Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (October 2012)
69 slides from Fortescue's investor presentation, Oct 24, 2012
Slide 1: Fortescue Investor Presentation and Site Visit
For personal use only Fortescue Investor Presentation and Site Visit October 24 - 25 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: Welcome
For personal use only Nev Power Welcome 3
Slide 4: Agenda
Agenda For personal use only 1. The Team – View from the Chair 2. CEO’s overview 3. Development Update 4. Operational Update 5. Financial Snapshot 6. Q&A 7. Close 4
Slide 5: View from the Chair
For personal use only View from the Chair Andrew Forrest 5
Slide 6: CEO's overview
For personal use only CEO’s overview Nev Power 6
Slide 7: The Fortescue story
The Fortescue story World’s 4th biggest seaborne exporter For personal use only Strong culture delivers record results 57.5mt Top 20 ASX listed company record shipped in FY2012 12bt resource Target run rate 155mtpa 64 mtpa current run rate 7
Slide 8: See our operations in the Pilbara
See our operations in the Pilbara Corporate DVD For personal use only 8
Slide 9: 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 growth and manufacturing capability Speed Speed of delivery – time is money Planning Plan
Slide 10: Making a difference
Making a difference Fortescue in the community For personal use only 406 Aboriginal people currently employed at Fortescue $1b target for contracts through Billion Opportunities program for Aboriginal businesses of the Fortescue 10.4% workforce comprises Aboriginal people $546m in 85 separate contra
Slide 11: 2012 highlights
2012 highlights For personal use only 55.8mt Fortescue tonnes shipped up 38% yoy $6.7bn Revenues up 23% yoy $48/wmt C1 average $3bn EBITDA up 14% yoy $1.6bn NPAT up 53% A$0.08 fully franked dividend 11
Slide 12: Defining period for Fortescue
Defining period for Fortescue Decisive response to market volatility For personal use only $300m operating cost savings FY13 capital down US$1.6bn Chichester expansion 95mtpa Dec 2012 Solomon Firetail 20mtpa March 2013 March 2013 115mtpa Kings and 155mtpa on market recovery US$5.0bn debt restructure
Slide 13: Market
For personal use only Market 13
Slide 14: Long term confidence in China
Long term confidence in China Lower growth rates but still strong in absolute volumes For personal use only • Strong underlying economy • Stimulus packages • Regime change – 8 November • Steel market supply and demand balance 14
Slide 15: Stimulus package announced
Stimulus package announced Approves US$157 billion infrastructure projects For personal use only Near term Additional approvals steel 25 consumption 7 port and channel projects growth 13 highway projects urban railway 10 urban waste plant projects projects infrastructure and US$133 billion urbanisat
Slide 16: History shows price volatility
History shows price volatility Strong rebounds follow price drops For personal use only Iron Ore Price (62% Fe CFR – Platts IODEX China) $200.00 $180.00 $160.00 $140.00 $120.00 $100.00 $80.00 16
Slide 17: Chinese cost curve to support prices
Chinese cost curve to support prices With Fortescue products at lower end of cost curve For personal use only 200 Domestic Chinese Ore Australia Brazil US$/dry tonne CFR equivalent India 150 South Africa Other 100 50 0 0 100 200 300 400 500 600 700 800 900 1,000 * Estimated C1 costs at full producti
Slide 18: Decreasing cost profile
C1 cost Decreasing cost profile For personal use only $/wmt 50 45 40 35 30 25 20 15 10 5 0 Fortescue Firetail* RIO^ BHP^ Industry leaders^ Vale^ * Estimated C1 costs at full production ^ C1 costs estimated from Metalytics industry US$/dry tonne CFR equivalent analysis 18
Slide 19: Expansion and Development
For personal use only Expansion and Development 19
Slide 20: The quarterly milestone calendar
The quarterly milestone calendar Forging ahead For personal use only 115mtpa run rate Christmas Creek 2nd OPF JUN QTR SEP QTR FY MAR QTR 2013 DEC QTR Solomon Firetail Train unloaders 20
