

 

Note 23

 

35,854

 

25,145

Total non-current liabilities

 

  

 

522,530

 

549,681

Current liabilities

 

  

 

  

 

  

Provisions

 

Note 15

 

145,507

 

137,625

Bank borrowings

 

Note 16

 

62,059

 

95,297

Lease liabilities

 

Note 17

 

8,929

 

8,390

Debt instruments

Note 18

12,787

35,359

Other financial liabilities

 

Note 19

 

60,382

 

62,464

Payables to related parties

 

Note 24

 

1,790

 

9,545

Trade and other payables

 

Note 20

 

219,666

 

206,000

Current income tax liabilities

 

Note 23

 

53,234

 

1,775

Other obligations

Note 21

9,580

22,843

Other current liabilities

 

Note 22

 

104,563

 

74,328

Total current liabilities

 

  

 

678,497

 

653,626

Total equity and liabilities

 

  

 

1,957,840

 

1,523,338

Notes 1 to 32 and Appendix I are an integral part of the consolidated financial statements

F-7

FERROGLOBE PLC AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS 2022, 2021 AND 2020

Thousands of U.S. Dollars

    

    

2022

    

2021

    

2020

Notes

US$'000

US$'000

US$'000

 

  

 

  

 

  

 

  

Sales

 

Note 26.1

 

2,597,916

 

1,778,908

 

1,144,434

Raw materials and energy consumption for production

 

Note 26.2

 

(1,285,086)

 

(1,184,896)

 

(835,486)

Other operating income

 

Note 26.3

 

147,356

 

110,085

 

33,627

Staff costs

 

Note 26.4

 

(314,810)

 

(280,917)

 

(214,782)

Other operating expense

 

  

 

(346,252)

 

(296,809)

 

(132,059)

Depreciation and amortization charges, operating allowances and write-downs

 

Note 26.5

 

(81,559)

 

(97,328)

 

(108,189)

Impairment (loss) gain

 

Note 26.7

 

(56,999)

 

137

 

(73,344)

Net gain due to changes in the value of assets

 

Note 26.5

 

349

 

758

 

158

(Loss) gain on disposal of non-current assets

 

Note 26.8

 

(459)

 

1,386

 

1,292

Other (loss) gain

 

 

91

 

62

 

(1)

Operating (loss) profit

 

  

 

660,547

 

31,386

 

(184,350)

Finance income

 

Note 26.6

 

2,274

 

253

 

177

Finance costs

 

Note 26.6

 

(61,015)

 

(149,189)

 

(66,968)

Financial derivative gain

Note 19

3,168

Exchange differences

 

  

 

(9,995)

 

(2,386)

 

25,553

(Loss) Profit before tax

 

  

 

591,811

 

(119,936)

 

(222,420)

Income tax benefit (expense)

 

Note 23

 

(147,983)

 

4,562

 

(21,939)

(Loss) Profit for the year from continuing operations

 

  

 

443,828

 

(115,374)

 

(244,359)

(Loss) profit for the year from discontinued operations

Note 30

(5,399)

Total (Loss) Profit for the year

443,828

(115,374)

(249,758)

Attributable to the Parent

 

  

 

440,314

 

(110,624)

 

(246,339)

Attributable to non-controlling interests

 

Note 13

 

3,514

 

(4,750)

 

(3,419)

 

  

 

 

 

Earnings per share

 

  

 

2022

 

2021

 

2020

(Loss) Profit attributable to the Parent (US$'000)

 

  

 

440,314

 

(110,624)

 

(246,339)

Weighted average basic shares outstanding

187,815,672

 

176,508,144

 

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic profit (loss) earnings per ordinary share (US$)

Note 14

2.34

(0.63)

(1.46)

Diluted profit (loss) earnings per ordinary share (US$)

Note 14

2.32

(0.63)

(1.46)

(Loss) Profit for the year from continuing operations attributable to the Parent (US$'000)

 

  

 

440,314

 

(110,624)

 

(240,940)

Weighted average basic shares outstanding

187,815,672

 

176,508,144

 

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic profit (loss) earnings per ordinary share (US$)

 

Note 14

 

2.34

 

(0.63)

 

(1.42)

Diluted profit (loss) earnings per ordinary share (US$)

Note 14

2.32

(0.63)

(1.42)

(Loss) Profit for the year from discontinued operations (US$'000)

(5,399)

Weighted average basic shares outstanding

 

  

 

187,815,672

 

176,508,144

 

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic (loss) earnings per ordinary share (US$)

Note 14

(0.03)

Diluted (loss) earnings per ordinary share (US$)

Note 14

 

 

(0.03)

Notes 1 to 32 and Appendix I are an integral part of the consolidated financial statements

F-8

FERROGLOBE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR 2022, 2021 AND 2020

Thousands of U.S. Dollars

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

 

  

 

  

 

  

Net (loss) gain

 

443,828

 

(115,374)

 

(249,758)

 

  

 

  

 

  

Items that will not be reclassified subsequently to income or loss:

 

  

 

  

 

  

Defined benefit obligation

 

9,779

 

2,566

 

3,630

Tax effect

(2,082)

139

(45)

Total income and expense that will not be reclassified subsequently to income or loss

 

7,697

 

2,705

 

3,585

 

  

 

  

 

  

Items that may be reclassified subsequently to income or loss:

 

  

 

  

 

  

Arising from cash flow hedges

 

 

 

(3,752)

Translation differences

 

(17,178)

 

(20,393)

 

3,239

Total income and expense that may be reclassified subsequently to income or loss

 

(17,178)

 

(20,393)

 

(513)

 

  

 

  

 

  

Items that have been reclassified to income or loss in the period:

 

  

 

  

 

  

Arising from cash flow hedges

 

 

(922)

 

8,091

Total transfers to income or loss

 

 

(922)

 

8,091

 

  

 

  

 

  

Other comprehensive income (loss) for the year, net of income tax

 

(9,481)

 

(18,610)

 

11,163

 

  

 

  

 

  

Total comprehensive (loss) for the year

 

434,347

 

(133,984)

 

(238,595)

 

  

 

  

 

  

Attributable to the Parent

 

430,219

 

(131,413)

 

(235,022)

Attributable to non-controlling interests

 

4,128

 

(2,571)

 

(3,573)

Notes 1 to 32 and Appendix I are an integral part of the consolidated financial statements

F-9

FERROGLOBE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR 2022, 2021 AND 2020
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, 2021

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

Comprehensive (loss) income for the year 2022

(15,305)

5,210

440,314

4,128

434,347

Cash settlement of equity awards

Share-based compensation

5,825

5,825

Distribution of 2021 (loss)

(110,624)

110,624

Dividends paid non-controlling interests

(3,430)

(3,430)

Other changes

40

40

Balance at December 31, 2022

188,883

1,962

86,220

353,454

(242,623)

10,735

440,314

106,751

756,813

Notes 1 to 32 and Appendix I are an integral part of the consolidated financial statements

F-10

FERROGLOBE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 2022, 2021 AND 2020
Thousands of U.S. Dollars

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Cash flows from operating activities:

 

Profit (Loss) for the year

 

443,828

 

(115,374)

 

(249,758)

Adjustments to reconcile net profit (loss) to net cash provided by operating activities:

 

Income tax expense (benefit)

 

147,983

 

(4,562)

 

21,939

Depreciation and amortization charges, operating allowances and write-downs

 

81,559

 

97,328

 

108,189

Finance income (loss)

 

(2,274)

 

(253)

 

(177)

Finance costs

 

61,015

 

149,189

 

66,968

Financial derivative (gain) loss

(3,168)

Exchange differences

 

9,995

 

2,386

 

(25,553)

Impairment (gain) loss

 

56,999

 

(137)

 

73,344

Loss (gain) on disposal of discontinued operations

5,399

Loss (gain) due to changes in the value of assets

 

(349)

 

(758)

 

(158)

Loss (gain) on disposal of non-current assets

 

459

 

(1,386)

 

(1,292)

Share-based compensation

5,836

3,627

2,017

Other loss (gain)

 

(91)

 

(62)

 

Changes in operating assets and liabilities:

 

(Increase) decrease in inventories

 

(220,823)

 

(60,296)

 

114,585

(Increase) decrease in trade and other receivables

 

(72,558)

 

(161,434)

 

71,034

Increase (decrease) in trade and other payables

 

30,640

 

64,382

 

(55,405)

Other changes in operating assets and liabilities

 

(56,677)

 

29,803

 

14,473

Income tax paid

 

(80,524)

 

(3,794)

 

11,831

Net used cash provided (used) by operating activities

405,018

(1,341)

154,268

Cash flows from investing activities:

 

Interest and finance income received

 

1,520

 

207

 

630

Payments due to investments:

 

Other intangible assets

 

(1,147)

 

 

(2,654)

Property, plant and equipment

 

(52,153)

 

(27,597)

 

(30,257)

Other

 

6

 

 

Disposals:

 

Other non-current assets

1,919

341

Other

 

 

1,623

 

Net cash provided (used) by investing activities

(51,774)

(23,848)

(31,940)

Cash flows from financing activities:

 

Payment for debt and equity issuance costs

(853)

(43,755)

(4,540)

Proceeds from equity issuance

40,000

Proceed from debt issuance

60,000

Repayment of debt instruments

(84,823)

Increase (decrease) in bank borrowings:

 

Borrowings

 

898,586

 

659,083

 

177,593

Payments

 

(919,932)

 

(671,467)

 

(235,296)

Amounts paid due to leases

(11,590)

(11,232)

(10,315)

Proceeds from other financing liabilities

38,298

Other amounts (paid) due to financing activities

 

678

 

 

(2,863)

Interest paid

 

(60,822)

 

(22,177)

 

(37,912)

Net cash provided (used) by financing activities

(140,458)

10,452

(113,333)

Total net cash flows for the year

 

212,786

 

(14,737)

 

8,995

Beginning balance of cash and cash equivalents

 

116,663

 

131,557

 

123,175

Exchange differences on cash and cash equivalents in foreign currencies

 

(6,506)

 

(157)

 

(613)

Ending balance of cash and cash equivalents

 

322,943

 

116,663

 

131,557

Notes 1 to 32 and Appendix I are an integral part of the consolidated financial statements

F-11

Ferroglobe PLC and Subsidiaries

Notes to the Consolidated Financial Statements for the years ended

December 31, 2022, 2021 and 2020

(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 5 Fleet Place, London EC4M 7RD (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”).

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, 2022 and 2021, classified by reporting segments, were as follows:

F-12

Percentage of Ownership

 

    

Direct

    

Total

    

Reporting Segment

    

Registered

Alabama Sand and Gravel, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Alden Resources, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Alden Sales Corporation, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

ARL Resources, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

ARL Services, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Core Metals Group Holdings, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

Core Metals Group, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

ECPI, Inc.

100.0

North America – Silicon Alloys

Delaware - USA

Gatliff Services, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe BG, LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GBG Financial LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GBG Holdings, LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe Metallurgical Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe Metals Enterprises, Inc.

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

GSM Alloys I, Inc.

 

 

100.0

 

North America – Silicon Metal

Delaware - USA

GSM Alloys II, Inc.

 

 

100.0

 

North America – Silicon Metal

Delaware - USA

GSM Enterprises Holdings, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GSM Enterprises, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GSM Sales, Inc.

 

100.0

 

North America – Silicon Metal

Delaware - USA

Laurel Ford Resources, Inc.

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

LF Resources, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Metallurgical Process Materials, LLC

 

100.0

 

North America – Silicon Alloys

Delaware - USA

Norchem, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Florida - USA

QSIP Canada ULC

 

 

100.0

 

North America – Silicon Metal

Canada

Quebec Silicon General Partner

 

51.0

 

North America – Silicon Metal

Canada

Quebec Silicon Limited Partnership

 

 

51.0

 

North America – Silicon Metal

Canada

Tennessee Alloys Company, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

West Virginia Alloys, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

WVA Manufacturing, LLC

 

 

51.0

 

North America – Silicon Metal

Delaware - USA

Cuarzos Industriales, S.A.U.

 

 

100.0

 

Europe – Silicon Metal and Alloys

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

FerroPem, S.A.S.

 

 

100.0

 

Europe – Silicon Metal and Alloys

France

Grupo FerroAtlántica, S.A.U.

 

 

100.0

 

Europe – Manganese and Silicon Metal

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 Metal and Alloys

A Coruña - Spain

Rebone Mining (Pty.), Ltd.

 

 

74.0

 

South Africa – Silicon Metal and Alloys

Polokwane - South Africa

Silicon Smelters (Pty.), Ltd.

 

 

100.0

 

South Africa – Silicon Metal and Alloys

Polokwane - South Africa

Silicon Technology (Pty.), Ltd.

 

 

100.0

 

South Africa – Silicon Metal and Alloys

South Africa

Thaba Chueu Mining (Pty.), Ltd.

 

 

74.0

 

South Africa – Silicon Metal and Alloys

Polokwane - South Africa

Cuarzos Industriales de Venezuela, 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

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 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

F-13

2021 Subsidiaries

Percentage of Ownership

 

Direct

    

Total

    

Reporting Segment

    

Registered

Alabama Sand and Gravel, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Alden Resources, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Alden Sales Corporation, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

ARL Resources, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

ARL Services, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Core Metals Group Holdings, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

Core Metals Group, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

ECPI, Inc.

100.0

North America – Silicon Alloys

Delaware - USA

Gatliff Services, LLC

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe BG, LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GBG Financial LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GBG Holdings, LLC

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe Metallurgical Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Globe Metals Enterprises, Inc.

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

GSM Alloys I, Inc.

 

 

100.0

 

North America – Silicon Metal

Delaware - USA

GSM Alloys II, Inc.

 

 

100.0

 

North America – Silicon Metal

Delaware - USA

GSM Enterprises Holdings, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GSM Enterprises, LLC

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

GSM Sales, Inc.

 

100.0

 

North America – Silicon Metal

Delaware - USA

Laurel Ford Resources, Inc.

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

LF Resources, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

Metallurgical Process Materials, LLC

 

100.0

 

North America – Silicon Alloys

Delaware - USA

Norchem, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Florida - USA

QSIP Canada ULC

 

 

100.0

 

North America – Silicon Metal

Canada

Quebec Silicon General Partner

 

51.0

 

North America – Silicon Metal

Canada

Quebec Silicon Limited Partnership

 

 

51.0

 

North America – Silicon Metal

Canada

Tennessee Alloys Company, LLC

 

 

100.0

 

North America – Silicon Alloys

Delaware - USA

West Virginia Alloys, Inc.

 

 

100.0

 

North America – Silicon Metal and Alloys

Delaware - USA

WVA Manufacturing, LLC

 

 

51.0

 

North America – Silicon Metal

Delaware - USA

Cuarzos Industriales, S.A.U.

