Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (February 2005)
50 slides from Fortescue's investor presentation, Feb 11, 2005
Slide 1: Fortescue Metals Group Ltd
w Fortescue Metals Group Ltd Fortescue Metals Group Ltd “ Fortescue House 50 Kings Park Road West Perth. ~~ Western Australia 6005 PO Box 910. West Perth Western Australia 6827 Telephone: + 61 8 9266 0111 Facsimile: + 61 8 9266 0188 Website: www.fmgl.com.au Email: jmorrin@fmgl.com.au Microplaty Hema
Slide 2: World Economy 2004
World Economy 2004 US$1,000 billion GDP
Slide 3: World Economy 2024
World Economy 2024 Europe Russia US$1,000 billion GDP
Slide 4: Iron Ore Outlook
Iron Ore Outlook Citigroup citigroup! “A long term super cycle combined with an extended current cycle is driven by materials intensive growth in China. The most important implication of the super cycle is higher long-term prices”. “Iron ore - a paradigm shift whatever the size of increase is agreed
Slide 5: China's Iron Ore import future - a calculation
China’s Iron Ore import future - a calculation Population Assume ~ 1.5 billion minimum if population control policy continues Steel intensity Assume - 450kg/capita; Korea [750] Japan [590] USA [400] Recycling scrap metal Assume - 20%; currently 16%, growth will exceed scrap potential Fe content of i
Slide 6: And then there is India...
And then there is India... - Population exceeds 1 billion - May exceed China by 2040 - GDP doubling every 10-12 yrs - Steel intensity currently - 26 kg/capita If India matched only current Chinese levels of steel use (per capita) its steel use would increase by I5OMt/a = 250Mt/a extra iron ore deman
Slide 7: The Pilbara, the lowest supply costs
The Pilbara, the lowest supply costs ‘Other N. Amerion — 492 aa Australia’s iron ore is cheaper than Brazil’s a — SEL foun AME, JP Horgan Australia’s current freight advantage over Brazil exceeds US$20
Slide 8: Pilbara Tenement Holdings
Pilbara Tenement Holdings Fortescue’s 17,100 sq km tenement reach dominates the Pilbara
Slide 9: Fortescue, Rio Tinto and BHPB
Fortescue*, Rio Tinto and BHPB ST kilometers Mount Goldsworthy | LEGEND Town Hahwey Creinage ail - existing all corricior - proposed FMG FMG Rio Tinto. BHP Robe River ron Ore depost fron Ore mine
Slide 10: Meeting the demand for major independent supply
Meeting the demand for major independent supply Wholly owned Iron Ore Regions Port Hedland a . . poe] f ey me outh Hedland pee Dathpier: 3 Sy " ty Karratha: Bs 2 a Tie ae cies N ODUM pando ‘om Price a 50 100~ 7 kilometers mr LEGEND Riount Goldsworthy @ Town — Hiahwaw ve ——_ Drainage rari. where Rail
Slide 11: Iron Ore region
yn Ore region DI = 1 w mult a Ne S ters 1
Slide 12: The Chichesters actual mineralisation JORC standard
The Chichesters actual mineralisation JORC standard (Snowden) to date 1.242 billion tonnes & growing JORC Ore Body Miltion Tonnes Ke Lo! Shipping Grade Estimation Christmas Creek (50% Area drilled JORC & 653 56.8 75 >60% . to JORC Standard) metallurgical results Mt Lewin/The Hammer 50% Area drilled
Slide 13: Cloud Break
Cloud Break om Additional 30 km strike length discovery ’ ¢ Drilling commenced mid-November 2004 * 6 separate mineralised zones established, each | to 2 kms across & open down plunge * Typical thickness 5 to 12 m, up to 20 m * Assay results show increasing grade trend, moving west along Chichesters
Slide 14: The Chichesters are a new multi-project iron ore region
The Chichesters are a new multi-project iron ore region The New Force in lron Ore
Slide 15: Chichester Project Size Relative to Sydney
Chichester Project Size Relative to Sydney The New Force in Iron Ore
Slide 16: Exploration, Bulk Sampling & Commercialisation
2 e) s iS a a iS) 8 is) am 3 © Zz. ® a) aa Exploration, Bulk Sampling & Commercialisation 16
Slide 17: Exploration & Bulk Sampling
Exploration & Bulk Sampling * 3,700 reverse circulation and diamond holes drilled * 87,000 metallurgical samples taken * Bucket augur drill (used for pilings in bridges and buildings) ¢ 15 major bulk sample holes drilled - 900mm diameter ¢ 800t of sample produced ~ 500t of ore material * bulk sample
Slide 18: Spudding in
Spudding in Bulk Sample: Li Ge aie °
