Mines & Money Conference     Hong Kong – 21 March 2012
DisclaimerImportant NoticeThe purpose of this presentation is to provide general information about Fortescue Metals Group ...
Fully integrated – large scale efficiencyOwnership of infrastructure is the key                                            3
Clear strategy155mtpa June 2013                                  Herb Elliott Port                                      Po...
A near term growth storyValue creation through early delivery        Jun-12       Dec-12       Jun-13   Dec-13   Jun-14   ...
Fortescue Corporate DVDForging Ahead                          6
Core competenciesInnovation and rapid execution• A new exploration model• Fastest ramp up in the  history of the Pilbara• ...
Resource portfolio sets expansion platform                                        8
NyidinghuA dot on the map in 2010                                  Herb Elliott                                     Port• ...
New development modelDelivering results          Culture          Fortescue’s unique culture is the key          Relations...
Operating Highlights• Integrated mine, rail  and port running at  over 55mtpa for  December Qtr• Commissioning of  third b...
Financial HighlightsRecord performance• $3.4 billion first half FY2012 record revenue• $1.5 billion underlying EBITDA• $80...
Consistent sustainable growth   Mining          Rail         Port                                       13
High margin producer          Changed pricing delivers strong returns                        Benchmark regime - FOB       ...
Debt maturity profileDebt profile extended with $2 billion raising in March 2012As at March 2012 (US$m)                   ...
The market             16
China – the twelfth five year planGreat news for Pilbara iron ore1           billion            people  will live in China...
China increasingly looks to imported iron ore China’s steel production up 60% over 5 yrs – Iron Ore imports up 110%       ...
And the seaborne market is struggling                                                   India’s withdrawal from the iron o...
China’s domestic production fills the gap,but at a costGrade degradationin Chinese domesticproduction rises atan alarming ...
Development              21
Fortescue to capture the opportunityRapid growth – Capital Efficiency• Short term  155mtpa two mining hubs, rail and port ...
Port access – the key to success inthe Pilbara             Fortescue                                      23
Port expansion milestonesPort• Commissioning of third berth in progress• Second in-load circuit end September Qtr• Third i...
Rail expansion milestonesRail• Main line duplication end September Qtr 2012• Spur line to Solomon end December Qtr 2012• A...
Chichester Hub expansion milestonesChristmas Creek• Second OPF end September Qtr 2012• Current OPF to 25mtpa run rate by e...
Solomon Hub expansion milestonesSolomon• Mining contract to be finalised early June Qtr 2012• Sealed airstrip operational ...
$3bn of EBITDA growth on the tableIt’s all about execution      The above chart uses broker consensus operating costs and ...
The equity value proposition awaitsA PE uplift and re-rating expected on milestone achievementsYear            2012    201...
2012 and beyond – delivering on promisesPure iron ore company leveraged to Asia                         • Culture is our d...
ForgingAheadSign up to alerts onlinewww.fmgl.com.au
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Iron ore market outlook and strategies for growth - Presented at www.minesandmoney.com

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Keynote presentation: Iron ore market outlook and strategies for growth

China, India, Japan, Korea: Examining the status of Asia’s major steel markets
Iron ore pricing mechanisms and the impact on profitability of a mining project
Project development challenges and key success factors for growth
FMGL’s growth strategy: People, infrastructure, global partnerships

Nev Power, CEO, Fortescue Metals Group

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Iron ore market outlook and strategies for growth - Presented at www.minesandmoney.com

