Ferrexpo rejects Deloitte view on delay to Blooming Land probe

Ferrexpo rejected Deloitte's assertion that it delayed a review into donations to the Blooming Land charity in Ukraine in the latest exchange between the company and its former auditor over the affair.

The FTSE 250 miner sought to present its version of events after the resignations of Deloitte as auditor and two directors over the Blooming Land affair.

Deloitte said it told the company in October 2018 that if Blooming Land did not supply original bank statements by the end of that month the company should start an independent forensic investigation.

The accountancy firm said it repeated its request several times and told Ferrexpo at the end of January that if there was no investigation it would have to consider its position as auditor.

The Ukraine-focused miner delayed its annual results twice in 2019 as it reviewed its donations to Blooming Land, a Ukrainian charity set up to coordinate Ferrexpo’s corporate and social responsibility activities. Unexplained discrepancies were found in Blooming Land’s bank statements, prompting Ferrexpo’s board to conduct a review.

But Ferrexpo said Deloitte did not point out problems with its its half-year results, published on 1 August 2018. After discrepancies were found in copy bank statements from Blooming Land on 29 August it tried to get the originals from the charity, it said.

Ferrexpo formally considered setting up a review on 22 November but decided to take a “cooperative route” with Blooming Land. In January it again deferred a review, though differing views were expressed. After requesting further clarification from Blooming Land on 25 January the board decided unanimously on 3 February to launch a review.

“The company formed its own considered view and believes it initiated the formal independent review at the appropriate time, given the other steps it was taking and all the surrounding circumstances,” Ferrexpo said in a statement.

Deloitte quit as auditor on 26 April, sending Ferrexpo shares plunging. Two non-executive directors, Mary Reilly and Bert Nacken, also said they would not stand for re-election at the company’s annual meeting in June.

Deloitte said the investigation had identified a significant number of "potential associations and linkages adjacent to [Ferrexpo’s] CEO" Kostyantin Zhevago. The auditor said it had not been given enough evidence to show that $33.5m of donations to Blooming Land over two years was spent legitimately.

Ferrexpo shares have been battered by the affair in recent weeks. They rose 10% to 212.70p at 08:22 BST.