Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (July 2007)
33 slides from Fortescue's investor presentation, Jul 13, 2007
Slide 1: The New Force in Iron Ore – Institutional Placement July 2007
Fortescue Metals Group Ltd THE NEW FORCE IN IRON ORE For personal use only Institutional Placement – July 2007 T ra in U nl o a d er Fortescue Port Footprint – 5km Fortescue Metals Group Ltd THIS DOCUMENT MAY NOT BE DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON This presentation was prepared
Slide 2: Placement Summary
FMG – establishing a 200mtpa iron ore producer For personal use only Placement Summary • 265 million shares currently on issue • New shares to be placed with institutions through a 3 day book build process Placement Reason • To complete financing to 55mtpa and secure platform for future growth Forte
Slide 3: Executive Summary
For personal use only Executive Summary Executive Summary Fortescue is set to become one of the world’s leading iron ore companies • Significant reserves and resources with very strong exploration upside • World class asset expected to be in the bottom decile of the cost curve • Off take agreements
Slide 4: Executive Summary
Executive Summary For personal use only Fortescue’s perfect timing - the iron ore market is the strongest it has ever been • Chinese demand is fuelling prices • Supply cannot keep up with demand • Forecast Market price increases of 25% in 2008 Fortescue has positioned itself very well • Management i
Slide 5: The China Story – Urbanisation
For personal use only The China Story “- isations” – Driving China’s Unprecedented Demand for Iron ore Urbanisation • Currently 44% (circa 580m people) live in urban areas • Increasing by approximately 1% pa (10 -15m people) and is independent of economic cycles Urbanisation is a juggernaut – unaffe
Slide 6: Industrialisation and Globalisation Driving Demand
“- isations” – Driving China’s Unprecedented Demand for Iron ore For personal use only Industrialisation • Pools of able people willing to work for low wages • Rapidly growing internal market • High savings rate underpinning investment • Industrial output 3rd globally and growing > 10% pa • Major ad
Slide 7: Ultra-fast Development = New Risks
Ultra-fast Development = New Risks For personal use only Underestimating Demand Again • expansion plans risk being too little too late • “isations” = more demand sooner • more than “compound growth” • “logistic growth” – 120Mt higher by 2011 Rearview mirror forecasting doesn’t see the changes coming
Slide 8: China Requires that Australia Recover Market Share
China Requires that Australia Recover Market Share Chinese Im ports by Source For personal use only 80.00% Infrastructure constraints limit Australian 70.00% response leading to falling market share 60.00% 50.00% Aust Brazil 40.00% India S.Africa 30.00% Others 20.00% 10.00% 0.00% 89 90 91 92 93 94 9
Slide 9: Infrastructure Constraints
Infrastructure Constraints For personal use only Access to infrastructure essential for a major new producer • No access = no nimble competitors • We mistook structural change as merely cyclical waves Absence of latent capacity • Effective capital management? or • Avoidance of potential third party
Slide 10: Fortescue Snapshot
For personal use only FMG Snapshot and Project Update Fortescue snapshot • Major Australian company, market capitalisation of approximately A$10 billion – 29th largest company listed on the ASX as at 10 July 2007 – S&P/ASX 200 and MSCI Index inclusion • Approx 40,000 square kilometers of mining tene
Slide 11: Massive Pilbara Holdings
Massive Pilbara holdings 40,000 square kilometres For personal use only Exploration Covering 40,000 square kilometres efficiently 11
Slide 12: Unparalleled Assets – Significant Reserves & Resources
Unparalleled Assets – Significant Reserves & Resources For personal use only • One of the largest bedrock hosted iron ore discoveries in Australia • Ore reserves of 1.1 Bt, including proved ore reserves of 120 Mt, providing sufficient ore for approximately 20 year mine life at 45Mtpa 2500 2000 milli
Slide 13: Unparalleled Assets – Shallow & Extensive Ore Body
Unparalleled Assets – Shallow & Extensive Ore Body For personal use only Ore Body Characteristics • More than 2.4Bt of high quality hematite resource, 1.1Bt reserve • Free digging over burden low cost removal • Mineralisation gently undulating - typical dip at 2° to 5° • Mineralised thickness varies
Slide 14: Unparalleled Assets – Competitive Cost
Unparalleled Assets – Competitive Cost For personal use only 60 Australian mines US cents/dmtu 50 Brazilian mines FMG mine 40 30 20 10 0 0 200 400 600 800 1000 Cumulative Production (mn wmt) (1) Site Operating Costs are those costs used to determine free cashflow and include raw material costs and c
Slide 15: The Port
BHPB ship enjoying the dredged turning circle (as we soon will be) For personal use only The Port Port construction +45=100 ahead of schedule 100-200 mtpa mtpa with reclaim area of 55 mtpa 200+ mtpa capacity T55 train unloader 15
