Securities & Derivatives Industry Association 2009 SDIA Conference. Sydney - 28 May 2009

Transcription

1 Securities & Derivatives Industry Association 2009 SDIA Conference Sydney - 28 May

2 Fortescue Metals Group 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 statements which may constitute "forward-looking statements". Such statements are 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-looking statements. No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Fortescue, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission there from. Fortescue accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information. Competent Persons Statement The geological information in this presentation is based on information compiled by Mr Stuart Robinson, and by Dr John Clout. Mr Robinson and Dr Clout are both fellows of The Australasian Institute of Mining and Metallurgy and are both employees of Fortescue Metals Group Ltd. Mr Robinson and Dr Clout both have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for reporting of Exploration results, Mineral Resources and Ore Reserves. Mr Robinson and Dr Clout consent to the inclusion in this presentation of the matters based on the information in the form and context in which it appears.

3 Executive Summary Fortescue is one of the world s Big 4 iron ore companies World class low cost asset base, from mine to port, built in record time Strong ramp up achieved and production growing Processing rates increasing and costs decreasing Strong product acceptance by all customers 3

4 Executive Summary Significant additional resources to underpin expansion with identified, exploration targets now total 20bt Front-end engineering design complete for production increase to 95mtpa and at prefeasibility level for 155mtpa Positive cashflow, and >US$650m cash on hand Management with proven track record Fortescue s charter is to become China s most important iron ore supplier. 4

5 Immediate Focus Cost control Continuing strong ramp up focus Shipping settlements Not losing sight of expansion program 5

6 Recent Developments Hunan Valin A$644m placement Solomon resource increased by 332mt to 2.2bt Desand plant commissioned Increased surface miner utilisation Second mine at Christmas Creek commences Continuing Strong customer support based on strong product quality 6

7 Production

8 Quarterly Iron Ore Production top 4 since we joined them Million Tonnes FMG BHP RIO VALE

9 Free Moisture on Ship falling Percentage Moisture (%) Actuals Q4 FY08 Q1 FY09 Estimate based on April actual Q2 FY09 Q3 FY09 Q4 FY9

10 OPF Average Daily Production rising 100,000 90,000 80,000 70,000 60,000 Tonnes per day 50,000 40,000 30,000 20,000 10,000 0 Q4 FY 2007/08 Q1 FY 2008/09 Actuals Estimate based on April actual Q2 FY 2008/09 Q3 FY 2008/09 Q4 FY 2008/09

11 Cash Operating Cost Per Tonne falling US$ per tonne Actuals 0 Q1 FY09 Estimate based on April actual Q2 FY09 Q3 FY09 Q4 FY09

12 Cloudbreak Several Surface Miners at Brampton Pit

13 State of the art mining operations Target: The lowest cost, highest efficiency iron ore producer in the Pilbara 6 mining pits in operation at Cloudbreak New production being established at Christmas Creek 17 x 2500 surface miners 4 x 4200 surface miners 4 excavators 3 shovels 49 trucks 12 dozers

14 Surface Miner Productivity rising 80,000 70,000 60,000 50,000 Average Daily Tonnes 40,000 30,000 20,000 10,000 0 Actuals Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Estimate based on April actual

15 An innovative machine converted to major mining equipment FMG s pioneer machines New 4200 Surface Miner

16 Ore processing plant at Cloudbreak Largest processing plant in the Pilbara Dual fines and lump operation modes to suit market requirements 11 screens 8 crushers Capacity to expand and add additional screens and secondary crushers / high pressure grinding rolls

17 Desand plant at Cloudbreak Innovative design proven in operations Improves product in Fe and Al Fed with <1mm natural fines fraction Extends life of mine 3 modules with option for 4 th Quick expansion potential

18 Christmas Creek Fortescue s second major mine

19 First ore trucked from Christmas Creek 18 May 2009

20 State of the art rail operations Target: The lowest cost transport in the Pilbara Clean sheet design captures best of existing technology Bigger carrying capacity, electronic braking system, aerodynamics Low centre of gravity, long wheel base and automatic air brakes deliver higher safe speed 15 locomotives 4 x 240 ore wagon trains 40 tonne axle loads 12 fuel tankers 256 km rail track from mine to port 300 km of rail track in total

21 First Ore on Train 15 May th Train 8 May

22 Train Cycles - faster DFS based on 20 hour cycle time Hours Actuals Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Estimate based on April & May actuals

23 Train Loading Speed - accelerating Seconds per dual wagon pair Actuals Q2 FY09 Q3 FY09 Estimate based on April & May actuals Q4 FY09

