Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Day (December 2020)
59 slides from Fortescue's investor day presentation, Dec 9, 2020
Slide 1: ASX cover letter: Investor and Media Day
For personal use only 9 December 2020 The Companies Officer Australian Securities Exchange Ltd Level 40, Central Park 152-158 St Georges Terrace Perth WA 6000 Dear Madam or Sir FORTESCUE METALS GROUP INVESTOR AND MEDIA DAY Fortescue Metals Group Ltd (Fortescue) (ASX: FMG) today hosts its Investor an
Slide 2: Authorisation and contacts
Authorised by Cameron Wilson For personal use only Company Secretary Media contact: Investor Relations contact: Michael Vaughan, Fivemark Partners Andrew Driscoll, GM Investor Relations E: mediarelations@fmgl.com.au E: investorrelations@fmgl.com.au M: +61 422 602 720 P: +61 8 9230 1647 Fortescue Met
Slide 3: Investor and Media Day
For personal use only Investor and Media Day Wednesday, 9 December 2020 1
Slide 4: Elizabeth Gaines, Chief Executive Officer
For personal use only Elizabeth Gaines Chief Executive Officer 2
Slide 5: Important Notice
Forward Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Ltd (“Fortescue”). It is not recommended that any person makes any investment decision in relation Looking For personal use only to Fortescue based on this presentation. This pres
Slide 6: Agenda
Agenda For personal use only 08:30am Vision and strategy Elizabeth Gaines (AWST) Approach to sustainability Chief Executive Officer A fully integrated business Greg Lilleyman Chief Operating Officer Marketing and product strategy Danny Goeman Director Sales and Marketing Followed by a five minute br
Slide 7: Our Purpose and Values
For personal use only Our Purpose Thriving communities | Global force Fortescue’s Values
Slide 8: For personal use only
For personal use only 6
Slide 9: Our strategic focus
Our strategic focus Underpinned by operational excellence Sustainability For personal use only and balance sheet strength Ensuring communities benefit from Fortescue’s success Optimising Returns and growth in the iron ore business Diversifying Commodities that support decarbonisation Pursuing
Slide 10: Strong start to FY21 with record first quarter
Strong start to FY21 with record first Q1 FY21 quarter operating performance highlights For personal use only 2.1 TRIFR 44.3 mt shipped 13% improvement 5% higher than Q1FY20 US $12.74 /wmt US $106 /dmt C1 cost Average realised price 89% of average Platts 62% CFR Index US $1.0bn >10 mt sold Net cash
Slide 11: Multifaceted relationship with China
Multifaceted relationship with China For personal use only China produces more than half of global steel1 Share of world crude steel production1 Supplier First shipment to China in 2008 20% Procurement Over US$1 billion procurement from China 4% 4% 58% Investment and funding 5% Significant sharehold
Slide 12: Diversification
Diversification Focus on copper and commodities Western Australia that support decarbonisation Extensive tenement footprint For personal use only Australia NSW 3,000km2 tenure SA 15,000km2 tenure South America Argentina 450,000ha of tenements Ecuador 135,000ha of tenements Colombia, Chile, Peru Othe
Slide 13: Ambitious, industry leading emissions reduction target
The global climate An ambitious, industry leading change challenge emissions reduction target For personal use only Net zero Operational emissions by 2040 26% reduction Scope 1 and Scope 2 emissions by 2030 Decarbonisation pathway Energy infrastructure to increase use of renewables Technology and in
Slide 14: Pathway to decarbonisation
Pathway to decarbonisation Underpinned by practical initiatives that will deliver goals in an For personal use only economically sustainable manner Chichester solar gas Pilbara Energy Connect Hydrogen hybrid project US$100 million investment by US$250 million Pilbara Reduce carbon emissions an
Slide 15: Pilbara Energy Project
Pilbara Energy Project Future opportunities to increase the use of renewable energy For personal use only 13
Slide 16: Fortescue Future Industries
Fortescue Future Renewable energy driving new Industries green industries For personal use only Assessing A portfolio of renewable energy and green industry opportunities Maintaining Fortescue’s disciplined capital allocation framework and dividend policy Funding Separately secured without recourse