 

 

100.0

 

Europe – Silicon Metal and Alloys

A Coruña - Spain

Ferroatlántica del Cinca, S.L.

 

99.9

 

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 Metal and Alloys

France

Grupo FerroAtlántica, S.A.U.

 

 

100.0

 

Europe – Manganese and Silicon Metal

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 Metal and Alloys

A Coruña - Spain

Rebone Mining (Pty.), Ltd.

 

 

74.0

 

South Africa – Silicon Metal and Alloys

Polokwane - South Africa

Silicon Smelters (Pty.), Ltd.

 

 

100.0

 

South Africa – Silicon Metal and Alloys

Polokwane - South Africa

Silicon Technology (Pty.), Ltd.

 

 

100.0

 

South Africa – Silicon Metal and Alloys

South Africa

Thaba Chueu Mining (Pty.), Ltd.

 

 

74.0

 

South Africa – Silicon Metal and Alloys

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

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

 

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

F-14

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.

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”).

F-15

The consolidated financial statements have been authorized for issuance on May 1, 2023.

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 year ended December 31, 2022, the Company reported a net profit of $462,414 thousand and for the years ended 2021 and 2020, the Company reported net losses of $115,374 thousand, $249,758 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.

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 2023 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.

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, 2022 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, 2022 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, 2023:

IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (issued on  June 2020 and effective from annual period beginning on January 1, 2023)

F-16

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 and effective from annual period beginning on January 1, 2023)
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on February 2021 and effective from annual period beginning on January 1, 2023)
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on February 2021 and effective from annual period beginning on January 1, 2023)
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on May 2021 and effective from annual period beginning on January 1, 2023)
Amendments to initial application of IFRS 17 and IFRS 9: Comparative information (issued on December 2021 and effective from annual period beginning on January 1, 2023)
Amendments to IFRS 16: Lease Liability in a sale and Leaseback (issued on September 2022 and effective from annual period beginning on January 1, 2024)
Amendments to IAS 1: Non-current liabilities with Covenants (issued on October 2022 and effective from annual period beginning on January 1, 2024)

The Company is continuously assessing the impact of the application of these standards or interpretations that are not yet effective, and it is not expected that the application of these standards will 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.”

F-17

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.

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

The impairment analysis on goodwill, see Note 7;
the useful life of property, plant and equipment and intangible assets, see Note 4.3;
the impairment analysis on property, plant and equipment and valuations, determined by value in use or by fair value less cost of disposal methods, see Note 9;
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 net realizable value of inventory, see Note 11;
income taxes, including the recoverability of the deferred tax asset; see Note 23;

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.

F-18

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.

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 2023 annual budget and management’s five-year financial model.

Impairment of long-lived 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 underlying assumptions concerning future market and conditions (operating costs and working capital requirements) for the periods projected, as well as the determination of an appropriate discount rate and terminal value. The key assumptions used for estimating cash flow projections in the Group’s impairment testing are those relating to discount rate, revenue, operating cost and operating margin. For certain assets, recoverable amount has been determined at fair value less cost of disposal, which determination is subject to significant judgement.

Inventories

Cost of inventories is determined by the average cost method. Inventories are valued at the lower of cost or Net Realizable Value. Circumstances may arise (e.g., reductions in market pricing, obsolete, slow moving or defective inventory) that require the carrying amount of our inventory to be written down to net realizable value. We estimate market and net realizable value based on current and future expected selling prices, as well as expected costs to complete, including utilization of parts and supplies in our manufacturing process. We believe that these estimates are reasonable; however, future market price decreases caused by changing economic conditions, customer demand, or other factors could result in future inventory write-downs that could be material.

F-19

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.

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/Profit 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.

F-20

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.

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).

F-21

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 2022, 2021 and 2020 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.

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, right-of-use 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 CGUs are tested for impairment annually, and whenever there is an indication of impairment and property, plant and equipment. Where the asset itself does not generate cash flows

F-22

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.

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

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.

F-23

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.

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

F-24

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.

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.

F-25

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.

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.

F-26

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.

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, inventory write-downs and changes in inventory.

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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 or withdrawal is restricted by financial agreements.

Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements and/or contracts entered into with others; however, time deposits and short-term certificates of deposit are not included in legally restricted deposits. In cases where compensating balance arrangements exist but are not agreements which legally restrict the use of cash amounts shown on the balance sheet, those arrangements and the amount involved are disclosed in the notes. Compensating balances that are maintained under an agreement to assure future credit availability are also disclosed in the notes.

As discussed in Note 31, certain of the Company´s credit agreements restrict the transfer of assets in the form of loans or dividends to other affiliates. The amount of cash and cash equivalents in subsidiaries subject to such restrictions amounted to $253,085 as of December 31, 2022, and is not presented as Restricted cash and equivalents in the balance sheet because it can be withdrawn or used except for transfers to affiliates.

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.

F-28

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.

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.

F-29

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.

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

F-30

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 relevant 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.

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 2022 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.

F-31

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.
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

F-32

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.

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 is recognized 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 acquisition 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.

F-33

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.

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.

F-34

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 2022 and 2021.

6.    Segment reporting

Operating segments are based upon the Company’s management reporting structure. During 2022, 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 ten operating segments:

Canada – Silicon Metals
Canada – Silicon Alloys
US – Silicon Metals
US - Silicon Alloys
Europe – Manganese Alloys
Europe – Silicon Metals
Europe - Silicon Alloys
South Africa – Silicon Metals  
South Africa – Silicon Alloys; and
Other segments

F-35

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 Metal and North America – Silicon Alloys reportable segments are the result of the aggregation of the operating segments of the United States and Canada Silicon Metals and the operating segments of the United States and Canada 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 Metals, the Europe-Silicon Alloys, the Europe -Manganese, the South Africa – Silicon Metals and South Africa – Silicon Alloys reportable segments are equal to each related Operating segment.

All other segments that do not meet the quantitative threshold for separate reporting have been grouped as “Other segments”, mainly includes holding entities in United Kingdom and subsidiary OPCO in Spain.

F-36

The consolidated income statements as of  December 31, 2022, 2021 and 2020, by reportable segment, are as follows:

2022

    

North America

    

North America

Europe

    

Europe

Europe

South Africa

South Africa

    

    

Adjustments/

    

Silicon Metal

Silicon Alloys

Manganese

Silicon Metal

Silicon Alloys

Silicon Metal

Silicon Alloys

Other segments

Eliminations (**)

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Sales

 

671,290

339,414

701,140

536,753

259,419

17,337

122,262

81,560

(131,259)

 

2,597,916

Raw materials and energy consumption for production

 

(305,545)

(68,490)

(541,034)

(241,936)

(139,687)

(9,270)

(65,373)

(46,759)

133,008

 

(1,285,086)

Other operating income

 

6,464

122

42,882

76,255

23,622

156

66

59,840

(62,051)

 

147,356

Staff costs

 

(61,378)

(41,923)

(28,996)

(81,175)

(50,467)

(1,736)

(11,652)

(37,483)

 

(314,810)

Other operating expense

 

(33,708)

(37,859)

(111,741)

(99,513)

(33,265)

(2,649)

(13,193)

(74,626)

60,302

 

(346,252)

Depreciation and amortization charges, operating allowances and write-downs

 

(33,708)

(15,135)

(13,005)

(4,605)

(8,086)

(748)

(5,278)

(994)

 

(81,559)

Impairment (loss) gain

 

(33,222)

(26,028)

5,357

2,408

(5,514)

 

(56,999)

Net gain due to changes in the value of assets

 

349

 

349

(Loss) gain on disposal of non-current assets

 

(522)

(126)

(189)

230

82

66

 

(459)

Other (loss)

11

80

91

Operating Profit

 

242,893

176,003

15,846

186,009

25,590

8,447

29,240

(23,481)

 

660,547

(**)

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

F-37

2021(*)

    

North America

    

North America

Europe

    

Europe

Europe

South Africa

South Africa

    

    

Adjustments/

    

Silicon Metal

Silicon Alloys

Manganese

Silicon Metal

Silicon Alloys

Silicon Metal

Silicon Alloys

Other segments

Eliminations (**)

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Sales

 

370,109

154,699

476,287

437,533

227,804

12,604

104,591

43,568

(48,287)

 

1,778,908

Raw materials and energy consumption for production

 

(265,653)

(57,663)

(326,257)

(303,811)

(170,073)

(8,240)

(68,377)

(33,445)

48,623

 

(1,184,896)

Other operating income

 

5,089

296

34,142

48,828

16,924

278

485

49,901

(45,858)

 

110,085

Staff costs

 

(51,163)

(31,300)

(33,696)

(77,608)

(42,679)

(1,542)

(11,726)

(31,203)

 

(280,917)

Other operating expense

 

(22,222)

(20,848)

(105,290)

(105,712)

(23,043)

(1,904)

(11,352)

(51,960)

45,522

 

(296,809)

Depreciation and amortization charges, operating allowances and write-downs

 

(40,489)

(15,281)

(18,634)

(7,330)

(9,522)

(546)

(4,535)

(991)

 

(97,328)

Impairment (loss) gain

 

(376)

14

(455)

288

2,396

(1,730)

 

137

Net gain due to changes in the value of assets

 

758

 

758

(Loss) gain on disposal of non-current assets

 

(347)

741

733

296

(37)

 

1,386

Other (loss)

Operating (loss) profit

 

(4,676)

30,644

26,176

(7,353)

(749)

938

11,482

 

(25,076)

 

 

31,386

(*) Our operating segments have been revised in 2022 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2021 and 2020 have been restated to report results according to the operating segments revised in 2022.

(**)

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

F-38

2020(*)

    

North America

    

North America

Europe

    

Europe

Europe

South Africa

South Africa

    

    

Adjustments/

    

Silicon Metal

Silicon Alloys

Manganese

Silicon Metal

Silicon Alloys

Silicon Metal

Silicon Alloys

Other segments

Eliminations (**)

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Sales

 

289,485

135,792

240,142

321,632

146,096

17,631

62,941

25,334

(94,619)

 

1,144,434

Raw materials and energy consumption for production

 

(205,260)

(75,597)

(204,063)

(255,798)

(113,332)

(12,267)

(43,796)

(19,518)

94,145

 

(835,486)

Other operating income

 

2,804

113

9,199

19,971

5,078

127

3

24,587

(28,255)

 

33,627

Staff costs

 

(48,219)

(25,769)

(28,337)

(52,236)

(32,064)

(2,497)

(8,516)

(17,144)

 

(214,782)

Other operating expense

 

(18,990)

(15,325)

(33,884)

(35,415)

(16,397)

(3,515)

(10,583)

(26,679)

28,729

 

(132,059)

Depreciation and amortization charges, operating allowances and write-downs

 

(48,691)

(12,973)

(19,086)

(8,900)

(10,352)

(1,563)

(5,578)

(1,046)

 

(108,189)

Impairment (loss) gain

 

(26,861)

(8,824)

305

(17,942)

(1,899)

(6,777)

(11,346)

 

(73,344)

Net gain due to changes in the value of assets

 

158

 

158

(Loss) gain on disposal of non-current assets

 

(641)

(227)

1,154

682

319

5

 

1,292

Other (loss) gain

 

4

(5)

 

(1)

Operating (loss)

 

(56,373)

(2,810)

(34,566)

(10,064)

(38,594)

(3,983)

(12,306)

 

(25,654)

 

 

(184,350)

(*) Our operating segments have been revised in 2022 to reflect the way its chief operating decision maker (“CODM”) is currently managing and viewing the business. Accordingly, the results of 2021 and 2020 have been restated to report results according to the operating segments revised in 2022.

(**)

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

F-39

Other disclosures

Sales by product line

Sales by product line are as follows:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Silicon metal

 

1,116,193

 

637,695

 

463,217

Manganese-based alloys

 

525,483

 

469,138

 

267,469

Ferrosilicon

 

561,539

 

337,833

 

176,447

Other silicon-based alloys

 

192,409

 

161,750

 

126,817

Silica fume

 

32,290

 

32,409

 

25,888

Other

 

170,002

 

140,083

 

84,596

Total

 

2,597,916

 

1,778,908

 

1,144,434

Information about major customers

Total sales of $1,322,724 thousand, $870,039 thousand, and $580,570 thousand were attributable to the Company’s top ten customers in 2022, 2021, and 2020 respectively. During 2022, 2021, and, 2020 sales corresponding to Dow Silicones Corporation represented 16.8%, 12.2% and 13.2%, respectively of the Company’s sales. Sales to Dow Silicones Corporation are included partially in the North America – Silicon Metal segment and partially in the Europe - Silicon Metal segment.

Non current assets by geographical area

The non-current assets by geographical area are as follows:

Year ended December 31, 

    

2022

    

2021

US$´000

US$´000

United States of America

231,565

230,356

Europe

  

  

Spain

109,759

146,405

France

133,684

138,842

Other EU Countries

55,835

71,612

Total non-current assets in Europe

299,278

356,859

Rest of the World

133,040

124,839

Total

663,883

712,054

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, 

2021

(Note 26.5)

differences

2021

(Note 26.5)

differences

2022

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

U.S. Silicon Metal cash generating unit

 

17,230

 

 

17,230

 

 

17,230

U.S. Silicon Based Alloys cash generating unit

12,472

12,472

12,472

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

F-40

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, 2022 and December 31, 2021, in connection with our annual goodwill impairment test, the Company did not recognize an impairment charge.

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, 2022, and 2021 the remaining goodwill for the U.S Silicon Metal and U.S Silicon Alloys 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 units to which goodwill has been allocated, the value in use is determined based on economic assumptions and forecasted operating conditions as follows:

2022

 

2021

 

2020

 

    

U.S.

 

    

U.S.

U.S.

 

Weighted average cost of capital (pre-tax)

 

14.6

%  

 

13.2

%  

10.3

%  

Long-term growth rate

 

2.0

%  

 

2.3

%  

2.0

%  

Normalized tax rate

 

21.0

%  

 

21.0

%  

21.0

%  

These assumptions have been used in the impairment test for the two Cash Generating Units

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 discount rate, revenue, operating cost, operating margin and carrying amount. Carrying amount for the cash-generating units is determined by allocating individual balances to each of the cash-generating units, when a balance split is not possible an allocation key is applied based on the estimated production for the following 5 year period. 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. In particular in the case of sales prices assumptions the Company has used the latest forward prices published by a reputable industry analyst.

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.

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 (2023-2027), 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 units including prices, volumes, costs, CAPEX and net working capital. The Company has assumed that the average Operating profit margin for the five year period is 23.8 % and a Compound Annual Growth Rate of (11.0) %.

