Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — FY2015 Earnings Presentation
46 slides from Fortescue's earnings presentation, Aug 24, 2015
Slide 1: FY15 Results
For personal use only FY15 Results
Slide 2: Important Notice Additional Information
For personal use only 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 not recommended that Report at 30 June
Slide 3: Building a world class company
Building a world class company For personal use only Reliable and competitive supplier to Asia 3
Slide 4: Building a world class company
Building a world class company For personal use only Reliable and competitive supplier to Asia Founded First ore Low cost in 2003 in 2008 producer Shipped over 165mt 550mt Production rate Unique culture 4
Slide 5: For personal use only
For personal use only
Slide 6: The safest, lowest cost, most profitable iron ore producer
at O J R V/ I S I @ The safest, lowest cost, Fortescue most profitable iron ore producer Our Values | Safety Family oxAVIOy, . ty Frugality Empowerment A x ¢ 3 an 9 . oo Integrity Dy) Fortescue © Enthusiasm Generating ideas Determination Set yourself stretch targets
Slide 7: 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 7
Slide 8: Operating performance FY15
Operating performance FY15 For personal use only Cost and efficiency focus C1 $27/wmt US$2.4bn 21% improvement cash on hand C1 $19/t in June 165 mtpa Sustainable strip ratios Run rate maintained Realised price 85% C1 $18/wmt US$39/dmt FY16 Guidance Breakeven price 8
Slide 9: Key C1 cost drivers
Key C1 cost drivers For personal use only Tier 1 asset base, efficiency and productivity C1 US$/wmt 1 Solomon operations 60 50 48 44 2 Blending strategy 58% Fe 40 34 3 Processing, wet plants + de-sands 30 27 20 18 4 Operational efficiencies 10 5 Fx and fuel decreases 0 FY2012 FY2013 FY2014 FY2015 FY
Slide 10: Delivering $18/wmt
Delivering $18/wmt For personal use only Efficiencies + productivity to optimise and improve performance 30 Initiative Implementation Cost savings US/wmt Contractor consolidation End April 2015 1.20 25 Roster changes End May 2015 0.90 20 Procurement initiatives 50% complete 2.00 Mining initiatives 3
Slide 11: Costs reduction momentum
Costs reduction momentum For personal use only FY16 guidance of $18/wmt long term sustainable 90 8 All in cost per wmt, inc interest + sustaining capex 9 6 7 Delivered cost 60 9 5 18 6 6 C1 – mining processing 4 18 rail and port 20 2 4 16 13 2 4 30 8 2 50 39 7 33 34 30 24 18 - 1HY13 2HY13 1HY14 2HY1
Slide 12: Break even price
Break even price For personal use only Continuing to reduce breakeven price on 62% Platts equivalent basis US$ 50 USD:AUD of 0.77 5 39 40 3 2 31 30 4 2 0.5 25 5 20 18 10 - C1 Shipping Royalty Admin Delivered Interest Sustaining Total wmt Moisture Price Breakeven cost to capex cost adjustments price
Slide 13: Financials
For personal use only Financials
Slide 14: FY15 Earnings
FY15 Earnings For personal use only Operational performance supporting financial results Sustainable Controlling the controllable US$18/wmt cost savings costs + C1 cost FY16 production +US$2bn operating Further Final dividend cashflows improvements A$0.02/share 14
Slide 15: Earnings
Earnings For personal use only Operational performance supports strong financial results Revenue and price realisation Underlying EBITDA1, US$ millions Price realisation, US$/dmt 16 160 Operating revenue, US$m 11,753 5,636 12 120 8,120 8,574 3,575 8 6,716 80 3,035 5,442 2,661 2,506 4 40 0 0 FY11 FY1
Slide 16: Underlying EBITDA
Underlying EBITDA For personal use only Production and cost management remain key focus 1,596 7,184 2,179 5,636 259 121 101 2,506 FY14 Volume Cost Price Royalty Fx Other FY15 • 165mt shipped 33% • Production costs C1 $27/wmt 21% 16
Slide 17: C1 cost transformation
C1 cost transformation Cost savings FY12 to FY15 of $1.8bn + FY16 of $1.4bn For personal use only US$/wmt 60 50 48 44 40 CB + CC1 34 • 58mt shipped 30 • 2 OPF’s 27 CC2 + Firetail • CC1 wet plant • Three berths • 81mt shipped 20 • Multiple products • • 4 OPF’s 3 wet plants Kings, AP4 + ITCS, • 124mt
Slide 18: Balance sheet
For personal use only Balance sheet
Slide 19: Capital expenditure
Capital expenditure For personal use only US$2/wmt post expansion sustainable capex Capital profile FY15 Capital – US$626m US$bn mt shipped 7.5 175 Exploration 47 6.0 140 Operational capital 4.5 105 271 3.0 70 308 Development and optimisation 1.5 35 projects 0.0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Slide 20: Debt maturity profile
Debt maturity profile For personal use only No repayments due until June 2019 with flexibility for early repayments Extended Runway $2.4bn cash on hand at 30 June 2015 20
Slide 21: Key credit metrics
Key credit metrics For personal use only Operating cashflows supporting metrics Cash and debt (US$bn) Gearing: Debt / (Debt+Equity) 12.7 69% 71% 67% 9.6 9.6 56% 56% 8.5 4.9 2.7 2.3 2.2 2.4 2.4 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 Underlying EBITDA / Interest Debt / Underlying EBITDA 6.9
Slide 22: Maximising value
For personal use only Maximising value
Slide 23: Maximise asset base
