Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (November 2018)
71 slides from Fortescue's investor presentation, Nov 27, 2018
Slide 1: Investor and media tour November 2018
For personal use only Investor and media tour November 2018 Together we are Fortescue
Slide 2: Disclaimer
Forward looking For personal use only statements Disclaimer Important Notice Additional Information The purpose of this presentation is to provide general information about Fortescue This presentation should be read in conjunction with the Annual Report at Metals Group Limited ("Fortescue"). It is n
Slide 3: Elizabeth Gaines, Chief Executive Officer
For personal use only Elizabeth Gaines Chief Executive Officer 3
Slide 4: Integrated mining and infrastructure operations
Integrated mining and infrastructure operations For personal use only Focus on safety, production and cost 4
Slide 5: Placeholder: corporate video
PLACEHOLDER: For personal use only Launch new corporate video 5
Slide 6: Safety and unique culture
Safety and unique culture For personal use only Looking out for our TRIFR 3.9 (Sept 18) mates 94% Company Safety and Culture wide safety survey participation stop 6
Slide 7: Communities benefit from our success
Communities benefit from our success For personal use only 14.1% Aboriginal employment Empowering communities A$2bn contracts with Aboriginal businesses 814 Aboriginal people employed via VTEC A$50m Guaranteed Leasing Facility 7
Slide 8: Embracing diversity
Embracing For personal use only diversity Practical initiatives 17.4% female employment in the workplace 24% female senior managers Fortescue Family room Flexible working arrangements 8
Slide 9: Safeguarding the environment
Safeguarding For personal use only the environment 91.7 million kL of water directly reinjected into aquifers Responsible environmental 88% recycled waste management GHG emissions intensity reduced by 13.5% since FY15 Expand climate related financial disclosure reporting 9
Slide 10: September 2018 Quarterly production report
September 2018 For personal use only Quarterly production report TRIFR 3.9 40.2mt C1 cost Shipped US$13.19/wmt US$45/dmt US$972m US$3.0bn Average Cash on hand Net debt realised price 10
Slide 11: Greg Lilleyman, Chief Operating Officer
For personal use only Greg Lilleyman Chief Operating Officer 11
Slide 12: Integrated marketing and operations
Integrated marketing and operations For personal use only Market Marketing and drivers product strategy alignment Operational Margin delivery optimisation 12
Slide 13: Steel mill profits moderating
Steel mill profits moderating For personal use only Rebar margins 1,600 1,400 High steel margins during 2018 Rebar margins RMB 1,200 Mills drive for productivity 1,000 800 Focus on Fe grade 600 400 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 13 Source: Platts; Fortescue Analysis
Slide 14: Iron ore price
Iron ore price For personal use only Variation between iron ore products driven by high steel mill profitability with peak spreads declining due to lower steel margins 160% 140% 120% Platts 62 Platts 65 100% MBIOI 58 Premium 80% MBIOI 58 Platts 58 60% 40% Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Ju
Slide 15: West Pilbara Fines
West For personal use only Pilbara Fines Typical grade WPF Platts First shipment scheduled Dec 2018 IODEX 62 Iron content (Fe) 60.1 62.0 5-10mt in FY19 Alumina (Al2O3) 2.3 2.25 Growing to ~40mtpa for 20+ years Silica (SiO2) 4.7 4.0 on completion of Eliwana Phosphorous (P) 0.075 0.09 15
Slide 16: Strategic mine plan to 2050
Strategic mine plan to For personal use only 2050 delivers: West Pilbara Flexible Exploration Fines at product mix opportunities 40mtpa Western Hub Nydinghu Long mine Stage 2 potential lives prospects ~2030 16
Slide 17: Danny Goeman, Director Sales and Marketing
For personal use only Danny Goeman Director Sales and Marketing 17
Slide 18: Global crude steel production forecast to grow
Global crude steel production forecast to grow For personal use only Underpinned by ROW, India and SEA ….sustaining demand for seaborne iron ore 2,000 1,600 Crude Steel Production (mt) Seaborne IO Imports (mt) 1,500 1,200 1,000 800 500 400 0 0 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2
Slide 19: China steel demand drivers supportive