  1. 1. Mines & Money Conference Hong Kong – 21 March 2012
  2. 2. DisclaimerImportant NoticeThe 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 thispresentation.This presentation contains certain statements which may constitute "forward-looking statements". Such statementsare only predictions and are subject to inherent risks and uncertainties which could cause actual values, results,performance or achievements to differ materially from those expressed, implied or projected in any forward-lookingstatements.No representation or warranty, express or implied, is made by Fortescue that the material contained in thispresentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each ofFortescue, its officers, employees and advisers expressly disclaims any responsibility for the accuracy orcompleteness of the material contained in this presentation and excludes all liability whatsoever (including innegligence) for any loss or damage which may be suffered by any person as a consequence of any information inthis presentation or any error or omission therefrom. Fortescue accepts no responsibility to update any personregarding any inaccuracy, omission or change in information in this presentation or any other information madeavailable to a person nor any obligation to furnish the person with any further information.Additional InformationThis presentation should be read in conjunction with the Annual Financial Report as at 30 June 2011, the half yearfinancial statements together with any announcements made by Fortescue in accordance with its continuousdisclosure obligations arising under the Corporations Act 2001.All amounts within this presentation are stated in United States Dollars consistent with the Functional Currency ofthe Fortescue Metals Group Limited.Tables contained within this presentation may contain immaterial rounding differences. 2
  3. 3. Fully integrated – large scale efficiencyOwnership of infrastructure is the key 3
  4. 4. Clear strategy155mtpa June 2013 Herb Elliott Port Port Hedland Fortescue Infrastructure Dampier Fortescue Rail Karratha Rio Tinto Rail BHP Rail Solomon Hub Chichester Hub BCI JV Tom Price 4
  5. 5. A near term growth storyValue creation through early delivery Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 5
  6. 6. Fortescue Corporate DVDForging Ahead 6
  7. 7. Core competenciesInnovation and rapid execution• A new exploration model• Fastest ramp up in the history of the Pilbara• Surface mining technology for grade control• Heaviest haul rail system in the world• Highest port out-load rates in Australia• Largest ore processing plant in the Pilbara 7
  8. 8. Resource portfolio sets expansion platform 8
  9. 9. NyidinghuA dot on the map in 2010 Herb Elliott Port• Over 2 billion tonnes discovered since 2010• Low 2:1 low strip ratio = low cost• Ideal for Chichester blending• Leverage existing infrastructure Chichester Solomon Hub Hub Fortescue tenement holding Nyidinghu 9
  10. 10. New development modelDelivering results Culture Fortescue’s unique culture is the key Relationships Direct relationships with sub contractors and local suppliers China Leveraging China’s fabrication and delivery capability Speed Speed of delivery – time is money Planning Planning for scale today and efficiency into the future 10
  11. 11. Operating Highlights• Integrated mine, rail and port running at over 55mtpa for December Qtr• Commissioning of third berth with new out-load circuit• Sixth train set joins the rail fleet• New generation surface miners at Chichester Hub 11
  12. 12. Financial HighlightsRecord performance• $3.4 billion first half FY2012 record revenue• $1.5 billion underlying EBITDA• $801 million net profit of up 155% on the prior period last year• 27 million tonnes shipped up 30% on the prior period• 14.4 million tonnes shipped in Dec Qtr a run rate of 58mtpa• C1 costs reduced to $46/wmt in Dec Qtr• $2.5 billion cash at bank at end of Dec 12
  13. 13. Consistent sustainable growth Mining Rail Port 13
  14. 14. High margin producer Changed pricing delivers strong returns Benchmark regime - FOB Index pricing - CFR Average CFR selling price per dry tonneUS$ per dry tonne Gross margin Average COGS per $79 dry tonne Gross margin Gross margin $68 $60 Gross margin $46 Gross margin Gross margin $20 $15 • Index pricing better represents supply/demand • CFR terms lock in shipping advantages for proximity to market 14
  15. 15. Debt maturity profileDebt profile extended with $2 billion raising in March 2012As at March 2012 (US$m) 15
  16. 16. The market 16
  17. 17. China – the twelfth five year planGreat news for Pilbara iron ore1 billion people will live in China’s cities by 2030 50,000 skyscrapers by 2030 - equal to ten NY cities 221 Chinese cities will have 1m+ people living in them – Europe has 35 5x GDP growth by 2025 todaySource: McKinsey Global Institute 17
  18. 18. China increasingly looks to imported iron ore China’s steel production up 60% over 5 yrs – Iron Ore imports up 110% Iron ore production (Mt) Steel production (Mt) China’s steel production forecast to increase 25% over next 5 years - China’s imports of iron ore up 50%Source: Moelis & Company estimates, Tex Report, Bloomberg 18
  19. 19. And the seaborne market is struggling India’s withdrawal from the iron ore market has been rapid and unexpectedMillion Tonnes ` 2012 likely to be the smallest increase to seaborne supply in last 5 years Source: Macquarie Bank Commodity Review 2012 19
  20. 20. China’s domestic production fills the gap,but at a costGrade degradationin Chinese domesticproduction rises atan alarming rate China’s iron ore tonnes mined doubles in 5 years but contained iron units of production remain steady 20
  21. 21. Development 21
  22. 22. Fortescue to capture the opportunityRapid growth – Capital Efficiency• Short term 155mtpa two mining hubs, rail and port expansion advancing rapidly• Medium term Options with Nyidinghu, Western Hub and Anketell Port Budget US$ billions Committed to date Port 2.4 1.7 Infrastructure capital intensity Rail 2.2 1.5 Chichester Hub 1.1 0.7 Solomon Sub Total Mine Fleet 2.7 8.4 1.6 2.3 6.2 1.2 $84 per tonne Total 10.0 7.4 as at 14 February 2012 22
  23. 23. Port access – the key to success inthe Pilbara Fortescue 23
  24. 24. Port expansion milestonesPort• Commissioning of third berth in progress• Second in-load circuit end September Qtr• Third in-load and out-load circuits end December Qtr 2012• Fourth berth end March Qtr 2013 24
  25. 25. Rail expansion milestonesRail• Main line duplication end September Qtr 2012• Spur line to Solomon end December Qtr 2012• Additional ore cars and locos over the next 10 months. 25
  26. 26. Chichester Hub expansion milestonesChristmas Creek• Second OPF end September Qtr 2012• Current OPF to 25mtpa run rate by end June 2012• Mining ramp up to 50mtpa by end December Qtr 2012Cloudbreak• Wet front end completed by end September Qtr 2012 26
  27. 27. Solomon Hub expansion milestonesSolomon• Mining contract to be finalised early June Qtr 2012• Sealed airstrip operational in June Qtr 2012• Firetail OPF commencing ramp up December Qtr 2012• Kings OPF commencing ramp up March Qtr 2013 27
  28. 28. $3bn of EBITDA growth on the tableIt’s all about execution The above chart uses broker consensus operating costs and consensus iron ore prices with the differential being the tonnes per annum ramp up profile. 28
  29. 29. The equity value proposition awaitsA PE uplift and re-rating expected on milestone achievementsYear 2012 2013 2014Average 11.6 7.9 5.6Fortescue PEASX 200 12.6 11.1 10.1SampleASX 200 12.7 10.0 9.0Materials 29
  30. 30. 2012 and beyond – delivering on promisesPure iron ore company leveraged to Asia • Culture is our differentiator • 55mtpa production base sets the platform • Growth to 155mtpa June 2013 • Further development options through aggressive exploration • Nyidinghu + Western Hub = options • Multiple mine and port strategy to deliver within window of opportunity • A value proposition without parallel 30
  31. 31. ForgingAheadSign up to alerts onlinewww.fmgl.com.au

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