Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Diggers and Dealers 2013
28 slides from Fortescue's conference presentation, Aug 5, 2013
Slide 1: Diggers and Dealers
For personal use only Diggers and Dealers 5 August 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 Ltd ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation. This presentat
Slide 3: Company overview
For personal use only Company overview
Slide 4: Fortescue
Fortescue World’s 4th biggest seaborne exporter For personal use only 25mt Shipped in June 2013 quarter 15.6bt Costs 155 mtpa by December resource base Efficiency 2013 focus strong Kings $2.2bn operating October 2013 cash cash flows production 4
Slide 5: Growth across all areas
Growth across all areas Continuing growth trajectory over FY2013 For personal use only Mining Processed Port Ore Mined (wmt) Ore Processed (wmt) Total Ore Shipped (wmt) 40 25 30 35 25 20 30 Third Party Ore 20 Million tonnes Million tonnes Million tonnes 25 15 20 15 15 10 10 10 5 5 5 0 0 0 55
Slide 6: The path to 155mtpa
The path to 155mtpa Execution Strategy – Production – June 2012 Execution Strategy – Production – Dec 2012 For personal use only Chichester Hub Port Chichester Hub Port Hedland Hedland Fortescue Fortescue 55 Infrastructure 95 Infrastructure Dampier Dampier Fortescue Rail Fortescue Rail Karratha Rio
Slide 7: Highlights June Quarter FY2013
Highlights June Quarter FY2013 For personal use only • Average realised CFR sales price of US$113dmt • Shipped 25mt, a 24% increase on the prior quarter • Significant decrease in C1 costs US$36.01wmt, down 17% on previous quarter • Cash on hand of US$2.2bn 77
Slide 8: Financials
For personal use only Financials
Slide 9: Operating margins support
Operating margins support Fortescue’s average realised selling price and C1 costs For personal use only US$/wmt 62% Platts US$/dmt 200 200 180 180 160 160 $146 140 140 $127 $127 120 $114 120 $110 $100 $74 100 $96 100 $65 $57 $45 $77 $28 $53 80 $44 80 $64 $58 60 $32 $22 $22 $20 $18 60 $8 $18 $24 $18
Slide 10: Simplified debt capital structure
Simplified debt capital structure Increased flexibility with new debt maturity schedule For personal use only $5.0 $4.5 $4.0 NO DEBT REPAYMENT $3.5 until November 2015 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022 Senior Secured Credi
Slide 11: Capital management
Capital management June Quarter FY2013 For personal use only • Flexible debt maturity profile • Continued drive to reduce operating costs • Disciplined capital allocation to key projects • De-gear balance sheet • Adopt a profit payout ratio dividend policy 11 11
Slide 12: Market
For personal use only Market
Slide 13: Long term confidence in China
Long term confidence in China Strong volume growth off a massive base For personal use only • Strong underlying economy >7.5% GDP • In volume terms – growth never bigger • New leaders committed to growth • Steel consumption 780mtpa annualised • Urbanisation & infrastructure driving steel demand • IO
Slide 14: "Ghost City" hysteria
“Ghost City” hysteria Despite heat coming out of the market, real estate prices continue to rise For personal use only • Of total 658 cities in China, 12 new suburbs labelled “ghost cities” • These are under-populated suburbs of 3rd & 4th tier cities • Real estate prices in 1st & 2nd tier cities sti
Slide 15: China GDP Volume
China GDP Volume Lower growth rates but very strong in absolute volumes For personal use only 60 16 14 50 12 GDP Trillion RMB GDP % Growth 40 10 30 8 6 20 4 10 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 15
Slide 16: Steel consumption per capita
Steel consumption per capita China just reaching levels maintained by developed countries for decades For personal use only Kg's per capita 900 800 700 600 500 400 300 200 100 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 China USA Japan Germany Source: Macquarie 16
Slide 17: Steel production continues to rise
Steel production continues to rise Steel production grew by 7.4% in first half CY13 For personal use only 17
Slide 18: Strong rebounds follow price drops
For personal use only $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 Strong rebounds follow price drops Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-1
Slide 19: Trends reinforce seaborne advantage
Trends reinforce seaborne advantage New super mills built to capitalize on seaborne trade For personal use only • 460 mills – 51% private • 35 iron ore coastal ports • Coastal mines highest cost • New ~10mtpa Tonkin Gulf Baosteel & Wisco super mills • 88% steel produced in H1 CY13 from Eastern seabo
Slide 20: Strategic Geographic Location
Strategic Geographic Location Freight from Australia compares favourably to domestic ore by rail For personal use only Radius marks equivalent transport cost by domestic Hebei bulks railway compared to transport China cost by sea freight to Hebei with Australia at the centre of ~US$8 / tonne the bul
Slide 21: Decline in domestic ore continues
Decline in domestic ore continues Long term trend decline in domestic iron ore production For personal use only Source: Credit Suisse, the BLOOMBERG PROFESSIONAL™ service, MySteel, China NBS, Customs Data 21
Slide 22: Clear Strategy
For personal use only Clear Strategy
Slide 23: Moving down the global cost curve
Moving down the global cost curve Targeting bottom quartile For personal use only CFR equivalent Cost of China's Iron Ore Supply: 2013 Domestic Chinese Ore 150 Australia Brazil India South Africa Other 100 US$/dry tonne 50 0 0 100 200 300 400 500 600 700 800 900 1,000 1,100 Cumulative Mt (wet, as de
Slide 24: Resource portfolio sets expansion platform
Resource portfolio sets expansion platform To leverage existing assets for low cost growth only 18,000 Annualised growth of 2bt 16,000 use 14,000 Mineral Resources (Mt) 5,205 12,000 per annum For personal 3,236 10,000 2,465 2,463 8,000 2,013 1,032 624 624 624 1,230 6,000 1,230 3,247 3,070 3,070 2,86
Slide 25: Supporting the community
Supporting For personal use only the community
Slide 26: Making a difference
Making a difference Fortescue is changing lives through training and employment For personal use only Direct Aboriginal 461 employees 12% Aboriginal people in Fortescue workforce 504 Aboriginal people employed by contractors VTEC Operating in Roebourne and South Hedland 26
Slide 27: Delivering on targets
Delivering on targets For personal use only Strong financial results Expansion to 155mtpa Deleverage following expansion Flexible incremental growth Unique culture drives performance 27
Slide 28: Proudly supporting
For personal use only Proudly supporting: Sign up to alerts online: www.fmgl.com.au