Fortescue Ltd · ASX:FMG
Fortescue — Fortescue Metals Group — Macquarie West Australian Forum 2019
31 slides from Fortescue's conference presentation, Dec 4, 2019
Slide 1: Macquarie West Australian Forum
For personal use only Macquarie West Australian Forum 4 December 2019 Global force Thriving communities
Slide 2: Important Notice
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: A world class company
For personal use only A world class company >1.3 billion ~170mtpa Shipped Wholly owned, fully integrated supply chain Core supplier Low cost to China producer 3
Slide 4: FY19: a record year
FY19: a record year For personal use only Underpinned by record safety performance 167.7million tonnes Shipped US $6.0 billion Underlying EBITDA US $3.2 billion US $13.11/wmt Net profit after tax (NPAT) C1 cost US $2.1billion A $1.14 per share Net debt Total FY19 paid dividend 4
Slide 5: Increasing shareholder returns
Increasing shareholder returns For personal use only A $0.24 per share Fully franked final dividend paid A $1.14 per share Total FY19 dividends paid in October 78% of FY19 NPAT Dividend pay-out ratio Share buy-backs A$139m completed, extended to October 2019 5
Slide 6: A strong start to FY20
A strong start to FY20 First quarter of FY20 builds on record results in FY19 For personal use only Safety 2.7 42.2mt Total Recordable Injury Frequency Rate Shipments for the quarter US$12.95/wmt US $85/dmt C1 costs Average revenue received US$0.5 billion US$3.4 billion Net debt Cash on hand 6
Slide 7: Investment in growth
Investment in growth For personal use only Unparalleled track record and capability in safely developing and operating major iron ore projects in the Pilbara 7
Slide 8: Building strong relationships with China
Building strong relationships with China For personal use only WA companies have forged strong connections with China Major supplier Investment and financing of iron ore to China relationships Over US$1billion in Academic, policy and procurement from China community engagement 8
Slide 9: Crude steel production
Crude steel production For personal use only China Monthly Crude Steel Output 95 90 Strong growth in China’s 85 crude steel production 80 Million tonnes 75 70 7.4% increase in steel 65 production YTD Oct 2019 60 55 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 9 Source: China’s N
Slide 10: Strong demand for Fortescue products
Strong demand for Fortescue products For personal use only China’s iron ore port Mt Total Chinese port stocks stockpiles drawn down to 170 128mt (31 October 2019) 150 130 Peak stockpiles of 163mt 110 (March 2018) 90 70 50 China Q3 iron ore imports Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct
Slide 11: Enhanced product mix
Enhanced product mix For personal use only Average realised price increased 48% in FY19 Product mix optimisation delivers value: Introduction of West Pilbara Fines Tonnes shipped millions (wmt) FY19 Product FY18 Product mix % mix % Production of Fortescue Lump West Pilbara Fines 9.0 5% - - Kings Fin
Slide 12: Iron ore price
Iron ore price Key drivers contributing to Fortescue’s For personal use only average price received increase with 89% contractual price realisation in Sept Q USD/dmt 140 Optimising product mix 120 Steel mill margins 100 80 Strength in Chinese steel 60 production 40 20 Global supply disruptions 0 Jan
Slide 13: Financial results
For personal use only results Financial 13
Slide 14: Sustainable low cost producer
Sustainable low cost producer For personal use only Industry leading cost position C1 US$/wmt 60 Structural improvements 50 Solomon + blending + processing 48 40 44 Productivity and efficiency 30 34 Utilisation, recoveries, maintenance 27 20 12.95 Innovation and technology 10 15 13 12 13 Autonomy, c
Slide 15: Price and margins
Price and margins For personal use only 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 For
Slide 16: Capital expenditure
Capital expenditure For personal use only Disciplined allocation to core business, innovation and growth FY19 Capital expenditure - US$1,040m FY20 Capital expenditure guidance - US$2,400m Sustaining 700 Sustaining 612 Development * 206 Development 360 Exploration 105 Exploration 140 Eliwana 102 Eliw
Slide 17: Capital allocation
Capital allocation For personal use only Disciplined allocation to capital investment and shareholder returns Capital allocation of debt and dividends Cumulative allocation of NPAT: FY05-19 US$m US$m 15,000 Capital Allocation 4,000 11,000 3,000 2,000 7,000 1,000 3,000 - -1,000 FY13 FY14 FY15 FY16 FY
Slide 18: Credit metrics
Credit metrics Investment grade metrics support financial strength For personal use only Earliest debt maturity in 2022 Gearing % Debt maturity profile 56% 49% 45% 38% 31% 1,000 29% 27% 24% 21% 16% 750 FY15 FY16 FY17 FY18 FY19 Volume (US$m) Gross gearing (%) Net gearing (%) Debt to EBITDA (x) 500 75
Slide 19: Iron ore growth projects
For personal use only Iron ore growth projects Eliwana and Iron Bridge 19
Slide 20: Eliwana project
Eliwana project For personal use only 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 20
Slide 21: Iron Bridge Magnetite Project
Iron Bridge Magnetite Project For personal use only 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
Slide 22: Achieving our strategy to deliver majority of product over 60% Fe
Achieving our strategy to deliver majority of product over 60% Fe For personal use only Aligned with customer requirements Competitively positioned across all key segments Flexibility to optimise product mix to meet customer requirements Highest grade Australian product with global scale in magnetit
Slide 23: Growth and development
For personal use only Growth and development 23
Slide 24: World class exploration
World class exploration For personal use only 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 24
Slide 25: Automated mining
Automated mining For personal use only Innovation delivering safety and productivity improvements AHS operation Autonomous drills >37 million km safely travelled 8 drills in operation AHS conversion Relocatable conveyor 147 trucks in operation Operating at full capacity 25
Slide 26: Chichester Solar Gas Hybrid
Chichester Solar Gas Hybrid For personal use only 100 per cent of daytime stationary energy requirements at Fortescue’s Chichester Hub will be powered by renewable energy 60MW solar PV 60-kilometre generation facility transmission line Displace around 100 Pilbara Energy Connect million litres of die
Slide 27: Ambition for hydrogen
Ambition for hydrogen For personal use only 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 hydroge
Slide 28: FY20 Guidance
FY20 Guidance For personal use only 170-175mt Shipments US $13.25-13.75 C1 cost / wmt US $2.4 billion 50-80% FY NPAT Capital investment Dividend policy 28
Slide 29: Key strategic focus
For personal use only Key strategic focus Balance sheet Long term strength sustainability Growth and Returns to development shareholders 29
Slide 30: Our Vision
Our Vision ak ~~ CZ vores ~The safest, lowest = ~ » | ct “cost, most profitable yy } go company. is... a ALARARGES Fortescue’ Pa KE f _waiues ee * ’ ene a 4} ¥ [Sal a [aR
Slide 31: Fortescue: The New Force in Iron Ore
Fortescue The New Force in Iron Ore
Fortescue Metals Group — Macquarie West Australian Forum 2019 on 6ix