Slide 21: Fortescue has the dominant Pilbara land position
Fortescue has the Fortescue: dominant Pilbara land 85,000km2 Rio: 14,230km2 For personal use only position BHP: 8,195km2 21
Slide 22: Resource portfolio sets expansion platform
Resource portfolio sets expansion platform To leverage existing assets for low cost growth For personal use only 14,000 Annualised growth of 1.5bt 12,000 3,236 10,000 Mineral Resources (mt) 2,465 per annum 8,000 2,013 1,032 624 624 6,000 1,230 1,230 3,070 3,070 4,000 2,224 2,860 1,715 695 695 695 69
Slide 23: Flexible design for future growth
Flexible design for future growth Fifth berth (AP5) approved For personal use only Fourth berth - in construction Fifth berth - approval granted Fortescue * 120mtpa allocated priority capacity 23
Slide 24: Building one of the world's great resource companies
Building one of the world’s great resource companies For personal use only Strong FY2012 results Expansion to 155mtpa Deleverage following expansion Flexible growth pipeline Unique culture drives performance 24
Slide 25: Development
For personal use only Development Peter Meurs 25
Slide 26: Our transformational T155 expansion
For personal use only Our transformational T155 expansion 26
Slide 27: The current path to 155mtpa
The current path to 155mtpa For personal use only 27
Slide 28: T155 at a glance
T155 at a glance For personal use only $9.0 bn 2 shiploaders ~ 300km of rail 7,000 people 3 ROM pads ~ 300km of roads 1 train loader 3 OPFs ~ 30km of conveyors 2 train unloaders 3 stockyards ~ 300km of pipelines 4 stackers 2 airstrips 98 turnouts 4 reclaimers Production to increase by 180% 28
Slide 29: Port expansion
Port expansion Project director – Peter Thomas For personal use only $2.4bn 1200 people >15 contractors 31 Mar 2012 Sept 2012 Aug 2013 2014 (Pending Kings restart) Third berth Second train Fourth berth Fifth berth (AP3) unloader (TUL2) (AP4) (AP5*) 60mtpa 115mtpa 155mtpa * Additional costs when
Slide 30: Third berth – AP3
Third berth – AP3 Milestone achieved! For personal use only • Extension of existing wharf with a third berth and second shiploader • FOOS 1 February 2012 • Second reclaimer • 2nd shiploader fully operational 30
Slide 31: Fourth berth – AP4
Fourth berth – AP4 First berth in South West Creek For personal use only • New shiploading berth and third shiploader • Third reclaimer • Piling for wharf completed • Deck module installation underway • Shiploader complete and ready in China 31
Slide 32: Train unloading
Train unloading Increasing inload capacity at Herb Elliott Port: Two new train unloaders For personal use only • TUL2 Commissioned on schedule in September 2012 • TUL3 due to be commissioned by end November 2012 • 353,000m3 of earth • 15,728m3 of concrete 32
Slide 33: Rail expansion
Rail expansion Project director – Peter Thomas For personal use only $2.2bn 1500 people >10 contractors Oct 2012 Dec 2012 May 2013 Mainline Rail to Expansion upgraded Solomon complete 90mtpa 115mtpa 155mtpa 33
Slide 34: Mainline duplication
Mainline duplication Increasing Fortescue’s rail capacity to 15 trains a day For personal use only • 120 kilometres of rail • 50 turnouts, 6 catchpoints • 1 bridge • 11 rakes – 115mtpa • 13 rakes – 155mtpa (pending Kings restart) 34
Slide 35: Solomon spur
Solomon spur Connecting Solomon to Fortescue’s mainline For personal use only • 130 kilometres of rail • 16 turnouts, 5 catchpoints • 4 bridges • More than 10 million m3 of earth to be moved • Multiple contractors and work fronts 35
Slide 36: Thomas Yard construction
Thomas Yard construction Increasing Fortescue’s rail maintenance capacity For personal use only • Pilbara’s first automated wheel shop • New operations building • New locomotive provisioning facility • New fuelling facilities 36
Slide 37: Christmas Creek Phase (CC2)
Christmas Creek Phase 2 (CC2) Project director – Mark Skelton For personal use only $1.3bn 1500 people >11 contractors Mar 2012 Sept 2012 Dec 2012 May 2013 Pre-strip mining First ore to CC2 Jigging commences stockpile CC2 Increasing plant output to 95mtpa 23mtpa – CC1 27mtpa – CC2 (in ramp up) 5