Maximise asset base For personal use only Maintaining mine lives +20 years 165mtpa Mt / grade Strip ratio • Maintained ~58% Fe product grade 200 5 160 4 • Strategic investments in: Lower cost Solomon mines 120 3 OPF upgrade Fortescue blend 80 2 • Improved ore body definition 40 1 • Future tech
Slide 24: Product strategy
Product strategy For personal use only Strategy continues to evolve to maximise value from asset base • Product consistency Solving to maximise • Enhanced processing ability Product • Fortescue blend • Lowering cut off grades Life of Costs mine • Improved understanding 24
Slide 25: Step 1. Product from single mine source
Step 1. Product from single mine source… For personal use only Dry plant only with product grade of 59% Strip ratio 5.4 Pit Production inventory at cut off grade 57.5% limit 25
Slide 26: Step 2. Blending with Firetail
Step 2. Blending with Firetail… For personal use only Dry plant + blending with Firetail, product grade of 57.5% Strip ratio 3.5 New pit limit + = Product inventory at cut off grade 55% 26
Slide 27: Step 3. Blending + wet processing
Step 3. Blending + wet processing For personal use only Blending with Firetail + wet processing, product grade 57.5% Strip ratio 2.3 New pit limit + + = Production inventory at cut off grade of 54% 27
Slide 28: Maximising flat tonnes / grade
Maximising flat tonnes / grade For personal use only OPF upgrade and blending reduces cut-off grade + strip ratios Fe content Fe cut-off grade Dry processing Wet processing Step 1 Step 2 Step 3 Based on Cloudbreak production inventory 28
Slide 29: Wet process beneficiation
Wet process beneficiation For personal use only Extracting more Fe and removing Si & Al to improve cut off grades 29
Slide 30: Hematite reserves
Hematite reserves For personal use only Reserve life maintained through improved recovery + blending 3,000 180 165 2,500 150 Hematite reserves mt Tonnes shipped mt 2,000 827 791 120 716 903 592 1,500 90 1,000 60 1,540 1,547 1,495 1,517 1,470 1,609 500 30 - 0 2010 2011 2012 2013 2014 2015 Chichester
Slide 31: Revised strip ratios
Revised strip ratios For personal use only Mining presents greatest opportunity to reduce operating costs 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 31
Slide 32: Market
For personal use only Market
Slide 33: Core supplier to China
Core supplier to China For personal use only Well established 17% market share of imported iron ore to China • Optimised product range • Low impurity 58% Fe average product • High value in use • Large diverse customer base • Reliable consistent delivery 33
Slide 34: China's long term growth remains strong
China’s long term growth remains strong For personal use only 300 million people to urbanise • Economic reform process • Steel demand 800mtpa level • GDP growth ~7% (2015) ~6.5% (2016) • One Belt One Road US$1.6 trillion • RMB 10 trillion in projects approved • Property market key driver of demand 3
Slide 35: Demand for seaborne supply
Demand for seaborne supply For personal use only New coastal capacity moving away from domestic iron ore Iron Ore Reserves New/proposed steel capacity Seaborne iron ore Source: ANZ Research Seaborne iron ore imports (Ex. Australia, Brazil etc.) 35
Slide 36: Iron ore supply in balance…sentiment driving price
For personal use only Days Coverage 10 20 30 40 50 0 Jul-10 Aug-10 Oct-10 Dec-10 Jan-11 Source: Bloomberg and Umetal Mar-11 May-11 Jun-11 Aug-11 Oct-11 Nov-11 Jan-12 Feb-12 Apr-12 Jun-12 Jul-12 Sep-12 IO Inventory days coverage (days) Nov-12 Dec-12 Feb-13 Apr-13 May-13 Port stocks continuing to decl
Slide 37: Price realisation
For personal use only 10 30 40 50 60 70 80 90 20 0 100 29/07/2014 17/08/2014 5/09/2014 24/09/2014 13/10/2014 Price realisation 1/11/2014 Platts 62 CFR 20/11/2014 9/12/2014 28/12/2014 16/01/2015 MBIO58 [P] CFR 4/02/2015 Realising consistently at 85-90% of Platts 62% 23/02/2015 14/03/2015 2/04/2015 21
Slide 38: Reserves and resources
For personal use only Reserves and resources
Slide 39: 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 2,463 2,463 Mineral Resources dry in situ (Mt) 10,000 2,463 740 740 8,000 2,013 624 1,032 624 624 6,000 4,877 4,793 3,504 3,070 3,070 2,860 4,000 2,224 1,715 695 303 491
Slide 40: Supporting our local community
For personal use only Supporting our local community
Slide 41: Ending Aboriginal disparity in the Pilbara
Ending Aboriginal disparity in the Pilbara For personal use only Creating opportunities through training, employment and business opportunity 41
Slide 42: Clear strategy
For personal use only Clear strategy
Slide 43: 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 44: The new force in iron ore
The new force in iron ore For personal use only Unique culture drives performance Reliable World class Efficient assets + Delivery people Low cost producer 165mt Production rate 44
Slide 45: For personal use only
For personal use only www.fmgl.com.au @FortescueNews Proudly supporting:
Slide 46: Glossary
Glossary For personal use only C1: Operating costs of mining, processing, rail and port. The reconciliation of C1 to the amounts disclosed in the financial Reconciliation of Underlying 30 June 2015 30 June 2014 statements prepared under the Australian EBITDA to IFRS measures US$m US$m accounting sta
Fortescue Metals Group — FY2015 Earnings Presentation on 6ix