Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Investor Presentation (October 2014)
108 slides from Fortescue's investor presentation, Oct 21, 2014
Slide 1: Investor Briefing
For personal use only Investor Briefing 21 October 2014
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 a world class company
Building a world class company For personal use only Reliable and competitive supplier to Asia • First ore 2008 • Over 415mt shipped to date • 155mtpa++ production rate • Low cost producer • Unique culture 3
Slide 4: For personal use only
For personal use only 4
Slide 5: The safest, lowest cost, most profitable iron ore producer
Be nc @) a R VIS I 0 The safest, lowest cost, = Fortescue most profitable iron ore producer C) Our Values oe & oe -: f Safety Family ¢ AVI (os AVIO _& “eg | Frugality a = 6! Empowerment A) = Ss J : i . es) ) Integrity 2, Fortescue © Cc J a The New Force in Iron Ore $ Enthusiasm “Yo 4 ayy Generating
Slide 6: Safety is at the heart of Fortescue's family values
Safety is at the heart of Fortescue’s family values For personal use only “My brothers’ / sisters’ keeper” • Safety Priorities 1. Look after yourself 2. Look after your mates • Engagement active participation • Empowerment to make decisions • Encouragement to speak up • Leadership strong and visible
Slide 7: September Quarter in review
September Quarter in review For personal use only Cost and efficiency focus 41.5mt $US3.6bn 7% Sept Qtr debt reduction 166 mtpa Annualised run rate Infrastructure complete Sweating the assets US$2.6bn Costs $32/t cash on hand 6% from June Qtr 7
Slide 8: Fortescue overview
Fortescue overview For personal use only Record operational performance delivers NPAT of US$2.7bn and EBITDA* of US$5.6bn Volume 54% Costs 23% 140.0 50 US$/wmt 105.0 40 mt 70.0 30 35.0 - 20 FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 Earnings EBITDA 58% NPAT 57% Debt repaid US$3.6bn 6.0 14.0 1
Slide 9: Moving down the global cost curve
Moving down the global cost curve For personal use only Targeting bottom quartile China Iron Ore Supply CFR Costs – Oct 2014 (including royalties and freight) 200 Domestic Chinese Ore Australia Brazil India 150 South Africa Other US$/dry tonne 100 50 Fortesc 0 0 100 200 300 400 500 600 700 800 900 1
Slide 10: Financials
For personal use only Financials Stephen Pearce
Slide 11: Introduction and key themes
Introduction and key themes For personal use only 1. Costs All in costs lower year on year and continuing to be reduced 2. Working capital Focus on reduction in inventory 3. Debt US$3.6bn debt repaid committed to further debt reduction 4. Cash Focus on maximising free cash flow and return on capital
Slide 12: C1 cost reductions
C1 cost reductions For personal use only Focus on low cost operations, productivity and costs US$/wmt Key drivers 50 • Low cost Solomon 33% 40 • Blending 48 44 • Enhanced processing 30 34 32 • Lower strip ratios 20 FY12 FY13 FY14 Q1FY15 • Productivity efficiencies 3
Slide 13: Further cost reductions planned
Further cost reductions planned For personal use only Clear strategies to continue to reduce costs US$/wmt 50 Key drivers • Fortescue River gas pipeline 40 • Autonomous haulage system 48 • Operational efficiencies and 30 innovation 32 • Enhanced processing to 20 upgrade product FY12 Q1FY15 Future ta
Slide 14: All in delivered cost to China $54/wmt
All in delivered cost to China $54/wmt For personal use only $5 Sustaining Capital $4 Interest Shipping 8.50 $13 Royalties 4.00 Overheads 0.60 C1 Cost $32 Mining, Processing, Rail and Port The cost of getting ore on to the ship 14
Slide 15: Working capital
Working capital For personal use only Focus on working capital management Sales terms All product sold on confirmed Letter of Credit (LC) Inventory 19% since December 2013 Liquidity $1-1.5bn minimum cash, or cash equivalents Prepayments potential roll-over options Procurement initiatives incremental