China steel demand drivers For personal use only supportive …with real estate investment robust 12% 10% 8% 6% 4% 2% Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Real Estate Investment Manufacturing Investment Fixed Asset Investment 19 Source: CEIC
Slide 20: Record China steel production
Record China steel production with steel inventories remaining low For personal use only 25 90 20 80 15 70 mt mt 10 60 5 50 0 40 Oct 2016 Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Steel Stocks (LHS) Crude Steel Production (RHS) 20 Source: Steelhome; Bloomberg; Fortescue
Slide 21: Hot metal production expected to remain stable
Hot metal production expected to remain stable For personal use only Scrap usage will increase from a low base, but remain constrained in the medium-term 6 870 860 5 850 4 840 mt 3 830 2 820 810 1 800 0 2017 2018 2019 2020 2021 2022 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Crude Steel Production Ho
Slide 22: 2018 seaborne imports in line with previous years
2018 seaborne imports in line with previous years For personal use only 2018 YTD imports Strong demand for Fortescue products 105 • China port stocks of Fortescue material 95 Mt continue to decrease. 85 75 • Stock draw down required to meet 2016 2017 2018 65 apparent demand. Jan Feb Mar Apr May Jun
Slide 23: China supply-side reforms have changed the industry landscape
China supply-side reforms have changed the industry landscape For personal use only …with steel mill profitability supporting high steel production rates, and environmental controls leading to improved air quality in major cities Rebar margin & Super Special price realisation AQI Index - Beijing Air
Slide 24: The market remains dynamic
The market remains dynamic For personal use only …and is responding to prevailing market conditions USD/dmt Daily port price converted to USD at Caofeidian port 110 100 90 80 70 60 50 40 30 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 SSF (portside) FB (portsid
Slide 25: Demand for Fortescue products increasing
Demand for Fortescue products increasing in China and other regions… For personal use only September 18 quarterly sales to non-China customers at 10% • Proximity to high growth region • Responsive to market needs • Customer base continues to increase • Maiden shipments to Vietnam and Malaysia • Comp
Slide 26: Fortescue continues to work closely with customers
Fortescue continues to work closely with customers For personal use only Technical collaboration and engagement key to delivering value Fortescue customers successfully using up to Physical product attributes as 75% of Fortescue products in the sinter blend important as chemistry: • Versatile and ca
Slide 27: Optimise product mix
…and optimise product mix For personal use only Sept’18 quarter average realised Product mix optimisation delivers real value: price increased 12.5% vs 2% for the Platts 62% index due to: (Tonnes shipped Q1 FY19 Product FY18 Product millions, wmt) mix % mix % • Increased Fortescue Blend shipments Fo
Slide 28: Introduction of new West Pilbara Fines product
Introduction of new West Pilbara Fines product For personal use only Extensive sinter testing undertaken to date • 20-25% improvement in sinter productivity • Stable fuel rates and tumble index • Competitive metallurgical sinter properties (compared to other Pilbara products) 28
Slide 29: Strengthening Fortescue's product portfolio
…further strengthening Fortescue’s product portfolio For personal use only • Strong customer interest in WPF • Joint test work programs • Maiden shipments agreed with key customers • Clear pathway to long term offtake agreements 29
Slide 30: Gerhard Veldsman, Executive GM Pilbara Operations
For personal use only Gerhard Veldsman Executive GM Pilbara Operations 30
Slide 31: Efficient product delivery
Efficient product delivery For personal use only Maintaining low cost position Delivering products to specification – scheduling, batching, blending Focus on innovation and technology 31
Slide 32: Operations located in Pilbara region of WA
Operations located in Pilbara region of WA For personal use only 32
Slide 33: Maintaining low cost position
Maintaining low cost position For personal use only Life of mine (LOM) plans continue to be optimised to capitalise on market conditions improving the outlook for strip ratios OPF Average beneficiation strip ratio FY19-23 1.6 Ore body FY 24-28 1.8 Blending Optimise modelling for margin FY 29-33 1.8
