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Iron Ore Mining Industry - Growth Strategies: Nev Power, Fortescue Metals Group at Mines and Money Hong Kong 2013

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  • Last updated 24 September 2012, update on Tuesday
  • Transcript

    • 1. Presented at:www.minesandmoney.com/hongkong
    • 2. Investor PresentationHong KongMarch 2013
    • 3. DisclaimerImportant NoticeThe purpose of this presentation is to provide general information about Fortescue Metals Group Ltd ("Fortescue"). It is notrecommended that any person makes any investment decision in relation to Fortescue based on this presentation.This presentation contains certain statements which may constitute "forward-looking statements". Such statements are onlypredictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance orachievements to differ materially from those expressed, implied or projected in any forward-looking statements.No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will beachieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Fortescue, its officers, employeesand advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentationand excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as aconsequence of any information in this presentation or any error or omission therefrom. Fortescue accepts no responsibility toupdate any person regarding 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 2012, the half year financialstatements together with any announcements made by Fortescue in accordance with its continuous disclosure obligations arisingunder the Corporations Act 2001.All amounts within this presentation are stated in United States Dollars consistent with the Functional Currency of the FortescueMetals Group Limited. Tables contained within this presentation may contain immaterial rounding differences. 3
    • 4. Company overview 4
    • 5. FortescueWorld’s 4th biggest seaborne exporterStrong culturedelivers record results 35.7mt Top 20 ASX listed company record shipped in 1H13 8.5mt shipped in Dec 2012 15.6bt resource100 mtpa mtpa December run rate 155 target 5
    • 6. A differentiated modelDelivering results Culture Fortescue’s unique culture is the key Relationships Direct relationships with sub contractors and local suppliers China Leveraging China’s growth and manufacturing capability Speed Speed of delivery – time is money Planning Planning for scale today and efficiency into the future 6
    • 7. HighlightsHalf Year FY2013• Record production results with 35.7mt shipped• Key expansion milestones delivered, 50mtpa new capacity Kings development resumed for 155• Continuing safety improvement TRIFR decreasing 17%• US$5.0bn refinancing completed• Significant progress in asset sale process 77
    • 8. The path to 155mtpa9
    • 9. Financials 10
    • 10. Financial SummaryHalf Year FY2013• Revenue of US$3.3bn and EBITDA of US$1.1bn• Net profit after tax of US$478m• Tax US$263m and royalties US$194m paid• Refinancing US$5.0bn 11 11
    • 11. EBITDA analysis Increased volumes offset market volatility impact 2,500 476 1,018 2,000EBITDA variance (US$m) 1,534 1,500 156 1,134 10 7 26 43 1,000 500 - 1HFY12 Volume Price Costs Royalty Loan note Fx Other 1HFY13 re-estimation 32% increase in production offset by 42% decrease in price 12 12
    • 12. Operating margins supportFortescue’s average realised selling price and C1 costs Production growth supports strong operating cash flows through the commodity cycle 13 13
    • 13. Capital ExpenditureHalf Year FY2013 FY2011 FY2012 FY2013 FY2014 US$bn Actual Actual Forecast Indicative 155mtpa expansion 0.5 4.1 3.8 0.6 Operational capital 0.3 0.9 0.9 0.7 Other capital projects 0.6 0.3 0.2 0.3 Exploration 0.3 0.4 0.1 0.1 Fleet - 0.4 1.3 0.2 Total 1.7 6.1 6.3 1.9 $4.5 billion spent in 1H2013 Kings restart from January with completion by 1H2014 14 14
    • 14. Simplified debt capital structureIncreased flexibility with new debt maturity schedule$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 Credit Facility (1) Senior Unsecured notes Preference Shares (1) Senior Secured Credit Facility will be subject to some amortization over its life. 15
    • 15. Capital managementHalf Year FY2013• 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 16 16
    • 16. Market 17
    • 17. Long term confidence in ChinaLower growth rates but still strong in absolute volumes• Strong underlying economy >7% GDP growth• New leaders committed to growth• Urbanisation & infrastructure driving steel demand• Targeted infrastructure stimulus packages• Short term steel market volatility 18
    • 18. China steel intensity below global averages Developed economies have spent 40+ years consuming more than 500kg of steel per person – China is yet to reach this level Steel Intensity & GDP 1850-2012 (smoothed)kg/capita1,400 Korea1,2001,000 Taiwan 800 Japan 600 Germany China US 400 200 0 0 10,000 20,000 30,000 Real GDP per capita (PPP basis)Source: ANZ Research 19
    • 19. $100 $120 $130 $140 $150 $160 $170 $190 $200 $110 $180 $80 $90 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Strong rebounds follow price drops Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 History shows price volatility Jul-12 Aug-12 Iron Ore Price (62% Fe CFR – Platts IODEX China) Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-1320
    • 20. Clear Strategy 21
    • 21. Moving down the global cost curve Targeting bottom quartile 200 Domestic Chinese Ore Australia Brazil US$/dry tonne CFR equivalent India 150 South Africa Other Firetail & Kings to reset the cost base 100 50 0 0 100 200 300 400 500 600 700 800 900 1,000 Cumulative mt (wet, as delivered)Source: Metalytics prepared March 2012 22
    • 22. Flexible design for future growth Fifth berth approved Fortescue* 120mtpa minimum guaranteed allocated priority capacity 23 23
    • 23. Fortescue’s dominant Pilbara land position Fortescue: 85,000km2 Rio: 14,230km2 BHP: 8,195km2 24
    • 24. Resource portfolio sets expansion platform To leverage existing assets for low cost growth 18,000 Annualised growth of 1.5bt 16,000 14,000Mineral Resources (Mt) 5,205 12,000 per annum 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 2,860 4,000 1,715 2,224 695 695 695 695 695 695 2,000 3,379 2,266 2,227 2,143 2,550 2,550 - 2008 2009 2010 2011 2012 2013 Chichester Hub Chichester Other Solomon Hub Western Hub Nyidinghu Magnetite Fiscal Year 25
    • 25. Delivering on targetsStrong financial resultsExpansion to 155mtpaDeleverage following expansionFlexible incremental growthUnique culture drives performance 26
    • 26. Proudly supporting:Sign up to alerts online:www.fmgl.com.au
    • 27. GlossaryDefinition of non-IFRS termsEBITDA = profit before income tax adjusted for depreciation and amortisation, netfinance expenses and refinancing costsReturn on equity = profit for the year after income tax divided by total equityCash flow per share (CFPS) = net cash inflows from operating activities divided byundiluted weighted average ordinary shares
    • 28. Save the Date for Mines and Money Hong Kong 2014 March 24-28, 2014 - Hong Kong Convention & Exhibition CentreRegister your Interest at:www.minesandmoney.com/hongkong

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