Slide 16: US$3.6bn re-paid since November 2013
US$3.6bn re-paid since November 2013 For personal use only Flexibility with $5.3bn available for voluntary repayment and $7.8bn by Nov 2015 5,000 Pre-payable at Fortescue's option 4,500 4,900 4,000 3,500 3,000 Pre-payable at US$m 2,500 Fortescue's Pre-payable at option 2,000 Fortescue's in April 201
Slide 17: Key credit metrics
Key credit metrics For personal use only Moving towards investment grade metrics Debt to EBITDA Gearing: Debt / (Debt + Equity) 69% 71% 3.5x 67% 67% 56% 2.7x 2.8x 1.8x 1.7x FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 Interest coverage: EBITDA / Interest Cash and debt (US$bn) 12.7 6.9x 9.6 5.4x
Slide 18: Cost of borrowings
Cost of borrowings For personal use only Focus on debt reduction lowering interest costs • Cost of borrowings reduced 10.1% to 5.3%* 7.0% 7.0% • Debt repayments US$3.6bn 6.3% 5.3% committed in Oct 14 • Debt reductions + refinancing reduce borrowing costs by US$330m p.a. FY10 FY11 FY12 FY13 FY14 18 *
Slide 19: Cashflow FY14
Cashflow FY14 For personal use only Record net free cash flow US$4.3bn US$m 9,000 6,248 6,000 2,778 2,808 3,004 3,000 1,294 - (584) (3,000) (1,477) (1,931) (6,000) (6,044) (6,355) (9,000) FY10 FY11 FY12 FY13 FY14 Operating cash flow Capital expenditure • Increased production volumes and lower costs
Slide 20: Capital expenditure
Capital expenditure For personal use only Significant reduction in expenditure as expansion complete Capital profile FY15 Capital US$bn US$bn 7.5 Exploration 6.0 100 450 4.5 Operational capital 3.0 750 Development and 1.5 optimisation projects* 0.0 FY10 FY11 FY12 FY13 FY14 FY15(est) * Includes const
Slide 21: Return on capital metrics
Return on capital metrics For personal use only Fully ramped up operations deliver strong returns on capital Return on equity % 60% 40% 50% 52% 50% 20% 39% 43% Strong returns 0% FY10 FY11 FY12 FY13 FY14 on capital employed Return on assets % 25% 20% 15% 10% 20% 15% 17% 14% 5% 11% 0% FY10 FY11 FY12
Slide 22: Pro-forma free cash
Pro-forma free cash For personal use only Adjusted for timing difference of tax and iron ore prepayments Pro-forma free cash per tonne – CFR US$85/dmt 80 66.0 31.0 60 28.0 40 13.1 21.9 3.3 8.4 12.0 20 10.2 3.1 4.5 2.0 7.1 - Revenue C1 costs Other operating Operating margin Interest Capex Pro-forma f
Slide 23: Shipping
Shipping For personal use only Vessel Mix FY15 YTD TARGET 25% 45% 55% 75% <200k DWT >200k DWT <200k DWT >200k DWT • Target vessels that increase loadport efficiency, typically large deadweight (DWT) capacity and shallow draft • FY15 YTD 45% of vessels >200k DWT and 52% in FY14 • Moving towards targe
Slide 24: Shipping: VLOC Operational Benefits
Shipping For personal use only VLOC Operational Benefits • At Port Hedland fully laden vessels sail on the high tide. • Limited number of sailing slots per tide, vessels with large deadweight and shallow draft are more efficient. • Configuration of shore side infrastructure drives the ideal type of
Slide 25: Financial Policies
Financial Policies For personal use only Working capital Product sold on LC, 14 days receivable Liquidity $1-1.5bn minimum cash, or cash equivalents Leverage Initial target 40% gearing (D/D+E), committed to further voluntary repayments of US$2-2.5 billion over the next 18 to 24 months, flexible debt
Slide 26: Operations
Operations For personal use only Nick Cernotta
Slide 27: For personal use only
FABRICATION | DEPARTMENT SAFETY IS YOUR RESPONSIBILITY TAKE CARE
Slide 28: TRIFR
TRIFR For personal use only Lag indicators continues to show improvement 10 9.2 9 8 7.6 7 6.6 6.0 5.8 6 5.4 5.1 5 5.8 5.3 5.4 4 3 2 1 0 Nov-14 Target FY15 FY12 FY13 FY14 Jul-14 Aug-14 Jun-15 Sep-14 Oct-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Historical 3 Month Rolling TRIFR 12 Month Rolling TRI