F-41

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, 2021

 

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

910

23

522

113,159

(725)

113,889

Disposals

(20)

(96,869)

20

(96,869)

Exchange differences

(2,914)

(153)

(62)

(6,102)

2,536

830

(5,865)

Business disposal

Balance at December 31, 2022

 

49,694

 

37,836

 

13,239

 

5,530

 

115,904

 

(94,309)

 

(16,097)

 

111,797

Additions and disposals in other intangible assets in 2022 and 2021 primarily relate to the acquisition, use and expiration of rights held to emit greenhouse gasses by certain Spanish, French, Norwegian 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 2022 and 2021 the company has purchased rights to emit greenhouse gasses amounting $25,035 thousand and $44,138 thousand respectively.

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, 2022 and 2021, the Company has certain intangible assets related to rights held to emit greenhouse gasses pledged as collateral for debt instruments in Canada (see Note 18).

F-42

9.    Property, plant and equipment

The detail of property, plant and equipment, net of the related accumulated depreciation and impairment in 2022 and 2021 is as follows:

Advances and

Property, Plant

Other Items of

Other Fixtures,

and Equipment

Property,

Other Items 

Other Items

Land and

Plant and

Tools and

in the Course of

Mineral

Plant and

of Leased

of Leased

Accumulated

    

Buildings

    

Machinery

    

Furniture

    

Construction

    

Reserves

    

Equipment

Land and

    

Plant and

    

Depreciation

    

Impairment

    

Total

Buildings

machinery

(Note 26.3)

(Note 26.5)

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, 2021

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

Additions

3,170

15,329

2,883

59,532

131

4,714

4,624

(80,834)

(56,999)

(47,450)

Disposals and other

(18,544)

(122)

(595)

17,685

(90)

(1,666)

Transfers from/(to) other accounts

505

28,295

(349)

(33,485)

1,212

3,822

Exchange differences

(7,291)

(48,278)

(731)

(6,021)

(215)

(725)

(625)

(1,028)

42,157

4,273

(18,484)

Transfer to assets and disposal groups classified as held for sale (see Note 30)

(18,108)

(56,571)

(470)

(320)

56,297

18,105

(1,067)

Balance at December 31, 2022

175,490

1,122,855

8,690

133,073

58,804

34,207

21,245

31,358

(922,951)

(176,522)

486,247

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 cash generating 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 segments 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 recognized 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.

F-43

As of December 31, 2022 the Company tested property, plant and equipment for impairment related to our solar-grade silicon metal project based in Puertollano, Spain, as the plant was shutdown at the end of 2022,  the recoverable value was determined at fair value and the key assumptions used in the measurement of fair value measurements has been categorized within level “3”. Therefore, OPCO recorded an impairment of  $5,515 thousand in 2022.

During 2022, the Company identified indicators of impairment for some plants within the Manganese and European Silicon Alloys segments (reduction of the spread as inferred from the forward prices and increase in the energy prices). As of  December 31, 2022 the Company tested property, plant and equipment for impairment, estimating the recoverable value of the cash-generating units requires significant judgment in developing and applying key underlying assumptions concerning future market and conditions (volumes, sale prices, cost structure and capital expenditure - “capex” and operating margins) for the periods projected, as well as the determination of an appropriate discount rate and terminal value assumptions (including terminal value growth rate) based on management’s business plans. An impairment was recorded according to the analysis performed. Therefore, the plant and machinery for Cee, Boo, Moi Rana and Monzon facilities were fully impaired by $20,034 thousand, $11,559 thousand, $15,749 thousand and $5,915 thousand respectively.

As of December 31, 2022 the Company tested property, plant and equipment for impairment related to our silicon metal plant in Polokwane, South Africa, which has restarted in October 2022, for which the recoverable value was estimated by determining the value in use for its assets. Therefore, the company recorded an impairment reversal of $5,017 thousand for the plant in Polokwane, South Africa.

As of December 31, 2022, assets related to Chateau Feuillet facility in France have been transferred to asset held for sale. The asset has been measured at the lower of carrying amount and fair value less costs to sell, and is presented separately as an asset held for sale in the current position of the financial statements. As fair value is lower than the carrying amount, the company recognized an impairment of $5,994 thousand (see Note 30).

The investments in property plant and equipment in 2022 and 2021 amounted to $59,532 thousand and $33,409 thousand, respectively. The investments were in connection with productivity and efficiency improvements. In addition to the impairments indicated in the paragraphs above, the Company recorded at South Africa mines an impairment reversal of $2,750 thousand in 2022.

As of 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.

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 wrote 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.

F-44

At December 31, 2022 and 2021, the Company has property, plant and equipment ($278,796 thousand in 2022 and $305,298 thousand in 2021) pledged as security for debt instruments in Canada, France, Norway, Spain and USA (see Note 18).

Commitments

At December 31, 2022 and 2021, the Company has capital expenditure commitments totaling $16,607 thousand and $3,834 thousand, respectively, primarily related to improvement works at plants.

10.  Financial assets and other receivables

The company’s financial assets and their classification under IFRS 9 are as follows:

2022 classification

Note

Amortized cost

Fair value through profit or loss - mandatorily measured

Fair value through other comprehensive income - designated

Total

US$'000

US$'000

US$'000

US$'000

Other financial assets

10.1

13,253

936

14,189

Receivables from related parties

24

4,275

4,275

Trade receivables

10.2

294,491

294,491

Other receivables

10.2

6,039

6,039

Cash and cash equivalents

317,935

317,935

Restricted cash

5,008

5,008

Total financial assets

641,001

936

641,937

2021 classification

Note

Amortized cost

Fair value through profit or loss - mandatorily measured

Fair value through other comprehensive income - designated

Total

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

Restrictions on the use of group assets

F-45

As of year ended December 31, 2022 and 2021, Cash and cash equivalents and restricted cash comprise the following:

    

2022

    

2021

US$'000

US$'000

Cash and cash equivalents

 

317,935

114,391

Non Current restricted cash presented as Cash

2,133

2,272

Current restricted cash presented as Cash

 

2,875

Escrow: Hydro sale

2,133

2,272

NMTC Program

2,875

Total

322,943

 

116,663

As of December 31, 2022, non-current restricted cash comprises cash in relation to the guarantees taken over escrow amounting $2,133 thousand ($2,272 thousand in 2021). 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.

As of  December 31, 2022, current restricted cash comprises cash in relation to the NMTC program. The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private capital by providing investors with a federal tax credit. The net grant received by Globe Metallurgical, Inc. from the NMTC program amounts to $2,875 thousand and it will be invested in CAPEX at the Selma plant throughout fiscal year 2023 as per the investment plan of the group.

The Company also has restrictions for the disposal of cash in the joint ventures with Dow Silicones Corporation.  When the Company wants to access excess cash available in the joint ventures, it is necessary to organize a board meeting and approve a dividend payment.

10.1 Other financial assets

As of  December 31, 2022, other financial assets comprise the following:

2022

Non-

    

Current

    

Current

    

Total

US$'000

US$'000

US$'000

Other financial assets held with third parties:

 

  

 

  

 

  

Other financial assets at amortised cost

 

3,344

3,344

Other financial assets

9,909

9,909

Equity securities

933

3

936

Total

 

14,186

 

3

 

14,189

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

F-46

Other financial assets at amortized cost mainly comprises deposits given to French government by Ferropem ($2,770 thousand in 2022 and 2,718 thousand in 2021), 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.

The carrying amount of other financial assets at amortised cost is considered to approximate their fair value.

Other financial assets comprise the investment fund of $9,909 thousand in Selma Globe Investment Fund, LLC as a result of the NMTC Program. The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private capital by providing investors with a federal tax credit. Investments made through the NMTC Program are used to finance businesses, breathing new life into neglected, underserved low-income communities. The reactivation of the plant in Selma, Alabama, has been granted with a $13,230 thousand allocation by the end of fiscal year 2022 under the NMTC Program (See Note 16). This allocation has been subscribed by Globe Metallurgical, Inc. (GMI) as owner of the plant and United Bank as investor and beneficiary of the tax credit resulting from this grant. As a result of the structure implemented for the NMTC, (i) Globe Specialty Metals, Inc. (GSM) has granted a loan to a special purpose vehicle (SPV I) (Leveraged Loan) and (ii) GMI has received two qualify low-income community investment loans (QLICI Loans) from another special purposes vehicle (SPV II) wholly owned by SPV I. Leverage loan is in the amount of $9,909 thousand, a 26 years term and an interest rate of 4.27%. QLICI Loan A is in the amount of $9,909 thousand, with a 30 years term and 3.57% interest rate. QLICI Loan B is in the amount of $3.3 million, with a 30 years term and 3.57% interest rate. Out of this investment-funding structure,  GMI receives a  federal grant of approximately $2,875 thousand, out of which, all the expenses related to the investment-funding structure are to be detracted. This subsidy must be invested in in CAPEX in the Selma plant throughout fiscal year 2023 as per the investment plan of the group. After seven years, the NMTC structure set up will be wound up, as a result of which (ii) SPV II will cancel the QLICI B loan, resulting in cancellation of debt income (CODI) for GMI; (ii) GSM will become the owner of SPV I and SPV II. Upon liquidation and dissolution of these two entities, the Leverage loan will void by confusion. QLICI A loan will be capitalized by GSM into GMI.

The loan was granted on December, 2022 therefore its carrying amount equals to its fair value as of December 31, 2022.

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:

    

2022

    

2021

US$'000

US$'000

Trade receivables

 

295,678

 

322,935

Less – allowance for doubtful debts

 

(1,187)

 

(1,006)

294,491

321,929

Tax receivables(1)

 

36,852

 

25,244

Government grant receivables

 

88,092

 

27,701

Other receivables

 

6,039

 

6,199

Total

 

425,474

 

381,073

(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.

F-47

The trade and other receivables disclosed above are short-term in nature and therefore their carrying amount is considered to approximate their fair value.

The changes in the allowance for doubtful debts during 2022 and 2021 were as follows:

    

Allowance

US$'000

Balance at January 1, 2021

 

1,697

Impairment losses/(reversal) recognized

 

(580)

Exchange differences

 

(111)

Balance at December 31, 2021

 

1,006

Impairment losses/(reversal) recognized

361

Amounts used credited to income

(124)

Exchange differences

(56)

Balance at December 31, 2022

 

1,187

Factoring of trade receivables

On October 2, 2020, the Company signed a factoring agreement with a financial institution, to anticipate the collection of receivables issued by the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS).

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;
-a 0.18% to 0.25%  fee charged on the total of invoices and credit notes sold to the factor;
-a financing commission set at Euribor 3-month +1% charged on the drawdowns;

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.

On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with an additional Spanish Bank. This program offers the possibility to sell the receivables corresponding to nine customers pre-approved by the bank and its credit insurer. Receivables are pre-financed at 100% of their face value.

The main characteristics of this program are the following:

-the maximum cash consideration advanced for the financing facility is up to 30,000 thousand;
-a service fee set at 0.25% of the receivable face value;
-a cost of financing set at Euribor 12-month +1%;
-a closing fee set at 0.25% of the financing;
-an annual renewal fee set at 0.25% of the financing;

F-48

-invoices that remain unpaid by the customers to the factor at due date are subject to a late payment interest charge set at Euribor 12-month +15%, with a grace period during the first 30 days.

During 2022, factoring agreements provided upfront cash consideration of approximately $895,264 thousand ($659,083 thousand in 2021). The Company has repaid $ 918,070 thousand ($640,168 thousand in 2021), showing at December 31, 2022, an on-balance sheet bank borrowing debt of $60,976 thousand (2021: $$93,090 thousand), see Note 16.

At December 31, 2022, the Company held $80,112 thousand of accounts receivables recognized in consolidated balance sheet in respect of factoring agreements ($115,684 thousand at December 31, 2021). Finance costs incurred during the year ended December 31, 2022, amounts $3,426 thousand ($3,202 thousand at December 31, 2021) recognized in finance costs in the consolidated income statement.

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 agreements as it is exposed to credit risk and late-payment 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 and by Bankinter. The amount repayable under the factoring agreements is presented as on-balance sheet factoring and the debt assigned to factoring is showed as bank borrowings. See Note 16.

Government grants receivables

The Company has been awarded a compensation for the indirect CO2 emissions costs included in the energy bills in France, Spain and Norway.

During the year ended December 31, 2022, the Company recognized $72,251 thousand of income related to these compensations. The amount was deducted against the related expense in Raw Materials and energy consumption for production (2021: $31,588 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:

    

2022

    

2021

US$'000

US$'000

Finished goods

 

169,956

 

118,080

Raw materials in progress and industrial supplies

 

266,348

 

110,965

Other inventories

 

44,257

 

42,815

Advances to suppliers

 

19,519

 

17,937

Total

 

500,080

 

289,797

During 2022 the Company recognized an expense of $29,865 thousand, of which $17,523 related to finished goods (2021: $1,095 thousand) and $12,342 to raw material (nil in 2021) in respect of write-downs of inventory to net realizable 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.

As of  December 31, 2022 and 2021, inventories in the Company’s subsidiaries in the United States, Canada, Norway, France and Spain ($435,347 thousand in 2022 and $180,575 thousand in 2021) were pledged forming part of the collateral for debt instruments, see Note 18.

F-49

12. Other assets

Other assets comprise the following at December 31:

2022

2021

    

Non-

    

    

    

    

    

Non-

    

    

    

    

    

Current

    

Current

    

Total

    

Current

    

Current

    

Total

US$'000

    

US$'000

    

US$'000

    

US$'000

    

US$'000

    

US$'000

Guarantees and deposits given

 

17,492

293

17,785

 

18,020

299

 

18,319

Prepayments and accrued income

 

37

5,925

5,962

 

27

3,213

 

3,240

Other assets

 

689

24,390

25,079

 

687

4,896

 

5,583

Total

 

18,218

 

30,608

 

48,826

 

18,734

 

8,408

 

27,142

As of  December 31, 2022, the figure in Prepayments and accrued income increased due to prepayments recorded in “Grupo FerroAtántica S.A.U”.

In 2022, a provision of $18,000 thousand was recognized at Globe Metallurgical Inc. (see Note 15) with respect to civil lawsuits arising out of a 2018 incident at Globe Metallurgical Inc.’s Selma, Alabama, facility in which two employees were injured and one of whom later died.  At the time, Globe Metallurgical Inc. also recorded an expected reimbursement from the Company’s insurer as other assets for the same amount.  In the first quarter of 2023, the Company reached full and final settlements of the lawsuits and all amounts were paid directly by the insurer.

During 2022 and 2021, the amount in Guarantees and deposits is mainly due to a cash deposit made during 2021 with TAC (Tennessee Valley Authority) which supplies power to "Core Metals Group Holdings, LLC”, the letter of credits related to the insurance company in “Global Specialty Metals, Inc” and deposits linked to factoring agreements.

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.

F-50

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 were 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 sold 186,053 ordinary shares with net proceeds of $1.4 million in 2021 (no sales were made in 2022).

