Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Day (October 2016)
86 slides from Fortescue's investor day presentation, Oct 25, 2016
Slide 1: Investor Briefing 2016
For personal use only Investor Briefing 2016
Slide 2: Forward looking statements
Forward looking statements For personal use only Important Notice Additional Information The purpose of this presentation is to provide general information about This presentation should be read in conjunction with the Annual Report at 30 Fortescue Metals Group Limited ("Fortescue"). It is not recom
Slide 3: Building a world class company
Building a world class company Core supplier to China’s growth For personal use only Safety focus First ore Low cost Engagement Empowerment Leadership in 2008 producer Shipped over 165-170mt Production rate 760mt Unique culture 3
Slide 4: Our Vision: The safest, lowest cost, most profitable iron ore producer
Our Vision: The safest, lowest cost, most profitable iron ore producer v Fortescue i Determination The New Force in Iro! Set yourself stretch targets Enthusiasm Empowerment Generating ideas
Slide 5: Delivering on targets
Delivering on targets For personal use only Focus on safety, productivity and efficiency Safety 165-170mt shipped Productivity + efficiency Debt repayments Consistent dividend policy 5
Slide 6: Continuous + sustainable cost improvements
Continuous + sustainable cost improvements Sept ’16 quarter US$13.55/t – productivity and efficiency delivering cost savings For personal use only US$/wmt 1 Solomon operations 60 50 48 44 2 Blending strategy 58% Fe 40 34 3 Processing, wet plants + de-sands 30 27 15 4 Operational efficiencies 20 10 $
Slide 7: Breakeven price
Breakeven price For personal use only FY17 continuing to lower all in breakeven price on Platts 62% CFR basis US$/t 40 Fx:0.75 30 2.6 28.3 3.1 22.6 2.5 18.1 1.9 20 0.3 1.3 4.5 12-13 10 - C1 Shipping Royalty Admin Delivered Moisture Dmtu Total dmt Interest Capex Breakeven cost to China adjustments co
Slide 8: Iron ore supply in balance
For personal use only Mt 20 40 60 80 0 100 120 140 160 180 Jul-10 Sep-10 Nov-10 Jan-11 Source: Bloomberg and Umetal Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Iron ore supply in balance Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Price and iron ore port stocks remaini
Slide 9: Moving down the global cost curve
Moving down the global cost curve For personal use only China's Iron Ore Supply CFR Costs (including royalties & ocean freight) 2012 2016 Source: Metalytics 26 May 2016 9
Slide 10: Fortescue's strategy
Fortescue’s strategy For personal use only Alignment of marketing and operations to deliver ongoing productivity and efficiency 10
Slide 11: Operations - Nick Cernotta
For personal use only Operations - Nick Cernotta
Slide 12: Safety / People and culture
Safety People and culture pC
Slide 13: Safety performance improves year on year
Safety performance improves year on year For personal use only Significant improvement since FY11 Total Recordable Injury Frequency Rate 16 14.4 Rolling 12 month 14 12 10 9.2 TRIFR 8 7.6 6.0 6 5.1 4.3 4 3.4 2 0 FY11 FY12 FY13 FY14 FY15 FY16 Q1 FY17 13
Slide 14: People and culture
People and culture Underpinned by our core values For personal use only 14
Slide 15: For personal use only
For personal use only 15
Slide 16: Reserve portfolio supports asset base
Reserve portfolio supports asset base use only Significant resource supports reserves and mine life 12,000 3,000 2,463 2,463 2,463 10,000 2,500 2,463 740 740 740 Ore Resource (Mt) For personal Ore Reserves (Mt) 8,000 624 2,000 791 827 903 728 6,000 4,877 4,793 4,755 3,504 1,500 4,000 695 303 491 1,0
Slide 17: Chichester Hub
Chichester Hub For personal use only Typical section 0 1 S Vertical exaggeration = 10 times Kilometres N Unconsolidated gravels, silts, clays • Bedded mineralisation in the Marra Hardcap Mamba iron formation Mineralised dehydrated and hydrated zones Mineralised Primary zone Microplaty hematite ore z
Slide 18: Solomon Kings Valley iron mineralisation
Solomon Kings Valley iron mineralisation For personal use only Recent alluvium (gravels and silts) Marginal CID (clay dominant material) Detrital Iron Formation (iron rich alluvium) Basal CID (clay and conglomerates) Oakover Formation (calcrete and silcrete) Lateritised bedrock Upper CID (dominant h