Slide 29: Safety
Safety For personal use only The focus • Major Hazards - recognise and understand the risk • Safety culture through visible leadership • Contractor alignment • Management accountability • Continuous improvement • Learning from incidents 29
Slide 30: Operations snapshot update
For personal use only Operations snapshot update
Slide 31: Cloudbreak
Cloudbreak For personal use only Snap shot 40mtpa Average annual production; Approximate total workforce; 2,550 1,990 FMG, 560 contractors 2012 Project delivers wet front end, increase product quality 78 Total fleet of 190t and 240t capacity dump trucks 100GL Annual quantity of water pumped to enabl
Slide 32: Christmas Creek
Christmas Creek For personal use only Snap shot 50mtpa Average annual production; 2 x Ore Processing Facilities Approximate total workforce; 700 2,900 FMG, 2,200 contractors 2011 Production commenced 217mtpa Total material movement in the mine 2013 Owner Operated Processing after taking over from CS
Slide 33: Solomon
Solomon For personal use only Snap shot 60mtpa 220mtpa x OPF’s; 40mtpa Kings, Firetail Approximate workforce; 2,040 655 FMG, 1,385 contractors 2013 Fortescue’s youngest mine Low Cost Low unit cost operations Low Strip Ratio Product Firetail, high Fe blends with Low Phos from Chichester
Slide 34: Rail
Rail For personal use only Snap shot • World’s heaviest haul railway • Approx. total workforce of 511 people, 427 FMG, 84 contractors • Average cycle time: • Cloudbreak – 20hrs • Christmas Creek – 22hrs • Solomon – 22hrs 34
Slide 35: Port operations – flexible, efficient
Port operations – flexible, efficient For personal use only Three In Load and Out Load Circuits
Slide 36: Resource and reserve
For personal use only Resource and reserve
Slide 37: Resource portfolio supports asset base
Resource portfolio supports asset base For personal use only Drilling as required and extend through near mine exploration 12,000 Mineral Resources dry in situ (Mt) 2,463 10,000 2,463 2,013 740 8,000 624 624 1,032 624 6,000 4,877 3,246 3,504 3,070 2,860 4,000 1,715 2,224 695 695 303 695 695 695 695
Slide 38: Reserve portfolio - Hematite
Reserve portfolio - Hematite For personal use only Reserve base supports extended operations • Focused exploration programs • Significant reserve lives • Significant prospectivity at: – Mt MacLeod (Solomon) – Fredricks (Solomon) – Kutayi (Chichesters)
Slide 39: Mine lives based on current reserves
Mine lives based on current reserves For personal use only Fortescue mine lives compare favourably Reserve and Resource Tonnages bn (dry) Ore Reserve Life (Years) 25 25 20 20 15 15 10 10 5 5 0 0 Fortescue BHPBIO RTIO Fortescue BHPBIO RTIO Reserves M&I Resources Total Resources Based on last 12 month
Slide 40: Improving efficiencies
For personal use only Improving efficiencies
Slide 41: Improving efficiencies: Strip ratio
Improving efficiencies For personal use only Strip ratio • Improved OPF upgrade performance • Blending of high Fe material from Firetail into Fortescue Blend • Increasing contribution from Solomon contributes to overall lower strip ratio across all operations • Mining has continued at or around LOM
Slide 42: Improving efficiencies: driving mining costs down
Improving efficiencies For personal use only Focus is on driving mining costs down US$/wmt • Contractor reviews 50 • Mining hygiene 40 • Maximising ore extraction 48 • Reduce rehandle 30 32 • Major maintenance optimisation 20 • Optimising blend between mines FY12 Q1FY15 Future target • Truck utilisa
Slide 43: Automated haulage system - AHS
Automated haulage system - AHS For personal use only Automated 793F trucks • Intuitively safer • Like-for-like application • >10% annualised capacity per truck • 10% reduced relative unit cost • More gains; system tweaks, expanded application, drum beat operation
