Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Goldman Sachs JB Were Sixth Annual Australasian Investment Forum 2010
66 slides from Fortescue's conference presentation, Mar 12, 2010
Slide 1: The Evolution to a Formidable Tier One Iron Ore Major
The Evolution to a Formidable Tier One Iron Ore Major Goldman Sachs JB Were Sixth Annual Australasian Investment Forum 11-12 March 2010
Slide 2: Disclaimer
Disclaimer 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 presentation contains certain s
Slide 3: Operational overview
Operational overview
Slide 4: Integrated Business ~ 55Mt shipped, 55mtpa annual capacity imminent
Integrated Business ~ 55Mt shipped 55mtpa annual capacity imminent
Slide 5: Overview
Overview 1 • Current run rate of ~ 40Mtpa annualised • Chichester expansion in progress • Target Production 55Mtpa within 12 months • Cash costs US$27/tonne • Strengthening outlook for iron ore prices • Strong liquidity – over US$700m cash (Dec 09)
Slide 6: Overview
Overview 2 • ONLY GLOBAL SCALE PURE IRON ORE INVESTMENT • Chichester hub will consolidate at 95mtpa • Solomon feasibility 60mtpa study nears completion • Utilises Port Hedland capacity of 155mtpa • New Pilbara Port allows an initial additional100mtpa p • Studies contemplate total 200mtpa of new port
Slide 7: Mining overview – Chichester Hub
Mining overview – Chichester Hub Production Optimising Cloudbreak and expanding Christmas Creek operations • Cloudbreak production stable at ~ 40Mtpa • Christmas Creek expansion underway to 15Mtpa • Strip ratios gradually increasing from 2.5 : 1 up to 4.4 : 1 by end 2010 12 10 8 6 4 2 0 Q1 09 Q2 09
Slide 8: Infrastructure overview – Chichester Hub
Infrastructure overview – Chichester Hub Fortescue 40 State of the Art Logistics – Rail BHP 37.5 Rio 35.7 • World’s heaviest haul rail Vale 31.5 system » 40 tonne axle loads US (best) 32.7 • Shortest rail cycle times in the Pilbara ~ 18 hrs QCCM 32 7 32.7 LKAB 30 State of the Art Logistics – Port Ch
Slide 9: Proven skills in Operations – Ramp Up Records
Proven skills in Operations – Ramp Up Records 50,000 45,000 FMG Cloudbreak 40,000 Annual Prroduction ((kt) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Credit Suisse estimates RIO Hope Downs RIO IOC (pellets and concentrate) RIO
Slide 10: Fortescue Forging Ahead - Video
Fortescue Forging Ahead - Video
Slide 11: Production costs
Production costs Cash costs per tonne US$/t Q1FY10 Q2FY10 Mining and processing 21 22 Rail and port 5 5 Total Direct Costs 26 27 Despite AUD/USD appreciation, cost per tonne held at US$27
Slide 12: Exploration
Exploration 6.3 billion tonnes in 5 years • Christmas Creek drilling commenced May 2004; • Cloudbreak commenced November 2004; • Solomon drilling commenced June 2007. • R Reserves now 1 1.6 6 billi billion ttonnes • Resources now 5.1 billion tonnes • Additional 1 1.2 2 billion tonnes of magnetite re
Slide 13: Financial highlights – HY2010
Financial highlights – HY2010 • Revenues up 17% % on previous period despite 20% % price reduction • Despite D it AUD/USD appreciation i ti off 22% 22%, costt per ttonne h held ld at US$27 • Net equity up nine per cent on previous period • Exceeded previous production guidance
Slide 14: Reconciliation of Half Year Underlying EBITDA
Reconciliation of Half Year Underlying EBITDA Dec 08 and Dec 09 (US$M) 800 283 2 27 110 700 224 600 475 500 400 400 300 200 400 100 0
Slide 15: Income statement
Income statement 6 Months to 6 Months to 2008-2009 (US$m) 31/12/2009 31/12/2008 US$m US$m Revenue 1,189 1,015 EBITDA 426 479 EBIT 315 458 Net Profit After Tax 43 760 Result reflects strong ramp up and market conditions
Slide 16: Balance Sheet
Balance Sheet As at As at 2008-2009 31/12/2009 31/12/2008 US$m US$m Current assets 1,013 961 Non-current assets 3,628 3,448 Current liabilities 737 746 Non-current liabilities 2,978 2,812 Net assets 926 851 Total equity 926 851 Strong balance sheet – massive operating and future reserve and resource