Slide 17: Building on our track record
Building on our Leveraging Fortescue’s value track record chain and project development For personal use only capabilities Rapid development Ability to safely develop large, complex projects quickly and at low cost Innovative culture Adapting technology and innovation to drive safety and productivit
Slide 18: Large scale green hydrogen project, Tasmania
Large scale green hydrogen Tasmania plant in study phase project For personal use only 250MW Green hydrogen plant in Bell Bay Industrial Precinct, Tasmania 250,000 tonnes Annual green ammonia production capacity for domestic and international export Clean energy Powered by existing renewable energy
Slide 19: Approach to Sustainability
Approach to Sustainability We are a global force, committed to empowering thriving communities For personal use only Setting Safeguarding the Creating positive high standards environment social change Employee health and safety Climate change action and Creating employment and disclosure busin
Slide 20: Protecting Aboriginal heritage
Protecting Detailed processes for Aboriginal heritage engagement and heritage For personal use only management Seven agreements with Native Title Groups Heritage avoidance Primary objective ~6,000 heritage sites Protected and avoided 2.7 million ha of land Ethnographically surveyed 18
Slide 21: Creating positive social change
Building thriving communities and Creating positive empowering Aboriginal people social change For personal use only through training, employment and business development 900 jobs to Aboriginal people via VTEC since 2006 Fortescue’s Trade Up Providing an accredited pathway to a trade qualification B
Slide 22: FY21 guidance
FY21 guidance For personal use only 175 – 180mt Iron ore shipments US$13.00 – US$13.50/wmt C1 costs based on assumed exchange rate of AUD:USD 0.70 US$3.0 – US$3.4 billion Capital expenditure 20
Slide 23: Greg Lilleyman, Chief Operating Officer
For personal use only Greg Lilleyman Chief Operating Officer 21
Slide 24: Integrated mine to market infrastructure
Integrated mine to market infrastructure For personal use only 3 >180 Mining hubs Autonomous haul trucks 5 berths >620 km Fastest, heavy haul Herb Elliott Port railway 8 ore carriers 55 260,000t capacity each Locomotives 22
Slide 25: Mineral resources base
Mineral resources base Large footprint enables mine plan optionality For personal use only Mineral resources (Mt) dry insitu 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Chichester Hub Greater Chichester Hub Solomon Hub Western Hub (
Slide 26: Value chain
Value chain For personal use only Delivering sustained operational efficiencies 24
Slide 27: Safety and unique culture
Safety and unique culture Unwavering focus on health and safety of the Fortescue family For personal use only Values and culture Total Recordable Injury Frequency Rate Empowering all team members to take 9.2 control and look out for their mates 7.6 Led by leaders 6.0 5.1 Setting up their teams for s
Slide 28: Production growth
Production growth For personal use only Track record of delivering strong volume growth, optimising assets and achieving guidance Total shipments and installed capacity (mt) 178 180 169 170 170 165 168 160 140 124 120 100 81 80 58 60 40 41 40 27 20 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Slide 29: Sustainable low cost producer
Sustainable low cost producer For personal use only Innovation and productivity offsetting ongoing mining cost inflation C1 cost (US$/wmt) 48.36 44.00 34.00 27.00 15.43 12.82 12.36 13.11 12.94 12.74 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Q1 27
Slide 30: Fleet performance
Fleet performance Consistent improvements and maintenance For personal use only efficiencies Available truck time (Indexed1) CAT 793F Run hours per annum2 1.18 1.16 1.16 1.08 1.03 1.00 1.00 Jun-18 Jun-19 Jun-20 FY16 FY17 FY18 FY19 FY20 1Indexed to June 2018 actuals 2Indexed to FY16 actuals, Solomon
Slide 31: Ore Processing Facility performance
