UPDATE 2-Ferrexpo says Ukraine charity funds may have been misappropriated

* Ferrexpo donated $110 mln to charity

* Ferrexpo spent $6.4 mln on review

* Ferrexpo could look to recover some funds -source

* IRC unable to conclude ultimate use of all funds (Adds source comments, details, shares)

By Noor Zainab Hussain and Yadarisa Shabong

Aug 30 (Reuters) - Ferrexpo said an independent review of funds it donated to a Ukrainian charity had concluded some of the money could have been misappropriated but cleared the iron-ore pellet maker's directors of any involvement.

The Blooming Land charity, which coordinated Ferrexpo's Corporate Social Responsibility (CSR) programme, came under scrutiny in 2018 after auditors found holes in its statements showing how it uses the funds it receives.

Concluding the review, which was launched in February, Ferrexpo said it had not been possible to explain a number of discrepancies outlined in the 2018 Annual Report relating to the charity and its use of the funds donated by Ferrexpo.

"The (independent review committee) IRC has been unable to conclude as to the ultimate use of all of the funds by the Charity," Ferrexpo said in a statement, adding that it had now ended its relationship with Blooming Land.

Ferrexpo, the third largest producer of iron ore pellets for the global steel industry with a 2018 turnover of $1.27 billion, donated $110 million to Blooming Land over a period of six years.

Switzerland-based Ferrexpo, which has major assets in Ukraine, said the IRC was satisfied that none of its directors, managers or employees were involved in any misappropriation of funds.

The company's auditor Deloitte quit in April, saying it was unable to conclude whether the miner's chief executive - Ukrainian mogul Kostyantin Zhevago - controlled the charity.

Ferrexpo has maintained that Zhevago, also its majority owner, did not have significant influence or control over Blooming Land, which ran health events and health programmes focused on diabetes throughout Ukraine.

The IRC said the charity is not a related party of the company nor of Zhevago.

Reuters was unable to find a way to contact Blooming Land for comment.

DRAWING A LINE

Friday's announcement draws a line under an investigation which has cost the miner $6.4 million and weighed on its shares, which have fallen by more than more than a fifth since early February when Ferrexpo first disclosed that it was looking at possible discrepancies in its charity partner's bank statements.

"(The company) has replaced in auditors, refreshed its board and now feels it can move on from this difficult affair," a source with knowledge of the matter told Reuters.

Ferrexpo's shares fell as much than 6.5% in early trade before reversing course to stand 2.04% higher at 0926 GMT.

The source said the miner is looking into whether it can recover any of the money it donated.

"Ferrexpo has not made any decision but it may take steps to recover some of the funds if Blooming Land cannot account for whether the money was spent properly," the source said.

The source added that the IRC had not been able to get sufficiently detailed records from Blooming Land to know where the money was spent.

Funding for Blooming Land's CSR activities during 2017 and 2018 was provided by one of Ferrexpo's units in Ukraine and Khimreaktiv LLC, an entity ultimately controlled by Zhevago.

The miner said on Friday it was aware of various tax and other investigations in Ukraine in connection with the charity's matters. (Reporting by Noor Zainab Hussain and Yadarisa Shabong in Bengaluru; Editing by Arun Koyyur and Kirsten Donovan)