Slide 17: Debt maturity
Debt maturity US$ face 54.0 / paid 38.3 1200 US$ $ 1,026m 1000 Senior Secured Notes 800 EUR face 16.2 / paid 10.1 US$ face 2.5 / paid 1.8 600 EUR 299m 400 US$318m US$250m Subordinated Notes 200 US$100 US$100m 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Long-term g repayment p y p profil
Slide 18: Iron ore for generations
Iron ore for g generations i
Slide 19: Captive market – Asian growth engine
Iron ore for generations Captive market – Asian growth engine • 3 billion people, rapid urbanisation and industrialisation • Competitive advantage of the Pilbara is growing • China’s ability to meet its own requirement declining – fast • Fortescue has delivered ~55mt to ~45 steel mills in Asia and E
Slide 20: Proven Value in Use for Customers
Iron ore for generations Proven Value in Use for Customers Most mills using Rocket Fines at 30-45% of their sinter blend with 57.3-58.3% sinter Fe. Larger size mills using 20-35%
Slide 21: Tenements and Resources
Iron ore for generations Tenements and Resources
Slide 22: Fortescue has a dominant Pilbara land position
Iron ore for generations Fortescue has a dominant Pilbara land position 71 400k 2 FMG 71,400km FMG: Rio: 11,000km2 (Robe 4,200km2) BHP: 6,500km , 2
Slide 23: Strong reserve position
Iron ore for generations Strong reserve position Reserve Tonnes Fe (%) SiO2 (%) Al2O3 (%) P (%) LOI (%) Category (Mt) Proven 123 59.7 3.61 1.89 0.051 8.1 Probable 1 459 1,459 58 8 58.8 4 23 4.23 2 40 2.40 0 057 0.057 76 7.6 Total 1,582 58.8 4.18 2.36 0.056 7.6
Slide 24: Resources supporting future generations
Iron ore for generations Resources supporting future generations Current Resources (Bt) Current Targets (Bt)* Further Potential (Bt)* TOTAL (Bt) Chichester Hub • CB, CC, environs 2.87 1.8 1.3 6.0 • Eastern E t Pilbara Pilb 05 0.5 .05 05 10 1.0 Solomon Hub • Greater Solomon 2.45 1.0 1.5 4.9 • Adjacen
Slide 25: Three Hub Production Strategy
Iron ore for generations Three H Hubb Production Strategy
Slide 26: Three Hub Production Strategy
Three Hub Production Strategy Chichester Solomon and Western Chichester, Fortescue Infrastructure Fortescue Rail Port New Pilbara Hedland Proposed Fortescue Rail Dampier Port API Joint Venture Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Western Hub Hub Tom Price Paraburdoo Newman
Slide 27: Chichester Hub
Iron ore for generations Chichester Hub
Slide 28: Chichester Hub overview
Iron ore for generations Port Hedland • Tier 1 asset • Christmas Creek Rail • Mine, port and advanced rail operation construction • 55mt shipped Chichester • 95mtpa long- Hub t term capacity it • 55mtp capacity • underway N Newman •
Slide 29: Chichester Mining
To Port Chichester H dl d Hedland Mining Existing Mine Proposed Mine Camp village Cloudbreak 4 accommodation Christmas Ch i t Ore Processing Creek Battle Hill Facility Mt Lewin 4 Airport Fortescue Rail Mindy Mt Nicholas Mindy Proposed Fortescue Rail Rio Tinto Rail Horatio BHP Rail Newman
Slide 30: Chichester Hub – Short Term
Chichester Hub – Short Term PORT Total volume capacity to expand to 55Mtpa by early 2011 RoM (unprocessed) Mtpa 55 Product (processed) Mtpa SOLOMON CHRISTMAS CREEK OPF with wet front-end 39 and desand plant Hauled to Christmas CLOUDBREAK OPF with dry front-end and 16 Creek OPF de-sand plant Hauled H
Slide 31: Chichester Hub – Medium Term
Chichester Hub – Medium Term PORT Growing from 55mtpa to 95mtpa 95 SOLOMON 39 Cloudbreak 56 Christmas Creek
Slide 32: Pit operations – Cloudbreak
Iron ore for generations Pit operations – Cloudbreak Employing techniques matched to our ore body characteristics Excavator Overburden trucks Surface miner OVERBURDEN O trucks Ore t k ORE BODY
Slide 33: Christmas Creek on the move
Iron ore for generations Christmas Creek on the move October 2009
Slide 34: Solomon Hub
Iron ore for generations Solomon Hub
Slide 35: Solomon Hub - video
Iron ore for generations Solomon Hub - video
Slide 36: Solomon Hub