At December 31, 2022, 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, (2021: 188,882,316  ordinary shares in issue with a par value of $0.01, for a total issued share capital of $1,784 thousand). The Company held 1,448,773 ordinary shares in treasury.

At December 31, 2022, the Company’s largest shareholders are as follows:

Number of Shares

Percentage of

 

Name

    

Beneficially Owned

    

Outstanding Shares (*)

 

Grupo Villar Mir, S.A.U.

 

81,924,822

 

43.7

%

Cooper Creek Partners Management LLC

11,144,337

5.9

%

(*) 187,433,543 ordinary shares were outstanding at 31 December 2022, comprising 188,882,316 shares in issue less 1,448,773 shares held in treasury

Valuation adjustments

Valuation adjustments comprise the following at December 31:

    

2022

    

2021

US$'000

US$'000

Actuarial gains and losses

 

12,817

 

5,525

Deferred Tax Income (See Note 23)

(2,082)

Total

 

10,735

 

5,525

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;

F-51

2.bank borrowings,
3.debt instruments, including the Reinstated Senior Notes due 2025.
4.factoring and forfaiting of receivables
5.Asset-Based Lending facility


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.

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.

On July 21, 2022, the $60 million of the new Senior secured Notes maturing on June 30, 2025 were redeemed at 100% of the principal amount thereof plus accrued interest.

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, 2022 neither during the year ended December 31, 2021.

There were earnings distributed by a Joint Venture participated by a Globe Speciality Metals, Inc subsidiary to non-controlling interests, classified as cash from operating activities, during the years ended December 31, 2022 and 2021.

F-52

Non-controlling interests

The changes in non-controlling interests in the consolidated statements of financial position in 2022 and 2021 were as follows:

    

Balance

US$'000

Balance at January 1, 2021

 

114,504

(Loss) Profit 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

(Loss) Profit for the year

3,514

Dividends paid to joint venture partner

(3,430)

Translation differences

(1,873)

Other

2,487

Balance at December 31, 2022

 

106,751

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:

The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private capital by providing investors with a federal tax credit. Investments made through the NMTC Program are used to finance businesses, breathing new life into neglected, underserved low-income communities. The reactivation of the plant in Selma, Alabama, has been granted with a $13.5 million allocation by the end of fiscal year 2022 under the NMTC Program. This allocation has been subscribed by Globe Metallurgical, Inc. (GMI) as owner of the plant and United Bank as investor and beneficiary of the tax credit resulting from this grant. As a result of the structure implemented for the NMTC, (i) Globe Specialty Metals, Inc. (GSM) has granted a loan to a special purpose vehicle (SPV I) (Leveraged Loan) and (ii) GMI has received two qualify low-income community investment loans (QLICI Loans) from another special purposes vehicle (SPV II) wholly owned by SPV I.

The lender to structure this program created the two SPVs described above. The Company has no exposure, risk, commitment, or obligation with these SPVs. The Company neither has any share in the equity of these vehicles (SPV I and SPV II). Accordingly, the Company has concluded that it does not control the SPV I and SPV II and does not include the special purposes vehicles in the Company’s consolidation.

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, 2022 and 2021, the balance of Non-controlling interest related to WVA was $62,630 thousand and $61,912 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 250 Canadian dollars per metric ton. As of

F-53

December 31, 2022 and 2021, the balance of non-controlling interest related to QSLP was $39,023 thousand and $37,682 thousand, respectively.

2022

2021

2020

    

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

 

78,992

64,291

83,176

63,088

99,235

67,806

Current assets

 

86,847

53,830

73,883

46,186

65,703

37,095

Non-current liabilities

 

7,108

18,719

8,654

19,005

8,982

18,529

Current liabilities

 

53,680

21,201

43,577

14,671

33,378

16,320

Income Statements

 

Sales

 

187,854

102,865

165,660

89,446

156,995

70,637

Operating profit

 

8,306

2,897

(4,871)

2,093

(7,503)

3,113

Profit before taxes

 

8,155

2,195

(5,062)

1,237

(7,503)

2,898

Net (loss) income

 

3,075

1,015

(3,362)

613

(2,970)

1,666

Cash Flow Statements

 

Cash flows from operating activities

 

(5,934)

(10,037)

11,981

8,997

28,683

15,387

Cash flows from investing activities

 

(8,304)

(1,525)

(3,893)

(4,956)

(7,977)

(5,227)

Cash flows from financing activities

 

905

Exchange differences on cash and cash equivalents in foreign currencies

 

10

31

45

Beginning balance of cash and cash equivalents

 

35,360

16,596

27,272

12,524

6,566

2,319

Ending balance of cash and cash equivalents

 

21,122

5,949

35,360

 

16,596

27,272

 

12,524

F-54

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

F-55

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.

    

2022

    

2021

2020

US$'000

US$'000

US$'000

Profit (Loss) for the year from continuing operations

443,828

(115,374)

(244,359)

(Loss) for the year from discontinued operations

(5,399)

Total Profit (Loss) for the year

443,828

(115,374)

(249,758)

Attributable to the Parent

440,314

(110,624)

(246,339)

Attributable to non-controlling interests

3,514

(4,750)

(3,419)

Earnings per share

 

  

 

  

  

2022

    

2021

2020

Numerator:

 

  

 

  

  

(Loss) attributable to the Parent (US$'000)

 

440,314

 

(110,624)

(246,339)

Denominator:

 

  

 

  

  

Weighted average basic shares outstanding

 

187,815,672

 

176,508,144

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic profit (loss) earnings per ordinary share (US$)

 

2.34

 

(0.63)

(1.46)

Diluted profit (loss) earnings per ordinary share (US$)

 

2.32

 

(0.63)

(1.46)

Numerator:

 

  

 

  

  

(Loss) for the year from continuing operations attributable to the Parent (US$'000)

440,314

(110,624)

(240,940)

Denominator:

 

  

 

  

  

Weighted average basic shares outstanding

 

187,815,672

 

176,508,144

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic profit (loss) earnings per ordinary share (US$)

 

2.34

 

(0.63)

(1.42)

Diluted profit (loss) earnings per ordinary share (US$)

2.32

(0.63)

(1.42)

Numerator:

 

  

 

  

  

(Loss) profit for the year from discontinued operations (US$'000)

(5,399)

Denominator:

 

  

 

  

  

Weighted average basic shares outstanding

187,815,672

 

176,508,144

169,269,281

Weighted average dilutive shares outstanding

189,625,195

176,508,144

169,269,281

Basic profit (loss) earnings per ordinary share (US$)

 

 

(0.03)

Diluted (loss) earnings per ordinary share (US$)

(0.03)

No potential ordinaries shares were excluded from the calculation of diluted earnings (loss) per ordinary share because their effect would be anti-dilutive. Potential ordinary shares of 4,359,436 and of 3,411,974 were excluded from the calculation in 2021 and 2020 respectively for this reason.

F-56

15.  Provisions

Provisions comprise the following as of  December 31:

    

2022

    

2021

Non- Current

    

Current

    

Total

    

Non- Current

    

Current

    

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Provision for pensions

 

25,546

180

25,726

 

41,238

180

 

41,418

Environmental provision

 

168

1,396

1,564

 

2,562

1,133

 

3,695

Provisions for litigation

 

23,142

23,142

 

1,952

 

1,952

Provisions for third-party liability

 

5,960

5,960

 

8,905

 

8,905

Provisions for C02 emissions allowances

7,956

94,800

102,756

3,033

107,213

110,246

Provision for restructuring cost

21,539

21,539

22,350

22,350

Other provisions

 

8,040

4,450

12,490

 

5,220

4,797

 

10,017

Total

 

47,670

 

145,507

 

193,177

 

60,958

 

137,625

 

198,583

F-57

As of December 31, 2022 the restructuring provision corresponds to the restructuring process in Château-Feuillet facility in France amounting $21,539 thousand ($21,717 thousand as of December, 2021) and Monzon facility in Spain reversed with a credit to income amounting $591 thousand as of December 31, 2022.

The changes in the various line items of provisions in 2022 and 2021 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, 2021

 

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

Charges for the year

1,405

13

22,134

454

114,185

9,092

7,022

154,305

Provisions reversed with a credit to income

(3,417)

(48)

(2,435)

(591)

(890)

(7,381)

Amounts used

(1,181)

(345)

(798)

(2,863)

(112,485)

(8,012)

(2,516)

(128,200)

Provision against equity

(9,394)

(9,394)

Transfers from/(to) other accounts

(1,510)

(666)

(2,176)

Exchange differences and others

(3,105)

(289)

(98)

(536)

(6,755)

(1,300)

(477)

(12,560)

Balance at December 31, 2022

 

25,726

 

1,564

 

23,142

 

5,960

102,756

 

21,539

12,490

 

193,177

F-58

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 2022 and 2021 were as follows:

    

2022

    

2021

US$'000

US$'000

Obligations at the beginning of year

 

25,950

 

34,496

Current service cost

 

(1,159)

 

1,082

Borrowing costs

 

310

 

212

Actuarial differences

 

(4,821)

 

(3,003)

Benefits paid

 

(1,181)

 

(995)

Exchange differences

 

(1,253)

 

(2,412)

Others

(1,508)

(3,430)

Obligations at the end of year

 

16,338

 

25,950

At December 31, 2022 and 2021 the effect of a 1% change in discount rate would have resulted in a change to the provision of approximately $1,695 thousand and $3,288 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:

    

2022

US$'000

2023

 

1,087

2024

 

1,279

2025

 

1,339

2026

 

1,316

2027

 

1,349

Years 2028-2032

 

7,237

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.

F-59

In this regard, the changes of this provision in 2022 and 2021 were as follows:

    

2022

    

2021

US$'000

US$'000

Obligations at beginning of year

 

3,779

 

3,461

Current service cost

 

34

 

32

Borrowing costs

 

411

 

390

Actuarial differences

 

(861)

 

526

Benefits paid

 

(219)

 

(232)

Exchange differences

 

(132)

 

(398)

 

3,012

 

3,779

At December 31, 2022 and 2021, the effect of a 1% change in the cost of the medical aid would have resulted in a change to the provision of approximately $352 thousand and $481 thousand, respectively.

The breakdown, in percentage, of the plan assets are as follows:

    

2022

    

2021

 

Cash

 

56.37

%  

2.85

%

Equity

 

%  

47.21

%

Bond

 

43.63

%  

17.32

%

Property

 

%  

2.79

%

International

 

%  

28.42

%

Others

 

%  

1.41

%

Total

 

100.00

%  

100.00

%

As of December 31, 2022 and 2021 the Plan assets amounted to $94 thousand and $1,706 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:

    

2022

    

2021

US$'000

US$'000

Fair value of plan assets at the beginning of the year

 

1,706

 

2,204

Interest income on assets

 

93

 

172

Benefits paid

 

(1,619)

 

(775)

Actuarial differences

 

(84)

 

223

Other

 

(2)

 

(118)

Fair value of plan assets at the end of the year

 

94

 

1,706

Actual return on assets

 

9

 

395

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 as of December 31, 2022 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.

F-60

In this regards, the changes of this provision in 2022 and 2021 were as follows:

    

2022

    

2021

US$'000

US$'000

Obligations at the beginning of year

 

190

 

22

Current service cost

 

66

 

102

Borrowing costs

 

748

 

115

Benefits paid

 

(24)

 

(2)

Exchange differences

 

(578)

 

(47)

Obligations at the end of year

 

402

 

190

The summary of the main actuarial assumptions used to calculate the aforementioned obligations is as follows:

France

South Africa

Venezuela

 

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

 

Salary increase

 

1.60%-6.10%

1.60%-6.10%

N/A

N/A

%

180

%

500

%

Discount rate

 

3.84%

0.75%

8.2-12.8%

10.60-11.60%

%

202.4

%

536

%

Expected inflation rate

 

2.20%

1.60%

4.0-7.30%

5.80-7.10%

%

200

%

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

63-64

High percentages are driven by hyperinflationary economy in Venezuela.

North America

a. Defined Benefit Retirement and Post-retirement Plans

Globe Metallurgical Inc. (“GMI”) sponsored three non-contributory defined benefit pension plans covering certain employees, which were all frozen in 2003. Core Metals sponsored a non-contributory defined benefit pension plan covering certain employees, which was closed to new participants in April 2009. The Plan’s liabilities were 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 were satisfied due to the plan termination. The total settlement payment was $2,784 thousand  and resulted in a net income of $1,027 thousand recognized in 2021.

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.

F-61

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, 2022 and 2021:

2022

2021

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

 

18,266

5,497

23,763

 

25,349

8,569

 

33,918

Fair value of plan assets

 

(17,777)

(17,777)

 

(14)

(22,417)

 

(22,431)

Provision for pensions

 

 

489

 

5,497

 

5,986

 

(14)

 

2,932

 

8,569

 

11,487

All North American pension and post-retirement plans are underfunded. At December 31, 2022 and 2021, the accumulated benefit obligation was $18,266 thousand and $25,349 thousand for the defined pension plan and $5,497 thousand and $8,569 thousand for the post-retirement plans, respectively.

The assumptions used to determine benefit obligations as of December 31, 2022 and 2021 for the North American plans are as follows:

North America – 2022

North America – 2021

 

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

5.25%

5.25%

N/A

3.21%

3.30%

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

 

N/A

CPM2014-Private Scale CPM-B

 

CPM2014-Private Scale CPM-B

Retirement age

 

N/A

58-60

58-60

 

N/A

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 2022 and 2021 and the Mercer Proprietary Yield Curve for 2022 and 2021 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 $648 thousand to the defined benefit pension and post-retirement plans for the year ending December 31, 2022.

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.

F-62

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

2023

 

985

180

2024

 

1,027

186

2025

 

1,110

207

2026

 

1,154

227

2027

1,203

247

Years 2027-2031

 

6,212

1,535

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 5.0% for 2022 and decreasing to an ultimate rate of 4.0% in fiscal 2040. At December, 31 2022 and 2021, the effect of a 1% increase in health care cost trend rate on the non-pension post-retirement benefit obligation is $848 thousand and $1,735 thousand, respectively. At December, 31 2022 and 2021 the effect of a 1% decrease in health care cost trend rate on the non-pension post-retirement benefit obligation is ($689) thousand and ($1,327) thousand.