Slide 44: Rail operations
For personal use only Rail operations
Slide 45: Rail: Shift the bottleneck
Rail For personal use only Shift the bottleneck • Increasing to 250 cars per rake • Ore trains moving to 40,000 wmt • 13 rakes (510,000 tpd sprint capacity) • From 23 to 22 hour cycle
Slide 46: Ore cars per rake
For personal use only 250 per rake Ore cars
Slide 47: Axle loads
Axle loads For personal use only Constantly upgrading design
Slide 48: Rail: Shift the bottleneck
Rail For personal use only Shift the bottleneck • Next move: 42 tonne Axle Loads • Maintain Rail integrity state of the art maintenance technology • Moving to Triple head end plus banker • Increase acceleration • Increase Maximum Speed and optimise ITCS potential
Slide 49: Rail: Cycle time - every minute counts
Rail For personal use only Cycle time - every minute counts 192 Improved average unload time Minutes reduced from 208 minutes 82 Improved average tip time Seconds reduced from 87 seconds • Faster loading to Axle load specification • Continued focus on improving reliability
Slide 50: Train Cycle Times
For personal use only 50 Train Cycle Times
Slide 51: Port operations
For personal use only Port operations
Slide 52: Transitioning to 155mtpa
Transitioning to 155mtpa For personal use only Port operations expansion timeline
Slide 53: Production capacity
Production capacity For personal use only Most efficient port operation in the world • Delivering >450kt / FTE / year • 180mtpa inload capacity; 3 circuits • Outload capacity 160mtpa; 3 circuits, 4 berths • Highest return on capital invested • 55mtpa / shiploader • 60mtpa / train unloader 53
Slide 54: Port: Cycle Time
Port For personal use only Cycle Time - Every TLO and TUL minute counts Ship loader GLR 9.0 8.7 Thousand Tonnes per Hour Improve Reliability 8.5 • 8.5 8.3 8.1 8.0 7.9 8.0 7.9 8.0 7.7 7.6 7.6 7.6 8.0 7.5 • Optimise major shut 7.0 Oct-13 Apr-14 Sep-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 May-14 Jun-14 A
Slide 55: Increased capacity from AP5
Increased capacity from AP5 For personal use only Always working towards stretch targets • Construction of fifth berth expected to be completed early 2015 • Additional 15-20mtpa outload capacity
Slide 56: Integrated Operational Control - IOC
Integrated Operational Control - IOC For personal use only Bringing it together through integrated planning and coordination Perth-based Centralised Train Control; digital voice/data comms; asset protection, GE RailEdge using Incremental Train Control System
Slide 57: Development
For personal use only Development Peter Meurs
Slide 58: Anderson Point Berth
For personal use only Anderson Point Berth 5
Slide 59: AP5 Project
AP5 Project For personal use only • March 2015 commissioning – on schedule • China fabrication 82% complete • All major equipment delivered • 80% piles driven • Heavy lift modules on target for Nov 2015 • On time and budget • 20mpta incremental tonnes 59
Slide 60: Energy
For personal use only Energy
Slide 61: Significant reliance on diesel fuel
Significant reliance on diesel fuel For personal use only Driven by mobile fleet and remote power consumption Total energy spend >US$800 million * Diesel (Mine Fleet) Diesel Diesel (Rail) (Electricity) Diesel Gas (Port) (Ancillary) 61 * Based on annual output of 155mtpa
Slide 62: Fortescue River Gas Pipeline
Fortescue River Gas Pipeline For personal use only Stage 1 to Solomon Hub • 270km gas pipeline • 16 inch pipe • Built, owned, operated by DBP/TransAlta 62
Slide 63: Fortescue River Gas Pipeline
Fortescue River Gas Pipeline For personal use only Stage 1 to Solomon Hub • All pipe and materials delivered • Construction 40% progressed • March 2015 quarter commissioning on schedule • Solomon Power Station conversion to gas using CNG in November 2014 63