Slide 34: West Pilbara Fines – Pre Eliwana
West Pilbara Fines – Pre Eliwana For personal use only Maximising value from high Fe areas 34
Slide 35: Key WPF pits – Cloudbreak
Key WPF pits – Cloudbreak For personal use only ROM ROM 35
Slide 36: Quality control to meet market
Quality control to meet market For personal use only Blending of ore occurs at each step in the process from mining to ship loading Mining ROM Stockpile Mine Product Port Stockpile Ship Loading ‘In situ’ Ore blocks Blending Stockpile Blending Blending In Situ ‘as mined’ OPF Railed Shipped 36
Slide 37: Innovation drives productivity and efficiency
Innovation drives productivity and efficiency For personal use only Focus on people and process Data analytics Maximising value from assets 37
Slide 38: Innovation and technology framework
Innovation and technology framework For personal use only Safety People and process • Integrated operations • Digital twin technology People • Drone technology Safest, Data analytics lowest cost, • Down hole assay tool most • Material modelling & tracking profitable Production • Asset health monitor
Slide 39: Automated mining
Automated mining For personal use only All operations Relocatable World leading conveyor Commercial scale AHS implemented across all mines by Ideally suited to AHS at Solomon Fortescue’s operations end of 2019 Autonomous Remote Data analytics integrated New technology, Drills systems and 30% improve
Slide 40: Chichester AHS truck deployments
Chichester AHS truck For personal use only deployments 34 CAT 793s deployed at On track to Christmas Creek complete by First conversion of a Komatsu December 19 930E integrated to the Caterpillar MineStar System Cloudbreak conversions commenced 40
Slide 41: Benefits of AHS
Benefits of AHS For personal use only • 793F conversion time reduced from 21 to 8 days • Safety benefits • Redeployment opportunities for operators Pit • 32% improvement in productivity ROM Eyre Pit to ROM at Christmas Creek 41
Slide 42: Autonomous drills
Autonomous For personal use only drills Removes operators from Safety and high risk activities productivity Achieving 30% higher drill improvements hours and consistent penetration rates compared through to manned equivalent automation 20% reduction in number of drills required 42
Slide 43: Relocatable conveyor
Relocatable conveyor For personal use only Greater flexibility Relocatable modules and crushers and increased Achieved full capacity accessibility to within 14 days other ore bodies Adaptable to other Fortescue operations Replaced 12 manned trucks 43
Slide 44: For personal use only
For personal use only 4444
Slide 45: Port and Rail
Port and Rail For personal use only Designed, built and operated for low cost operations Shipped tonnes per man hour High asset utilisation (Pilbara Operations) 16 • Ship loaders – Avg Gross Load Rate 14 >8,800tph (<24hrs loading/ship) 12 • Train unloaders – Avg Gross Dump Rate 10 10,180tph (3.1hrs
Slide 46: Productivity and efficiency
Productivity and For personal use only efficiency Staying low cost - counteracting inflationary pressures Through our Advanced Business Driver Total material moved per mining team man hour (ABD) process: 60 • Improved run hours on manned and AHS fleet 50 • Reduce maintenance cost by improving reliab
Slide 47: Greg Lilleyman, Chief Operating Officer
For personal use only Greg Lilleyman Chief Operating Officer 47
Slide 48: Eliwana mine and rail project
Eliwana mine For personal use only and rail project US$1.275bn capital investment Underpins West Pilbara 143kms rail Fines 30mtpa dry OPF First ore on train Dec 2020 48
Slide 49: Eliwana rail track
Eliwana For personal use only 143km of new track including two bridges 49
Slide 50: Eliwana: Highly efficient infrastructure
Eliwana For personal use only Highly efficient infrastructure 50
Slide 51: Eliwana mining summary
Eliwana For personal use only Mining summary BROADWAY STOCKYARD 100m deep 5m bench height • Brockman and Marra 2km to ROM OPF Mamba ore types • Mining inventory TALISMAN 120m deep 540mt 5m bench height ROM 2.5km to ROM • 18 year mine life • Haul distance <5km for 5 years • Autonomy ready WEST END 25
Slide 52: Eliwana smaller footprint compared to Firetail
Eliwana For personal use only Significantly smaller footprint compared to Firetail Firetail Eliwana 52
Slide 53: Eliwana OPF flythrough