Ore Processing Facility performance For personal use only Improvement in production rate and reliability OPF operating time (Indexed1) OPF production rate per hour OPF production 1.12 1.10 1.08 1.08 1.07 1.06 1.04 1.04 1.01 1.02 1.00 1.01 1.00 1.00 1.00 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 F
Slide 32: Downhole assay tool
Downhole assay tool Implementation of innovative technology For personal use only Measures Response to downhole radiation Calibrated At multiple operational sites Improves Sample quality and scheduling Lowers costs And better safety outcomes 30
Slide 33: Eliwana ore processing facility
Eliwana ore processing facility For personal use only Highly efficient design, significantly smaller footprint to comparable facilities 31
Slide 34: Next generation mobile fleet
Next generation mobile fleet For personal use only A pathway to decarbonisation Emissions reduction Truck haulage represents around a quarter of Fortescue’s Scope 1 and 2 emissions 240t prototype truck Phase 1 focussed on battery electric power train and phase 2 to consider hydrogen fuel cells Inves
Slide 35: Optimising Fortescue's value chain
Optimising Fortescue’s value chain For personal use only Performance focus Key metrics of safety, budget, schedule and cost Market strength Robust demand for Fortescue’s products Maximising value Successful execution of integrated operations and marketing strategy 33
Slide 36: Danny Goeman, Director Sales and Marketing
For personal use only Danny Goeman Director Sales and Marketing 34
Slide 37: Global crude steel production is recovering
For personal use only 10 20 30 40 50 60 70 80 90 0 100 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 China Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 ROW Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Global crude steel production (mt) Oct-20 Source: China NBS, Platts, Mysteel, World Stee
Slide 38: Global crude steel production growth expected beyond 2021
Global crude steel production growth expected beyond 2021 For personal use only Despite the potential moderation in China’s crude steel production growth Global crude steel production China crude steel production forecasts (mt) forecasts (mt) 2,500 1,400 Supported by growth in emerging markets such
Slide 39: Supporting seaborne iron ore demand well into this decade
Supporting seaborne iron ore demand well into this decade For personal use only Notwithstanding a projected increase in future scrap availability Seaborne iron ore imports (mt) China scrap consumption (mt) 2,000 350 1,800 300 1,600 250 1,400 1,200 200 1,000 150 800 600 100 400 50 200 0 0 2010 2012 2
Slide 40: Additional supply expected in medium term
Additional supply is expected in the medium term, but challenges and uncertainties persist For personal use only With Brazilian recovery, mine depletion and potential exits to impact supply Global iron ore cost1 (US$/dmt) Pace of supply recovery 150 in Brazil Extent of Australian 100 mine depletions
Slide 41: Marketing strategy aligned with customer needs
Marketing strategy aligned with needs of customers and market For personal use only Creating value through supply chain optimisation Integrated operations Direct customer and marketing engagement Timely and coordinated Aligning our products with supply chain response to what our customers need and c
Slide 42: Commercial excellence delivers tangible business outcomes
Commercial excellence delivers tangible business outcomes For personal use only With timely market insights supporting portfolio optimisation Fortescue realised price and China port stocks (mt) Seaborne v port prices (US$/t) Platts Index (US$/dmt) 170 50% $20 45% 140 150 40% $15 93% 120 35% 89% 130
Slide 43: Sales channels support diversified customer base
Sales channels support our increasingly diversified customer base For personal use only Whilst providing supply chain optionality Offering a Long Term Contracts Customer diversification within range of sales providing baseload offtake stability and outside of China channels Spot Contracts providing
Slide 44: Deep technical collaboration remains critical
