Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — BMO Conference February 2012
30 slides from Fortescue's conference presentation, Feb 29, 2012
Slide 1: BMO Conference February 2012
For personal use only BMO Conference February 2012
Slide 2: Disclaimer
Disclaimer For personal use only 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 to Fortescue based on this presentation. This presentat
Slide 3: Fully integrated – large scale efficiency
Fully integrated – large scale efficiency Ownership of infrastructure is the key For personal use only 3
Slide 4: Clear strategy
Clear strategy 155mtpa June 2013 For personal use only Herb Elliott Port Port Hedland Fortescue Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Hub BCI JV Tom Price 4
Slide 5: A near term growth story
A near term growth story Value creation through early delivery For personal use only 160 Solomon Brockman 140 Solomon CID BCI JV 120 Christmas Creek Cloudbreak Million Tonnes 100 Consensus 80 60 40 20 0 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 5
Slide 6: Fortescue DVD – Forging ahead
Fortescue DVD Forging ahead For personal use only 6
Slide 7: Core competencies
Core competencies Innovation and rapid execution For personal use only • A new exploration model • Fastest ramp up in the history of the Pilbara • Surface mining technology for grade control • Heaviest haul rail system in the world • Highest port out-load rates in Australia • Largest ore processing
Slide 8: Resource portfolio sets expansion platform
Resource portfolio sets expansion platform For personal use only 14,000 Annualised growth of 12,000 1.5bt 3,236 Mineral Resources (Mt) 10,000 per annum 2,465 8,000 2,013 1,032 624 624 1,230 6,000 1,230 3,070 3,070 2,860 4,000 1,715 2,224 695 695 695 695 695 2,000 2,266 2,227 2,143 2,550 2,550 0 2008
Slide 9: Nyidinghu
Nyidinghu A dot on the map in 2010 For personal use only Herb Elliott Port • Over 2 billion tonnes discovered since 2010 • Low 2:1 low strip ratio = low cost • Ideal for Chichester blending • Leverage existing infrastructure Chichester Solomon Hub Hub Fortescue tenement holding Nyidinghu 9
Slide 10: New development model
New development model Delivering results For personal use only Culture Fortescue’s unique culture is the key Relationships Direct relationships with sub contractors and local suppliers China Leveraging China’s fabrication and delivery capability Speed Speed of delivery – time is money Planning Plann
Slide 11: Operating Highlights
Operating Highlights For personal use only • Integrated mine, rail and port running at over 55mtpa for December Qtr • Commissioning of third berth with new out-load circuit • Sixth train set joins the rail fleet • New generation surface miners at Chichester Hub 11
Slide 12: Financial Highlights
Financial Highlights Record performance For personal use only • $3.4 billion first half FY2012 record revenue • $1.5 billion underlying EBITDA • $801 million net profit of up 155% on the prior period last year • 27 million tonnes shipped up 30% on the prior period • 14.4 million tonnes shipped in De
Slide 13: Consistent sustainable growth
Consistent sustainable growth For personal use only Mining Rail Port Ore Processed (wmt) Ore Railed (wmt) Ore Shipped (wmt) 30.0 30.0 30.0 Third Party Ore Third Party Ore 25.0 25.0 25.0 Railed Shipped 20.0 20.0 20.0 15.0 15.0 15.0 10.0 10.0 10.0 5.0 5.0 5.0 0.0 0.0 0.0 2H08 1H09 2H09 1H10 2H10 1H11
Slide 14: High margin producer
High margin producer Changed pricing delivers strong returns For personal use only Benchmark regime - FOB Index pricing - CFR $180 Average CFR selling price per dry tonne $159 US$ per dry tonne $160 Gross margin Average COGS per $135 $138 $140 $79 dry tonne Gross margin Gross margin $120 $60 $107 $6
Slide 15: The market
For personal use only The market 15
Slide 16: China – the twelfth five year plan
China – the twelfth five year plan Great news for Pilbara iron ore For personal use only billion people 50,000 skyscrapers by 221 2030 - equal to Chinese cities will will live in China’s have 1m+ people ten NY cities cities by 2030 living in them – Europe has 35 5x GDP growth by 2025 today Source: M
Slide 17: China increasingly looks to imported iron ore
China increasingly looks to imported iron ore For personal use only Seaborne IO demand China’s steel production up 60% over 1400 900 Domestic IO demand 5 yrs – Iron Ore imports up 110% Steel production 1200 850 Iron ore production (Mt) 1027 Steel production (Mt) Crude steel production 1000 800 953 8
Slide 18: And the seaborne market is struggling
And the seaborne market is struggling For personal use only New seaborne production India’s withdrawal from the iron ore market has been rapid and 180 unexpected 160 140 Indian Exports Million Tonnes 120 100 140 80 120 60 100 Million Tonnes 40 80 20 60 0 2012 f 2013 f 2014 f 2015 f 2016 f 2006 2007
Slide 19: China's domestic production fills the gap, but at a cost
China’s domestic production fills the gap, but at a cost For personal use only China - average domestic iron ore grade (% Fe) Grade degradation 35% 30% in Chinese domestic 33% 32% 25% production rises at 27% 20% 25% an alarming rate 23% 15% 18% 10% 5% Source: Moils & Company estimates, Tex Report, B
Slide 20: Development
For personal use only Development 20
Slide 21: Fortescue to capture the opportunity
Fortescue to capture the opportunity Rapid growth – Capital Efficiency For personal use only • Short term 155mtpa two mining hubs, rail and port expansion advancing rapidly • Medium term Options with Nyidinghu, Western Hub and Anketell Port Budget US$ billions Committed to date Port 2.4 1.7 Infrastr
Slide 22: Port access – the key to success in the Pilbara
Port access – the key to success in the Pilbara For personal use only Fortescue 22
Slide 23: Port expansion milestones
Port expansion milestones For personal use only Port • Commissioning of third berth in progress • Second in-load circuit end September Qtr • Third in-load and out-load circuits end December Qtr 2012 • Fourth berth end March Qtr 2013 23
Slide 24: Rail expansion milestones
Rail expansion milestones For personal use only Rail • Main line duplication end September Qtr 2012 • Spur line to Solomon end December Qtr 2012 • Additional ore cars and locos over the next 10 months. 24
Slide 25: Chichester Hub expansion milestones
Chichester Hub expansion milestones For personal use only Christmas Creek • Second OPF end September Qtr 2012 • Current OPF to 25mtpa run rate by end June 2012 • Mining ramp up to 50mtpa by end December Qtr 2012 Cloudbreak • Wet front end completed by end September Qtr 2012 25
Slide 26: Solomon Hub expansion milestones
Solomon Hub expansion milestones For personal use only Solomon • Mining contract to be finalised early June Qtr 2012 • Sealed airstrip operational in June Qtr 2012 • Firetail OPF commencing ramp up December Qtr 2012 • Kings OPF commencing ramp up March Qtr 2013 26
Slide 27: $3bn of EBITDA growth on the table
$3bn of EBITDA growth on the table It’s all about execution For personal use only 10,000 Potential FMG results - EBITDA 9,256 Broker consensus - EBITDA 8,000 EBITDA (US$m) 6,000 5,421 6,031 4,058 4,634 4,000 3,956 2,000 0 FY12 FY13 FY14 The above chart uses broker consensus operating costs and conse
Slide 28: 2012 and beyond – delivering on promises
2012 and beyond – delivering on promises Pure iron ore company leveraged to Asia For personal use only • Culture is our differentiator • 55mtpa production base sets the platform • Growth to 155mtpa June 2013 • Further development options through aggressive exploration • Nyidinghu + Western Hub = opt
Slide 29: The equity value proposition awaits
The equity value proposition awaits A PE uplift and re-rating expected on milestone achievements For personal use only Year 2012 2013 2014 Average 11.6 7.9 5.6 Fortescue PE ASX 200 12.6 11.1 10.1 Sample ASX 200 12.7 10.0 9.0 Materials 29
Slide 30: Forging Ahead
For personal use only Forging Ahead Sign up to alerts online www.fmgl.com.au
Fortescue Metals Group — BMO Conference February 2012 on 6ix