The changes to these obligations in the current year ended December 31, 2022 were as follows:

2022

    

USA

    

Canada

Total

Pension

Pension

    

Post-retirement

    

Plans

Plans

Plans

US$'000

US$'000

US$'000

US$'000

Obligations at the beginning of year

 

 

25,349

 

8,569

 

33,918

Service cost

 

162

301

463

Borrowing cost

 

773

271

1,044

Actuarial differences

 

(5,774)

(3,040)

(8,814)

Benefits paid

 

(870)

(162)

(1,032)

Exchange differences

 

(1,374)

(442)

(1,816)

Expenses

 

Plan settlement

 

 

 

 

Obligations at the end of year

 

 

18,266

 

5,497

 

23,763

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, 2022 and 2021 of the assets by class are:

    

2022

    

2021

Cash

 

%  

%

Equity Mutual Funds

 

31

%  

31

%

Fixed Income Securities

 

14

%  

14

%

Assets held by insurance company

 

55

%  

55

%

Total

 

100

%  

100

%

F-63

For the year ended December 31, 2022, the changes in plan assets were as follows:

2022

USA

Canada

 Pension

 Pension

     

Plans

    

Plans

    

Total

US$'000

US$'000

US$'000

Fair value of plan assets at the beginning of the year

 

22,417

 

22,417

Interest income on assets

690

690

Benefits paid

 

(870)

 

(870)

Actuarial return on plan assets

 

(3,496)

 

(3,496)

Exchange differences

(1,269)

(1,269)

Other

 

305

 

305

Plan Settlement

Fair value of plan assets at the end of the year

 

 

17,777

 

17,777

b. Other Benefit Plans

The Company administers healthcare benefits for certain retired employees through a separate welfare plan requiring reimbursement from the retirees.

Environmental provision

Environmental provisions related to $168 thousand of non-current environmental rehabilitation obligations as of December 31, 2022 (2021: $2,562 thousand) and $1,396 thousand of current environmental rehabilitation obligations as of December 31, 2022 (2021: $1,133 thousand). A significant part of these provisions is related to residues disposal, such as the remediation costs required to comply with government regulations.

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 $955 thousand during the year ended December 31, 2022 as part of the current portion of Provisions for litigation (2021: $1,143 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.

In 2022, a provision of $18,000 thousand was recognized at Globe Metallurgical Inc. with respect to civil lawsuits arising out of a 2018 incident at Globe Metallurgical Inc.’s Selma, Alabama, facility in which two employees were injured and one of whom later died. At the time, Globe Metallurgical Inc. also recorded an expected reimbursement from the Company’s insurer as other assets for the same amount (see Note 12).  In the first quarter of 2023, the Company reached full and final settlements of the lawsuits and all amounts were paid directly by the insurer.

F-64

Provisions for third-party liability

Provisions for third-party liability presented as non-current obligations $5,960 thousand relate to health costs for retired employees (2021: $8,905 thousand) in 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, 2022:

    

2022

US$'000

2023

-

2024

529

2025

270

2026

275

2027

282

Years 2028-2032

1458

The recognized provisions are based on an actuarial study performed by an independent expert.

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 $1,998 thousand (2021: $2,506 thousand) and $7,551 thousand are related to the accrued estimated costs of reclaiming the land after it has been mined for gravel or coal  ($6,422 thousand as of December 31, 2021).

16.  Bank borrowings

Bank borrowings comprise the following at December 31:

2022

    

    

Non-Current

    

Current

    

Limit

Amount

Amount

Total

US$'000

US$'000

US$'000

US$'000

Borrowings carried at amortised cost:

Credit facilities

100,000

Borrowings from receivable factoring facility

95,994

60,976

60,976

Other loans

 

 

15,774

1,083

 

16,857

Total

 

 

15,774

 

62,059

 

77,833

2021

    

    

Non-Current

    

Current

    

Limit

Amount

Amount

Total

US$'000

US$'000

US$'000

US$'000

Borrowings carried at amortised cost:

Credit facilities

 

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

F-65

Credit facilities

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 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.

On June 30, 2022, The Company closed a new, five-year $100 million North American asset-based revolving credit facility (the “ABL Revolver”), involving Ferroglobe’s subsidiary, Globe Specialty Metals, Inc. (“Globe”), and its wholly owned North American subsidiaries, as borrowers, and Bank of Montreal (“BMO”), as lender and agent.

At closing, there was no drawing under the ABL Revolver. Going forward, potential drawings under the ABL Revolver will be used for general corporate purposes.

The ABL Revolver is subject to a borrowing base comprising North American inventory and accounts receivable of Globe (and certain of its subsidiaries) and bears interest of SOFR plus a spread of 150-175 basis points depending on the level of utilization.

Under the ABL credit agreement, the borrowers commit to respect usual affirmative covenants, among others communicating any default or event of default, a change of control, the creation of acquisition of subsidiaries, a casualty or damage to any material used as a collateral, maintenance of the insurance, the compliance with ERISA and the Canadian Pension Laws, the compliance with environmental laws. The borrowers commit not to create or incur any indebtedness, capital leases in excess of a $7.5m, create liens, merge, dissolve, divide any borrowers, change the nature of the business, pay dividends, repay indebtedness for the account of holder of Equity Interests of any Loan Party or its affiliates, maintain a financial covenant consolidated fixed charge coverage ratio to be less than 1.00 to 1.00.

Borrowings from receivable factoring facility

On October 2, 2020, the Company signed a factoring agreement with a financial institution, to anticipate the collection of receivables issued by the Company’s European entities (See Note 10).

The main characteristics of the 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;
-a 0.18% to 0.25%  fee charged on the total of invoices and credit notes sold to the factor;
-a financing commission set at Euribor 3-month +1% charged on the drawdowns;

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.

On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with an additional Spanish Bank. This program offers the possibility to sell the receivables corresponding to nine customers pre-approved by the bank and its credit insurer. Receivables are pre-financed at 100% of their face value.

F-66

The main characteristics of this program are the following:

-the maximum cash consideration advanced for the financing facility is up to 30,000 thousand;
-a service fee set at 0.25% of the receivable face value;
-a cost of financing set at Euribor 12-month +1%;
-a closing fee set at 0.25% of the financing;
-an annual renewal fee set at 0.25% of the financing;
-invoices that remain unpaid by the customers to the factor at due date are subject to a late payment interest charge set at Euribor 12-month +15%, with a grace period during the first 30 days.

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.

The borrowings from receivable factoring facility disclosed above are short-term in nature and therefore their carrying amount is considered to approximate their fair value.

Other Loans

Include loans held by the Company to finance their current activities in France and in the United States. The loan related to France was signed in July 2020 for an amount of $5,277 thousand. The balance as of December 31, 2022 is $2,544 thousand ($3,670 thousand as of December 31, 2021). 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 fair value of this loan as of December 31, 2022, based on discounted cash flows at a market interest rate (Level 2), amounts to $2,959 thousand.

The loan related to the United States relates to the NMTC program, which has been signed in December by Globe Metallurgical, Inc, as owner of the Selma plant, for an amount of $13.230 thousand. The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private capital by providing investors with a federal tax credit. Investments made through the NMTC Program are used to finance businesses, breathing new life into neglected, underserved low-income communities. The reactivation of the plant in Selma, Alabama, has been granted with a $13,230 thousand allocation by the end of fiscal year 2022 under the NMTC Program. This allocation has been subscribed by Globe Metallurgical, Inc. (GMI) as owner of the plant and United Bank as investor and beneficiary of the tax credit resulting from this grant. As a result of the structure implemented for the NMTC, (i) Globe Specialty Metals, Inc. (GSM) has granted a loan to a special purpose vehicle (SPV I) (Leveraged Loan) and (ii) GMI has received two qualify low-income community investment loans (QLICI Loans) from another special purposes vehicle (SPV II) wholly owned by SPV I. Leverage loan is in the amount of $9,909 thousand, a 26 years term and an interest rate of 4.27% (See Note 10). QLICI Loan A is in the amount of $9,909 thousand, with a 30 years term and 3.57% interest rate. QLICI Loan B is in the amount of $3.3 million, with a 30 years term and 3.57% interest rate. Out of this investment-funding structure,  GMI receives a  federal grant of approximately $2,875 thousand, out of which, all the expenses related to the investment-funding structure are to be detracted. This subsidy must be invested in in CAPEX in the Selma plant throughout fiscal year 2023 as per the investment plan of the group. After seven years, the NMTC structure set up will be wound up, as a result of which (ii) SPV II will cancel the QLICI B loan, resulting in cancellation of debt income (CODI) for GMI; (ii) GSM will become the owner of SPV I and SPV II. Upon liquidation and dissolution of these two entities, the Leverage loan will void by confusion. QLICI A loan will be capitalized by

F-67

GSM into GMI. The loan was granted on December, 2022 therefore its carrying amount equals to its fair value as of December 31, 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.

Foreign currency exposure of bank borrowings

The breakdown by currency of bank borrowings at December 31, is as follows:

2022

Non-Current

Current

    

Principal

    

Principal

    

Amount

Amount

Total

US$'000

US$'000

US$'000

Borrowings in US Dollars

 

13,230

170

 

13,400

Borrowings in Euros

2,544

61,889

64,433

Total

 

15,774

 

62,059

 

77,833

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 other currencies

 

3,670

94,052

 

97,722

Total

 

3,670

 

95,297

 

98,967

Contractual maturity of non-current bank borrowings

The contractual maturity of bank borrowings at December 31, 2022, was as follows:

2022

    

2023

2026

    

2029

Total

US$'000

US$'000

US$'000

US$'000

Borrowings from supplier factoring facility

60,976

60,976

Other loans

 

1,083

2,544

13,230

16,857

Total

 

62,059

2,544

 

13,230

77,833

17.  Leases

Lease obligations

F-68

Lease obligations as at December 31 are as follows:

2022

2021

Non-

Non-

    

Current

    

Current

    

Total

    

Current

    

Current

    

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Other leases

12,942

8,929

21,871

9,968

8,390

18,358

Total

12,942

8,929

21,871

9,968

8,390

18,358

As of  December 31, 2022 and 2021 Ferroglobe holds short-term leases and low-value leases for which it has elected to recognize 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, 2022 and 2021 Ferroglobe has not recorded any expense relating to variable lease payments.

As of December 31, 2022 and 2021 the company has not identified any indicator for impairment in relation to the right-of-use assets.

The detail, by maturity, of the non-current payment obligations under leases as of December 31, 2022 is as follows:

    

2024

    

2025

    

2026

2027

    

2028 and after

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Other leases

4,420

2,930

1,739

1,506

3,643

14,238

Total

4,420

2,930

1,739

1,506

3,643

14,238

IFRS 16 has had the following effect on components of the consolidated financial statements:

2022

2021

US$'000

US$'000

Balance at January 1,

(18,358)

(22,536)

Additions

(14,979)

(7,761)

Disposals and other

713

517

Interest

(1,587)

(1,100)

Lease payments

11,590

11,285

Exchange differences

750

1,237

Balance at December 31,

(21,871)

(18,358)

Lease liabilities were discounted at the average incremental borrowing rate of 5.3%.

Leases are presented as follows in the Statement of financial position:

2022

2021

US$'000

US$'000

Non-current assets

Leased land and buildings

21,245

17,156

Leased plant and machinery

31,358

27,762

Accumulated depreciation

(34,622)

(29,855)

Non-current liabilities

Lease liabilities

(12,942)

(9,968)

Current liabilities

Lease liabilities

(8,929)

(8,390)

F-69

Leases are presented as follows in the Consolidated income statement:

    

2022

2021

US$'000

US$'000

Depreciation and amortization charges, operating allowances and write-downs

Depreciation of right of use assets

4,767

7,357

Finance costs

Interest expense on lease liabilities

1,587

1,100

Exchange differences

Currency translation losses on lease liabilities

750

1,237

Currency translation gains on right of use assets

(812)

(1,838)

Leases are presented as follows in the Statement of cash flows:

2022

2021

US$'000

US$'000

Payments for:

Principal

10,003

10,185

Interest

1,587

1,100

18.  Debt instruments

Debt instruments comprise the following at December 31:

2022

2021

US$'000

US$'000

Notes carried at amortised cost (financial liability)

Secured Super Senior Notes

60,000

Secured Reinstated Senior Notes

349,704

351,003

Unsecured Stub Notes

4,942

Unamortised issuance costs

(6,064)

Accrued coupon interest

13,569

30,416

Notes carried at amortised cost (financial asset)

Secured Reinstated Senior Notes

19,048

Accrued coupon interest

783

Total net debt instruments

343,442

440,297

Amount due for settlement within 12 months

12,787

35,359

Amount due for settlement after 12 months

330,655

404,938

Total

343,442

440,297

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.

F-70

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”) were repaid 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. This related 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.

For accounting purposes the refinancing of the Senior Notes was 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 was adjusted to reflect actual and revised estimated contractual cash flows. The gross carrying amount of the Reinstated Notes was 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 amounted 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.

On June, 2022 Globe repurchased $19.05 million of the Reinstated Senior Notes and the corresponding accrued interest coupon amounting to $641 thousand as of the purchase date. The fair value of the Notes at the purchase date was $19.12 million and the purchase price was $1.01 per bond. Since the Company has a legally enforceable right to offset the financial liability and the financial asset, and has the intention to settle these financial instruments on a net basis, the Company has elected to offset these financial instruments and presents the net amount on the balance sheet.

On July 21, 2022, the Super Senior Notes maturing on June 30, 2025 were redeemed at 100% of the principal amount thereof plus accrued interest. The remaining unamortised issuance cost amounting to $6 million have been recognized as a finance expense.

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 $349,609 thousand.

F-71

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:

oborrow or guarantee additional indebtedness;
opay dividends, repurchase shares and make distributions of certain other payments;
omake certain investments;
ocreate certain liens;
omerge or consolidate with other entities;
oenter into certain transactions with affiliates;
osell, lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and
oguarantee certain types of other indebtedness of Ferroglobe and its restricted subsidiaries without also guaranteeing the Super Senior Notes.

On July 21, 2022, the Super Senior Notes maturing on June 30, 2025 were redeemed at 100% of the principal amount thereof plus accrued interest.

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.

F-72

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:

oborrow or guarantee additional indebtedness;
opay dividends, repurchase shares and make distributions of certain other payments;
omake certain investments;
ocreate certain liens;
omerge or consolidate with other entities;
oenter into certain transactions with affiliates;
osell, lease or transfer certain assets, including shares of any restricted subsidiary of Ferroglobe; and
oguarantee 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:

othe elimination of baskets or a reduction of basket sizes in the debt covenant, restricted payment covenant, permitted investments,
opermitted liens and asset disposition;
othe addition of a net leverage test in the debt covenant and reduced flexibility in financial calculations;
orequirement to apply certain excess proceeds to repay debt in accordance with the applicable intercreditor agreement;
olower event of default thresholds; and
oa 90% guarantor coverage test.

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.