Slide 38: Christmas Creek Phase (CC2)
Christmas Creek Phase 2 (CC2) Increasing Chichester Hub output to 95mtpa For personal use only Second OPF (27mtpa) Remote Crushing Hub Overland Conveyor System Airstrip Camp Expansion Power Station Expansion 38
Slide 39: Christmas Creek Phase (CC2)
Christmas Creek Phase 2 (CC2) First ore – September 28th 2012 For personal use only 39
Slide 40: Solomon
Solomon Project director – Simon Carter For personal use only $3.0bn 1500 people >30 contractors Mar 2012 Dec 2012 Mar 2013 Dec 2013 Pre-strip mining Early ore Firetail Kings commences, OPF Plant tailing storage (Pending restart) facility 5mtpa 20mtpa 60mtpa 40
Slide 41: Solomon Earthworks
Solomon Earthworks For personal use only • One of the Southern Hemisphere’s largest earthworks construction efforts • 35 million tonnes moved • Earthworks complete 41
Slide 42: Inbound for Solomon
Inbound for Solomon Local and global sourcing strategy For personal use only Transport of materials via: • 45 sea vessels • 400 oversized trailers • 3000 convention trailers 70% of modules now delivered to site. Delivery of Kings modules from January 2013 (pending restart). 42
Slide 43: Solomon progress update
Solomon progress update For personal use only 43
Slide 44: T155 Expansion - Well on the journey to 155mtpa
For personal use only T155 Expansion - Well on the journey to 155mtpa! 44
Slide 45: Operational Update
For personal use only Operational Update Jamie Frankcombe 45
Slide 46: Key points
Key points For personal use only Safety • Sustained performance improvement Operations • Shipment of 55.8mt of Fortescue ore for FY2012 exceeds full year guidance • 65mtpa annualised shipping rate achieved in September quarter 2012, ahead of guidance • 16.1mt shipped in Q1 despite high levels of mai
Slide 47: Safety performance
Safety performance Total Recordable Injury Frequency Rates (TRIFR) – as at 5/10/2012 For personal use only 16 14.4 14 Historical 12.9 12.4 11.6 12 10.7 11.4 9.9 11.1 8.9 10 9.2 10.7 9.1 3 Month Rolling TRIFR 8.8 8.8 8.5 9.7 8.1 7.8 8 9.0 7.7 8.4 7.6 7.4 7.3 6 12 Month Rolling TRIFR 6.4 5.9 6.0 4 2 T
Slide 48: Production ramp up
Production ramp up FY13 Q2 reforecast use only Sol BCI CC CB Rail Outload Capability 12,000 10,000 Train Unloader 2 Kilotonnes (kt) For personal 8,000 6,000 Solomon OPF Solomon train Firetail 4,000 load out 2,000 Christmas Creek OPF2 Cloudbreak wet front end 0 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-
Slide 49: Operations – 30%+ growth across all areas
Operations – 30%+ growth across all areas Continuing growth trajectory over FY13 For personal use only Mining Processed Port Ore Mined (wmt) Ore Processed (wmt) Total Ore Shipped (wmt) 35.0 40.0 40.0 30.0 35.0 35.0 25.0 30.0 30.0 Million tonnes Million tonnes Million tonnes 25.0 25.0 20.0 20.0 20.0
Slide 50: Cloudbreak
Cloudbreak For personal use only Fortescue’s flagship Higher strip ratios driving High value mine -143mt total ore efficiencies ore mined to date • Resizing mining fleet • Wet front end • Rebalancing mining costs 50
Slide 51: Christmas Creek
Christmas Creek For personal use only 2nd OPF Christmas Creek mining Operational currently in expansion progressing well efficiencies commissioning 51
Slide 52: Solomon
Solomon For personal use only Early ore Mobilisation of Firetail project at 20mtpa project on track mining contractor by end March 2013 52
Slide 53: Rail
Rail For personal use only Rolling stock Pursuing 43 locos, 2,746 commissioning opportunities for wagons at program on schedule efficiencies 115mtpa 53
Slide 54: Port
Port For personal use only 2nd inload and 115mtpa Port Operational performance outload circuit fully capacity exceeding expectations commissioned 54
Slide 55: Production forecast
Production forecast For personal use only • Q1 ore shipped 16.1mt slightly above guidance • On track for record production of approximately 20mt in December 2012 quarter • Major production ramp up through December quarter 2012 with commissioning of 2nd TUL and 2nd CC OPF • Exit December quarter at a
