Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — BMO Conference 2019
35 slides from Fortescue's conference presentation, Feb 26, 2019
Slide 1: BMO Conference 2019
For personal use only BMO Conference 2019 February 2019 Together we are Fortescue
Slide 2: Forward looking statements
Forward looking statements For personal use only 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: Integrated mining and infrastructure operations
Integrated mining and infrastructure operations For personal use only Focus on safety, production and cost 3
Slide 4: Corporate video placeholder
For personal use only • PLACEHOLDER – NEW CORPORATE VIDEO 4
Slide 5: Fortescue's values
Fortescue’s values For personal use only Our Vision: The safest, lowest cost, most profitable mining company 6
Slide 6: Safety and unique culture
Safety and unique culture For personal use only Looking out TRIFR 4.0 for our mates (12MMA) Targeted safety improvement TRIFR 3.5 initiatives (YTD) 7
Slide 7: Setting high standards
Setting high standards For personal use only Championing safety, preserving Aboriginal heritage, embracing diversity, demonstrating integrity 18% Female employment 24% Female senior managers Over A$3bn in Corporate Tax and A$4.8bn Royalties paid Over 5,000 Aboriginal heritage places managed 8
Slide 8: Creating positive social change
Creating positive social change For personal use only Building local communities, empowering Aboriginal people and eradicating modern slavery 13% Aboriginal employment across Australian workforce Over A$2.2bn contracts with Aboriginal businesses 824 Aboriginal team members trained and employed via V
Slide 9: HY19 highlights
HY19 highlights For personal use only US$1.6bn A$0.30/share NPAT Underlying US$644m dividends EBITDA US$13.11/wmt West Pilbara 82.7mt Fines shipped C1 cost Shipments commenced 10
Slide 10: Increasing shareholder returns
Increasing shareholder returns For personal use only A$0.19/share A$0.11/share Fully franked Fully franked Interim dividend Special dividend 65% pay-out ratio A$139m 50-80% of full Share buy-back year NPAT Average price of Dividend pay-out policy A$3.997/share 11
Slide 11: Price and margins
Price and margins For personal use only Cost leadership and efficient operations generating cash margins US$/dmt Underlying EBITDA per dmt 62 Platts CFR Index 90 Fortescue realised price Avg Underlying EBITDA per dmt 80 70 60 50 40 30 20 10 20 15 17 24 33 27 24 17 21 - 1H15 2H15 1H16 2H16 1H17 2H17
Slide 12: Sustainable cost improvements
Sustainable cost improvements For personal use only C1 US$/wmt 48 44 Structural improvements Solomon + blending + processing 34 27 Productivity and efficiency Utilisation, recoveries, maintenance 15 13 12 13 Innovation and technology Autonomy, conveyor, ore carriers, data analysis FY12 FY13 FY14 FY1
Slide 13: Debt repayments
Debt repayments For personal use only Flexible structure with target gearing achieved US$m % Debt Net debt Gross gearing (RHS) Net gearing (RHS) 16,000 80 12,000 12,691 60 10,533 9,557 9,569 8,000 40 7,159 7,188 6,771 4,000 5,188 20 4,471 3,975 3,998 3,112 3,036 2,633 0 0 FY13 FY14 FY15 FY16 FY17 FY
Slide 14: 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 CY2019 CY2020 CY2021 CY2022 CY2023 CY2024 15
Slide 15: Capital allocation
Capital allocation For personal use only Disciplined allocation to capital investment and shareholder returns FY16 – US$3.1bn FY17 – US$4.0bn FY18 – US$2.2bn HY19 – US$0.9bn Capital expenditure Net debt repayments Dividends Share buy back 16
Slide 16: Market
For personal use only Market 17
Slide 17: Integrated operations and marketing
Integrated operations and marketing For personal use only Market Marketing and drivers product strategy alignment Operational Margin delivery optimisation 18
Slide 18: Strong demand for Fortescue products in China and other regions
Strong demand for Fortescue products in China and other regions For personal use only China steel production increased 12% in 2018 to 928mt • Proximity to high growth region • Responsive to market needs • Diverse customer base • Half year sales outside China 10 per cent • Maiden shipments to new Ind
Slide 19: Chinese steel mill profits moderating
Chinese steel mill profits moderating For personal use only 250 90 225 85 China steel 200 Steel Product Margin (US$/t) 80 margins moderating 175 % of profitable mills 74 75 150 Focus moved to 125 70 input costs 100 88 65 75 60 Increasing demand 50 55 for lower Fe products 25 42 0 50 Jun-18 Jul-18 Au
Slide 20: Iron ore price
Iron ore price For personal use only Variation driven by steel mill profitability with price spreads narrowing due to lower steel margins 160% 140% % Mysteel 62 Port Index 120% 100% 80% 60% 40% Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 21 FBF - Mystee
Slide 21: West Pilbara Fines
West Pilbara Fines For personal use only Typical grade WPF Platts First shipments in Dec 2018 IODEX 62 Iron content (Fe) 60.1 62.0 8-10mt 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 Offtake agreements wit
Slide 22: Eliwana mine and rail project
Eliwana mine and rail project For personal use only US$1.275bn capital investment Underpins West Pilbara 143km rail Fines 30mtpa dry OPF First ore on train Dec 2020 23
Slide 23: Operations and Innovation
For personal use only Operations and Innovation 24
Slide 24: Automated mining
Automated mining For personal use only Delivering productivity and efficiency improvements AHS AHS Relocatable operation conversion conveyor 24.7million km safely 47 Trucks converted at Operating at full capacity travelled Christmas Creek Autonomous Remote Data analytics drills integrated Driving pr
Slide 25: Fortescue ore carriers
Fortescue ore carriers For personal use only Eight ore carriers now operational Designed to Completed 114 voyages optimise efficient port infrastructure 29mt of iron ore to China to date 14% annual volume 26
Slide 26: Growth and Development
For personal use only Growth and Development 27
Slide 27: Significant Pilbara footprint for long life production
Significant Pilbara footprint for long life production For personal use only 28
Slide 28: 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 29
Slide 29: Exploration in Australia
Exploration in Australia For personal use only Iron ore Largest tenement Lithium holding in the Pilbara Copper South NSW Australia ~2,000km2 tenure ~10,000km2 tenure 30
Slide 30: Opportunities in Latin America
Opportunities in Latin America For personal use only Exploration is key to low cost growth opportunities Ecuador Drilling at Santa 32 concessions Ana, Ecuador Potential for porphyry concessions to copper commence 2019 Argentina Colombia 48 tenements 64 applications for exploration concessions. in Sa
Slide 31: Landmark partnership with CSIRO
Landmark partnership with CSIRO For personal use only Develop and commercialise hydrogen technology Metal membrane technology has potential for bulk hydrogen transportation Potential for export market opportunities Potential fuel source for 32 operational requirements
Slide 32: FY19 Guidance
FY19 Guidance For personal use only 165-173mt US$12-13/wmt Shipments C1 cost Including 8-10mt WPF towards top end of range US$1.2bn Dividend policy 50-80% Capital spend pay-out of NPAT 33
Slide 33: Key strategic focus
Key strategic focus For personal use only Balance sheet Long term strength sustainability Growth and Returns to development shareholders options 34
Slide 34: Fortescue: The New Force in Iron Ore
For personal use only Fortescue The New Force in Iron Ore www.fmgl.com.au Ww FortescueNews
Slide 35: Glossary
Glossary For personal use only C1 - Operating costs of mining, processing, rail and port on a per tonne basis, Underlying EBITDA - Earnings before interest, tax, depreciation and amortisation, including allocation of direct administration charges and production overheads. exploration, development an