Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Mines and Money (March 2011)
22 slides from Fortescue's conference presentation, Mar 23, 2011
Slide 1: Mines and Money: Growth Opportunities and Market Challenges
For personal use only Mines and Money Growth Opportunities and Market Challenges 23 March 2011 Disclaimer 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 dec
Slide 2: The Waves Shaking the World
The Waves Shaking the World For personal use only • China, India, the Third Wave and the Crabs — Almost ¼ of world GDP and growing rapidly — ½ of world population enjoying rising standards of living • Wealth will approximately double every 10 years • Increased wealth taken initially as calories by p
Slide 3: The Impact of Digital Communication
The Impact of Digital Communication For personal use only Growth of mobile phones • CISCO predicts 138 million users globally by 2015 without access to electricity grid • Is underpinning productivity growth in less d developed l d countries ti — No need to wait for electricity — No need to wait for
Slide 4: Where are we in the economic cycle?
Where are we in the For personal use only economic cycle? y Predictions for growth CRABS – Canada, Russia, Australia, Brazil, South Africa Big economies underpinned by resources ~ 4% growth • Canada; Russia; Australia; Brazil; and South Africa - “CRABS” • Will continue to do well whilst commodity ma
Slide 5: China, India and Third Wave ridden by the CRABS
China, India and Third Wave ridden by the CRABS For personal use only (From the archives of Fortescue) Urbanisation in China and India has a way to go Source: CRU
Slide 6: China and India growth
China For personal use only China able to maintain growth > 8% growth • Overheating, property price inflation can cause problems • Controlled through directives used to keep growth balanced • Around 13% of world GDP; 1.3 billion people India Indian growth expected to mirror Chinese performance > 8%
Slide 7: Strong growth – a political imperative in China
For personal use only Strong growth – a political imperative i Chi in China China’s12th five year plan – great for growth • Current forecast of around 665mt of steel production for 2011 - YoY rise of over 6.2% (2010: 626mt) • Chinese economic growth is set to drive continued strength in demand for s
Slide 8: Fueling China's growth
For personal use only Fueling China’s growth Fueling China’s growth • Fortescue engaged with China in early stages of their emergence (first contracts in 2003/2005) • Targeted steel mills who did not previously have access to long-term supply arrangements • China Southern University, Fortescue devel
Slide 9: China and India: Outlook for Steel and Iron Ore Industries
China Thereand will India be dozens of future Chinese cities – planning to build up to 20 small and For personal use only medium new cities a year And grow from there... Outlook for Steel and Iron Ore Industries
Slide 10: Expected steel capacity growth
Expected steel capacity growth China’s growth will be supported by continued steel capacity expansions For personal use only • Crude Steel production capacity • Approximately 790Mt capacity in 2010; − To around 1290Mt in 2015 • An increase in steel capacity of 500Mt in 5 years Source: CBI China Chin
Slide 11: Chinese domestic iron ore cash costs
Chinese domestic iron ore cash costs The relatively high cost of China’s domestic iron ore supply will support the For personal use only long-term price of iron ore Source: Macquarie Research Outlook - steel demand World urbanisation will drive steel demand for decades Source: Metalytics
Slide 12: Iron ore price will remain strong
For personal use only Iron ore price will remain strong Outlook – iron ore price • Prices expected to remain high until at least 2012 with new supply gradually entering the market from 2013 to 2015 • Iron ore demand will continue to be supported by the industrialisation of the developing world • The
Slide 13: Marketing – index pricing transition
Marketing – index pricing transition For personal use only Benchmark regime - FOB Index pricing - CFR 160 150 140 130 120 Average CFR selling price per dry tonne 125 US$ per dry tonne 100 Average C1 costs per dry tonne 80 83 72 69 70 60 66 40 20 0 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec
Slide 14: Key risks for industry
Key risks for industry For personal use only Key risk • Supply of iron ore to keep up with demand • Skill shortages • Taxation (MRRT, Carbon Tax) Mitigation • Fortescue is expanding rapidly and has jump on others • Automation/remote A t ti / t control t l • We will continue to influence taxation out
Slide 15: Expected production increases by 2015
Expected production increases by 2015 For personal use only • Others (eg SNIM, Kumba, etc) ~ 75mtpa Shortfall — South Africa ~ 15mtpa (Kumba) — West Africa ~ ? Other I di India • Risk precludes conventional finance • New infrastructure not built Aust • Upgrades to existing possible • Delays - Rent s
Slide 16: Engaging with local communities
Engaging with local communities For personal use only Fortescue will be in the Pilbara for generations Community development plan • Residential workforce where possible, encouraging growth of regional cities • VTEC – local indigenous training and employment; guaranteed jobs for graduates • Actively
Slide 17: Three Hubs - Two Ports expansion strategy
Engaging with local communities For personal use only Three Hubs - Two Ports expansion strategy Chichester, Solomon and Western Hubs New 1Bt Nyidinghu discovery provides expansion flexibility and blending opportunities with Chichester mines 34
Slide 18: Fortescue – growing rapidly
For personal use only Fortescue – growing rapidly Carpe diem - 155mtpa • Rapid growth: • Now: Chichester 55mtpa on schedule for March Qtr 2011 commissioning • Short S o t term: te 155mtpa 55 tpa Port ota and d Rail a e expansion pa s o uunderway de ay aand d So Solomon o o ad advancing a c g rapidly
Slide 19: One of the world's greatest resource holdings
10 billion tonnes - one of the worlds greatest resource holdings 12,000 For personal use only 10,000 8,000 Million Tonnes Western Hub 6,000 Nyidinghu Resource Magnetite Resource Solomon Resource 4,000 Chichester Resource Chichester Reserve 2,000 0 2004 2005 2006 2007 2008 2009 2010 2011 Year • Maide
Slide 20: Designed for future expansion
Designed for future expansion For personal use only BHP Fortescue The Path to 155Mtpa then 355Mtpa Note: BCI JV is 50% Fortescue owned
Slide 21: Future growth story without parallel
Three Hubs - Two Ports expansion strategy For personal use only Chichester, Solomon and Western Hubs New 1Bt Nyidinghu discovery provides expansion flexibility and blending opportunities with Chichester mines 41 Future growth story without parallel • New exploration model across the Pilbara • Massiv
Slide 22: Forging ahead
For personal use only ahead Forging
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