Slide 19: Solomon Typical BID Section
Solomon For personal use only Typical BID Section • Mineralisation predominantly within the Dales Gorge, Whaleback Shale and Joffre Members of the Joffre Brockman Iron Formation Whaleback Shale • Outcropping mineralisation on the flanks of major hills, with some buried by alluvium along the valley e
Slide 20: Strip ratios
Strip ratios – FY17 1.1 For personal use only 5 year average strip ratio increases costs ~$1/wmt on current assumptions OPF beneficiation 5 year average Strip Ratios LOM FY17 - FY21 Blending Ore body Chichester 1.5 2.3 Optimisation modelling improving Solomon 1.3 1.8 strip ratios Combined 1.4 2.1 Mi
Slide 21: Innovation and technology
Safety Innovation and technology @
Slide 22: Fortescue's innovation and technology strategy
Fortescue’s innovation and technology strategy For personal use only Early adopters and future opportunities for strategic focus areas Solomon Cloudbreak Christmas Creek Autonomous Dewatering OPF optimisation Haulage telemetry Early adopter Integrated Autonomous Drilling Operations Centre Dewatering
Slide 23: Optimising assets
Optimising assets For personal use only To optimise return on capital that is invested in Assets Operating Philosophy Maintenance Strategy Work Management Reliability Standardisation Technology & Innovation Shutdown Strategy Root Cause Analysis Equipment Perth Operating Centre Contractor Engagement
Slide 24: Cloudbreak
For personal use only Cloudbreak
Slide 25: Cloudbreak Snapshot
Cloudbreak For personal use only Snapshot 40mtpa Annual production Approximate total workforce; 1,700 1,200 Fortescue, 500 contractors 2008 First ore Wet front end – improving 2011 beneficiation 25
Slide 26: Blending + beneficiation
Blending + beneficiation For personal use only Blending with Firetail + wet processing, product grade 57.5% Strip ratio 2.3 New pit limit + + = Production inventory at cut off grade of 54% 26
Slide 27: Solomon
For personal use only Solomon
Slide 28: Solomon Snapshot
Solomon Snapshot For personal use only 2 x OPF’s 73mtpa 27mtpa Firetail – dry plant 46mtpa Kings – wet plant Firetail Bedded/detrital product with high Fe and phos blended with low phos from Chichesters Kings CID Fines, a low alumina Kings channel iron product; and Western Fines, a bedded/detrital p
Slide 29: World class autonomous haulage operation
World class autonomous haulage operation For personal use only First to deploy CAT autonomous technology on a commercial scale > 200 Assets 2013 Safety and Interacting on one system First AHS Truck productivity 240mt 54 Autonomously moved Autonomous trucks 29
Slide 30: Autonomous haulage
Autonomous haulage For personal use only AHS are 20 per cent more productive than regular fleet of trucks of the same type • Fully integrated • Overburden and ore • Blended stockpiles • Primary crusher feed • Flexibility • Older trucks converted to autonomy 30
Slide 31: Fleet productivity
Fleet productivity For personal use only AHS are 20 per cent more productive than regular fleet of trucks of the same type Haul truck performance 3,000 2,500 T.KmEFH/cal hr 2,000 1,500 1,000 500 0 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Manned truck AHS tr
Slide 32: Autonomous drilling
Autonomous drilling For personal use only Leveraging proven technology • First autonomous drill to be operating in December 2016 • Forecasting 23% improvement - 9% increased operating time - 14% increased productivity • Safety improvement 32
Slide 33: Christmas Creek
For personal use only Christmas Creek
Slide 34: Christmas Creek Snapshot
Christmas Creek For personal use only Snapshot Average annual production; 60mtpa 2 x Ore Processing Facilities Approximate total workforce 1,830 1,170 Fortescue, 660 contractors CC1 commenced 2010 2010 CC2 commenced 2012 34
Slide 35: OPF initiatives
OPF initiatives For personal use only Blended stockpiles; cyclone efficiency Wet Yield to 90% Reduce mining costs scavenger cyclone recovery Iron upgrade +103% Reducing cut-off grades Silica upgrade -78% Lowering strip ratios Wet plant density and volume control Secondary and tertiary cycloning Belt
Slide 36: Christmas Creek Operations Centre