Deep technical collaboration remains critical to success For personal use only Focused on consistent product quality and emerging industry trends Technical engagement Technical collaboration Integrated operations and marketing Working with customers and research facilities facilitating the timely de
Slide 45: Product suite meets a variety of customer needs
Responsive to changing market dynamics, product Product suite meets a variety of customer needs strategy For personal use only Benefiting all Coarse sizing sinter blends attractive metallurgical properties through Increased consumption of finer ores Meeting a unique Fortescue Blend need in the versa
Slide 46: Our products play a fundamental role in the market
Our products play a fundamental role in the market Iron Bridge is a premium magnetite product with superior pelletising and For personal use only sintering characteristics Iron Content % Fines product positioning: Producer 2 Fe vs AI2O3 Fines product positioning: Fe vs P 6 0.14 Al2O3 P Mid-grade seg
Slide 47: Don Hyma, Director Projects
For personal use only Don Hyma Director Projects For the projects virtual tour, please refer to the Investor and Media Day 2020 webcast at http://www.fmgl.com.au 45
Slide 48: Ian Wells, Chief Financial Officer
For personal use only Ian Wells Chief Financial Officer 46
Slide 49: Integrated financial management
Integrated financial management Data analytics and integrated planning systems For personal use only Digital Data Planning and Continuous finance driven forecasting improvement Automation Intelligent decision Connected planning Organisational Eliminating manual support Connected Fortescue rethink pr
Slide 50: Focus on margins
Focus on margins Profitable through the cycle For personal use only Prices and EBITDA margin (US$/dmt) 180 Underlying EBITDA 160 Realised price 62 Platts CFR Index 140 Average Underlying EBITDA 120 Average realised price 100 80 75 60 58 52 52 40 48 39 20 30 21 20 17 0 FY11 FY12 FY13 FY14 FY15 FY16 F
Slide 51: Earnings convert to cash
Earnings convert to cash For personal use only Alignment of cashflow generation with earnings NPAT (US$bn) Free cashflow (US$bn) 5.0 4.7 5.0 4.4 4.0 4.0 3.5 3.5 3.3 3.2 3.0 2.7 3.0 2.1 2.1 2.0 1.6 1.7 2.0 1.0 1.0 0.9 0.8 1.0 1.0 0.6 0.7 0.3 0.0 0.0 (1.0) (1.0) (2.0) (2.0) (3.0) (3.0) (4.0) (4.0) (3.
Slide 52: Disciplined capital allocation
Disciplined capital allocation For personal use only Aggregate earnings and cashflows FY14 – FY20 1 Includes share buyback and FY20 final divided of US$2.2 billion paid in October 2020 2 From peak debt of US$12.7 billion at 30 June 2013 and includes FY20 lease payments 3 FY20 cash balance adjusted f
Slide 53: Generating superior returns
Generating superior returns A profitable and capital efficient business For personal use only Return on capital employed, ROCE1 (%) Fortescue ROCE 44 Fortescue average ROCE ASX 100 Resources Index ROCE 37 29 27 24 19 20 10 11 6 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1ROCE is calculated as
Slide 54: Balance sheet an asset
Balance sheet an asset For personal use only Maintain targeted investment grade credit metrics Gross debt (US$m) Debt maturity profile, excluding leases and RCF1 (US$m) 15,000 13,000 Syndicated Term Loan Senior Unsecured Notes 11,000 750 750 9,000 600 600 500 7,000 5,000 3,000 1,000 -1,000 FY11 FY12
Slide 55: Capital expenditure
Capital expenditure For personal use only Investing in the business and in growth Capital expenditure (US$bn) FY21 Capital expenditure guidance (US$m) 7.0 6.3 6.1 6.0 1,000 5.0 US$3,000 4.0 – 3,400m 1,900 – 3.0 2,300 140 2.0 2.0 2.0 1.5 0.9 1.0 1.0 0.8 0.7 0.4 0.0 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Slide 56: Capital returns a priority
Dividend policy to payout 50-80 per cent of full Capital returns year net profit after tax a priority For personal use only Dividends (A$/share) and payout ratio (%) 2.00 77% 90% 1.80 78% 1.76 80% 1.60 70% 62% 1.40 60% 52% 1.14 1.20 50% 1.00 38% 36% 40% 0.80 30% 0.60 21% 21% 0.45 17% 16% 20% 0.40 0.
Slide 57: Investor Q&A
For personal use only Investor Q&A 55
Slide 58: Concluding remarks
For personal use only remarks Concluding 56
Slide 59: Visit Fortescue
ait Fortescue w Fortescue iy www.fmgl.com.au a ( oe 1 YW FortescueNews ' ie _A 7 ec lal
Fortescue Metals Group — Investor Day (December 2020) on 6ix