Slide 19: He a
He a
Slide 20: Bulka Bag sample readied for transport
Bulka Bag sample readied for transport & ah
Slide 21: Commercialisation: Ore quality is highly competitive
Commercialisation: Ore quality is highly competitive “The identification of microplaty hematite at such shallow depth and across such large strike length is one of the most significant exploration discoveries in the Pilbara in the past 15 years” Dr John Clout - FMG Head of Resources Strategy (previo
Slide 22: Iron Ore: Calcined Fine Iron Ores - Iron Content
The New Force in Iron Ore uc Calcined Fine Iron Ores Tron Content 69.00 5 67.00 5 65.00 - 63.00 - % Fe 61.00 5 59.00 - BHPB - Premium Hi ~ Yandi HI - Marra Mamba HI - Premium BUPB - Marra Mambe Mesa J (Robe River) BHPB - Yandi 57.00 - 55.00 - Data Sources: Robe Ri from C HI — Industry Sources, FMG ~
Slide 23: Iron Ore: Phosphorus Content
The New Force in Iron Ore uc Calcined Fine Iron Ores Phosphorus Content 0.080 5 0.070 4 0.060 4 0.050 4 te a S 0.040 | g E : 4 z a a $ = 0.030 4 8 E . i 5 g 2 5 3 Z * i E 0.020 4 3 rs ” ES eB 5 * = 3 & z a = = 0.010 4 0.000 Data Source: Robe : irect fr : y, HI ~ Industry Sources, FMG - Own Tests
Slide 24: Iron Ore: Alumina Content
The New Force in Iron Ore uc Calcined Fine Iron Ores Alumina Content 3.50 5 3.00 | 2.50 | = 2.00 | t Sse z g z ; 2 2 H 5 Fe e 1.00 5 E E é 3 - 3 5 = : E = ; z E a = on 0.50 = = : = | < g 58 5 -_ = = z = = cy il 0.00 / Data Source: Robe River — Website, BHPB — Direct from Company, HI — Industry Sourc
Slide 25: Iron Ore: Silica Content
The New Force in Iron Ore uc Calcined Fine Iron Ores Silica Content 7.00 5 6.00 5 5.00 | 4.00 + 8 x g “30 [x Z F z : i Pa g E 3 3 & 2.00 = £ a z ; c é E € : > F 3 3 « 5 eG EI Z 1.00 - E = 5 ® * Et 0.00 - Data Source: Robe BHPB — Direct from Cor , HI ~ Industry Sources, FMG - Own Tests
Slide 26: Iron Ore
The New Force in Iron Ore & 3 3 > Oo > g iss 3 c & tot) 5 is E 3 oO 4) 2. CHAO - seferep| 8 | 8 o ae ~ ¢ 2) 3 O ja 2 | 2 2/2 2 6 omy ony - pueal = | & ata a ir |g 3 Sn f © OUI OlY- sejabuy |seyA & 5 e ° CHAO- Bulge} € co = 5 = 3B o eco 9 89 89 fF fF 8 o /BE FE lgeeseaeee 8 © [35 On 5 Buisseg % =
Slide 27: Comparisons of Size and Chemistry of Christmas Creek Fine Ore
Comparisons of Size and Chemistry of Christmas Creek Fine Ore HO UOI] UL 9010,J MAN su, Data Sources: *1 The Robe West Angelas Development Plan 2000: *2 Website for Robe River Mining; *3 Loo, C E, Witchard, D, Penny, G C, 1994, IMM
Slide 28: Comparisons of Christmas Creek High Grade Lump
Comparisons of Christmas Creek High Grade Lump = = o Z re) = es o jen oO a = 5 x ° 5 o) = a Data Sources: *1 The Robe West Angelas Development Plan 2000: *2 Website for Robe River Mining; *3. Test Methods: TI: 15kg test - % -6.3mm using ISO 3271; Al — 15kg test - % -0.5mm using ISO 3271; DI: tests o
Slide 29: FMG has two basic >60% Fe ore types
FMG has two basic > 60% Fe ore types do 6) ¢ Direct ship (or high grade) - requires no beneficiation and is already >60% Fe with low impurities ¢ Beneficiated ore - is processed (in common Pilbara practice) through a beneficiation plant to achieve > 60% Fe « High moisture content is removed in the s
Slide 30: Chichester Cross Section - why mining costs are low
Chichester Cross Section - why mining costs are low 2-3km Width «x thickness 2 100m Drill Hole Spacing es ces es =o LAGS ; : Reference FORTESCVE METALS GROUP ZEEE GENERAL CHICHESTER RANGES IRON ORE DEPOSIT EZ) Nomen DIAGRAMATIC CROSS SECTION EEEIGE, roctea seer LOOKING WEST [| uamineraices Mammut No
Slide 31: Slide 31
Slide 32: Marketing
2 © s 2 el ce in The New For Marketing
Slide 33: Marketing Success
Marketing Suc C) All of production covered by non-binding MOU’S prior to the release of technical specifications () Enthusiastic response by the steel industry to technical specs C) Four major long term off-take contracts signed covering 10 mtpa with prepayments: * Hebei Wenfeng * Jiangsu Fengli * P
Slide 34: Typical Contract
Typical Contract Ping Xiang Iron & Steel Co. Ltd _] 2m tonnes iron ore per annum LJ Life of contract 22 years J Prepayment of US$20m ¢ US$10m prior to financial close e US$10m during construction 2 e) s 2 a = iS) 8 is) am 3 © Zz. ® a) aa LI Ping Xiang — a large mill - 4 m tonnes p.a., 13,000 employe
