Slide 1: FY19 Results
FY19 Results 26 August 2019 Global force Thriving communities
Slide 2: Important Notice: Forward Looking Statements Disclaimer
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 presentation contains certain statemen
Slide 3: Safety and unique culture: 2.8 TRIFR
Safety and unique culture 2.8 TRIFR Total Recordable Injury Frequency Rate 24% Improvement compared to June 2018 “Take control” Safety campaign 3
Slide 4: Health and wellbeing
Health and wellbeing Village facilities Family Community activities Site visits and connectivity Pastoral care Flexible work Fortescue’s Chaplains, EAP Job share roles 4
Slide 5: Tailings storage facilities (TSFs)
Tailings storage facilities (TSFs) Fortescue has no TSFs constructed using the sequential upstream raise method 3 active TSFs 6 inactive TSFs Compliant with ANCOLD* Integrated monitoring, and DMIRS* guidelines surveillance management Daily inspections Annual independent audits Instrument data collec
Slide 6: A world class company
A world class company Wholly owned, >1.3 billion ~170mtpa fully integrated Shipped Shipping rate supply chain Core supplier Low cost to China producer 6
Slide 7: FY19 Highlights
FY19 Highlights US 167.7 million tonnes Shipped $6.0 billion Underlying EBITDA US $3.2 billion US $13.11/wmt Net profit after tax (NPAT) C1 cost US A $2.1billion $1.14 per share Net debt Total FY19 dividend 7
Slide 8: Increasing shareholder returns
Increasing shareholder returns A A $0.24 per share $1.14 per share Fully franked final dividend Total FY19 dividends A 78% of FY19 NPAT $139 million Dividend pay-out ratio Share buy-backs completed 8
Slide 9: Corporate social responsibility
Corporate social responsibility 9
Slide 10: Communities benefit from our growth
Communities Setting high benefit from standards our growth and Safeguarding the development environment Creating positive social change 10
Slide 11: Setting high standards
Setting high standards Safety, diversity and integrity TRIFR 2.8 A $13.1billion Record annual low Total global economic contribution 19% 26% Female employment Women in senior management roles 11
Slide 12: Safeguarding the environment
Safeguarding the environment Protecting biodiversity, managing water, reducing emissions and waste Zero Significant environmental incidents 90GL pa groundwater Abstracted and returned A $5.5 million Investment in Fortescue Marsh biodiversity programs TCFD aligned Taskforce on Climate-related Financi
Slide 13: Creating positive social change
Creating positive social change Building strong communities 15% Aboriginal employment across Pilbara operations 847 VTEC graduates employed since 2006 A $2.3billion Contracts to Aboriginal businesses and JVs 85% Trade Up program participants are Aboriginal 13
Slide 14: Financial results
Financial results 14
Slide 15: FY19 Financial highlights
FY19 Financial highlights Record NPAT of US$3.2 billion US US $10.0 billion $65/dmt Revenue Realised price US US $6.0 billion $39/dmt Underlying EBIDTA Underlying EBITDA/dmt US $3.2 billion US$1.03 or A$1.47 NPAT Earnings per share 15
Slide 16: FY19 Highlights: Delivering record results
FY19 Highlights Delivering record results Revenue Underlying EBITDA Underlying NPAT US$m 45% US$m 90% US$m 195% 10,000 8,000 4,000 Delivering strong results 8,000 6,000 3,000 6,000 4,000 2,000 4,000 2,000 1,000 2,000 - - - FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 16
Slide 17: Price and margins
Price and margins Cost leadership and efficient operations underpin resilience in earnings through all market cycles US$/dmt 90 80 70 60 50 40 30 20 10 17 21 30 20 39 - FY15 FY16 FY17 FY18 FY19 Underlying EBITDA per dmt Platts 62% CFR Index Average Underlying EBITDA per dmt Fortescue realised price
Slide 18: Sustainable low cost producer
Sustainable low cost producer Industry leading cost position C1 US$/wmt 60 Structural improvements 50 Solomon + blending + processing 48 40 44 Productivity and efficiency 30 34 Utilisation, recoveries, maintenance 27 20 Innovation and technology 10 15 13 12 13 Autonomy, conveyor, ore carriers, data