F-73

19.  Other financial liabilities

Other financial liabilities comprise the following at December 31:

2022

2021

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

38,279

60,382

98,661

4,549

62,464

67,013

Total

38,279

60,382

98,661

4,549

62,464

67,013

Financial loans from government agencies

On September 8, 2016, FerroAtlántica, S.A.U (“FAU”), as borrower, and the Spanish Ministry of Industry, Tourism and Commerce (the “Ministry”), as lender, entered into a loan agreement under which the Ministry made available to the borrower a loan in aggregate principal amount of €44,999 thousand and €26,909 thousand in connection with industrial development projects relating silicon purification project. FAU transferred the loan to OPCO before its sale. The loan is contractually due to be repaid in seven installments over a 10-year period with the first three years as a grace period. Interest on outstanding amounts under the loan accrues at an annual rate of 3.55%. Default interests are calculated at an annual rate of 3.75%. As of December 31, 2022, the amortized cost of the loan was €54,989 thousand (equivalent to $58,651 thousand) (2021: €54,578 thousand and $61,815 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 inconsideration of OPCO assuming liability for the REINDUS Loan. Reindus loan fair value as of December 31, 2022 and 2021, based on discounted cash flows at a market interest rate (Level 2), amounts to $48,066 thousand and $44,200 thousand respectively.

The agreement governing the loan 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.

In January 25, 2022, the Ministry opened a procedure to decide about the potential reimbursement of the loan. The company presented its allegations on February 15, 2022. Based on those allegations, in January 19, 2023, a new resolution was signed by the Ministry terminating the total reimbursement procedure initiated in January 2022. Once that procedure was definitively closed, the company decided to proceed with the foreseen partial early repayment of €16.3 million in February 10, 2023.

In 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 €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 secured by corporate joint guarantees from Ferroglobe, Ferroglobe Holding Company and Ferroglobe Finance Company and certain share pledges, bank account pledges, intercompany receivables pledges, inventory pledges and security over certain real property, and other assets from Grupo FerroAtlántica and certain of its subsidiaries. These loans are

F-74

granted at rates that are considered to be below-market rates. The company has calculated the fair value of the loans liability, based on discounted cash flows at a market interest rate (Level 2), resulting in €30,693 thousand ($34,149 thousand) as of the grant date. The difference between the fair value and the proceeds received, amounting to €3,807 thousand $(4,236 thousand), was recorded as a government grant. As of December 31, 2022, the amortized cost of the SEPI loans was $34,675 thousand.

SEPI loan fair value as of December 31, 2022 based on discounted cash flows at a market interest rate (Level 2), amounts to $48,066 thousand.

Until the loans have been fully repaid, the Beneficiaries are subject to several restrictions, including the following prohibited payments: (1) payment of dividends; (2) payment of management fee; (3) repayment of intra-group loans; (4) payment of intercompany net commercial balances as of June 30, 2021 (denominated “legacy”), with the exception of $20M of those balances. (Intercompany commercial balances generated after Jun-21 are permitted); and (5) payment of interest on intercompany loans corresponding to the years 2021 and 2022.

If GFAT fails to make the payments to which it is obliged, FASEE shall have the option (but never the obligation) to convert all or part of the Participating Loan into share capital of GFAT.

The loan contains a change of control clause stating that it will be considered change of control and therefore will suppose an early repayment event of the loan: with respect to GFAT, (a) if Ferroglobe Plc ceases to hold, directly or indirectly, an interest of at least 51% of the voting share capital or, (b) if Grupo Villar Mir, S.A.U. ceases to hold a stake of at least 35% of the voting share capital of Ferroglobe Plc, or loses the rights to which it is entitled as holder of such stake or more by virtue of the shareholders' agreement of Ferroglobe Plc or (c) if GFAT ceases to be the holder, directly or indirectly, of hundred percent (100%) shareholding in Grupo FerroAtlántica de Servicios.

Finally, the loan contains a cross-default clause meaning that (A) If any of GFAT or GFAT de Servicios: (a) defaults on any payment obligation arising from Indebtedness contracted with any other entity for amounts exceeding, during a fiscal year, €2,500,000; or (b) defaults on due and payable payment obligations of a commercial (non-financial) nature assumed with third parties for an individual or cumulative amount exceeding €2,500,000  unless such defaults are below the average of the customary commercial defaults that the Beneficiaries or Guarantors have had between fiscal years 2016 to 2019 or (B) If any creditor that has granted Indebtedness to GFAT or GFAT de Servicios for an amount equal to or greater than €5,000,000 , is entitled to declare it liquid, due and payable before its ordinary maturity date upon a default of its obligations by GFAT or GFAT de Servicios.

The remaining non-current and current balances are related to loans granted mainly by Canadian and Spanish government agencies.

20.   Trade and other payables

Trade and other payables comprise the following at December 31:

    

2022

    

2021

US$'000

US$'000

Payable to suppliers

 

219,020

 

200,999

Trade notes and bills payable

 

646

 

5,001

Total

 

219,666

 

206,000

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21.   Other Obligations

Other obligations comprise the following at December 31:

2022

2021

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

183

4,149

4,332

135

2,677

2,812

Guarantees and deposits

12

235

247

14

4,554

4,568

Contingent consideration

3,893

1,945

5,838

13,504

13,023

26,527

Tolling agreement liability

33,414

3,251

36,665

24,429

2,589

27,018

Total

37,502

9,580

47,082

38,082

22,843

60,925

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.

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 2022, the total payment made amounts to $18,931 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, 2022 of $5,838 thousand (2021: $26,527 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 11.5 percent for Ferroglobe Mangan Norge and Ferroglobe Manganèse France respectively (2021: 10.7 percent and 10.9 percent), volumes and manganese spread. Average simulated revenues in Ferroglobe Mangan Norge and Ferroglobe Manganèse France are between $137,871 thousand and $124,999 thousand per year (2021: between $245,292 thousand and $311,050 thousand). The liability has decreased primarily driven by a reduction in the manganese spread driven by higher manganese ore costs and lower selling prices combined with higher operational costs and impact of FX and inflation forecasts. Changes in the value of contingent consideration are presented in the income statement - other operating expense.

F-76

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

Sensibility on

Sensibility on

discount rate

volumes

Mn Spread

Contigent consideration

Decrease

Increase

Decrease

Increase

40%

60%

December 31, 2022

by 10%

by 10%

by 10%

by 10%

percentil

percentil

Fair value contingent consideration

5,838

5,880

5,672

4,398

7,209

1,856

12,795

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 Cee 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. As of December 31, 2022, the liability recognized amounts to $36,665 thousand (€34,375 thousand). The liability recognized is considered the fair value of the tolling agreement liability as of December 31, 2022 since is approximately the amount to pay by the contract as penalty fee for an early termination of the agreement.

22.   Other liabilities

Other liabilities comprise the following at December 31:

2022

2021

Non-

Non-

    

Current

    

Current

    

Total

    

Current

    

Current

    

Total

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Remuneration payable

55,791

55,791

36,046

36,046

Tax payables

37,628

37,628

17,613

17,613

Other liabilities

12

11,113

11,125

1,476

20,669

22,145

Total

12

104,532

104,544

1,476

74,328

75,804

Tax payables

Tax payables comprise the following at December 31:

2022

2021

    

Current

    

Total

    

Current

    

Total

US$'000

US$'000

US$'000

US$'000

VAT

20,905

20,905

4,839

4,839

Accrued social security taxes payable

6,195

6,195

6,251

6,251

Personal income tax withholding payable

896

896

820

820

Other

9,632

9,632

5,703

5,703

Total

37,628

37,628

17,613

17,613

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23.  Tax matters

The components of current and deferred income tax expense (benefit) are as follows:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Consolidated income statement

Current income tax

Current income tax charge

 

144,246

 

5,284

 

4,307

Adjustments in current income tax in respect of prior years

 

(5,681)

 

 

901

Total

 

138,565

 

5,284

 

5,208

Deferred tax

Origination and reversal of temporary differences

15,032

(9,954)

(20,961)

Impact of tax rate changes

460

Write-down of deferred tax assets

(1,448)

37,660

Adjustments in deferred tax in respect of prior years

(4,626)

108

32

Total

9,418

(9,846)

16,731

Income tax expense (benefit)

147,983

(4,562)

21,939

As the Company has significant business operations in Spain, France, South Africa and the United States, a weighted blended statutory 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, 2022, 2021, and 2020:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Accounting profit/(loss) before income tax

 

602,660

 

(119,936)

 

(222,420)

Adjustment for discontinued operations

(5,399)

Accounting profit/(loss) before income tax

602,660

(119,936)

(227,819)

At weighted statutory tax rate of 26% (2021: 19% and 2020: 24%)

 

157,620

(22,650)

(54,294)

Non-deductible income/ (expenses)

(5,920)

(11,399)

6,779

Differing territorial tax rates

591

2,603

3,064

Adjustments in respect of prior periods

1,368

(50)

Other items

7,539

27,884

70,123

Elimination of effect of interest in joint ventures

(913)

(782)

899

Other permanent differences

 

159

 

(673)

 

(389)

Incentives and deductions

 

(11,740)

 

88

 

(2,456)

US State taxes

(721)

 

367

 

(1,737)

Income tax expense (benefit)

 

147,983

 

(4,562)

 

21,939

Other items mainly comprise unrecognized temporary differences for tax losses.

F-78

Deferred tax assets and liabilities

For the year ended December 31,2022:

Opening

Recognized in

Write-down of

Exchange

Closing

Balance

P&L

OCI

Deferred Tax Assets

Differences

Balance

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Intangible assets

 

(451)

 

(14,014)

 

496

 

(9)

 

(13,978)

Provisions

 

21,672

 

9,090

 

(1,416)

9,347

 

(682)

 

38,011

Property, plant & equipment

 

(52,231)

 

3,920

 

(8,089)

 

1,670

 

(54,730)

Inventories

 

 

480

 

708

 

(2)

 

1,186

Tax losses

 

6,353

 

(5,894)

 

2,595

 

205

 

3,259

Incentives & credits

9,333

(254)

(8,542)

(505)

32

Partnership interest

 

(8,514)

 

 

8,514

 

 

Other

 

5,703

(2,746)

(666)

(4,425)

(364)

(2,498)

Total

 

(18,135)

(9,418)

(2,082)

604

313

(28,718)

For the year ended December 31, 2021:

Opening

Prior Year

Recognized in

Reclassifications

Exchange

Closing

Balance

Charge

P&L

Differences

Balance

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)

 

21,672

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)

10,524

(451)

143

(18,135)

Presented in the statement of financial position as follows:

 

2022

    

2021

US$'000

US$'000

Deferred tax assets

44,644

45,246

Deferred tax liabilities

 

(73,362)

(63,381)

Offset between deferred tax assets and deferred tax liabilities

37,508

38,236

Total deferred tax assets due to temporary differences recognized in the statement of financial position

7,136

7,010

Total deferred tax liabilities due to temporary differences recognized in the statement of financial position

(35,854)

(25,145)

F-79

Unrecognized deductible temporary differences, unused tax losses and unused tax credits

 

2022

    

2021

US$'000

US$'000

Unused tax losses

 

587,495

624,635

Unused tax credits

6,761

8,487

Unrecognized deductible temporary differences

 

208,011

135,174

Total

 

802,267

768,296

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 unused tax credits have decreased in 2022 compared to 2021 because of the significant positive results obtained in all jurisdictions. Unrecognized deductible temporary differences have increased in 2022 compared to 2021 due to ordinary liquidation of the tax. Management has decided to book the respective deferred tax assets corresponding to the jurisdictions where taxable profit is expected to be generated in the short and mid-term.

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.

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24.  Related party transactions and balances

Balances with related parties at December 31 are as follows:

2022

Receivables

Payables

    

Non-Current

    

  Current  

    

Non-Current

    

  Current  

US$'000

US$'000

US$'000

US$'000

Inmobiliaria Espacio, S.A.

2,675

Villar Mir Energía, S.L.U.

1,600

(10)

Enérgya VM Gestión de la Energía, S.L.

1,800

Total

1,600

2,675

1,790

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

Total

1,699

2,841

9,545

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).

Additionally in 2022, as a result of a tax audit of the IESA tax group, a reassessment of its net operating losses (NOLs) was made within the members of the tax group with respect to fiscal years 2008 through 2012.  In particular, additional NOLs were attributed to Grupo Ferroatlántica, S.A.U. (GFAT) and Ferroatlántica, S.A.U. (FAT). GFAT, as top parent company of a tax group to which FAT belonged to until fiscal year 2019, filed an amending corporate income tax (CIT) return of fiscal years 2016 and 2017. By way of this amending returns, the reassigned NOLs of FAT have been partially applied and consequently partial refund of the CIT paid in such fiscal years has been in the amount of $592,378. To the extent that the negative results obtained by GFAT and FAT when forming part of the IESA tax group were duly paid each year, this refund corresponds to IESA. GFAT has granted to IESA a loan in the amount of the CIT refund requested (the CIT loan). Therefore, upon receiving the CIT refund, the CIT loan will be canceled under an assignment and offsetting agreement between GFAT and IESA. The CIT loan bears interest annually at 5.25% fix rate for one-year loan under Ferroglobe transfer pricing policy. The Company shows a tax receivable amounting in its balance for this concept.

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Transactions with related parties in 2022, 2021 and 2020 are as follows:

2022

Sales and

Raw materials

Other

Finance

Operating

and energy

Operating

Income

    

Income

    

consumption for production

    

Expenses

    

(Note 26.4)

US$'000

US$'000

US$'000

US$'000

Inmobiliaria Espacio, S.A.

Villar Mir Energía, S.L.U.

128,211

1,612

Espacio Information Technology, S.A.U.

1,008

Enérgya VM Gestión, S.L

4,506

646

Other related parties

101

Total

132,717

3,367

2021

Sales and

Raw materials

Other

Finance

Operating

and energy

Operating

Income

    

Income

    

consumption for production

    

Expenses

    

(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

Sales and

Raw materials

Other

Finance

Operating

and energy

Operating

Income

    

Income

    

consumption for production

    

Expenses

    

(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

“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 FerroAtlántica) and Hidro Nitro Española (now FerroAtlántica del Cinca) in the wholesale power market. The contracts allow FAU Boo or FAU Sabon (now Grupo FerroAtlántica) 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,

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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 FerroAtlántica and FerroAtlántica 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. The contracts have a term of one year, which can be extended by the mutual consent of the parties to the contract. The contracts were renewed in January 2019 and will renew annually for up to three years unless terminated. The contracts were again renewed in January 2020. In January 2021, the contracts were renewed for two years with the possibility to extend it for additional one-year periods unless terminated with thirty days’ notice. On September 30, 2021 Grupo FerroAtlántica, S.A.U absorbed its subsidiaries FAU Boo and FAU Sabón assuming all the rights and obligations derived from those contracts. Those contracts were assigned from Villar Mir Energía SLU to Energya VM Gestión de Energía, SLU (“Energya VM”) on October 15, 2022. Therefore, since the assignment the payments for the service charge was done to Energya VM, amounting $4,506 thousand in 2022.

On December 22, 2022, Grupo FerroAtlántica and VM Energía entered into a Power Purchase Agreement (PPA). Under this PPA, VM Energía would supply to Sabón plant 65 GW on a pay as produced basis during 10 years from the commencement of operation of the Plants. This PPA would cover 10% of the total power consumption of the Sabón plant. The agreement has been cancelled in February 2023.

