Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (December 2013)
27 slides from Fortescue's investor presentation, Dec 10, 2013
Slide 1: Corporate Presentation
Corporate Presentation For personal use only December 2013
Slide 2: Disclaimer
Disclaimer For personal use only Important Notice The purpose of this presentation is to provide general information about Fortescue Metals Group Limited ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This prese
Slide 3: Building World Class Operations
Building World Class Operations Unprecedented ramp up For personal use only • Founded 2003 • First ore 2008 • 100mt expansion 2011 - 2013 • First dividend 2011 • Ramp up to 155mtpa 2014 3
Slide 4: FY13 pivotal in Fortescue's history
FY13 pivotal in Fortescue’s history World’s fourth largest seaborne exporter For personal use only 81mt shipped in FY13 Expansion Firetail Port Rail 155 Costs mtpa by March 2014 efficiency focus A$0.10 15.6bt final fully franked dividend declared resource base 4
Slide 5: Production and costs
Production and costs Continued growth of all operations For personal use only Ore Mined (wmt) Ore Processed (wmt) 25 40 35 20 30 Million tonnes Million tonnes 25 15 20 10 15 10 5 5 0 0 Total Ore Shipped (wmt) Strip Ratios 30 6.0 6.0 25 5.0 5.0 Third Party Ore Million tonnes 20 4.0 4.0 15 3.0 3.0 10
Slide 6: A differentiated model
A differentiated model Delivering results For personal use only China Leveraging China’s growth and manufacturing capability Speed Speed of delivery – time is money Planning Planning for scale today and efficiency into the future Relationships Direct relationships with sub contractors and local supp
Slide 7: Financials
For personal use only Financials
Slide 8: Financial Summary FY13
Financial Summary FY13 Record operational results delivering financial strength For personal use only • Record revenue US$8.1bn 21% • EBITDA of US$3.6bn 18% & NPAT US$1.7bn • Capital expenditure of US$6.2bn • Net debt US$9.9bn* - peak debt behind us • Flexible debt structure with early repayment
Slide 9: Sustained operating cost reduction
Sustained operating cost reduction C1 trending lower as steady state operations commence For personal use only C1 Cash Cost (US$/wmt shipped) Strip Ratio 6.0 C1 estimate for the 5.0 remainder of FY14 4.0 3.0 2.0 1.0 0.0 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 FY12 FY13 FY14 C
Slide 10: Operating margins
Operating margins support Fortescue’s average realised selling price and C1 costs For personal use only US$/wmt 62% Platts US$/dmt 180 180 160 160 $146 140 140 $119 120 $110 $115 $114 $111 120 $73 $102 $103 100 100 $40 $89 $42 $49 $58 $33 $60 80 $21 $48 80 60 $23 $23 60 $21 $18 $18 $19 $18 $19 $18 4
Slide 11: Breakeven cash price
Breakeven cash price Reduced to low US$70’s / t (62% CFR basis) For personal use only 100 80 60 40 20 0 C1 Admin and Fixed Shipping Royalties Interest Realised Grade, Breakeven Breakeven sustainable minimal elements FMG discount and price - FY14 price - 12 capex US$/wmt moisture months ago CFR Deliv
Slide 12: Capital Expenditure
Capital Expenditure FY13 actual and FY14 indicative For personal use only FY2013 FY2014 US$bn Actual Indicative 155mtpa expansion 3.9 0.5 Operational capital 0.7 0.8 Other capital projects 0.3 0.2 Exploration 0.1 0.1 Fleet 1.1 0.3 Total 6.2* 1.9 • T155 expansion completing in FY14 • Significant posi
Slide 13: A new era for Fortescue
A new era for Fortescue CAPEX declines rapidly as production climbs For personal use only Total spend Tonnes shipped US$ billions millions 10.0 180 2014 and 2015 estimates 9.0 160 8.0 140 7.0 120 6.0 100 5.0 80 4.0 60 3.0 40 2.0 1.0 20 0.0 0 FY10 FY11 FY12 FY13 FY14 (est) FY15 (est) Operating spend
Slide 14: Debt repayment has commenced
Debt repayment has commenced Staged debt reduction focused on short term bond maturities For personal use only 5,000 4,950 Term Loan 4,500 repayable at 4,000 any time 2015 and 3,500 2016 Notes are now 3,000 callable US$m 2,500 2,000 1,000 1,500 1,500 1,000 1,040 1,000 1,000 900 500 600 0 CY2013 CY20
Slide 15: Market
For personal use only Market
Slide 16: 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 7.8% GDP growth Q3 • New leaders committed to growth • Steel consumption >2.1mt per day • Urbanisation and infrastructure driving steel demand • 90% steel coastal a
Slide 17: China GDP Volume
China GDP Volume GDP doubled in 6 years For personal use only % GDP Growth GDP Trillion RMB 16 70 14 60 12 % GROWTH 50 FORECAST* 10 40 8 30 6 GDP 20 4 GDP 2 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 * Based on IMF forecasts 19
Slide 18: Steel consumption per capita
Steel consumption per capita China has only just reached levels of consumption of a developed country For personal use only Kg per capita 800 700 600 500 400 300 200 GDP 100 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 China USA Source: Macquarie Research 20
Slide 19: Strong rebounds follow price drops
For personal use only 21 $100 $110 $120 $130 $140 $150 $160 $170 $180 $190 $200 $80 $90 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Strong rebounds follow price drops Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Au
Slide 20: Clear Strategy
For personal use only Clear Strategy
Slide 21: Port – flexible design for future growth
Port – flexible design for future growth Fourth berth commissioned with fifth berth approved For personal use only AP3 AP2 AP1 AP4 AP5 2014 23
Slide 22: Product Strategy
Product Strategy Revised product strategy at 155mtpa - average grade 58% For personal use only Bonnie Fines 6mtpa Super Special Fines 30mtpa Fortescue Blend 70mtpa Rocket 10mtpa Kings CID 40mtpa • Focused on maximising resource recovery • Optimising revenue by an integrated product 24
Slide 23: Moving down the global cost curve
Moving down the global cost curve Targeting bottom quartile For personal use only October 2013 CFR Cost of China's Iron Ore Supply – August 2013 (including royalties & freight) 200 Domestic Chinese Ore Australia Brazil India 150 South Africa Other US$/dry tonne 100 50 Fortescue 0 0 100 200 300 400 5
Slide 24: Resource portfolio sets expansion platform
Resource portfolio sets expansion platform Leverage existing assets for low cost growth For personal use only 18,000 16,000 14,000 5,205 5,205 Mineral Resources (Mt) 12,000 3,236 10,000 2,465 2,463 2,463 8,000 2,013 624 624 1,032 624 624 1,230 6,000 1,230 3,247 3,504 3,070 3,070 2,860 4,000 1,715 2,
Slide 25: Making a difference
Making a difference Jobs and opportunities replacing welfare For personal use only Direct Aboriginal 489 employees Aboriginal people in 12.5% Fortescue workforce Aboriginal people 481 employed by contractors 1,000+ Trained through VTEC Contracts awarded to $1.4bn Aboriginal companies + JV’s 27
Slide 26: Delivering on targets
Delivering on targets 10 years strong For personal use only • Strong financial results • Expansion to 155mtpa • Strong cash position reduces net debt with repayments in 2013 • Move to a dividend pay out ratio • Flexible incremental growth • Unique culture drives performance 28
Slide 27: For personal use only
For personal use only Sign up to alerts online: www.fmgl.com.au Proudly supporting: 29
Fortescue Metals Group — Investor Presentation (December 2013) on 6ix