Slide 19: Underlying EBITDA
Underlying EBITDA Strong margins maintained at an average realised price of US$65/dmt Underlying EBITDA (US$m) Underlying EBITDA Margin 61% 46% Price / FY18 FY19 product mix 19
Slide 20: Cashflow
Cashflow Cash balance of US$1.9 billion at 30 June 2019 Net cash from operations Capital expenditure Free cashflow US$m US$m US$m 5,000 1,500 4,000 4,000 3,000 1,000 3,000 2,000 2,000 500 1,000 1,000 - - - FY18 FY19 FY18 FY19 FY18 FY19 20
Slide 21: Capital expenditure
Capital expenditure Disciplined allocation to core business, innovation and growth FY19 Capital expenditure - US$1,040m FY20 Capital expenditure guidance - US$2,400m Sustaining 700 Sustaining 612 Development * 206 Development 200 Exploration 105 Exploration 140 Eliwana 102 Eliwana 700 Iron Bridge 15
Slide 22: Record dividends
Record dividends Record returns to shareholders with total dividends declared of A$1.14/share, a 78% payout ratio of NPAT Dividends declared and payout ratios 120 80% 70% 24 Dividends declared (A cents) 100 Dividend pay-out ratio % 60% 80 50% 60 40% 90 30% 40 20% 20 45 10% 20 23 10 15 7 8 5 0 0% FY1
Slide 23: Capital allocation
Capital allocation Disciplined allocation to capital investment and shareholder returns Capital allocation of debt and dividends Cumulative allocation of NPAT: FY05-19 US$m US$m 15,000 4,000 Capital Allocation 3,000 11,000 2,000 7,000 1,000 3,000 - -1,000 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Debt Repa
Slide 24: Share buy-back
Share buy-back A$500 million on market buy-back program A$139m of shares acquired Value of shares acquired (A$) since launch A$500m of program on market program continues through to October 2019 139 Shares acquired at an average price of A$3.997/share All shares acquired have been cancelled 361 Curr
Slide 25: Debt repayments
Debt repayments 16,000 80% 12,000 12,691 60% 10,533 9,557 9,569 8,000 40% 7,159 7,188 6,771 4,000 5,188 20% 4,471 3,975 3,952 3,112 2,633 2,078 - 0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 Debt Net debt Gross gearing (RHS) Net gearing (RHS) 25
Slide 26: Credit metrics
Credit metrics Investment grade metrics support financial strength Earliest debt maturity in 2022 Gearing % Debt maturity profile 56% US$m 49% 45% 38% 1,500 31% 29% 24% 27% 1,400 21% 16% FY15 FY16 FY17 FY18 FY19 1,000 Gross gearing (%) Net gearing (%) Debt to EBITDA (x) 750 750 3.8x 500 500 2.9x 2.1
Slide 27: Integrated operations and marketing
Integrated operations and marketing 27
Slide 28: Fully integrated supply chain
Fully integrated supply chain Supported by a culture of innovation 28
Slide 29: Integrated operations and marketing
Direct customer engagement driving deep market insights Integrated operations Co-location of key decision makers enabling rapid and response to market trends marketing Agile product mix adjustments to meet customers’ needs Collaborative operations and marketing to optimise market opportunities 29
Slide 30: Crude steel production
Crude steel production China monthly crude steel output Mt 95 90 Strong growth in China’s 85 crude steel production 80 75 70 9.9% increase in the first 65 half of calendar 2019 60 55 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 Source: China’s National Bureau of Statistics 30
Slide 31: Strong demand for Fortescue products
Strong demand for Fortescue products Total Chinese port stocks Mt 170 China’s iron ore port stockpiles drawn down 150 to 118mt (6 August 2019) 130 110 Peak stockpiles of 90 163mt (March 2018) 70 50 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Australia Brazil Others 31 Sourc
Slide 32: Iron ore price
Iron ore price Key drivers contributing to Fortescue’s average price received increase to US$65/dmt US$/dmt $150 Optimising product mix $140 $130 $120 Steel mill margins $110 $100 $90 $80 Strength in Chinese steel $70 $60 production $50 $40 $30 Global supply disruptions $20 $10 $0 FB - Mysteel (Port
Slide 33: Enhanced product mix