“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. On April 2022, Grupo VM sold its interest in Espacio I.T. so those transactions do not involve a Grupo VM subsidiary and therefore as of that date should no longer be considered as related party transactions.

25.   Guarantee commitments to third parties and contingent liabilities

Guarantee commitments to third parties

As of December 31, 2022 and 2021, the Company has provided bank guarantees commitments to third parties amounting $7,905 thousand and $11,948 thousand, respectively. Management believes that any unforeseen liabilities at December 31, 2022 and 2021 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. Ferroglobe agreed with Abanca that it continues the litigation at the judiciary level by filing an appeal before the Audiencia Nacional. This filing was 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

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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.

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, 2022, 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, 2022 at an estimated amount of $955 thousand in Provisions for litigation in progress ($1,143 thousand in 2021).

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. To resolve the NOV/FOVs, GMI likely will be required to install additional pollution control equipment, implement other measures to reduce emissions from the facility, as well as pay a civil penalty.  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. Liabilities in respect these claims have been recorded at December 31, 2022 at an estimated amount of $2,800 thousand in Provisions for litigation in progress.

F-84

Other legal procedures

In the first quarter of 2023, the Company reached full and final settlements of civil lawsuits arising out of 2018 incident at Globe Metallurgical Inc.’s Selma, Alabama, facility in which two employees were injured, one of whom later died.  The Company’s insurer settled those claims for $18m and paid the amounts directly.   

26.   Income and expenses

26.1 Sales

Sales by geographical area for the years ended December 31 are as follows:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Spain

282,387

251,528

133,370

Germany

442,331

292,774

191,107

Italy

111,887

76,721

42,067

France

148,741

130,811

79,491

Other EU Countries

162,374

176,046

88,443

USA

966,161

515,095

404,633

Rest of World

484,035

335,933

205,323

Total

2,597,916

1,778,908

1,144,434

26.2 Raw materials and energy consumption for production

Raw materials and energy consumption for production are comprised of the following for the years ended December 31:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Purchases of raw materials, supplies and goods

793,014

581,991

366,532

Variation in stocks of finished goods, raw materials, supplies and goods

(163,430)

(74,361)

61,827

Others

625,637

676,171

405,188

Write-down of raw materials

12,342

Write-down of finished goods

17,523

1,095

1,939

Total

1,285,086

1,184,896

835,486

26.3 Other operating income

Other operating income are comprised of the following for the years ended December 31:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Energy

(53,802)

C02

(88,952)

(103,044)

(25,702)

Others

(4,602)

(7,041)

(7,925)

Total

(147,356)

(110,085)

(33,627)

The Company recognizes emission rights (allowances) allocated by government as intangible assets. The intangible asset recognized is initially measured at fair value (current market value).

The 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

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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, during 2022 the Company has recorded an amount of $88,952 thousand, $103,044 thousand in 2021 and $25,702 thousand in 2020.

As the Company emits CO2, it recognizes a provision for its obligation to deliver the CO2 emissions 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). Provision for its obligation to deliver the CO2 emissions is presented in the income statement - other operating expense.

26.4 Staff costs

The average monthly number of employees (including Executive Directors) was:

    

2022

    

2021

    

2020

Directors

9

8

6

Senior Managers

288

289

291

Employees

3,173

2,997

3,020

Total

3,470

3,294

3,317

Staff costs are comprised of the following for the years ended December 31:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Wages, salaries and similar expenses

232,880

214,374

161,957

Pension plan contributions

7,977

7,571

3,641

Employee benefit costs

73,953

58,972

49,184

Total

314,810

280,917

214,782

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), except the options granted in 2021 which have a strike of 0.01. The awards are subject to a service condition of three years from the date of grant in the case of the options granted in 2017, 2018, 2019 and 2022, and four years from the date of grant in the case of the options granted in 2020, in each case to the extent that performance conditions are satisfied, and subject to continued service with the Company, remain exercisable until the tenth anniversary of their grant date. In the case of the options granted in 2021 the options vest on January 1, 2024.

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Details of the Plan awards during the current and prior years are as follows:

Number of awards

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

Granted during the period

848,710

Exercised during the period

(208,076)

Expired/forfeited during the period

 

(1,198,364)

Outstanding as of December 31, 2022

 

3,801,706

Exercisable as of December 31, 2022

 

344,385

The awards outstanding under the Plan at December 31, 2022 and December 31, 2021 were as follows:

    

    

    

Fair Value at

Grant Date

Performance Period

Expiration Date

Exercise Price

Grant Date

2022

2021

September 22, 2022

December 31, 2024

September 9, 2032

nil

8.53

848,710

September 9, 2021

December 31, 2021

September 9, 2031

nil

$

8.83

1,255,824

1,307,934

December 16, 2020

December 31, 2020

December 16, 2030

nil

$

1.23

1,352,788

1,411,271

March 13, 2019

 

December 31, 2021

March 13, 2029

 

nil

$

2.69

136,682

1,184,441

June 14, 2018

 

N/A

June 13, 2028

 

nil

$

9.34

44,650

70,774

March 21, 2018

December 31, 2020

March 20, 2028

nil

$

22.56

52,819

136,434

June 20, 2017

December 31, 2019

June 20, 2027

nil

$

15.90

June 1, 2017

N/A

June 1, 2027

nil

$

10.96

834

June 1, 2017

 

December 31, 2019

June 1, 2027

 

nil

$

16.77

77,712

168,469

November 24, 2016

December 31, 2018

November 24, 2026

 

nil

$

16.66

32,521

79,279

3,801,706

4,359,436

The awards outstanding as of December 31, 2022 had a weighted average remaining contractual life of 8.33 years (2021: 8.37 years).

The weighted average share price at the date of exercise for stock options exercised in the year ended December 31, 2022 was $6.46 ($5.28 in 2021).

As of December 31, 2022, 3,757,056 of the of the outstanding awards were subject to performance conditions (2021: 4,287,828 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 for the shares granted in 2022 can be summarized as follows:

Vesting Conditions

40% based cumulative earnings before interest and tax (EBIT)

40% based on cumulative operational cash flow

20% based on total shareholder return (TSR) relative to a comparator group

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There were no performance obligations linked to 44,650 of the outstanding awards at December 31, 2022 (2021: 71,608 awards). These awards were issued as deferred bonus awards and vested 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, 2022 was $8.53 (2021: $8.83). The Company estimates the fair value of the awards using Stochastic and Black-Scholes option pricing models (Level 3). 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 22, 2022

September 9, 2021

Fair value at grant date

$

8.53

$

8.83

Grant date share price

$

5.76

$

8.57

Exercise price

Nil 

0.01

Expected volatility

94.28

%

104.75

%

Option life

3.00 years

2.31 years

Dividend yield

 —

Risk-free interest rate

4.12

%

0.28

%

Remaining performance period at grant date (years)

3.00

2.31

Company TSR at grant date

(27.2)

%

NA

Median comparator group TSR at grant date

10.5

NA

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. 

 

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, 2022, share-based compensation expense related to all non-vested awards amounted to $5,836 thousand, which is recorded in staff costs (2021: $3,627 thousand).

b. Executive bonus plan assumed under business combination with Globe

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, 2022 and 2021.

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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, 2020

26,268

$

16.70

0.16

$

Expired/forfeited during the period

Outstanding as of December 31, 2021

 

26,268

$

16.70

 

0.16

 

$

Expired/forfeited during the period

 

 

 

  

 

  

Outstanding as of December 31, 2022

 

26,268

$

16.70

 

0.16

$

Exercisable as of December 31, 2022

 

26,268

$

16.70

 

0.16

$

For the year ended December 31, 2022, share based compensation expense related to stock options under this plan was $101 thousand (2021: $120 thousand).  The expense is reported within staff costs in the consolidated income statement.

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, 2022 and 2021 no restricted options were exercised. As of December 31, 2022, and 2021, restricted stock units of 26,268 were outstanding.

26.5 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:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Amortization of intangible assets (Note 8)

725

7,241

7,183

Depreciation of property, plant and equipment (Note 9)

80,834

90,087

101,006

Total

81,559

97,328

108,189

26.6 Finance income and finance costs

Finance income is comprised of the following for the years ended December 31:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Finance income of related parties (Note 24)

16

Other finance income

2,274

253

161

Total

2,274

253

177

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Finance costs are comprised of the following for the years ended December 31:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Interest on debt instruments

40,913

42,579

34,989

Interest on loans and credit facilities

9,482

12,584

8,404

Interest on note and bill discounting

125

88

363

Interest on leases

1,587

1,100

1,358

Trade receivables securitization expense (Note 10)

26

399

15,044

Other finance costs

8,882

92,439

6,810

Total

61,015

149,189

66,968

At the completion of the comprehensive refinancing, the Company recorded a finance cost of $90.8 million as of December 31, 2021 (See Note 18).

26.7 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:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Impairment of intangible assets (Note 8)

 

(1,153)

Impairment of property, plant and equipment (Note 9)

 

(56,999)

1,663

(71,929)

Impairment of non-current financial assets

(373)

Impairment of other

 

(1,415)

Impairment reversal/(losses)

 

(56,999)

 

137

 

(73,344)

 

  

 

  

 

  

Other (loss) / profit

349

758

158

Net (loss) gain due to changes in the value of assets

 

349

 

758

 

158

26.8 (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:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Gain on disposal of intangible assets

1,692

Loss on disposal of intangible assets

(190)

Gain on disposal of property, plant and equipment

485

2,462

473

Loss on disposal of property, plant and equipment

(754)

(1,123)

(873)

Gain on disposal of other non-current assets

47

Total

(459)

1,386

1,292

During 2022,the French subsidiary FerroPem has sold property of Chateau-Feuillet facility, amounting to $312 thousand fully depreciated ($1,092 thousand as of December 31, 2021).

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).

Loss on disposal during 2022 and 2021 is mainly due to asset disposals in American and Canadian subsidiaries.

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.

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26.9 Contractual assets and liabilities

Contractual assets and liabilities are comprised of the following for the years ended December 31:

    

2022

    

2021

 

2020

US$'000

US$'000

US$'000

Contractual Liabilities

 

775

 

5,047

1,687

Total

 

6,708

 

10,832

6,839

Contractual liabilities are recorded within “Trade and other payable” and relate to advances from customers.

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:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Fixed remuneration

5,404

5,244

5,086

Variable remuneration

5,199

1,209

756

Contributions to pension plans and insurance policies

315

373

319

Share-based compensation

5,937

3,627

2,017

Termination benefits

316

119

1,886

Other remuneration

16

17

9

Total

17,187

10,589

10,073

During 2022, 2021 and 2020, 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 power.

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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. As of December 31, 2022 and December 31, 2021, 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 (which have been fully repaid in June 2022) 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.

During the year ended December 31, 2022 and 2021 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, 2022, while all other variables were remained constant, would have increased or (decreased) the net profit before tax of $62,764 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, 2022 and 2021, the Company did not enter into any interest rate derivatives in relation to its interest bearing credit facilities.

Interest Rate Sensitivity analysis

At December 31, 2022, an increase of 1% in interest rates would have given rise to additional borrowing costs of $812 thousand (2021: $990 thousand).

Power risk

Power constitutes one of the single largest expenses for most of Ferroglobe’s products. Ferroglobe focuses on minimizing energy prices and unit consumption throughout its operations by concentrating its silicon and manganese-based alloy production during periods when energy prices are lower. In 2022, Ferroglobe’s total power consumption was 6,431 gigawatt-hours, with power contracts that vary across its operations.

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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). On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with Bankinter.

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 December 31, 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 June 30, 2025 (the “Super Senior Notes”). Interest is payable semi-annually on January 31 and July 31 of each year. On July 21, 2022, the Super Senior Notes were redeemed at 100% of the principal amount.
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 a loan agreement under which the Ministry made available to the borrower loans in aggregate principal amount of 44,999 thousand in connection with industrial development projects relating silicon purification project. FAU transferred the loan to OPCO before its sale. The loan is contractually due to be repaid in 7 instalments starting in 2023 and completing by 2030. Interest on outstanding amounts under the loan accrues at an annual rate of 3.55%. As of December 31, 2022, the amortized cost of the loan was 54,989 thousand (equivalent to $58,651 thousand) (2021: 54,578 thousand and $61,815 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 financial institution, for anticipating the collection of receivables of the Company’s European entities (Grupo FerroAtlántica, S.A. and FerroPem S.AS). On February 2022 Grupo FerroAtlántica, S.A. signed an additional factoring agreement with Bankinter. This program offers the possibility to sell the receivables corresponding to ten customers pre-approved by the bank and its credit insurer. During 2022, the factoring agreements provided upfront cash consideration of approximately $895,264 thousand ($659,083 thousand in 2021). The Company has repaid $ 918,070 thousand ($640,168 thousand in 2021), showing at December 31, 2022, an on-balance sheet bank borrowing debt of $60,976 thousand (2021: $$93,090 thousand) (see Note 10 and 16).

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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 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. On June 30, 2022, The Company closed a new, five-year $100 million North American asset-based revolving credit facility (the “ABL Revolver”), involving Ferroglobe’s subsidiary, Globe Specialty Metals, Inc. (“Globe”), and its wholly owned North American subsidiaries, as borrowers, and Bank of Montreal (“BMO”), as lender and agent.
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.

Quantitative information

i.Interest rate risk:

At December 31, the Company’s interest-bearing financial liabilities were as follows:

2022

Fixed rate

Floating rate

Total

US$'000

US$'000

US$'000

Bank borrowings

16,857

60,976

77,833

Obligations under leases

21,872

21,872

Debt instruments

343,443

343,443

Other financial liabilities (*)

80,388

18,273

98,661

440,688

101,121

541,809

(*)  Other financial liabilities comprise loans from government agencies (see Note 19).

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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 (see Note 19).

ii.Foreign currency risk:

Notes and cross currency swap

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, 2022 and 2021, the Company has no foreign currency swaps in place in respect of foreign currency accounts receivable and accounts payable.

iii.Liquidity risk:

The table below summarizes the maturity profile of the Company’s financial liabilities at December 31, 2022, based on contractual undiscounted payments. The table includes both interest and principal cash flows. The cash flows for debt instruments assume that principal of Reinstated Senior Notes is repaid at maturity in December 2025 (see Note 18).

2022

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

61,888

2,544

13,230

77,662

Leases

8,928

7,349

6,888

23,166

Debt instruments

32,439

423,235

455,674

Financial loans from government agencies

61,796

4,336

41,239

2,792

110,163

Payables to related parties

1,790

1,790

Payable to non-current asset suppliers

4,149

183

4,332

Contingent consideration

1,945

3,930

1,257

7,132

Tolling agreement liability

3,555

7,110

10,665

113,759

135,089

Trade and other payables

219,666

219,666

396,156

446,143

62,593

129,781

1,034,674

F-95

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

Additionally, as of December 31, 2022, the Company has long-term power purchase commitments amounting to $526,841 thousand ($294,557 thousand in 2021), which represents minimum charges that are enforceable and legally binding, and do not represent total anticipated purchase.

