Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Corporate Update (November 2015)
28 slides from Fortescue's corporate update, Nov 17, 2015
Slide 1: Media Tour - Briefing
For personal use only Media Tour - Briefing 17 November 2015
Slide 2: Forward Looking Statements
Forward Looking Statements For personal use only Disclaimer Important Notice Additional Information The purpose of this presentation is to provide general information about This presentation should be read in conjunction with the Annual Financial Fortescue Metals Group Limited ("Fortescue"). It is n
Slide 3: Fortescue's world class assets
Fortescue’s world class assets For personal use only Pilbara Core supplier to Western Australia Asia’s growth
Slide 4: Our Vision: The safest, lowest cost, most profitable iron ore producer
Our Vision: The safest, lowest cost, most profitable iron ore producer 4: Ww Fortescue Integrity Determination Set yourself Enthusiasm Empowerment Generating ideas Frugality
Slide 5: Safety is at the heart of Fortescue's values
Safety is at the heart of Fortescue’s values My brothers’ / sisters’ keeper For personal use only • 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 6: Key themes
Key themes For personal use only Product Sustainable Expansions performance complete Costs Mine life Established Cashflow Continuous product suite supports improvement balance sheet focus
Slide 7: Delivery of sustainable cost improvements
Delivery of sustainable cost improvements For personal use only Through development of assets, efficiencies, productivity and costs saving 60 C1 cost $US/wmt 1 Solomon operations 50 48 44 2 Blending strategy 58% Fe 40 34 3 Processing, wet plants + de-sands 30 27 20 18 4 Operational efficiencies Exit
Slide 8: Finance
For personal use only Finance
Slide 9: Financial keys
Financial keys For personal use only Operational performance supporting financial results Cost Controlling the controllable Capital spend improvement costs + $2/wmt $15/wmt production sustainable Generating Shipping and operating procurement US$384m Debt repurchased cashflows initiatives
Slide 10: Path to US$15/wmt in Q4 FY16
Path to US$15/wmt in Q4 FY16 For personal use only Continued realisation from efficiency and productivity improvements Savings Savings initiatives (US$/wmt) 18 • Improved upgrades and yield OPF • Shutdown optimisation 0.90 16 • Enhanced plant reliability 4 14 2 • Maximising equipment productivity 12
Slide 11: Capital expenditure
Capital expenditure For personal use only Sustainable capex at US$2/wmt post expansion • FY16 guidance US$2/wmt Capital profile or US$330m US$bn mt shipped 7.5 175 • Expansions complete 6.0 140 • Long life installed asset 4.5 105 3.0 70 • Significant mine lives 1.5 35 • D+A ~US$7.50/wmt 0.0 FY10 FY1
Slide 12: Debt maturity profile
Debt maturity profile For personal use only On market buybacks US$384m principal value 5,000 4,500 4,851 4,000 3,500 3,000 $750m Tender offer launched for US$m 2,500 2019 and 2022 Notes 2,000 1,500 1,000 2,160 500 Extended Runway 889 917 0 CY2015 CY2016 0 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Se
Slide 13: Integrated Ore body / Planning Resource
For personal use only Integrated Ore body / Planning Resource
Slide 14: Product strategy
Product strategy For personal use only Innovative strategy maximises value from asset base Product • Beneficiation of ore Costs • Lower cut-off grades Mine life • Fortescue Blend • Product consistency
Slide 15: Blending + wet processing
Blending + wet processing For personal use only Blending with Firetail + wet processing, product grade 57.5% Strip ratio reduced from 5.4 to 2.3 New pit limit + + = Production inventory at cut off grade of 54%
Slide 16: Strip ratios
Strip ratios For personal use only Strategy and people delivering sustained reductions in strip ratios Maintained mine life Revised strip ratio Years 1-5 Life of mine C1 Strip Chichester Hub 1.6 2.3 Costs ratios Solomon Hub 2.0 1.7 Expect improvements to continue
Slide 17: Journey to C1 US$15/wmt and beyond
Journey to C1 US$15/wmt and beyond For personal use only Next wave of savings initiatives to deliver lower costs OPF Procurement • Upgrades and yield • Market deflation • Shutdown optimisation • Consolidation • Plant reliability • Re-negotiation Mining New initiatives • Equipment productivity • Majo
Slide 18: Market
For personal use only Market
Slide 19: Steel consumption to build economy
Steel consumption to build economy Above 800mtpa – driven by policy decisions For personal use only Source: Wood Mackenzie
Slide 20: Iron ore supply in balance…sentiment driving price
Iron ore supply in balance…sentiment driving price For personal use only Port stocks continuing to decline, currently at 83mt 50 $220 IO Inventory days coverage (days) $200 62% Fe CFR (RHS) 40 $180 $160 Days Coverage 30 $140 $120 20 $100 $80 10 $60 0 $40 Jul-10 Nov-10 Jul-11 Nov-11 Jul-12 Nov-12 Jul
Slide 21: Moving down the global cost curve
Moving down the global cost curve For personal use only China's Iron Ore Supply CFR Costs (including royalties & ocean freight) 2012 2015 Domestic Chinese 150 Australia Brazil India South Africa Other 100 50 Other Aust Fortescue Fortescue Vale Rio Tinto BHP Vale Rio Tinto BHP 0 0 100 200 300 400 500
Slide 22: Driving higher price realisation
Driving higher price realisation For personal use only Realised 91% in FY16 Q1 v 89% in FY15 Q4 $100 100% • Improved dmtu adjustments $90 95% $80 $70 • Pricing at average monthly QP 90% $60 $50 85% • Mills more focussed on margin $40 80% $30 $20 75% • Less driven by production $10 volumes $0 70% 29/
Slide 23: Value In Use drives price realization and cash flow
Value In Use drives price realization and cash flow For personal use only What is VIU ? • “Ores ain’t Ores” • Ore characteristics influence productivity • Estimates the value of an ore to the mill • Critical to FMG as it drives price realisation and cash flow • Oversupplied steel market drives focus
Slide 24: Supporting our local community
For personal use only Supporting our local community
Slide 25: Ending Aboriginal disparity in the Pilbara
Ending Aboriginal disparity in the Pilbara For personal use only Creating opportunities through training, employment and business opportunity
Slide 26: Moving down the global cost curve
Moving down the global cost curve For personal use only China's 2015 Iron Ore Supply CFR Costs (including royalties & ocean freight) 150 China Domestic Concentrate Australia Brazil India South Africa Other 100 US$/dry tonne 50 Other Australia DSO Fortescue Rio Tinto Vale Pilbara BHPB 0 0 100 200 300
Slide 27: The new force in iron ore
The new force in iron ore For personal use only Reliable efficient delivery Sustainable low cost World class producer assets + people 165mt Unique culture drives performance Production rate
Slide 28: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting:
Fortescue Metals Group — Corporate Update (November 2015) on 6ix