Eliwana OPF flythrough For personal use only 53
Slide 54: Eliwana development progress
Eliwana For personal use only Development progress Majority of major equipment tendered and in line with budget On target for delivery by Detailed design well progressed December 2020 using in-house integrated team 200 person fly camp mobilised Construction tenders early 2019 54
Slide 55: Ian Wells, Chief Financial Officer
For personal use only Ian Wells Chief Financial Officer 55
Slide 56: Sustainable cost improvements
Sustainable cost improvements For personal use only C1 US$/wmt 48 44 Structural improvements Solomon + blending + processing 34 27 Productivity and efficiency FY19 Utilisation, recoveries, maintenance 15 Guidance 13 12.36 12 - 13 Innovation and technology Autonomy, gas, ore carriers, data analysis F
Slide 57: Price and margins
Price and margins For personal use only Cost leadership and efficient operations generating cash margins US$/dmt 140 Underlying EBITDA, US$/dmt 62 Platts CFR Index, US$/dmt 120 Fortescue realised price, US$/dmt Avg Underlying EBITDA, US$/dmt 100 80 60 40 20 51 30 17 21 20 0 FY14 FY15 FY16 FY17 FY18
Slide 58: Fortescue ore carriers
Fortescue ore For personal use only carriers Eight ore carriers now operational Flexibility and Completed over 100 voyages control in volatile shipping market 27mt of iron ore to China to date 14% Fortescue’s total volume 58
Slide 59: FY19 capital expenditure
FY19 capital expenditure For personal use only Disciplined capital allocation, investing in the core iron ore business, innovation and growth 80 Sustaining capital ~$3.50/wmt 100 Sustaining capital Investing in innovation 100 Eliwana 580 Exploration Exploration and growth Development expenditure Ore
Slide 60: Capital allocation
Capital allocation For personal use only Increased returns to shareholders following rapid de-gearing of balance sheet FY16 – US$3.1bn FY17 – US$4.0bn FY18 – US$2.2bn Capital expenditure Net debt repayments Dividends 60
Slide 61: Financial strength
Financial strength For personal use only Investment grade credit metric target achieved Gross gearing (%) Net gearing (%) 56 56 45 49 49 38 31 29 21 24 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 Gross debt to underlying EBITDA (x) Net debt to underlying EBITDA (x) 3.8 2.9 2.1 1.7 1.6 1.2 1.3
Slide 62: Debt profile
Debt profile For personal use only Flexible structure, lower annual interest costs with investment grade terms supports ongoing operations and future growth US$m Syndicated Term Loan Senior Unsecured Notes 2,000 1,500 1,400 1,000 750 750 500 500 0 CY2018 CY2019 CY2020 CY2021 CY2022 CY2023 CY2024 62
Slide 63: Elizabeth Gaines, Chief Executive Officer
For personal use only Elizabeth Gaines Chief Executive Officer 63
Slide 64: Significant Pilbara footprint for long life production
Significant Pilbara footprint for long life production For personal use only 64 FY18 Full Year Results
Slide 65: Iron Bridge
Iron Bridge For personal use only Active assessment with JV partners +67% Fe magnetite concentrate product Process test work positive Project scale to optimise value Non-recourse financing options 65
Slide 66: Exploration key to delivering value
Exploration key to For personal use only delivering value Pilbara NSW Iron ore, lithium, ~2,000km2 tenure copper South South Australia America ~10,000km2 tenure Ecuador, Colombia Argentina 66
Slide 67: Energy innovation
Energy innovation For personal use only Committed to reducing our carbon footprint by ensuring security of supply of cost effective energy Partnership with CSIRO to develop and commercialise hydrogen Fortescue River Gas Pipeline Automation of operations Continuing to explore renewable energy options
Slide 68: FY19 Guidance
FY19 Guidance For personal use only 165-173mt US$12-13/wmt Shipments C1 cost US$1.2bn Dividend policy 50-80% Capital spend pay-out of NPAT 68
Slide 69: Key strategic focus
Key strategic focus For personal use only Balance sheet Long term strength sustainability Growth and Returns to development shareholders options 69
Slide 70: Fortescue's values
Fortescue’s values For personal use only Our Vision: The safest, lowest cost, most profitable mining company 70
Slide 71: Fortescue: The New Force in Iron Ore
For personal use only Fortescue The New Force in Iron Ore www.fmgl.com.au Ww FortescueNews minderoo
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