Changes in liabilities arising from financing activities

The changes in liabilities arising from financing activities during the year ended December 31, 2022 and 2021 were as follows:

January 1,
2022

Changes from financing cash flows

Effect of changes in foreign exchange rates

Changes in fair values

Interest expenses

Other changes

December 31, 2022

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Bank borrowings

98,967

(24,529)

(5,991)

3,185

6,201

77,833

Obligations under leases (Note 17)

18,358

(11,590)

(750)

1,587

14,266

21,871

Debt instruments

440,297

(136,260)

190

34,404

4,811

343,442

Financial loans from government agencies (Note 19)

67,013

35,924

(5,289)

5,239

(4,226)

98,661

Total liabilities from financing activities

624,635

(136,455)

(12,030)

190

44,415

21,052

541,807

Other amounts paid due to net financing activities

(4,003)

Net cash (used) by financing activities

(140,458)

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 (Note 17)

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

Other amounts paid due to net financing activities (**)

(3,755)

Net cash provided 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.

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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, 2022

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

936

936

Other obligations (Note 21)

Contingent consideration in a business combination

(5,838)

(5,838)

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 combination

(26,527)

(26,527)

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, 2022, presented as follows:

Total

US$'000

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)

Changes in fair value through profit or loss

1,758

Payments

18,931

Fair value at December 31, 2022

(5,838)

30.  Assets and disposal groups classified as held for sale and discontinued operations

Assets and disposal groups classified as held for sale

At the end of 2022, the Company received two offers to sale the assets related to Chateau Feuillet facility in France, stopped operations since March 202 and the Board approved the sale. Consequently, the assets were classified as held for sale in the balance sheet as of December 31, 2022. In accordance with IFRS 5, the Company ceased to recognize depreciation expense in relation to its assets in Chateau Feuillet while it is classified as held for sale.

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The assets transferred to held for sale have been measured at the lower of carrying amount and fair value less costs to sell and are presented separately in the statement of financial position. The fair value, according to the offers received,  as of December 31, 2022 was $1,067 thousand and carrying value $7,061 thousand, since fair value is lower than the carrying amount, the company recognized an impairment of $5,994 thousand.

The Company expect to achieve a sale agreement during first half of 2023.

Discontinued operations

As of  December, 31 2022 and 2021, there were not discontinued operations.

For the year ended December, 31 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.

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 profit and loss statement from discontinued operations is as follows:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Sales

Raw materials and energy consumption for production

Other operating income

Staff costs

Other operating expense

Depreciation and amortization charges, operating allowances and write-downs

Impairment losses

Operating Profit (loss)

Net finance expense

(LOSS) PROFIT BEFORE TAXES FROM DISCONTINUED OPERATIONS

Income tax expense

Gain on sale of discontinued operation

(5,399)

(LOSS) PROFIT AFTER TAXES FROM DISCONTINUED OPERATIONS

(5,399)

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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:

    

2022

    

2021

    

2020

Basic earnings (loss) per ordinary share computation

  

  

  

Numerator:

  

  

  

Profit (loss) attributable to Discontinued Operations (US$'000)

(5,399)

Denominator:

  

  

  

Weighted average basic shares outstanding

169,269,281

Basic earnings (loss) per ordinary share (US$)

(0.03)

Diluted earnings (loss) per ordinary share computation

  

  

  

Numerator:

  

  

  

Profit (loss) attributable to Discontinued Operations (US$'000)

(5,399)

Denominator:

  

  

  

Weighted average basic shares outstanding

169,269,281

Effect of dilutive securities

Weighted average dilutive shares outstanding

169,269,281

Diluted earnings (loss) per ordinary share (US$)

(0.03)

F-99

The statement of cash flows from discontinued operations is showed as follows:

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Cash flows from operating activities:

Profit for the period

(5,399)

Adjustments to reconcile net (loss) profit to net cash provided by operating activities:

Income tax expense (benefit)

Depreciation and amortization charges, operating allowances and write-downs

Net Finance expense

Gains on disposals of non-current and financial assets

5,399

Changes in working capital

Decrease / (increase) in accounts receivable

Decrease / (increase) in inventories

Increase / (Decrease) in accounts payable

Other changes in operating assets and liabilities

Other, net

(24)

Income tax paid

Interest paid

Total cash flow from operating activities

(24)

Cash flows from investing activities:

Payments due to investments:

Property, plant and equipment

Disposals:

Disposal of business, net of cash

Total cash flow from investing activities

Cash flows from financing activities:

Other financing activities

Total cash flow from financing activities

INCREASE / (DECREASE) IN CASH

(24)

CASH AT BEGINNING OF PERIOD

24

CASH AT END OF PERIOD

31. Other disclosures

Restricted Net Assets

Certain of our entities are restricted from remitting certain funds to us in the form of cash dividends or loans by a variety of, contractual requirements. These restrictions are related to standard covenant requirements included in our bank borrowings and debt instruments, such as the SEPI loan and the ABL Revolver. Additionally, the Company has restrictions for the disposal of cash in the joint ventures. Consequently, net assets from Ferroglobe subsidiaries Globe Specialty Metals, Inc., and other subsidiaries in the USA, QSIP Canada ULC, Grupo Ferroatlántica and the Joint Ventures are restricted. Please refer to Notes 10, 16 and 19 for further details of these restrictions.

As of December 31, 2022, the restricted net assets of the Ferroglobe Group’s subsidiaries were approximately $496,983 thousand. The Company performed a test on the restricted net assets of combined subsidiaries in accordance with Securities and Exchange Commission Regulation rule 5-04 (c) ‘what schedules are to be filed’ and concluded the restricted net assets exceed 25% of the consolidated net assets of the Company at December 31, 2022. Therefore the separate condensed financial statements, as per SEC rule S-X 12-04, of Ferroglobe PLC are presented (see Appendix I, considered to be part of the footnotes, for details.)

Additionally, the Super Senior Notes restricts the ability of Ferroglobe PLC to pay dividends.

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32.   Events after the reporting period

REINDUS loan

On January 19, 2023, a new resolution was signed by the Ministry terminating the total reimbursement procedure initiated in January 2022. Once that procedure was definitively closed, the company decided to proceed with the foreseen partial early repayment of €16.3 million on February 10, 2023

Grupo Villar Mir

On February 28, 2023 Grupo Villar Mir has reduced the number of shares owned from 81,924,822 to 76,265,434 shares, representing approximately 40.72% of the capital of the company.

Reinstated Senior Notes

On March 1, 2023 Globe repurchased $25.7 million of the Reinstated Senior Notes and the corresponding accrued interest coupon amounting to $207 thousand as of the purchase date. The fair value of the Notes at the purchase date was $26.1 million and the purchase price was $1.01 per bond.

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Appendix I

Schedule I has been provided pursuant to the requirements of Rule 12- 04(a) of Regulation S-X, of the US Securities and Exchange Commission (SEC) which require condensed financial information as to the financial position, cash flows and results of operations of Ferroglobe PLC, as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards have been condensed or omitted. The footnote disclosures contain supplementary information only and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements.

Basis of Presentation.

The presentation of Ferroglobe PLC separate condensed financial statements have been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that, in the separate condensed financial statements the investments in subsidiaries are being recorded at historic cost.

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SCHEDULE I -  FERROGLOBE PLC (Parent company)

CONDENSED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2022 AND 2021

Thousand of US dollars

    

2022

    

2021

US$'000

US$'000

ASSETS

Non-current assets

 

  

 

  

Investment in subsidiaries

 

629,284

 

629,284

Intangible assets

 

522

 

Property, plant and equipment

 

449

 

105

Trade and other receivables from subsidiaries

 

263,058

 

227,865

Total non-current assets

 

893,313

 

857,254

Current assets

 

 

  

Trade and other receivables

 

797

 

350

Trade and other receivables from subsidiaries

118,210

159,874

Other current assets

 

435

 

441

Cash and cash equivalents

 

605

 

1,311

Total current assets

 

120,047

 

161,976

Total assets

 

1,013,360

 

1,019,230

EQUITY AND LIABILITIES

Equity

 

 

  

Share capital

 

1,964

 

1,964

Other Reserves

 

(158,958)

 

(164,783)

Retained earnings

 

734,095

 

774,531

Total equity

 

577,101

 

611,712

Non-current liabilities

 

  

 

  

Lease liabilities

 

372

 

25

Trade and other payables

183,721

Other non-current liabilities

 

11

 

Total non-current liabilities

 

184,104

 

25

Current liabilities

 

  

 

  

Debt instruments

2,181

Lease liabilities

 

550

 

568

Trade and other payables

 

10,634

 

11,221

Trade and other payables to subsidiaries

240,753

392,803

Current income tax liabilities

 

115

 

490

Other current liabilities

 

103

 

230

Total current liabilities

 

252,155

 

407,493

Total equity and liabilities

 

1,013,360

 

1,019,230

The accompanying notes are an integral part of these Condensed Financial Statements.

F-103

SCHEDULE I -  FERROGLOBE PLC (Parent company)

CONDENSED  INCOME STATEMENT FOR THE PERIODS ENDING DECEMBER 31, 2022, 2021 and 2020

Thousand of US dollars

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

 

  

 

  

 

  

Other operating income

 

41,816

 

32,037

 

13,618

Staff costs

 

(5,864)

 

(4,983)

 

(6,379)

Other operating expense

 

(51,864)

 

(36,859)

 

(18,166)

Depreciation and amortization charges, operating allowances and write-downs

 

(104)

 

(109)

 

(3)

Finance income

 

4,029

 

77,232

 

8,976

Finance costs

 

(26,444)

 

(96,581)

 

(22,069)

Exchange differences

 

(2,005)

 

(15,227)

 

25,516

Financial derivative (gain) loss

3,168

(Loss) before tax

 

(40,436)

 

(44,490)

 

4,661

Income tax benefit (expense)

 

 

 

(515)

Total (Loss) profit for the year

(40,436)

(44,490)

4,146

The accompanying notes are an integral part of these Condensed Financial Statements.

F-104

SCHEDULE I -  FERROGLOBE PLC (Parent company)

CONDENSED STATEMENT OF CASH FLOWS FOR THE PERIODS ENDING DECEMBER 31

Thousand of US dollars

    

2022

    

2021

    

2020

US$'000

US$'000

US$'000

Cash flows from operating activities:

 

(Loss) for the year

 

(40,436)

 

(44,490)

 

4,146

Adjustments to reconcile net profit (loss) to net cash provided by operating activities:

 

Income tax expense

515

Depreciation and amortization charges, operating allowances and write-downs

 

104

 

109

 

3

Finance income (loss)

 

(4,029)

 

(77,232)

 

(8,976)

Finance costs

 

26,444

 

96,581

 

22,069

Exchange differences

 

2,005

 

15,227

 

(25,516)

Financial derivative gain (loss)

(3,168)

Share-based compensation

5,836

3,627

2,017

Changes in operating assets and liabilities:

 

(Increase) decrease in trade and other receivables

 

7,138

 

1,431

 

(21,300)

Increase (decrease) in trade and other payables

 

5,205

 

(22,169)

 

47,456

Other changes in operating assets and liabilities

 

(492)

 

(548)

 

(10,146)

Net used cash provided (used) by operating activities

1,775

(27,464)

7,100

Cash flows from investing activities:

 

Payments due to investments:

 

Other intangible assets

 

(522)

 

 

Net cash provided (used) by investing activities

(522)

Cash flows from financing activities:

 

Payment for equity issuance costs

(6,647)

Proceeds from equity issuance

41,440

Bank borrowings

218

Repayment of debt instruments

(2,181)

Amounts paid due to leases

(123)

(111)

(733)

Interest paid

 

 

(7,031)

 

(6,590)

Net cash provided (used) by financing activities

(2,304)

27,869

(7,323)

Total net cash flows for the year

 

(1,051)

 

405

 

(223)

Beginning balance of cash and cash equivalents

 

1,311

 

1,065

 

1,199

Exchange differences on cash and cash equivalents in foreign currencies

 

345

 

(159)

 

89

Ending balance of cash and cash equivalents

 

605

 

1,311

 

1,065

The accompanying notes are an integral part of these Condensed Financial Statements.

F-105

SCHEDULE I -  FERROGLOBE PLC (Parent company only)

Notes to Condensed Financial Statements

1. Basis for presentation

The presentation of Ferroglobe PLC separate condensed financial statements have been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that, in the separate condensed financial statements the investments in subsidiaries are being recorded at historic cost.

The Parent Company prepared these unconsolidated financial statements in accordance with International Accounting Standards 27, "Separate Financial Statements", as issued by the International Accounting Standards Board.

2. Commitments, long term obligations and contingencies

Commitments and long term obligations

On February 15, 2017, Ferroglobe PLC 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”). On March 27, 2021, Ferroglobe PLC and Globe and certain other members of the 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 Group completed the exchange of 98.588% of the 9⅜% Senior Notes due 2022 (the “Stub Notes”) issued by the Ferroglobe PLC 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”) were repaid on March 1, 2022.

As of December 31, 2022, Ferroglobe PLC only has long-term obligations related to intercompany loans. These main long- term obligations are the following:

-$147.8 million to Ferroglobe Finance Company PLC in relation to the transfer of the Reinstated Notes due in July 30, 2026.
-$25.5 million to Ferroglobe Holding Company, LTD related to a revolving credit facility signed on July 27, 2021 and due in June 30, 2031.
-$10.3 million to Ferroglobe Holding Company, LTD related to a loan facility signed on May 19, 2021 and due in June 30, 2025.

Contingencies and guarantees

Ferroglobe PLC is guarantor of the following material obligations:

$60 million Super Senior Notes issued by Ferroglobe Finance Company (the “UK Issuer”), which were redeemed on July 21, 2022;
$345 million in Reinstated Notes issued by the UK issuer;
34.5 million in indebtedness issued by Grupo FerroAtlántica and Grupo FerroAtlántica de Servicios under the agreement with the Sociedad Estatal de Participaciones Industriales (“SEPI”), a Spanish state-owned industrial holding company affiliated with the Ministry of Finance and Administration; and
Up to $7 million in connection with the New Markets Tax Credit Program in relation to our Selma, Alabama, plant and due in the event any tax credits under the Program are disallowed or recaptured.

F-106

As of December 31, 2022, 2021 and 2020, Ferroglobe PLC has no material contingencies.

3.Dividends from subsidiaries

For the years ending December 31, 2022, 2021 and 2020 Ferroglobe PLC did not receive cash dividends from its subsidiaries.

F-107