Slide 64: Energy cost reduction strategies
Energy cost reduction strategies For personal use only • Solomon power station conversion to gas from November 2014 • Port Hedland power station contract for lower cost power from mid 2017 • Cloudbreak power station conversion to CNG delivered by truck 64
Slide 65: Energy cost reduction strategies
Energy cost reduction strategies For personal use only • Solomon hub ancillary consumption to CNG • Discrete use of renewables for remote intermittent loads • Heavy mobile equipment conversion to LNG – when technology is available 65
Slide 66: Solomon Detritals Plant
For personal use only Solomon Detritals Plant
Slide 67: Detritals iron deposit (DID)
Detritals iron deposit (DID) For personal use only Processing summary • Detritals overly most of the Solomon Kings Valley deposit (CID ore) • Low cost – less than US$20/tonne • Reduced waste stockpiles • US$105M budget • First ore due September quarter 2015 67
Slide 68: Detritals plant progress
Detritals plant progress For personal use only • Strong progress on detailed engineering • Steel fabrication underway • All major equipment ordered • Site preparation commenced 68
Slide 69: WHIMS Project
For personal use only WHIMS Project
Slide 70: Wet high intensity magnetic separation summary
Wet high intensity magnetic separation summary For personal use only • Wet plant tailings streams contain product that can be recovered • Low cost - no mining costs associated with tailings streams • Experienced suppliers ready to deliver their low capital cost technology on a “cost per tonne of ore
Slide 71: WHIMS development
For personal use only 71 WHIMS development
Slide 72: Iron Bridge
For personal use only Iron Bridge
Slide 73: Iron Bridge: North Star
Iron Bridge For personal use only North Star • Located in the Pilbara, West Australia • Approx 100km south of Port Hedland • Excellent access to deliver iron ore to China, Asia and the Middle East 73
Slide 74: Iron Bridge Summary
Iron Bridge For personal use only Summary • Joint venture between Fortescue, Formosa and Baosteel • Magnetite is a premium blast furnace product • >4.5 billion tonnes at North Star and Glacier Valley • Low energy, industry changing process technology • Multi-stage development • Stage 2 (when approve
Slide 75: Development path
Development path For personal use only Mine Plant Transport Port Ship Stage 1 1.5-2mtpa Slurry Pipeline Fortescue Capesize and Truck Port Hedland Vessels Stage 2 9-10mtpa Slurry Pipeline Fortescue Capesize Port Hedland Vessels 75
Slide 76: Autonomous mining solution
For personal use only Autonomous mining solution
Slide 77: Solomon Autonomous Haulage Solution (AHS)
Solomon For personal use only Autonomous Haulage Solution (AHS) Q1 2013 • Commissioned first Autonomous Truck Kings Q2 2013 • Commenced operations at Kings mine and Mining Pit ramped up to 12 trucks • 27 million tonnes ex-pit hauled to date Q2 2014 Kings Run • Commenced Autonomous operation at one P
Slide 78: Solomon Kings Valley Mine operations – project ramp up
Solomon For personal use only Kings Valley Mine operations – project ramp up 9,000,000 30,000,000 Cumulative tonnage since commencement 8,000,000 25,000,000 7,000,000 Cummulative Tonnes Moved 6,000,000 20,000,000 for quarter Moved 5,000,000 15,000,000 Tonnes 4,000,000 Tonnes 3,000,000 10,000,000 Qua
Slide 79: Solomon Autonomous Haulage Solution (AHS)
Solomon For personal use only Autonomous Haulage Solution (AHS) Q4 2014 Ramp up second Primary Crusher at Kings taking total Kings trucks to 20 Q1 2015 Firetail Commence implementation at Firetail with an additional 13 trucks Solomon 2016 A complete autonomous mining solution for Solomon 79