Slide 16: Port Hedland Port Operations
Port Hedland Port Operations For personal use only Train Unloader – on Schedule 16
Slide 17: Rail Corridor
Rail Corridor Total Rail Line Cleared (260 kms) For personal use only Rail earthworks on eight separate construction fronts and all bridges underway East Turner River Bridge Concrete Piers 17
Slide 18: Rail construction progress
Fortescue’s construction locos at welding depot For personal use only Fortescue’s rail track laying underway 18
Slide 19: Rail track laying and Cloud Break airport
Fortescue’s rail track laying underway For personal use only Airport complete – Cloud Break Mine 19
Slide 20: Permanent Camp and Screening Plant
Permanent Camp – Cloud Break Mine For personal use only Screening Plant Artist’s Impression 20
Slide 21: Crushing Plant and Loading Vault
Crushing Plant For personal use only Artist’s Impression Loading Vault Artist’s Impression 21
Slide 22: Marketing – Sold Out
Marketing – Sold out For personal use only • 55Mtpa contracted for minimum of 10 years • Approximately 40Mtpa contracted for “Fortescue Expansion” tonnage • All “top 10” Chinese Mills have agreements • The focus has been on agreements directly with mills who have approval to expand and already recei
Slide 23: Baosteel and Tangshan Agreements; Straightforward Construction
and and Tangshan For personal use only • 55mtpa – 10mtpa to Baosteel • Of expansion tonnes, additional 10mtpa to Baosteel. • Underwrites future expansion beyond 55mtpa • Major product endorsement for other global steel mills. • Technical program to optimise Fortescue ore for market. • Preferentially
Slide 24: Significant Liquidity
Significant liquidity For personal use only 3,500 Cost Over-run & Back-up Reserve F.O.O.S. Millions 15/05/2008 (AUD) Infrastructure Contingency 3,000 Mining & Working Capital Infrastructure Costs Actual / Forecast 2,500 2,000 1,500 1,000 500 0 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- F
Slide 25: Optimise Project – Production Growth Strategy 55–200mtpa
Optimise Project – 55 mtpa First Ore on Ship For personal use only May 2008 2 Loading Berths 1 Ship loader 2.5mt stockpile Single loop 1 x 2 car train unloader Lumpcircuit 1Km Production Growth Strategy 55 – 200mtpa 25
Slide 26: Expansion Program Driven by Demand
Expansion program is being driven by demand. For personal use only • All first phase 55mtpa contracted for 10 years + • Further 40mtpa contracted for expansion tonnage • Baosteel, Tangshan and several others FMG’s China Headquarters in Shanghai Exploration CID (Yandi) occurs undercover and in massiv
Slide 27: Progressive Growth Trajectory
Progressive Growth Trajectory For personal use only • Fortescue has built a team of experienced staff and contractors – FMG/Worley Alliance performing strongly – Blue chip contractors committed to project success • Staged, continuous T200 growth, maximises stakeholder value and minimises risk – Remo
Slide 28: Expansion Map – Infrastructure for 200mtpa
Expansion map – 200 mtpa For personal use only Port Hedland Point Samson Dampier 200Mtpa LEGEND FMG Tenements Ore Processing Plant FMG Rail Glacier Glacier Valley Valley Other Rail FMG Rail Extension FMG Kennedy Rail 80+ Mtpa 120+ Mtpa Flinders Flinders Solomon Solomon White White Knight Knight Clou
Slide 29: Port Expansion to 200mtpa
Port Expansion to 100 mtpa 100 mtpa Anderson Point For personal use only 3 berths 5mt stockpile Double loop 2x 2 car train unloaders 1Km Port Expansion to 200 mtpa 200 mtpa Anderson Point 6 X Cape size + 1 X Panamax berths) 3rd Rail Loop 3rd Train Unloader 200mtpa stock yard 07_038_0521_COR 29
Slide 30: Summary and Basis for Expansion Stages
Summary and Basis for Expansion Stages For personal use only Step 1 – Expansion to 100mtpa • Optimum and shortest time expansion step in Chichester. Mines proven resources and maximises three berth capacity Step 2 – Expansion to 200mtpa • Progressive step up allowed by dredging approvals and mining
Slide 31: Funding – Optimisation Plans
For personal use only Funding Funding – optimisation plans • Proceeds will be used for : – Optimisation activities – General liquidity Sources to 30 June 20081 US$bn Uses to 30 June 20081 US$bn Existing debt facilities 2.03 Infrastructure / mining2 1.90 Leasing 0.35 Cash flow to FOOS 0.13 Equity (es
Slide 32: Funding – 200mtpa; Presentation Conclusion & Equity Execution Timetable
Funding – 200mtpa For personal use only • Mining Equipment and Ore Preparation – Free cash flow from project • Transport infrastructure – Sale and Lease back of Port and Rail facilities • Alternatives from U.S. 144A Capital Markets (Citigroup ) – Hybrid and other non dilutive project financing alter
Slide 33: Transaction Timetable
Transaction timetable For personal use only • There are a number of key dates in relation to the Institutional Placement which are detailed in the table below: • Preference given to new (and existing) FMG long term capital partners Key event Date and Time (AEST) Stock into voluntary trading halt/sus
Fortescue Metals Group — Investor Presentation (July 2007) on 6ix