Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Diggers & Dealers 2006
26 slides from Fortescue's conference presentation, Aug 8, 2006
Slide 1: Fortescue Metals Group Ltd - Diggers & Dealers 2006
Fortescue Metals Group Ltd Diggers & Dealers 2006 THE NEW FORCE IN IRON ORE August 2006
Slide 2: Project Dynamics
Project Dynamics ¥ The world needs more iron ore — the basic building block of urbanisation Pilbara region — world’s best address for iron ore 1.1 billion tonnes of reserves from small portion of tenements Fortescue to be low cost producer 88% of initial production under long-term sales contracts Ex
Slide 3: Iron Ore Market
lron Ore Market 1300 Iron Ore Consumption Iron Ore Fines Price 2000 — 2015 329 100 1998 — 2006 1200 90 1100 80 1000 70 900 2 “ E 60 = = 3 1 800 269) s 5 700 +163, = 265 g 40 3 ae ~ : 600 26 _ fxn 6 500 / 2 oon 20 Oo 400 5 10 = 300 0 200 1998 1999 2000 2001 2002 2003 2004 2005 2006 100 om Fines pb 20
Slide 4: Iron Ore Market
lron Ore Market ¥ Australia is the most competitive supplier to Asia | Australian Ore US$54.94 Three companies globally set price and South African Ore US$66.77 dominate the seaborne market Brazilian Ore US$70.91 Indian Ore US$76.23 Fortescue plans to be the 4 major seaborne supplier Source: China M
Slide 5: Significant Asset Value
¥ The Pilbara contributes about 20% of BHP Billiton’s Market Cap (~A$155 billion) Significant Asset Value The Pilbara contributes about 40% of Rio Tinto’s Market Cap (~A$100 billion) Location Source: BHPB | Rio Sector Analysis
Slide 6: Significant Asset Value
Significant Asset Value Fortescue’s tenements far exceed Rio Tinto’s and BHP Billiton’s Location LEGEND @ tom — Hihway ant Fall-exictng i wa FMC FM - Mining State Agreenent BHP Baton, in fin [Be wetrmoap 5 *
Slide 7: Significant Asset Value
Significant Asset Value ¥ + One of the largest bedrock hosted iron ore discoveries in Australia + Ore reserves of 1.053 Bt, including proved ore reserves of 121 Mt, providing sufficient ore for approximately 20 year mine life val ceserve Robe resource Robe reserve L-FMG resource Portman million tonn
Slide 8: Exploration and Asset Creation
Exploration and Asset Creation * Highly successful drilling program * 9,000 holes for 373 km of drill sample * Reserves 1.053 Bt Proved 121 Mt Probable 932 Mt * Resources 2.266 Bt Measured 150 Mt Indicated 1,642 Mt « Christmas Creek and Cloud Break ore body across 80 km strike * Chichester Range min
Slide 9: Competitive Grade
Competitive Grade %SIO, 7.00 %Fe Peseyy-oRy euGocopue, OR} sepiuy BAM OR uae ELAd KOS HRIOH ORL 38 2 2 8 8 2 won ova gana svjeBuy som ory uinjuerg kesrowep-ory eujBoosipue,-ony wana ig AOpSrEUTEE OR] %P 0.080 %AI,O, sepbuy aon oore eufiocopue, -oR] Pesaq-oR 0.080 0.050 onto 0.000 ampules AOS UEHOR l
Slide 10: Competitive Cost
Competitive Cost lron Ore Fines Site Cost Curve) 2008 60 Australian mines 50 {121 srazilian mines ME EMG mine Z 40 30 US cents/dmtu 0 1 0 200 400 600 800 1000 Cumulative Production (mn wmt) {1} Sife Operating Costs are those cosis used to determine free cashflow and include raw material costs and co
Slide 11: Shallow Ore Body
Shallow Ore Body Ore Body Characteristics * Mineralisation is gently undulating - typical dip at 2° to 5° + Mineralised thickness varies between 3 metres and 20 metres * Free digging over burden low cost removal + Multiple mining faces facilitate high productivity and blending flexibility Target Int
Slide 12: Productive and Fit for Purpose Mining Methods
Productive and Fit for Purpose Mining Methods ¥ « Superior grade control techniques will enhance Fortescue’s competitive position — Selective mining capability — Straight forward grade prediction from model and mapping — Textures and grades clearly visible after cutting cn
Slide 13: Slide 13
Slide 14: Fortescue November 2005 - Unparalleled Progress
g Fortescue 14 November 2005 — Unparalleled Progress Iron Ore ready to be shipped —
Slide 15: Marketing
Marketing ¥ « Asia-centric marketing strategy has proven to be successful « 39.5 Mtpa currently contracted from 28 agreements « Marketing campaign based on technical support and long term customer relationships * Steel mills looking for consistent quality from reliable supply source China : Total To
Slide 16: Two High Grade Product Streams Initially
Two High Grade (HG) Product Streams Initially * Two High Grade + 60% Fe Products * Lump and Fines * Competitive chemistry * 2004 — Pilbara majors sold 84 Mt of ores with Fe less than Fortescue High Grade Product Jaraet Grade. | High Grade Lump 61.1 76 2.8 1.3] 0.050 | 0.025 | 0.04 | 0.04 | 0.23 | 0.
Slide 17: Super Value Product - Approx 59% Fe
Super Value (SV) Product - Approx 59% Fe « Fines only product Cost effective choice for large to medium sized mills 2004 - Pilbara majors sold 62 Mt of ores with Fe less than Fortescue Super Value —rrr—“—t—C—OE | Clcned ~=— ss Moisture | Q ANCA) C20 TiC, Mn MgO KO NaO Fee Sic ALO.c © Chemical Analys
Slide 18: Product Quality
Product Quality It’s not all just about iron grade (Fe) « Independent test work conducted by CSIRO, China Central South University (CSU), Roche MT and SGS Lakefield Ore Test « Sample ore tests with 19 international steel mills « CSU sinter results demonstrate Fortescue’s fines ores provide: — Sinter
Slide 19: WorleyParsons EPCM and Fortescue create Project Team
WorleyParsons EPCM and Fortescue create Project Team 45 Material contracts identified and awarded or under negotiation Spread of contract risk — no single contract >10% of total capex Manageable risk and straightforward construction Multiple sites facilitate parallel construction Construction commen
Slide 20: Infrastructure at Port Hedland
Infrastructure at Port Hedland
Slide 21: a SE: Le a.
a SE: Le a.
Slide 22: Dredge ship arrived
Dredge ship arived ‘(week July FAG Poll Doveloornont ee ae
Slide 23: inna
inna MN Ye
Slide 24: Strong Government and Community Support
Strong Government and Community Support Key regulatory issues resolved and approvals obtained Nov 2004 Infrastructure State Agreement Oct 2005 Native Title Agreements Environmental Stage A Dec 2005 Mining State Agreement Environmental Stage B Apr 2006 Environmental Stage C Jul 2006 Federal Environme
Slide 25: Finance
Finance All outstanding convertible rates have been exercised — A$147m issues capital US$200m bridge facility enabled key contracts to proceed. Full project debt raising roadshow underway Key cornerstone investor sourced for US$400m Leucadia brings strategic clout for both long term positioning and
Slide 26: Conclusion
Conclusion ¥ Huge reserve portfolio — initial mine plan +20 years Products extensively trialed and 88% under contract Open access port and rail infrastructure commenced Straightforward project construction and operation Government and project partners fully committed Financing structure confirmed -