Christmas Creek Operations Centre For personal use only Initiatives • All mining, maintenance and fixed plant operations control • Engineering, planning and quality resource support • Remote crusher rock breakers • Autonomous drilling • Centralised Integrated Control Centre for all site based operat
Slide 37: Christmas Creek plant automation
Christmas Creek plant automation For personal use only Overview and outcomes 1 Minimise Operator Interface Increasing plant run-time 2 Wet Plant Automation Improving upgrades and yields 3 Dry Plant Automation Maximising throughput 4 Train Load Out Optimise train weight and load times 5 Constraint Co
Slide 38: Rail
For personal use only Rail
Slide 39: Rail
Rail For personal use only Shaping our great railway for long-term success Track connecting four mine sites 620km Approximate total workforce 470 380 FMG, 90 contractors 36kt/train 2 loco, 250 ore cars trains Longer 3kms with average cycle time 22hrs Faster 80km/hr speeds Heavier 42t axle loads 39
Slide 40: Virtual train control centre
Virtual train control centre For personal use only First company in WA to control a railway from outside the region of operation • Virtual control system, no per way signals or transponders • Communications based system with fibre optic backbone • In cab signalling and positive enforcement • Benefit
Slide 41: Condition monitoring management system
Condition monitoring management system For personal use only A postage stamp of space connects the wheel to the track • Wheel and brake shoe measurement at optimal speed • Measuring on train 2,000 wheels and 2,000 brake shoes in 3 minutes • Measuring on train 55,000 wheels and 55,000 brake shoes a d
Slide 42: Driver assist technology
Driver assist technology For personal use only Increase in safety, productivity and efficiency • Tendering on cruise control • Application of throttle and brake • Operator remains on the Train • Implementation of 18 to 24 months • Benefits include: – Reduced cycle times – Improved fuel consumption –
Slide 43: Port
For personal use only Port
Slide 44: Herb Elliot Port
Herb Elliot Port For personal use only Part of the worlds largest bulk port by annual throughput Australia’s most efficient bulk Port Approximate total workforce 390 250 Fortescue, 140 contractors 3 train loops, 3 TUL’s 36,000tph and 3 stackers unload at a combined rate 3 reclaimers, 3 shiploaders 3
Slide 45: Shiploader automation
Shiploader automation For personal use only Automation project to improve efficiencies • Radar System detects ore levels in hatch and informs operator to position shiploader • Benefits include – Improved anti-collision protection – Stage 1: Operator Assistance and diminish positioning error – Stage
Slide 46: Shiploader operator assistance
Shiploader operator assistance For personal use only Phased approach Basic automation Current 1. Anti Collision 2. Loading assistance Developments 100% automation 3. Remote Control 4. Hatch Automation 5. Ship Automation 46
Slide 47: Reclaimer Radar system
Reclaimer Radar system For personal use only • Radar System detect reclaimer position in the stockpile • Benefits include – Live cutting area measurement • Slew Speed Control • Reduction of Over Torques • Improved Mass Flow – Distance / depth measurements • Improved Face Up Procedure – Edge height d
Slide 48: Shipping - Mark Davidson
Shipping – Mark Davidson For personal use only 48
Slide 49: Market update
Market update For personal use only Shipping market remains weak but showing signs of having bottomed Port Hedland to Qingdao $16.00 $12.00 $8.00 $4.00 $0.00 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Baltic Capesize Index Route C5 49
Slide 50: Fleet development
Fleet development For personal use only Consolidation in ship building and ship owning markets Capesize Fleet Development 300 Delivered Scrapped 200 100 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Simpson Spence Young: Bulk Carrier Net Fleet Changes 50
Slide 51: Performance update
Performance update For personal use only Target efficient vessels with large deadweight and low draft Vessel Segment Distribution 56% 55% 56% 54% 52% 48% 46% 45% 44% 44% FY13 FY14 FY15 FY16 YTD FY17 >200k DWT Capesize 51
Slide 52: Sustained improvement of turnaround time
Sustained improvement of turnaround time For personal use only Target of zero demurrage days Demurrage Days Per Vessel 6.39 4.62 2.49 1.31 0.21 -0.36 FY12 FY13 FY14 FY15 FY16 YTD FY17 52