Iron ore for generations Port Solomon Hedland H b Hub D Dampier i • Initial production target 155 60mtpa • Total Hedland operation growing to 155mtpa Solomon Hub 60 Chichester Hub Tom Price 95 Fortescue Rio Tinto 100 BHP Paraburdoo Newman 60
Slide 37: Solomon Mining
To Pilbara Solomon Port Mining To Port Hedland Planned Feasibility Mine Firetail Serenity y Proposed Mine Investigator Raven Camp village accommodation Mt Sheila 4 Kings Ore Processing East Facility Flying 4 Airport Fish Tom Price Fortescue Rail Proposed Fortescue Rail Ri Tinto Rio Ti t Rail R il BH
Slide 38: Solomon Momentum
Iron ore for generations Solomon Momentum Three years in Progress - DFS underway underway, completion due end 2010 • Exploration success 2.4 5km billion tonnes and growing; 20 Mtpa BID • Land Access and Environmental 40 Mtpa CID consents / approval well advanced; and • Mining leases applied for and
Slide 39: Firetail project
Iron ore for generations Firetail project • Firetail north ((includingg Joffre)) and Firetail south all within close proximity; • Additional BID targets in region from drilling of mapped mineralisation
Slide 40: Firetail Project
Iron ore for generations Firetail Project • Resource R 300Mt iincluding l di 116Mt of ‘high grade’ @ 60.3% Fe p ratio – above water table • Low strip • Standard Pilbara style Brockman g / traditional • Traditional mining Vertical exaggeration product = 4 times No Vertical exaggeration
Slide 41: Kings CID
Iron ore for generations Kings CID • More than 30km Firetail Joffre strike length g of Valley of the Queens CID in valleys; Trinity Firetail North • Additional Firetail South tonnages to be gained by Valley of the Kings exploring other valleys and infill some areas.
Slide 42: Kings CID
Iron ore for generations Kings CID • Resource of 2Bt with upper CID grades ~ 58% Fe • Standard Pilbara CID – comparable Yandi • Low L strip t i ratios ti ~ 2 2.5 5:1 Vertical exaggeration = 4 times No Vertical exaggeration
Slide 43: Solomon Stage – Indicative Capex / Opex
Iron ore for generations Solomon Stage 1 – 60 mtpa • Decision to mine in 2010 / 2011 • Shipping from Port Hedland Item Capex Opex Port US$1,080m US$1.38/tonne Rail US$765m US$2 16/tonne US$2.16/tonne (Solomon Rail Spur, not including rollingstock which will be leased) Mine US$765m US$17 60/tonne US$
Slide 44: Solomon Stage – Additional 100Mtpa Operation
Iron ore for generations Solomon Stage 2 Additional 100Mtpa Operation • Target timeline – 2013/14 • Shipping from New Pilbara Item Capex $UA Port • Mine ~900 million • Rail ~1.17 billion • Port ~3.6 3 6 billion Total ~$5.7 billion • All figures are represented by Scoping estimates or Prefeasibility
Slide 45: Western Hub
Iron ore for generations Western Hub
Slide 46: Three Hubs – Twin Ports
IronHubs Three ore for generations – Twin Ports New Pilbara Dampier Port Karratha Western H b Hub
Slide 47: Western Mining
To Pilbara Western Port To Pilbara Mining Port Proposed Mine Camp village accommodation Delphine Eliwana Ore Processing Facility 1 &2 4 Airport Fortescue Rail Wyloo 4 Flying Fish Proposed Fortescue Rail API Joint Venture Rio Tinto Rail BHP Rail
Slide 48: Western Pilbara projects
Iron ore for generations Western Pilbara projects • Existing target developments • Maximizes use of total rail infrastructure • Rail spurs p to access API new heavy y axle western rail • Rail spurs to Fortescue Central Rail • Expansion E i provision i i att N New Pilb Pilbara portt • Can be delivere
Slide 49: Magnetite
Iron ore for generations Magnetite
Slide 50: Magnetite
Magnetite No. 1 Development North Star Investors FMG 2 Glacier Valley FMG/Baosteel JV Multiple developments 3 Tom Price Steel Mill Port 4 Neptune Metal Corporation New Pilbara Hedland 5 Jupiter Steel Mill 6 Millers Monster Steel Mill Dampier Port 7 Lawrences Reward Steel Mill Karratha 8 Lucy Corpora
Slide 51: Chichester Hub Magnetite
