Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Australian Stockbrokers Association, Melbourne (May 2012)
27 slides from Fortescue's conference presentation, May 31, 2012
Slide 1: An Opportunity Realised
For personal use only An Opportunity Realised Australian Stockbrokers Association Melbourne 31 May 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 business
Fully integrated - large scale business Over 150mt of product shipped to date For personal use only 3
Slide 4: A differentiated model
A differentiated 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 Plan
Slide 5: Risk mitigation through business evolution
Risk mitigation through business evolution For personal use only FY 2009 FY 2012 FY 2014 • 40mt run • 55mt run • 155mt run rate rate rate targeted • Single mine • Two mining • Four mining operation operations operations • One OPF • Two OPFs • Five OPFs • Three train • Six train • Thirteen train cons
Slide 6: Three fold near term production increase
Three fold near term production increase Multiple mines will deliver accelerated ramp up For personal use only 160 Solomon Firetail 140 Solomon Kings BCI JV 120 Christmas Creek onnes 100 Cloudbreak Million To 80 60 40 20 0 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 6
Slide 7: $3bn of EBITDA upside over FY12 – FY14
$3bn of EBITDA upside over FY12 – FY14 It’s all about ramp up volumes For personal use only 10 000 10,000 8,000 $2,270m EBITDA (US$m) 6,000 $650m 4,000 $80m E 2,000 Potential FMG results - EBITDA Broker consensus - EBITDA 0 FY12 FY13 FY14 The above chart uses broker consensus operating costs and con
Slide 8: Exploration success sets platform
Exploration success sets platform For personal use only 14,000 Annualised growth of 12 000 12,000 1 5bt 1.5bt 3,236 Resources (Mt) 10,000 per annum p 2 465 2,465 8,000 2,013 1,032 624 624 , 1,230 Mineral R 6 000 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,
Slide 9: Nyidinghu: A dot on the map in 2010
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 H b Hub Fortescue tenement holding Nyidinghu 9
Slide 10: Financial Highlights
Financial Highlights Record HY12 result and strong March YTD performance For personal use only 2012 Half Year Results: • $3.4 billion record revenues and $1.5 billion underlying y g EBITDA • $801 million net profit of up 155% on the prior period last yyear p 2012 Year to Date Performance (end March)
Slide 11: High margin producer
High margin producer Ch Changed d pricing i i delivers d li strong t returns t For personal use only Benchmark regime - FOB Index p pricing g - CFR $180 Average CFR selling price per dry tonne $159 ne $160 US$ per dry tonn Gross margin Average COGS per $135 $138 $140 $79 dry tonne Gross margin Gross
Slide 12: After consolidation comes growth
After consolidation comes growth The steep trajectory has just begun For personal use only Mining R il Rail P t Port Ore Processed (wmt) Ore Railed (wmt) Ore Shipped (wmt) 30.0 30 0 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 1
Slide 13: Financial strength will follow expansion
Financial strength will follow expansion Cashflow will be harnessed for financial de-risking de risking For personal use only Strong Balance sheet: • Gearing reduction through debt repayment • Preferred P f d gearing i range 30 – 40% b by FYE14 • Investment grade target over medium term Strong opera
Slide 14: Repayment options embedded in maturity profile
Repayment options embedded in maturity profile Structured for flexibility For personal use only Early call periods provide optionality $3,000 Senior Unsecured Notes Senior Unsecured Notes (Call Option) Revolving Credit Facility (undrawn) $2,500 $2,040 $2,000 Preference shares $1,500 $1,500 Unsecured
Slide 15: The market
For personal use only The market 15
Slide 16: A market snapshot
A market snapshot Law of large numbers - lower growth rates but higher absolute volumes For personal use only • Record CY2012 steel production annualising ~710mt • May M continues ti strong t trend t d att ~ 2mt 2 t per day d • Seaborne supply tight as India falls and Brazil flatlines • Recent index
Slide 17: Shorter term China – 2012 annualising ~710mt
Shorter term China – 2012 annualising ~710mt May daily steel production at record highs > 2mt per day For personal use only Monthly steel production Forecast annual steel production 70 Winter slow ends in 1000 March record 4.5% YOY growth 60 900 800 50 700 Million Tonnes nnes 40 600 Million Ton 500
Slide 18: China increasingly looks to seaborne iron ore
China increasingly looks to seaborne iron ore Seaborne imports forecast to rise 43% over next 5 years For personal use only 1400 Seaborne IO demand Domestic IO demand 1200 Mt) production (M 1000 1027 953 800 879 Iron ore p 600 764 719 400 200 333 357 295 271 236 0 2012 2013 2014 2015 2016 China’s do
Slide 19: Chinese cost curve supports iron ore prices
Chinese cost curve supports iron ore prices For personal use only 200 Domestic Chinese Ore Australia Brazil India valent 150 South Africa Other ne CFR equiv 100 US$/dry tonn 50 U 0 0 100 200 300 400 500 600 700 800 900 1,000 Cumulative Mt (wet, (wet as delivered) Source: Metalytics prepared March 20
Slide 20: History shows the cost curve floor in action
History shows the cost curve floor in action 62%Fe index price band of $130 - $150 per tonne over last 6 months For personal use only $210.00 $200.00 $190.00 $180.00 $170.00 mt US$/dm $160 00 $160.00 $150.00 $140.00 $130.00 $120.00 $110.00 $100.00 Mar Jul Nov Mar Jul Nov Mar 2010 2010 2010 2011 2011
Slide 21: Development
For personal use only Development 21
Slide 22: Port access – the key to Pilbara success
Port access – the key to Pilbara success Hi Tech, T h large l scale l equipment i t delivers d li superior i performance f rates t For personal use only Fortescue 22
Slide 23: A clear strategy to 155mtpa
A clear strategy to 155mtpa Near term growth profile set to triple production For personal use only H b Elli Herb Elliott tt P Portt Port Hedland Fortescue Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail 60mtpa 95mtpa Solomon Hub Chichester Hub BCI JV Tom Price 23
Slide 24: Expansion milestones – mining hubs
Expansion milestones – mining hubs For personal use only ` Chichester Hub Solomon Hub • Current OPF to 25Mtpa p by y end June • Sealed airstrip p operational p April p 2012 2012 • Mining contract finalised June Qtr • 2nd OPF by end Sept Qtr 2012 2012 • Mining ramp up to 50Mtpa by end Dec • Firetai
Slide 25: Expansion milestones – infrastructure
Expansion milestones – infrastructure For personal use only ` Port Rail • 2nd out-load circuit and 3rd berth • Mainline duplication p end Sept p Qtr commissioning done 2012 • 2nd in-load circuit end Sept Qtr • Spur line to Solomon end Dec Qtr 2012 2012 • 3rd in-load & out-load circuits end • Additio
Slide 26: A value opportunity unfolds
A value opportunity unfolds C Current t business b i powers the th expansion i For personal use only • E Existing i ti cashflows hfl d i record drive d fifinancial i l performance • Growth G th profile fil tto 155 155mtpa t jjustt around d th the corner • First mover advantage into window of opportu
Slide 27: Forging Ahead
For personal use only Forging F i Ah d Ahead Sign up to alerts online www.fmgl.com.au
Fortescue Metals Group — Australian Stockbrokers Association, Melbourne (May 2012) on 6ix