Slide 80: Solomon Autonomous Haulage Solution (AHS)
Solomon For personal use only Autonomous Haulage Solution (AHS) 80
Slide 81: Productivity Improvements
For personal use only Productivity Improvements
Slide 82: Productivity improvements beyond 155mtpa
Productivity improvements beyond 155mtpa For personal use only • Debottlenecking • Detritals plant US$102m for 5mtpa • Additional 10mtpa options of US$20 – 25/wmt • Driving productivity growth with existing port and rail assets • $1/tonne C1 cost reduction for each 10mtpa production above 155mtpa 82
Slide 83: Market
For personal use only David Liu Market
Slide 84: Over 415mt shipped since first shipment in May 2008
Over 415mt shipped since first shipment in May 2008 For personal use only 84
Slide 85: Chinese iron ore import market share reaching 16%
Fortescue’s Chinese iron ore import market share is reaching 16% For personal use only Target product strategy to deliver 155 to 160mtpa – average grade 58% Bonnie Fines 6mtpa Super Special Fines 30mtpa Fortescue Blend Rocket 70mtpa 10mtpa Kings CID 40mtpa 85
Slide 86: Products chemical analysis
Products chemical analysis For personal use only Customers focus on lower costs via high Calcined unit Fe Free Calcined LOI Moisture Fe Products Fe SiO2 Al2O3 CaO P S MgO (Wt %) Total Fortescue Blend (FB) 58.30 5.50 2.50 0.15 0.075 0.035 0.10 7.50 7.5 63.03 Super Special (SS) 56.70 6.40 2.80 0.10 0.
Slide 87: Price relativities now recovered from Q2
Price relativities now recovered from Q2 (Apr-Jun) For personal use only FB is clustering around the premium 58 index(s) and SS around standard 58 index(s) 20 day moving average dmtu adjustment to Platts 62% 100.00% 97.50% 95.00% 92.50% 90.00% 87.50% 85.00% 82.50% 80.00% 77.50% 75.00% 21/11/2013 19/
Slide 88: Short term realisation impacted by timing
Short term realisation impacted by timing For personal use only Maintain guidance of 85 – 90% realisation of 62% Platts index 100 Average 62% Platts in Sept Q US$90/dmt Open contracts provisionally 90 priced on $79/dmt Realisation increases with price greater than $79/t 80 Realisation steady at $79/
Slide 89: Chinese crude steel output at high level
Chinese crude steel output at high level For personal use only Net steel exports surge supports underlying steel demand Million tonnes Quarterly steel production Demand to improve in Dec Q and 2015 as real estate recovers and machinery and infrastructure growth 89 Source: CRU, MGI, Macquarie
Slide 90: Q3 Mill destock of import ore inventories
Q3 Mill destock of import ore inventories For personal use only Destock has continued into October - Mysteel inventory days has fallen to 24 days 90 Data: CRU, Mysteel. Note: Sample of 55 small and medium sized steel mills where production is less than 5 mtpa. It covers mills in Tangshan, Handan, Xi
Slide 91: Imported ore increasing in the Chinese mill blend
Imported ore increasing in the Chinese mill blend For personal use only Average import ore blend (%) by Chinese mills • Expectation Dec Q restock as mills prepared for winter • Seaborne prices expected to improve 91 Source: Mysteel
Slide 92: China's new home sales downturn is cyclical
China’s new home sales downturn is cyclical For personal use only New home sales by city size (3 month moving average) 92 Source: Policy Brief, PIIE, Li-Gang Liu (ANZ HK)
Slide 93: China's new home sales downturn is cyclical
China’s new home sales downturn is cyclical For personal use only New home sales by city size (3 month moving average) • China’s residential property market has slowed significantly during 2014 YTD, with significant falls in sales and an increase in inventory of new homes, but sales are now recoveri
Slide 94: Chinese domestic mine utilization declining