Enhanced product mix Average realised price increased 48% in FY19 Product mix optimisation delivers value: Introduction of Product Product West Pilbara Fines Tonnes shipped millions (wmt) FY19 mix % FY18 mix % West Pilbara Fines 9.0 5% - - Production of Fortescue Lump Kings Fines 14.2 9% 15.0 9% Red
Slide 34: Automated mining
Automated mining Innovation delivering safety and productivity improvements AHS operation Autonomous drills >32 million km safely travelled 8 drills in operation AHS conversion Relocatable conveyor 132 trucks in operation Operating at full capacity 34
Slide 35: Iron ore growth projects
Iron ore growth projects Eliwana and Iron Bridge 35
Slide 36: Eliwana project
Eliwana project US$1.275 billion capital investment Progressing on schedule and budget Infrastructure Latest technology 143km rail; 30mtpa dry OPF Driving low cost operation First ore on train West Pilbara Fines December 2020 Increasing production and mine life 36
Slide 37: Iron Bridge Magnetite Project
Iron Bridge Magnetite Project US$2.6 billion investment delivering enhanced returns to shareholders and JV partners 22 mpta 67% Fe First ore scheduled mid-2022 Low impurity premium product Low capital Energy efficient intensity and operating cost Industry leading, proven design 37
Slide 38: Achieving our strategy to deliver majority of product over 60% Fe
Achieving our strategy to deliver majority of product over 60% Fe Increasing Fortescue’s average grade Competitively positioned across all product segments Flexibility to optimise margins through iron ore market cycles Highest grade Australian product with global scale in magnetite 38
Slide 39: Project capital spend profiles
Project capital spend profiles Eliwana • Official sod turning – July 2019 850 • Awarded A$300m in contracts to 700 735 250 Australian business • Camp construction underway 500 473 Iron Bridge • Detailed engineering commenced • Bulk earthworks commence late 102 15 2019 FY19 FY20 FY21 FY22 • Long lead
Slide 40: Growth and development
Growth and development 40
Slide 41: Fortescue mineral base
Fortescue mineral base 14,000 12,000 Mineral Resources (Mt) dry insitu 10,000 8,000 6,000 4,000 2,000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Chichester Hub Greater Chichester Hub Solomon Hub Western Hub (inc Eliwana) Nyidinghu Magnetite 41
Slide 42: World class exploration
World class exploration Opportunities that will be driven by market demand Pilbara Largest tenement holder Australia NSW ~3,000km2 tenure SA ~15,000km2 tenure South America Ecuador, Argentina Colombia 42
Slide 43: Energy strategy
Energy strategy Innovative and practical initiatives managing emissions and cost of supply Automation Gas opportunities Offsetting haul distance and Displacing diesel, Solomon reducing fleet requirements power station Renewable energy Hydrogen Including solar and other studies Partnership with CSIRO
Slide 44: Ambition for hydrogen
Ambition for hydrogen Hydrogen is part of a broader energy strategy Technology Our operations Research, study and commercialise Reduce carbon footprint and cost of energy Domestic industry Global supply chain Develop, partner or participate in Supporting export of green hydrogen hydrogen related pro
Slide 45: FY20 Guidance
FY20 Guidance US 170-175mt $13.25-13.75 Shipments C1 cost / wmt US $2.4 billion 50-80% FY NPAT Capital investment Dividend policy 45
Slide 46: Key strategic focus
Key strategic focus Balance sheet Long term strength sustainability Growth and Returns to development shareholders 46
Slide 47: Our Vision
Our , Vision ae The safest, lowest « cost, most profitable mining company fe Pde FARIEIRIER — FEA
Slide 48: Fortescue: The New Force in Iron Ore
wn Fortescue ¥ | The New Force in Iron Ore
Slide 49: Glossary
Glossary C1 - Operating costs of mining, processing, rail and port on a per tonne basis, Underlying EBITDA - Earnings before interest, tax, depreciation and amortisation, including allocation of direct administration charges and production overheads. exploration, development and other expenses. Reco