Slide 56: Resetting the cost bar
Resetting the cost bar For personal use only Solomon resets the C1 cost profile: Current C1 $48/t Firetail $25/t Kings $30/t Revised C1 $40/t Greater flexibility to manage cost in volatile markets 56
Slide 57: Financial snapshot
For personal use only Financial snapshot Stephen Pearce 57
Slide 58: Financial Summary Year End June 2012
Financial Summary Year End 30 June 2012 For personal use only • Record revenues of US$6.7bn and EBITDA of US$3.0bn • Net profit after tax of US$1.6bn • Tax expense of US$704m and no MRRT obligation • Final fully franked dividend of A$0.04 per share declared. Total 2012 dividends declared A$0.08 per
Slide 59: Earnings analysis
Earnings analysis For personal use only 52.1% 50.3% 49.9% Return on equity • Sustained ~ 50% ROE 2010 2011 2012 Earnings and cash flow 89.3 90.2 per share (US$) 50.1 42.0 • 52% increase in earnings 32.9 per share 18.9 • Consistency in cash flow 2010 2011 2012 per share EPS CFPS 59
Slide 60: Robust operating margin
Robust operating margin C1 cost structural reduction when Solomon comes on line For personal use only Fortescue’s average realised selling price and C1 costs(1) $160 $146 $140 $128 $127 $120 $114 $100 $74 $100 $57 (3) $65 $88 $45 $76 US$ wmt $80 $44 $19 $64 $58 (4) $60 $32 $22 $22 $20 $20 $8 $18 $24
Slide 61: New Senior Secured Credit Facility
New Senior Secured Credit Facility For personal use only US$5.0bn Term Loan facility successfully executed in October 2012 • 5 years maturity • Terms and conditions substantially consistent with unsecured notes • Libor + 4.25% (Libor floor 1.00%) Key Deal Information • 150 investors, mix of bond and
Slide 62: New facility structured for flexibility
New facility structured for flexibility Extended maturity profile, enhanced cash liquidity For personal use only Debt maturity schedule $5.0 $4.5 $4.0 $3.5 $3.0 US$bn $2.5 $2.0 $1.5 No material debt $1.0 maturity until $0.5 November 2015 $0.0 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 C
Slide 63: Leucadia Settlement
Leucadia Settlement For personal use only In September, 2012, Fortescue agreed terms with Leucadia to repay the Leucadia loan notes. Key terms of the agreement: • Early repayment of the unsecured loan notes with release from all current and future liability • Settlement of the court proceedings • US
Slide 64: Cash position
Cash position For personal use only Pro forma cash at 30 September of US$4.1bn as follows: US$bn Cash on hand at 30 September 2012 2.4 Senior secured credit facility 5.0 Total cash available 7.4 Refinancing – Leucadia, bank facilities and costs (3.3) Pro forma cash position 4.1 Secured facility prov
Slide 65: Capital expenditure
Capital expenditure For personal use only • FY13 guidance revised on 4 Sept in response to market volatility Guidance Saving Revised 155mtpa expansion 4.2 (1.1) 3.1 Other capital 2.0 (0.5) 1.5 Total 6.2 (1.6) 4.6 • 155mtpa saving reflects deferral of Kings and fourth berth completion • Q1 spend of $
Slide 66: Financial strength will follow expansion
Financial strength will follow expansion Cashflow will be harnessed for financial de-risking For personal use only Strong operations • Expanded product range • Low Solomon Strip Ratio < 2 : 1 • Target Solomon C1 cost of US$25 - 30/wmt* • C1 cost in lowest 1/3rd of global cost curve • Economies of sc
Slide 67: Q&A Session
For personal use only Q&A Session 67
Slide 68: Site tour timetable
Site tour timetable For personal use only 06:10 Bus transfer from Hyatt to Network Aviation Terminal 06:45 Check in; Network Aviation Terminal 07:30 Depart Perth Solomon Tour Christmas Creek Tour 17:00 - 18:50 Flight to Perth Contact information Stuart Gale: 0437 900 175 Nathan Vass: 0405 040 133 68
Slide 69: Proudly supporting
For personal use only Proudly supporting: Sign up to alerts online: www.fmgl.com.au
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