Slide 1: ASX cover letter: Presentation - Fremantle Explorer Conference
Fortescue Metals Group Ltd Velephone: » OF 8 9266 O11 Facsimile: + G1 & 9266 0188 Park Road West Perih Website: www. foigtcom.an Western Australia 6 Pts Box 916 West Perth Western Australia 6872 w 4 March 2004 The Companies Officer Australian Stock Exchange Ltd. Exchange Plaza 2 The Esplanade Perth
Slide 2: The world iron ore industry is facing serious customer under supply
The world Iron Ore Industry is facing serious customer under supply... The Fortescue Metals Group Ltd., enjoying strong customer support - is a major part of the solution v Explorers Conference 2004, The New Convention Centre Esplanade Hotel Fremantle 24 ~ 25 February, 2004
Slide 3: Contents
Contents © Industry Overview = FMG - commencing @ 40 mt © The PIF (The Pilbara Infrastructure Fund) = Project Development © Marketing © Summary Feeding the Dragon - JP Morgan
Slide 4: FMG is removing the bottleneck
FMG IS REMOVING THE BOTTLENECK © The worlds largest iron ore region (the Pilbara) is bottlenecked - existing suppliers have absolute control © Owner restricted access to port and rail infrastructure ... “shutting out” all competition > but, iron ore customers, particularly China, have grown hugely a
Slide 5: Fortescue Metals Group
Fortescue Metals Group Commencing with 40 mtpa, FMG will be a new independent and reliable producer “If you do not change you can become extinct” Dr Spencer Johnson - Who moved My Cheese?
Slide 6: FMG's Enriched Marra Mamba Formation
FMG’s Enriched Marra Mamba Formation
Slide 7: Board of Directors
Board of Directors Andrew Forrest, Chairman (Mining/Finance Graeme Rowley AM, Executive (Major operations) I Ken Ambrecht (International banking) Herb Elliott AC MBE (nternational business) Chris Linegar (International banking) | Russell Scrimshaw (Banking/ Marketing : Seb Coe OBE (Marketing/Busines
Slide 8: FMG Mines (Finance)
FMG MINES (FINANCE) Mining Project - Sources of Funding EFMG EH lron Ore Customers O Equipment leases OUS Capital Markets Debt/Equity Ratio 60:40
Slide 9: FMG Mines (Finance) Strategy
FMG MINES (FINANCE) STRATEGY A$m’s Capital FMG Mines equity + equipment leases (50%) 144A US Capital Markets borrowings (50%) Revenue FMG (after operating costs) earnings Less external costs FMG capital contribution to PIF FMG operating cost contribution to PIF FMG servicing of (FMG mines) 50% debt
Slide 10: The Pilbara Infrastructure Fund (PIF Finance)
The PILBARA INFRASTRUCTURE FUND (PIF FINANCE) FMG Retained Equity in PIF = 40% 15% 15% Debt/Equity Ratio 50:50 50% 5% 5% 10% @ Infrastructure Investors H lron Ore Customers @ Supplier/Construction Groups @ Shipping/Rail Groups Cl Equipment Leases OUS Capital Markets < PIF to be listed post commissio
Slide 11: PIF (Finance) Strategy: A$m's
PIF (FINANCE) STRATEGY: A$m’s Return on Equity (12% minimum) $637.5 (50% equity) Return on Debt (6%, 20 years US 144A) $637.5 (50% debt) FMG capital (contribution to PIF) $120 Mindy capital (contribution to PIF) $30 FMG operating cost (contribution to PIF) $100 Mindy operating cost (contribution to
Slide 12: Assets and Earnings Power
Assets and Earnings Power FMG FMG Assets Ownership % Pilbara Infrastructure Fund 40% Mindy Mindy Iron Ore Mine 50% Chichester Range/East Pilbara 100% Central Pilbara/West Pilbara 100% FMG earnings (post all charges) A$400m CAPITAL COST OF FMG MINES A$575m Pay back period: Rapid *Subject to implement
Slide 13: The Resources
THE RESOURCES v FMG has major drilling programmes undetway and is highly acquisitive
Slide 14: Location Map
LOCATION MAP ed ‘paige to Femi Tomar Sitio Capi. rath Cath Taw ‘Binsceiece
Slide 15: FMG Mineral Tenements
FMG MINERAL TENEMENTS
Slide 16: Major Regional Tenement Holders
Major Regional Tenement Holders BOE Hi ca awe sgt Beninone Foe -uaising Beal gurpeane Ba Pine, ny mina ie ele tibaine in tan toe irr recat, anes. eighd ‘ze ‘ass Din saat ‘ean Ge ais
Slide 17: Resources Snapshot 1.05 billion tonnes
Resoutces Snapshot 1.05 billion tonnes FMG 100% ownership Muluda Yandicoogee (West Pilbara) Pinara 200 mt* Boolgeeda 220 mt* Marandoo Too (Central Pilbara) 247 mt* Nittingu’s Challenge (Central Pilbara) 55 mt* Mount Nicholas (East Pilbara) 330mt** Iron Ore tonnes total @ Ist February 2004 1,050 mt *
Slide 18: FMG Pilbara Target Grade
FMG PILBARA TARGET GRADE Iron 58% - 61% + Phosphorus 0.04% Silica 3.8% Alumina 2.0% LOI 5.5% Manganese 0.8%
Slide 19: East Pilbara Resource and Potential
EAST PILBARA RESOURCE AND POTENTIAL Drill Defined Pre-Resource Estimate Mt Nicholas 330 mt Current Drilling Program Potential Mt Lewin 80 mt* Tongololo Creek 25 mt* Other East Pilbara Target Areas Chichester Ranges 385 mt** Drilled and Targeted (20 years at 40mtpa) 800 mt * Potential based on recent
Slide 20: Central and West Pilbara
CENTRAL AND WEST PILBARA CENTRAL PILBARA (MARRADAS MONSTER) Marandoo Too 247mt Nittingu’s Challenge 55mt WEST PILBARA (MULUDA YANDICOOGEE) Pinara 200mt Boolgeeda 200mt FMG TOTAL 1.05 BILLION TONNES - AND GROWING
Slide 21: Mt. Nicholas
Mt. Nicholas
Slide 22: Mt Nicholas, Lewin and Tongololo
Mt Nicholas, Lewin and Tongololo East Pilbara Resource Definition - a flying start © Attractive mine stripping ratio of 1 to 1 including all pit ends and truck ramps © Drilling out with 3 rigs (including diamond) and growing as required © Drill programs continue at Lewin and Tongololo and up the Chi
Slide 23: Mt Nicholas Geology
Mt Nicholas Geology ma WYATT 2 —O—— FMG MU Nicholas Prospect : Line 7479400 W (116) : Ore resowece envelope |: few pO Panto ee a=og;
Slide 24: Pit Design for Mount Nicholas
Pit Design for Mount Nicholas * Three mining pits to commence simultaneously ¢ Primary in pit crushers * Conveyed to one of two secondary crushing and beneficiation plants 21 Gee oe * Conveyed to stockpile and train loading
Slide 25: Central Pit Concept
Central Pit Concept
Slide 26: Mt. Nicholas Iron Ore Project
Mt. Nicholas FORTESCUE METALS GROUPLTD | — Mt Nicholas tron Ore Project 77 7 a aie Ce ie 4 Sul hen Dee Cutere y ie
Slide 27: Consolidated Mine Mals Limited
LUNSOLIDATLO MINE MAls LiMi tie
Slide 28: Total Estimated Volumes of Mesas
Total Estimated Volumes of Mesas 8.45 MUR 21 250;006) SHAT canna Ok aie a 1 TE
Slide 29: The New Suppliers
THE NEW SUPPLIERS © FMG drilling shows potential for huge resources Targeting 40 Mtpa stand alone project - over 400mt, will reach 800mt before Ist Stage drilling complete a Strike length 200 kilometres, drilling advanced 100% FMG © Consolidated Minerals (Mindy Mindy) Targeting 10 Mtpa stand alone p
Slide 30: Grade Comparisons
GRADE COMPARISONS Mindy Mindy targeted grade ~ 57% to 60% Rio Tinto Robe River ~ 57.5% BHP Billiton Yandicoogina ~ 57.5% Hamersley Iron Yandi ~ 58.3% Mt Nicholas targeted grade ~ 58% to 61%+ Source: Tex Report, GSJBW “Improved technology and the lower cost of the new ore types (Yandi and Marra Mamba
Slide 31: Mt Lewin & Chichester Ranges
Mt Lewin & Chichester Ranges Hite ig) Ls A Vee al oe i a ES, aa Tongololo Creek
Slide 32: The Market
THE MARKET Ww “Old beliefs do not lead you to new cheese” Dr Spencer Johnson - Who moved My Cheese?
Slide 33: Steel Demand - Growth!
STEEL DEMAND —- GROWTH! Steel Consumption and GDP/Capita oa s ee ®, & re Korea » — 2 a * a* - * of, 2 a ae J = é . . Japan =] te”? > baad China a 40000 20000 30000 40006 GDP capital (constant 1995$US) Source: FSI, World Bank, uses crude steel basis
Slide 34: Crude Steel Production (CSP - in China)
Crude Steel Production (CSP - in China) “Beware of Producer Predictions” © In the late 1990’s Industry “experts” predicted CSP reaching 150 Mt by 2005 = This figure was exceeded in 2000. China became the world’s largest steel maker in 2001 - four years ahead of predictions! “The surge in crude steel
Slide 35: Producers, still predicting to the book...
Producers, still predicting to the book...