Slide 35: Partnerships
Partnerships 2 © s 2 el ce in The New For
Slide 36: International Corporate Support
International Corporate Support Contracts Signed & First Subcontractors Appointed MULTIPLEX Xt The New Force in lron Ore
Slide 37: China Rail Engineering Corporation and partners
>» China Rail Engineering Corporation >» USS$13 billion work in hand > 40,000 kms of rail > China Harbour Engineering Company Produces 60% of worid’s large cranes » US$3.2 billion assets >» US$2.3 billion turnover > China Metallurgical Construction (Group) Corporation > US$2.4 billion total assets >
Slide 38: Design, Construct & Finance Contracts
Design, Construct & Finance Contracts Q) Total Project Solution - only excludes locomotives & mining pre-production costs CREC, CHEC & MCC to assume 100% completion risk O oO Deferred Payment Schedule - most of settlement consideration due well after practical completion CL) Payment commences only o
Slide 39: Definitive Feasibility Study Manager WorleyParsons
Definitive Feasibility Study Manager WorleyParsons QC) Largest Engineering Service provider to Infrastructure Resource and Process Industries in Australia LL) Well known to International Credit Rating Agencies L) 9,500 Project Services Personnel in 59 global offices John Grill, WorleyParsons CEO: “W
Slide 40: FMG Funding
FMG Funding Forecast Sources and Uses , SOURCES A$m | USES A$m China Metallurgical * 306 | Pre-production 70 Iron Ore Customers **104 | Beneficiation Plant 340 Total $410 | Total $410 * Under Agreement ** Forecast Virtual Equity from Steel Mills The New Force in lron Ore
Slide 41: The Pilbara Infrastructure (TPI) Funding
The Pilbara Infrastructure (TPI) Funding Forecast Sources and Uses SOURCES A$m | USES A$m China Rail * 630 | Train Sets 290 China Harbour *571 | Below Track S15 Iron Ore Customers **139 | Train Loading 165 Locomotive leases 100 | Stock Yard Equipment 238 Wharf 232 Total $1,440 | Total $1,440 * Under
Slide 42: EBITDA of Aggregated FMG & TPI
35 4 30 4 E.B.1LT.D.A 2 of Aggregated 4 Revenue FMG & TPI 2 ($35.99) J 45Mt S 20 - > é $25.24/ ey Logistics Total Cost _ a 18 4 6275) ($10.75) = A$1,161m pa a 10 - S co i Mining & Processing ($8.00) FMG TPI oe The New Force in Iron Ore er
Slide 43: Valuation Sensitivities 45Mt/a
Valuation Sensitivities 45Mt/a SB yrc ; . Current Market ‘03 low 05 expected Iron Ore Selling Price per Price (2004) | Forecast 20%+| Forecast 50%+ tonne FOB Port Hedland A$29.99/Tn A$35.99/Tn A$44,98/Tn Margin per tonne (A$) 19.24 25.24 34,23 EBITDA (A$m) 866 1,161 1,609 EBITDA per share (A$) 3.46
Slide 44: Fortescue Corporate Summary
Fortescue Corporate Summary Ticker: FMG.AX 227m Shares, Con. Notes & Options @ current share price $3.75 ~ A$850m Market Cap Shareholder Shares (m) Percentage Directors and Management 118.2 50.4% Steel Mills and Institutions: 43.7 19.3% MLC JF Capital Partners JP Morgan Jiangsu Fengli Ospraie Fund A
Slide 45: Port & Rail Development Schedules
Port & Rail Development Schedules a = o Z re = ips o jen oO 6 = 5 z g 5 o = a
Slide 46: The Pilbara Infrastructure (TPI) Port & Rail
The Pilbara Infrastructure (PPI) Port & Rail
Slide 47: Fortescue Development Timeline
Fortescue Development Timeline
Slide 48: Rail Construction Months Fast Track
Rail Construction 18 Months Fast Track C) Computer aided designed rail corridor and alignment CQ) Engineering design ‘Worlds Best Practice” (2 Order locomotives and sleepers prior to financial close Q Rolling stock compatibility on key features Port Construction 20 months (Paralleled with Rail Const
Slide 49: FMG: Iron Ore
FMG: The New Force in [ron Ore Port'itedland! ‘J va rs ; jount Goldsworthy, LEGEND Town Highway Drainage ~ Rell - existing, Reail corridor - proposed FMI Tenements FG Rio Tinto Robe Fiver ron Ore deposit Iron Gre: mine: HE —F-3] ow cea Ad * & Distance equivalent: Los Angeles to San Francisco AQ
Slide 50: Fortescue House Kings Park Road
Fortescue House 50 Kings Park Road West Perth Western Australia www.fmegl.com.au FMG Road Show Syd Mel Feb 05
Fortescue Metals Group — Investor Presentation (February 2005) on 6ix