Slide 53: Investment in ships to deliver operational benefits
Investment in ships to deliver operational benefits For personal use only Very Large Ore Carriers (VLOC) update • 8 VLOCs being constructed at two shipyards in China • Efficient loading at Port Hedland – 261,000 deadweight tonne – 327m in length, 57m beam 53
Slide 54: First vessel delivers to Fortescue end November
First vessel delivers to Fortescue end November For personal use only • 8 VLOCs 21M tonnes p.a. or 12% of total volume • Contracted at bottom of market - low cost shipping option • Provide exposure to the wider shipping industry 54
Slide 55: Market - David Liu
For personal use only Market – David Liu
Slide 56: Market
Safety Innovation and technology People and ee culture #28 fell) 56
Slide 57: Fortescue values relationship with China
Fortescue values relationship with China For personal use only Four key areas of engagement 57
Slide 58: 13th Five Year Plan
13th Five Year Plan For personal use only Generating domestic demand for steel for the next five years 3,000km 152,000km New urban rail lines Roads in rural areas High speed rail network Over 50 to cover 80% civilian of cities airports Source: China Daily 58
Slide 59: Steel consumption to build economy
Steel consumption to build economy Steel demand – driven by policy decisions For personal use only Source: Wood Mackenzie 59
Slide 60: China's One Belt One Road
China’s One Belt One Road For personal use only Generating regional demand for steel and opportunities for Northern Australia 60
Slide 61: Iron ore market in balance
Iron ore market in balance For personal use only Market demand for Fortescue ore remains strong • Steel demand driven by property and infrastructure sectors in China • Demand for Fortescue ore remains strong • Iron ore market in balance with low cost seaborne ore displacing domestic • Price realisat
Slide 62: Core supplier to Asia
Core supplier to Asia For personal use only Well established 18% market share of imported iron ore to China • Low impurity 58% Fe average • High value in use • Large diverse customer base • Reliable consistent delivery • Proximity to high growth region 62
Slide 63: Property and infrastructure driving steel demand
Property and infrastructure driving steel demand For personal use only Chinese government stimulus and credit expansion pillar of economic support Home sales and prices have increased in 2016 80 40 60 30 % change y-o-y % change y-o-y 40 20 20 10 0 0 -20 Sales (left) Prices (right) -40 -10 01-Sep-10
Slide 64: Iron ore demand robust
Iron ore demand robust For personal use only Chinese 2016 imports forecast to exceed 1.0 billion tonnes • Seaborne supply slowed over China iron ore imports 2015-2016 100 • Steel fundamentals and iron ore 90 price has seen high cost supply 80 return Million wmt 70 • Domestic mine utilisation in Chin
Slide 65: Lower price realisation in Sept 2016 quarter
For personal use only $0 $40 $60 $80 $100 $20 29/07/2014 29/08/2014 29/09/2014 29/10/2014 29/11/2014 29/12/2014 Platts 62 CFR 29/01/2015 28/02/2015 31/03/2015 30/04/2015 31/05/2015 30/06/2015 31/07/2015 31/08/2015 MBIO58 [P] CFR 30/09/2015 31/10/2015 30/11/2015 31/12/2015 31/01/2016 29/02/2016 31/03
Slide 66: Finance
For personal use only Finance
Slide 67: September quarterly
September quarterly For personal use only Operational performance delivering financial results and cashflows C1 Cost US$700m US$4.2bn Debt repaid Net debt $13.55/wmt 33% gearing 1.8 1.6 Available Sustaining Prioritise cash 1.4 1.2 for debt US$ bn repayment 1.0 Capex for debt 0.8 0.6 0.4 Base liquidi
Slide 68: Quarterly C1 cost performance
For personal use only 10 15 20 25 30 35 40 45 0 5 FY13 44 FY14 34 US$/wmt Jul-14 Aug-14 Sep-14 Q1 15 32.08 Oct-14 Nov-14 Dec-14 Q2 15 28.48 Jan-15 Feb-15 Mar-15 Q3 15 25.90 Apr-15 May-15 Jun-15 Q4 15 22.16 Jul-15 Aug-15 Sep-15 Quarterly C1 cost performance Q1 16 16.90 Oct-15 Nov-15 Momentum continui
Slide 69: Path to US$12-13/wmt for FY17
Path to US$12-13/wmt for FY17 For personal use only Continued realisation from efficiency and productivity improvements US$ Productivity and efficiency initiatives including: /wmt US$/wmt 18 • Equipment productivity 16 • Haul route, pit design, mining hygiene, in-pit waste 1.7 Mining 14 dumping ~ 1.