Chinese domestic mine utilization declining For personal use only • China’s domestic iron ore production (concentrate) was ~ 400mt in 2013 • 26 major mills captive mines accounted for 27% of the total production • 53 concentrate producers (over 1mtpa) accounted for 20% of the total production, Mine
Slide 95: Domestic concentrate price uncompetitive
Domestic concentrate price uncompetitive For personal use only Inland transport cost curve for 150 Chinese mills • Price spread between 66% domestic concentrate (ex VAT) and Platts 62% is now ~US28/t, versus parity at start of year (typically a US$15/t spread) • Spread implies potentially 210Mt of i
Slide 96: Long term fundamentals remain positive
Long term fundamentals remain positive For personal use only • China’s Urbanization will continue to accelerate further – total 920 million by 2023 = 66% urbanization v 55% today* • More pro-business and structural reform initiatives are likely to be introduced after the October Party forum, China’s
Slide 97: Long term fundamentals remain positive
Long term fundamentals remain positive For personal use only • Iron ore restocking expected to accelerate amidst decreasing port stocks and seasonal requirement • China’s crude steel production expected to grow at 5% in 2014, and strong export underpinning iron ore demand • Fortescue well positioned
Slide 98: Clear strategy
For personal use only 98 Clear strategy
Slide 99: Moving down the global cost curve
Moving down the global cost curve For personal use only Targeting bottom quartile China Iron Ore Supply CFR Costs – Oct 2014 (including royalties and freight) 200 Domestic Chinese Ore Australia Brazil India 150 South Africa Other US$/dry tonne 100 50 Fortesc 0 0 100 200 300 400 500 600 700 800 900 1
Slide 100: Port – flexible design for future growth
Port – flexible design for future growth For personal use only Fifth berth under construction AP3 AP2 AP1 AP4 AP5 2015 100
Slide 101: Cost focus
Cost focus For personal use only Focused on efficiencies and lowering cost of production Production optimisation and blending Processing upgrades lowering strip ratio Equipment productivity and reduced rehandle Maintenance and shutdown management Autonomous haulage Gas conversion 101
Slide 102: Supporting our local community
For personal use only Supporting our local community
Slide 103: Building our economy
Building our economy For personal use only Unlocking the potential of WA’s North West 15,000 employed AU$800m* wages p.a. AU$2.1bn taxes and royalties p.a. AU$490m localised spend FY14 103 * applies to full time employee wages only
Slide 104: Ending Aboriginal disparity in the Pilbara
Ending Aboriginal disparity in the Pilbara For personal use only Creating opportunities through training, employment and business opportunity 1,100 Aboriginal employees Aboriginal people in 12% Fortescue workforce Contracts to Aboriginal $1.7bn companies and JV’s VTEC Roebourne, Training Centres Sou
Slide 105: Delivering on our stretch targets
Delivering on our stretch targets For personal use only Keeping Fortescue strong
Slide 106: Delivering on our stretch targets
Delivering on our stretch targets For personal use only Focused on shareholder value • Low cost, producer 155mtpa++ • Cash from operations and capex • Repaid $3.6bn gearing <40% • Moving to 30-40% dividend payout ratio • Unique culture drives performance
Slide 107: For personal use only
For personal use only Sign up to alerts online: www.fmgl.com.au Proudly supporting: Proudly supporting:
Slide 108: Glossary
Glossary For personal use only Definition of non-IFRS terms Reconciliation of EBITDA to IFRS items NPAT = net profit after income tax 2014 2013 EBITDA = profit before income tax adjusted for depreciation and US$m US$m amortisation, asset write offs, exploration, development and other Profit before i
Fortescue Metals Group — Investor Presentation (October 2014) on 6ix