1 2 Magnetite development notes 1&2 Feasibility Study with slurry pipeline to existing rail line Chichester Hub To Port 4&5 Adjacent to proposed mine and Mt Newman township Hedland Magnetite 6&7 8&9 Located at existing mine sites Slurry pipeline to existing rail siding, mine infrastructure and water
Slide 52: Solomon Hub Magnetite
To Pilbara Port Solomon Hub Magnetite To Port Hedland HAEMATITE MAGNETITE Firetail Serenity y E isting Mine Existing E isting Mine Existing 10 Investigator Proposed Mine Proposed Mine Raven Kings Camp village Camp village 13 12 Mt Sheila 4 accommodation accommodation E t East Ore Processing Ore Proc
Slide 53: Western Hub Magnetite
To Pilbara P t Port Western Hub To Pilbara Port Magnetite HAEMATITE MAGNETITE E isting Mine Existing E isting Mine Existing 17 Proposed Mine Proposed Mine Delphine 16 Eliwana Camp village Camp village 14 1 &2 accommodation accommodation Ore Processing Ore Processing Facility Facility Wyloo 4 Flying
Slide 54: Magnetite – long-term source of equity
Iron ore for generations Magnetite g – long-term g source of equity q y • China needs magnetite • Progressive rollout of magnetite with infrastructure hubs • All projects either adjacent to existing rail or suitable for slurry line from mine to existing/planned rail • Many projects adjacent to exist
Slide 55: Northern and Central Magnetite Provinces
Iron ore for generations •Magnetite is common to Fortescue •Magnetite M tit is i BIF (banded (b d d iiron fformation) ti ) Northern Magnetite g Province Two major developments in progress: • FMG/Baosteel JV – Feasibility about to commence, 1.23 Bt Resource • FMG North Star – Scoping study completed
Slide 56: Two Ports for Three Hubs
Two Ports for Th Three H Hubs b
Slide 57: Three Hubs – Two Ports
Three Hubs – Two Ports Fortescue Infrastructure Fortescue Rail Port New Pilbara Hedland Proposed Fortescue Rail Dampier Port API Joint Venture Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Western Hub Hub Tom Price Paraburdoo Newman
Slide 58: 1st Port – The Herb Elliot Port at Port Hedland
1st Port – The Herb Elliot Port at Port Hedland Current port infrastructure
Slide 59: Port infrastructure: 55, 95, 155Mtpa
Capacity (Mtpa) 55 95 155 Berths 2 3 5 Shiploaders 1 2 3 Capacity (Mtpa) 55 95 155 Stackers 2 2 4 Reclaimers 1 2 3 Capacity (Mtpa) 55 95 155 Train unloaders 1 2 3 Port infrastructure: 55, 95, 155Mtpa 5th berth at South West Creek awaiting approval by Port Authority
Slide 60: 2nd Pilbara Port (New)
Two ports for three hubs 2nd Pilbara Port (New) 100Mtpa from Solomon Hub • 220 kilometre Central FMG Rail (if no access to Rio line) • New multi-user Pilbara Port to 400Mtpa; • Multi-user port start-up capex only $4 billion • Can be delivered in 2013/2014 • Total capex of port, rail and mine ~ $6 bi
Slide 61: Pilbara Port - staged development
Two ports for three hubs Pilbara Port - staged development
Slide 62: New Pilbara port project - early cash flow option
Two ports for three hubs New Pilbara port project - early cash flow option • Access to Rio Rail • Early E l P Portt beach b hhhead d with ith 25Mt 25Mtpa ttrans shipping hi i lload-out d t • Potential to share trans-ship costs with MCC • CID or Brockman from Solomon deposits adjacent to rail • Devel
Slide 63: Proven skills – low risk
Iron ore for generations Proven skills – low risk
Slide 64: Proven skills in Construction – Completion Records
Iron ore for generations Proven skills in Construction – Completion Records From concept To reality Herb Elliott Port Port 2006 2008 Fortescue Rail Railway 2007 2008 Mine Cloudbreak Minesite 2006 2008 FACT: Fortescue built its infrastructure faster than any other mining company FACT: Fortescue rampe
Slide 65: Expansion risk considerations - answered
Iron ore for generations Expansion risk considerations - answered Risk Mitigant • Massive JORC resource base of 6.3 billion tonnes and Resource growing • Low tech civil works and very similar to works recently Construction completed • Proven team that has presided over the faster ramp up of Operatio
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