Slide 36: China's Economic Growth
China’s Economic Growth Minister of Commerce stated this year that China will quadruple its 2000 GDP by 2020 © This implies > 7% annual growth rate — teflects growth in recent years — China’s industrialisation © China’s iron ore ore import growth usually > 10%, exceeds GDP growth © Ifimports continu
Slide 37: Future iron ore supply, unreliable
Future iron ore supply, unreliable Supplier Constraint . Fragmented low quality mines China High energy cost Environmental concerns +k Bureaucratic limitations India «oti Poor logistic economics South American growing internal iron ore Brazil* demand Significant freight disadvantage to Asia * Have l
Slide 38: Iron Ore Shipments
Iron Ore Shipments Australian % lost market share 1000 800 — 600 400 an : wood! % Increase since 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 [2 Western Australian Exports L) Chinese Imports Source: DoIR/JP Morgan
Slide 39: Chinese imports of iron ore by country
Chinese imports of iron ore by Country, showing effect of the Pilbara bottleneck “Compared with major iron exporting countries in the world, our self-produced concentrate is obviously in an inferior position” Large Iron and Steel Group - China
Slide 40: The Pilbara, the lowest supply costs
The Pilbara, the lowest supply costs Austrady retains eure ANE JF Morp Cost difference of US$8.00 to $10.00 in additional shipping cost per tonne from Brazil (CVRD) to growth markets
Slide 41: Competition for Ore
Competition for Ore Shipments from Western Australia iy Le i . _ 1 ALW, i / Cy re La yay 1 Lo ~ 8 Lo. Lo _. | Source: DOIR
Slide 42: The Infrastructure
THE INFRASTRUCTURE
Slide 43: Operating cost advantage for new infrastructure
Operating cost advantage for new infrastructure Infrastructure Brownfields FMG General Original Design for 5Mtpa Peet0M Epa for Expansion means : *P Construction based on Rail duplication of older latest technology technology Expansion means Design flexibility for Port replacement but not phased exp
Slide 44: No existing producer (brownfields) capital cost advantage
No existing producer (brownfields) capital cost advantage Company Tonnes (expansion) A$million BHP Billiton Iron Ore 40 million (Option C) 2,000 Rio Tinto/Hamersley 50 million 1,900~2,300 FMG 45 million 1,850 Source: JP Morgan for BHPB IO and RT Hammersley
Slide 45: FMG Rail - Excellence in Heavy Haul
FMG RAIL - EXCELLENCE IN HEAVY HAUL Total Capital Cost at 50Mta A$806m Train Sets (rolling stock, etc) $291m Below Track $515m Total $806m. (incl.15%contingency) FMG personnel achieved 100% increase in efficiency in other Pilbara operations - as measured by net tonne per kilometre per employee on ra
Slide 46: FMG Port - More Tonnes, Less Time, Less Cost
FMG PORT - MORE TONNES. LESS TIME. LESS COST. Total Capital Cost at 5}0Mtpa $470m Dumper (rail car tippers) $70m Stackers, Reclaimers $84m Plant & Yard $84m Dredging $56m Wharf $176m Total $470m (incl.15%contingency) FMG personnel achieved 40% increase in port capacity measured by Tonnes per annum s
Slide 47: Rail Construction Months - Fast Track
Rail Construction 18 Months - Fast Track (initial shipments) © Computer designed rail corridor and alignment © Engineering design Worlds Best Practice © FMG understands that all stake-holders need a low cost iron ore producer © Rolling stock compatibility
Slide 48: Port Construction Months - Fast Track Single Berth
Port Construction 20 Months - Fast Track Single Berth © Optimal Stock Yard design for lowest operating cost © Blending capacities to meet customer specifications © Screening and quality control © Ship-loading and wharf design to optimise life of project costs
Slide 49: Port layout
FG OFTICN LODE PORT FACILITIES BHP & OBE DOWNS RAIL LINES ©: CROSSING AY GRADE Hinovonaore vowne, ‘S.EHP RAE LINES FMG Port layout
Slide 50: FMG stockpile & laydown area
FMG stockpile & laydown area
Slide 51: Shiploader
Slide 52: Reclaimer
Slide 53: Stacker
Stacker TbyssenKrupp Engineering (Australia) (
Slide 54: FMG Development Time Line
| FMG Development Time Line OO es——— —€e_— 52003 04200) G20 22004 32002 4200: at 2008 = azens © aa.z005 «aeons = ai ance a 2006 4 2006
Slide 55: FMG Fast Track Development Time Line
FMG Fast Track Development Time Line (e initial capital commitment)... WN ae . le ail TIM TTTTTTTTTTTTTTTTTTTT ii
Slide 56: Managing Future Risks / Threats
Managing Future Risks /Threats Challenges Price Reduction Infrastructure Rationalisation Company Take-over Uncertainties oft Stability of US recovery European recession Upturn in Japan China Growth in South America Response Lowest cost producer Long term structured/ customer finance Long term contra
Slide 57: FMG - Swimming with the Tide
FMG - SWIMMING WITH THE TIDE © Growing demand for iron ore far exceeds supply © With FMG infrastructure, the Pilbara will meet demand © FMG has the ore, the people and the commitment to make it happen © China’s demand is driving structural change Fortescue Metals Group