Slide 70: Cost savings delivered
Cost savings delivered For personal use only US$3.5bn in operating cost savings delivered since achieving full operational capacity US$bn 4.0 0.5 3.0 1.9 2.0 4.0 3.5 0.8 1.0 0.8 - FY14 FY15 FY16 FY14 - FY16 delivered FY17 fcst FY14 - FY17 forecast delivered savings 70
Slide 71: Debt maturity
Debt maturity For personal use only Flexibility to continue early repayments prior to first maturity in June 2019 6,000 5,000 4,000 US$m 3,000 2,976 2,000 2,160 1,000 0 478 0 CY2016 0 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior Secured Credit Facility Senior Unsecured Notes Senior Secured Notes
Slide 72: Capital expenditure
Capital expenditure For personal use only Free cash prioritised to debt with capex sustainable at current levels FY17 Guidance US$m Sustaining capital expenditure • Current low levels of sustaining capex 500 US$2/wmt 400 340 304 • Exploration US$40m 300 200 • Funding nearing completion 100 – VLOCs U
Slide 73: Firetail replacement
For personal use only Firetail replacement
Slide 74: Firetail replacement - 2021
Firetail replacement - 2021 For personal use only Options for replacement being developed 74
Slide 75: Western Hub
Western Hub For personal use only • Eliwana and Flying Fish • 740mt of resources • Prospective areas • Future replacement • Potential other users 75
Slide 76: Nyidinghu
Nyidinghu For personal use only • 2.5bnt resource • Iron ore central • ~100km to Cloudbreak • 57.4% Fe 76
Slide 77: Supporting our community
For personal use only Supporting our community
Slide 78: Building strong communities
Building strong communities For personal use only Creating opportunities through training, employment and business development 32 78
Slide 79: Championing diversity
Championing diversity For personal use only Workplace culture fundamental 79
Slide 80: Corporate Social Responsibility
Corporate Social Responsibility For personal use only Integrate sustainable development considerations into corporate decision making process • Fortescue is refreshing its approach in FY17 • Enhanced strategy builds on the highly developed sustainability and community development initiatives in plac
Slide 81: Focussed strategy
For personal use only Focussed strategy
Slide 82: Moving down the global cost curve
Moving down the global cost curve For personal use only China's Iron Ore Supply CFR Costs (including royalties & ocean freight) 2012 2016 Source: Metalytics 26 May 2016 82
Slide 83: Strategic delivery
Strategic delivery For personal use only Culture, continuous improvement, speed and flexibility Consistent 165-170mtpa Lowering costs to US$12-13/wmt Maximising resource value Debt repayment Ongoing improvements 83
Slide 84: The new force in iron ore
The new force in iron ore For personal use only Continuous improvement Sustainable low cost World class producer assets & people Customer focus Unique culture Reliable drives performance Competitive 38
Slide 85: Questions
For personal use only Questions
Slide 86: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting: