Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (June 2011)
63 slides from Fortescue's investor presentation, Jun 1, 2011
Slide 1: Fortescue Investor Presentation and Site Visit
For personal use only F t Fortescue Investor I t Presentation P t ti and Site Visit 1- 2 June 2011 Disclaimer 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
Slide 2: Welcome and Agenda
For personal use only Welcome Andrew Forrest 3 Agenda 1 The Team – View from the Chair 1. 2. Company Overview 3. Development 4. Operational Update 5. Marketing 6. Financial Snapshot 7. Investor Relations 4
Slide 3: Company Overview
For personal use only Company Overview Nev Power 5 Integrated Business > 100mt shipped Ownership of infrastructure is the key 6
Slide 4: Growth without parallel
Growth without parallel For personal use only Innovation at all levels • Starts with different exploration model • Surface miners optimise grade control • Largest ore processing plant in the Pilbara • Fastest heaviest haul rail system • Port out-load rates highest in Australia • Energised E i d mana
Slide 5: Proven project development skills - records
Proven project development skills - records From concept To reality For personal use only Herb Elliott Port Port 2006 2008 Fortescue Rail Railway 2007 2008 Cloudbreak Mining g Minesite 2006 2008 FACT: Fortescue built its infrastructure faster than any other Australian mining company FACT: Fortescue
Slide 6: Fortescue – forging ahead: Development Projects
Fortescue – forging ahead For personal use only 11 D Development l tPProjects j t Important p 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 F
Slide 7: Execution Strategy: Implementation Plan
For personal use only Execution Strategy S Implementation Plan Peter Meurs 13 Development Overview • Overall Development Plan • Exploration (Doug Kepert and Nick Nitschke) • Resource R S Strategy (J (Jason Y Young)) • Approvals (Deidre Willmott) • Active Projects – 55Mtpa – 155Mtpa • Chichesters – M
Slide 8: Three Hub Mining Strategy
Three Hub Mining Strategy Chichester, Solomon and Western Port For personal use only Hedland New Pilbara Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Western Hub Hub Tom Price Paraburdoo Newman 15 Execution Strategy – Product
Slide 9: Execution Strategy – Production – June 2011
Execution Strategy – Production – June 2011 Chichester, Solomon and Western Port For personal use only At capacity Hedland Fortescue 55 Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Chichester Hub 3 BCI JV 37 Hopper 5 jaw crusher 15 OPF 1 Expanded mine Tom Price Paraburdoo N
Slide 10: Execution Strategy – Production – June 2013
Execution Strategy – Production – June 2013 Chichester, Solomon and Western Port For personal use only Hedland New Pilbara 155 Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Hub 5 BCI JV 60 40 50 Tom Price Nyidindghu Paraburdoo
Slide 11: Execution Strategy – Production – June 2015
Execution Strategy – Production – June 2015 Chichester, Solomon and Western Port For personal use only Hedland New Pilbara 155 Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail 100 Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester 40 20 Hub 5 BCI JV 60 40 50 40 Tom Price Nyidindg
Slide 12: Capturing the opportunity – 155Mtpa
Execution Strategy – Production – June 2017 Chichester, Solomon and Western Port For personal use only Hedland New Pilbara 155 Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail 200 Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Western Hub 40 20 40 5 BCI JV Hub 60 50 60 40 40
Slide 13: Exploration: Real Estate Rules!
It starts at the For personal use only beginning…. beginning Exploration p Doug Kepert and Nick Nitschke 25 Real Estate Rules! #1. World’s Best Iron Ore Province #2. Dominant Land Position #3. Strong and Stable Leadership Fortescue: >85,000km2 Rio: 14,230km2 BHP: 8,195km2 26 26
Slide 14: Unprecedented Resource Portfolio Growth
Unprecedented Resource Portfolio Growth 12,000 For personal use only Magnetite Resource Western Hub Resource 10,000 Nyidinghu Resource Solomon Resource Solomon Reserve 8 000 8,000 Chichester Resource Million Tonnes (Mt) Chichester Reserve 6,000 4,000 2,000 0 2005 2006 2007 2008 2009 2010 2011 Financ
Slide 15: Resource and Target Tonnages
Resource and Target Tonnages For personal use only Underpinning Fortescue’s Anketell Port and Rail expansion RESOURCE TARGET TOTAL (Mt) (Mt) (Mt) CHICHESTER 2,913 1,400 4,313 NYIDINGHU 1 080 1,080 500 1 580 1,580 Other 0 1,400 1,400 CHICHESTER HUB 3,993 3,300 7,293 SOLOMON 1,746 500 2,246 SERENITY /
Slide 16: Ramping Up For Delivery
Ramping Up For Delivery • Exploration Leadership Group virtually unchanged over 7 years For personal use only • Provides the stable foundation for rapid and sustained growth • Removal of Bond Covenants Oct 2010 frees up regional exploration • April 2009 - 2 Rigs, 10 Geologists • April 2010 - 6 Rigs,
Slide 17: Proven Track Record
Proven Track Record For personal use only #1. Fortescue is a second generation explorer in an under-explored world class iron ore province #2. Major discoveries are dominated by undercover exploration - “Tigers Tail” #3. Success is driven byy fresh ideas and enthusiasm,, not 40 years y of conservati
Slide 18: Western Hub - Eliwana & Flying Fish
Western Hub - Eliwana & Flying Fish For personal use only Resource – 625 Mt, Total Potential > 1 Bt BID & DID mineralisation • Brockman and Marra Mamba type ores • Large exploration upside • >30% resource low P, blending options 35 Summary #1. World’s Best Iron Ore Province #2. Dominant Land Positio
Slide 19: Resource Strategy
For personal use only Resource Strategy Jason Young 37 The team • Team g growing g in line with corporate p expansion p p plans • Metallurgical centre of excellence (including 100tph pilot plant) at Newman in design • Collaborative research agreements with CSU (Central South University, China) and C
Slide 20: Core functions
Core functions For personal use only Ore Characterisation • The link between exploration, mining and product • Life of mine blending gy Metallurgy Geology • Convert resources into reserves • Assess amenability to beneficiation • Process design balancing and quality control strategies Process enginee
Slide 21: Product Evaluation
Product Evaluation For personal use only • Develop blends that best utilise Fortescues orebody portfolio to maximise production, revenue andd customer t b base bby bbalancing l i physical properties and grade • Conduct sintering and pelletising testwork programs to establish product blending ratio’s
Slide 22: Solomon Products
Solomon Products For personal use only Designed and Tested • ~40Mtpa 40Mt CID fifines only l product d t with ith F Fe ~57.5%, 57 5% similar i il tto Yandi but ~2.0-2.2% Al2O3. Competitive with existing Rio/BHPB CID products • ~20Mtpa Brockman fines only product from mixing higher P Firetail BID w
Slide 23: T155 Approvals Update
T155 Approvals Update For personal use only • T155 approvals pp in p place or on track The image cannot be display ed. Your computer may not hav e enough memory to open the image, or the image may hav e been corrupted. Restart y our computer, and then open the file again. If the red x still appears,
Slide 24: National Award Winning Water Management
National Award Winning Water Management For personal use only • Fortescue places a high priority on Water Management • Leading Hydrogeologists in WA • Cloudbreak Managed Aquifer Recharge (MAR) Scheme • Winner AWA National Water Awards 2011 - Infrastructure Innovation • Successful track record assist
Slide 25: Aboriginal Employment
Aboriginal Employment For personal use only • Fortescue currently employs 258 Aboriginal people (nine per cent of total workforce) • 152 5 Aboriginal g p people p are residential in Port Hedland and 85 of those FIFO from Port Hedland to the mine sites (at Chichester Hub) • Herb Elliott Port – 34 per
Slide 26: 55Mtpa
For personal use only 55Mtpa Project Director: Mark Skelton 51 Execution Strategy – Production – June 2011 Chichester, Solomon and Western Port At capacity Hedland Fortescue 55 Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Chichester Hub 5 BCI JV 35 Hopper 5 jaw crusher 17 O
Slide 27: Christmas Creek – First Ore Achieved!
Christmas Creek 1 – First Ore Achieved! Safety: For personal use only • 1.9 million hours worked without an LTI Progress: • First Ore Achieved – 2 April 2011 • Construction of facilities substantially complete with stockyard reclaimer due to complete in 4Q11 • >800kt Ore Produced and Railed to Port
Slide 28: Chichester Summary
CC1 - Stacker Loading – 10 April 2011 For personal use only 55 Chichester Summary • First ore through the new Christmas Creek OPF achieved on April 2, 2011 • Major line items completed in line with the original project schedule: Construction C t ti off OPF; OPF Stockyard; Power station; 800
Slide 29: 155Mtpa
For personal use only 155Mtpa 57 Execution Strategy – Production – June 2013 Chichester, Solomon and Western Port Hedland New Pilbara 155 Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Hub 5 BCI JV 60 40 50 Tom Price Paraburdoo
Slide 30: Christmas Creek 2 - Expansion
For personal use only Chichester Project Director: Mark Skelton 59 Christmas Creek 2 - Expansion • Brownfield expansion • New OPF including: • Wet Ore Scrubbing g • Crushing / Screening • Jigs Plant (shale treatment) • Remote Crushing Hub with 7km overland conveyor to Christmas Creek Hub • Water man
Slide 31: Christmas Creek – Key Milestone Schedule
Christmas Creek 2 – Key Milestone Schedule For personal use only 61 61 Progress • Approvals • Works Approval submitted for Phase 2 Expansion • Organisational Capacity • Integrated Project Management Team in place, place building on back of CC Phase 1 • Commercial • Major Contracts in place or immine
Slide 32: Solomon Project
For personal use only Solomon Project Project Director: Justin Nancarrow 63 Solomon Ore Body 64 64
Slide 33: Solomon Expansion
Solomon Expansion For personal use only 65 Solomon competitive advantages • Firetail and Kings Low Strip Ratios (Firetail less than 1:1, Kings Valley CID less than 2:1) • Low groundwater issues (Kings and CID Upper Above Water Table, CID Lower below water table) • Traditional truck/ shovel/ drill/ b
Slide 34: Solomon – Key Milestone Schedule
Solomon – Key Milestone Schedule For personal use only Smarter Project Execution (eg Offshore Modularisation) F t Delivery Faster D li off K Key C Components t Deferral of Non-Essential Construction Items The Prize!! Compressed Ramp Up 12 months earlier delivery than forecast at Sanction 67 67 Progr
Slide 35: Port Executive Summary
For personal use only Port Project Director: Peter Thomas 69 Executive Summary - Port • AP5 work halted by minister pending PWC review. • Plan B in place to develop AP4 only solution. • Dredging for AP3 complete. Currently dredging in SW Creek • Project on Schedule • Costs remain within budget. 70
Slide 36: Port Expansion
2 Berths For personal use only 1 Shiploader 2 Stackers 1 Reclaimer 1 Train Unloader Current Port infrastructure 71 Port Expansion • Three (3) Berths (AP3, AP4 and AP5) • Dredging of South West Creek and Anderson Point area (5.4m cubic mtrs) • Settlement Ponds • Two (2) Outload Circuits • 2 Shiploade
Slide 37: 155 Port infrastructure
Port For personal use only 5 Berths 3 Shiploaders 3 Stackers 3 Reclaimers 3 Train Unloaders Subject j to State Govt Approval pp 155 Port infrastructure 73 Port – Key Milestone Schedule 74
Slide 38: Port Progress
Progress • Excellent safety performance maintained with TRIFR <4.0 (3.7) For personal use only • Cost forecast within budget • On schedule, main challenges to milestone dates approvals, wharf construction, critical equipment deliveries • Phase 1 (T60) Steel Fabrication commenced, earth works complet
Slide 39: Rail Expansion Executive Summary
For personal use only Rail Expansion Project Director: Peter Thomas 77 Executive Summary - Rail • Federal approval to commence formation earth works outstanding. Approval in June will allow completion by end 2012 • Calibre Rail are overall EPCM contractor • Parsons Brinkerhoff advising on marshallin
Slide 40: Rail Expansion
Rail For personal use only Cloudbreak Christmas Creek 79 79 Rail Expansion • Greenfield (connecting track to Solomon mines) • 130km of track • 8 million cubic metres of earthworks • 3 bridges (incl across BHP line) • Balloon loopp at Solomon • Fuel unloading facility at Solomon • Brownfield - Mainli
Slide 41: Rail – Key Milestone Schedule
Rail – Key Milestone Schedule For personal use only 81 81 Progress • Contractors mobilised for start of mainline earthworks pending Federal environmental approval • Earthworks for camps (camp 25) commenced / Solomon camps earthworks to commence soon • Test pitting stage 1 for the borrow pits has bee
Slide 42: 355Mtpa: Three Hub Mining Strategy
For personal use only 355Mtpa Study Director: Neil Miller 83 Three Hub Mining Strategy Chichester, Solomon and Western Port Hedland New Pilbara Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Western Hub Hub Tom Price Paraburdoo
Slide 43: Execution Strategy – Production – 2015 and 2017
Execution Strategy – Production – June 2015 Chichester, Solomon and Western Port For personal use only Hedland New Pilbara 155 Fortescue Port (Anketell) Infrastructure Dampier Fortescue Rail 100 Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester 40 20 Hub 5 BCI JV 60 40 50 40 Tom Price Nyidindg
Slide 44: Expansion to 355Mtpa
Expansion to 355Mtpa For personal use only • Group is currently progressing three major potential projects • Central Pilbara Project – advanced Feasibility • Nyidinghu – early Feasibility • Northstar /Glacier Valley Magnetite - Feasibility • Target production dates - 2015 to 2017 • Projects primary
Slide 45: Status 2011
Status 2011 For personal use only • Three foundation proponents and Government • Major Project Status • Land Access and Approvals processes commenced – granting later 2012 • Port precinct designs progressed to support Master plan • Target first export ships 2014/2015 • FMG seeking leading proponent
Slide 46: Operational Update: Key Points
For personal use only Operational Update Paul Hallam 91 Key Points • Safety – Sustained performance improvement. • Operations – Solid FY11 despite unseasonal weather impact. – Christmas Creek commissioning well underway. – 55mtpa rate targeted to be achieved in June. • FY12 Exciting & Challenging Ye
Slide 47: Safety and Ramp up without Parallel
Safety • Significantly improved safety outcomes across all operational areas. For personal use only – Major Hazard Management Program. – Field Leadership Initiative delivering results. – Management led focus on reducing safety incidents and injuries. 93 Ramp up without Parallel 50,000 45,000 Fortesc
Slide 48: Operational Update
Operational Update Mining For personal use only • Ore Mining production ramping to combined rate of >60mtpa. • Christmas Creek ramping up to > 25mtpa Ore mining. • Mobile equipment upscaling being implemented. Processing • Cloudbreak at 40mtpa rate. • Christmas Creek ramping up to 15mtpa rate. • On
Slide 49: Marketing: Fortescue production & price
For personal use only Marketing David Liu 97 Fortescue production & price • June Quarter volume to be an improvement on March Quarter following commissioning of the CC OPF and the ramp up of CC mining. • Running at 12mt shipment rate for June Quarter, but May belt issues likely to delay 3-4 vessels
Slide 50: Chinese market pricing
Chinese market pricing Chinese steel price Vs 62% ore index Vs shipping prices (17 May)) For personal use only • Steel price has not kept up with iron ore (or coal) price rises • Some mills under short-term financial stress • In recent weeks steel prices have been rising • Key factors influencing re
Slide 51: Implication of declining iron ore grades
The implication of declining iron ore grades Great news for Pilbara Hematite For personal use only Source: AME 101101 Chinese steel industry still growing strongly • China’s crude steel output hit new highs in March • Steel output climbed to 174mt in March Quarter, 9.5% above the December Quarter an
Slide 52: China new year plan; Diversification of customer base
China new 5 year plan – great news for Pilbara iron ore For personal use only 350 million will be added to China’s urban population by 2025 - 170 mass transit systems could more than population of today’s US be built 1 billion people who will live in 40 billion sqm of floor space China’s cities by 2
Slide 53: BC Iron JV update
BC Iron JV update For personal use only Project status • First shipment of trial pit ore 24 Feb • Sinter test concluded “Bonnie Fines” is able to partially substitute for Pilbara Blend, and for Yandi ore • 3Mtpa rate over next month or so moving to 5mtpa rate by end of FY12 • Fortescue has accountab
Slide 54: Shipping
Shipping For personal use only Freight Market • Port Hedland to China spot rate is trading between US$7.00 and US$8.00/t • Fuel cost veryy high g at around US$700/t • Two key causes of market weakness: - Influx of new vessels - 85 new Capesize vessels delivered in Jan − April - Impact of natural dis
Slide 55: Shipping Strategy
Shipping Shipping Strategy For personal use only • Scope – at 55mtpa around 25 shipments per month, at 155mtpa* this increases to around 70 shipments per month • Optimise efficiency of port infrastructure • Increasing total throughput by targeting large, shallow drafted vessels • Wide range of comme
Slide 56: Financial overview and capital structure
Financial overview For personal use only • Capital structure • Financing for growth • Financial highlights • Costs and capital • Financial overview 111 Capital structure • Deliberate strategy to simplify capital structure • Capital structure to support current operations • Capital structure to suppo
Slide 57: Financing for growth
Financing for growth Pro Forma Debt Maturity Profile For personal use only June 2011 (US$m) Unsecured Notes Unsecured Revolver Term Loan • Portfolio approach across $2,040 markets, products and maturity $900 $600 $500 Preference Leucadia shares Note $144 $100 CY2011 CY2012 CY2013 CY2014 CY2015 CY201
Slide 58: Financial highlights
Financial highlights For personal use only US$mm FY08 FY09 FY10 1H11 1H10 LTM Total ore shipped (wmt)1 1.7 27.3 38.5 20.0 18.6 39.9 Total revenue 139 1,829 3,220 2,533 1,184 4,569 Adjusted EBITDA2 32 561 1,288 1,316 380 2,224 EBITDA margin 23% 31% 40% 52% 32% 49% Half year 2011 highlights • Record $
Slide 59: Costs and Capital
Costs and Capital For personal use only Costs • March quarter: $44.96, YTD $40.68 • June quarter: Stock flow-through and commissioning impacts • FY2012: ≈ $40/t • Solomon low cost blending benefits post expansion Capital • Currently finalising FY2012 capital programme • FY2012 increases due to incre
Slide 60: Investor Relations: Cloudbreak mining outlook
For personal use only Investor Relations Rod Campbell 119 Cloudbreak mining – 5 year outlook PORT HEDLAND (256 km) Fortescue Dave Forrest Aerodrome Cloudbreak rail line Cloudbreak Village Train Loader Ore Processing Facility (OPF) Site Offices BRAMPTON LINDERMAN Christmas Creek rail line HAMILTON BA
Slide 61: Consensus FY2011 – 17 Analysts
For personal use only Christmas Creek – 5 year outlook Christmas Creek Village VASSE MOKARE FLINDERS BAUDIN WINDICH EYRE Christmas Creek rail line Ore Processing Facility (OPF) PORT HEDLAND (291km) CLOUDBREAK (35km) Rail loop 121 Consensus FY2011 – 17 Analysts Revenue USD Billions Median $5.5 High $
Slide 62: Shareholding Structure
Shareholding Structure For personal use only Total Shares (millions) 123 Value Proposition 124
Slide 63: Sign up to alerts online
For personal use only Sign up to alerts online www.fmgl.com.au
Fortescue Metals Group — Investor Presentation (June 2011) on 6ix