24 State of the art train unloader 3.6 mt stock yard (12 x 300kt) 2 stackers 1 bucket wheel reclaimer Fully automated sampling system

25 Train Unloading Speeds accelerating Seconds per dual wagon pair Actuals Q2 FY09 Q3 FY09 Estimate based on April & May actuals Q4 FY09

26 Massive Stock Pile Capacity 3.6 mt stock yard (12 x 300kt) 2 stackers 1 bucket wheel reclaimer Fully automated sampling system

27 State of the art port operations Highly automated port operations Two ship loading berths catering for cape size vessels Ship loader highest capacity in Australia Significant expansion potential Third wharf dredged and ready for construction

28 Shiploading Rates accelerating 6,000 5,000 4,000 Tonnes per hour 3,000 2,000 1,000 0 Actuals Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Estimate based on April & May actuals

29 Third Party Access Fortescue is delivering

30 Summit 300 Fortescue s AEC Initiative Summit 300 is Fortescue s commitment to the Australian Employment Covenant. Progression from Fortescue s original VTEC program Approximately 200 Aboriginal people have been trained and employed over the past three years. Tailored training programs will be used to prepare 300 people for employment The job is guaranteed if the trainee meets all the training and employment requirements.

31 VTEC Fortescue s Vocational Training and Education Program Take people at any employment and educational level as long as they are willing to give it a go. Offer a broad range of employment and training opportunities not only in the mining sector, but also within businesses that have developed as a direct result of FMG s presence in the Pilbara. Have the ability to deliver training that is tailored to the individual, including Driver licences training. Support early intervention programs at schools both within major towns and remote communities. Provide a support to those in training and employment in order to keep them there, thus developing a sustainable balanced life. Currently have 100 Aboriginal people working across the project and are working to an additional 300.

32 Environment Committed to minimising the impact on the Environment Developed a robust Environmental Management System (EMS) Regular environmental auditing assists in meeting all regulatory requirements Environmental performance has met all external expectations

33 Marketing, Shipping and Finance

34 Current Market Status Steel production in Europe, Japan, Korea and Taiwan is down 40% to 60%. As a result, their imported iron ore volumes have greatly reduced. BHPB, Rio Tinto and Vale are promoting to mid tier mills in China to move tonnage via spot shipment contracts, once ignored by them. Between 60% and 80% of Chinese iron ore mine capacity has closed due to uncompetitive cost structure. Many of the Indian spot ore producers are also unprofitable at current market prices. As a result of record imported tonnages into China in the last quarter, Chinese port stockpiles and port congestion has increased resulting in efficiency concerns.

35 China Iron Ore Imports remain very strong Million Tonnes Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Actuals per UMETALS 2007 Q1 Q Q3 Q4 Q Q2 Estimate based on April actual

36 Fortescue Market Status FMG has small product stockpiles at Port and Mine. Current Port stockpile is around 600kt (about 4 vessels). Customers are still buying all we can produce. However, the aggressive spot shipment marketing of our competitors is straining market pricing, prior to the 2009 China Benchmark settlement. Nevertheless, we are achieving prices above the spot rates for similar products but a little weaker than our last quarter announced average price.

37 Benchmark Settlement Rio have settled with Nippon at 33% reduction on fines and 44% on lump. This translates to a price for FMG of around FOB US$57.25/dmt for Rocket fines. CISA wants less but also wants a benchmark system As a reminder, FMG was financed in 2006 at a target average market price of less than US$35 FOB per dmt for the next 5 years.

38 China Iron Ore Imports 140 Million Tonnes Other India Brazil Australia Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Source: UMETALS

39 Financing Initiatives Hunan Valin and Fortescue are working together to ensure that when the company decides to expand it has the necessary competitive financial capital China intends that Shanghai becomes an international finance hub Fortescue aims to be one of the first foreign companies to list on the Shanghai Stock Exchange Chinese regulators have almost finished writing the administration rules for the issue of A-shares by foreign companies Timing for the first foreign listings is uncertain but there is political will for it to happen Discussions advancing with regulators and advisers

40 Strong Australian and International Shareholders SHAREHOLDER OWNERSHIP % Directors, Employees and Related Parties 46 Hunan Valin Iron and Steel Group Company* 17 Harbinger Capital Partners 6 Magnitogorsk Iron and Steel Works 5 TOTAL 74 * Chairman Li to become a Director of Fortescue Hunan Valin has agreed to a standstill at 17.5%

41 Overall cooperation reached, including sponsorship for Shanghai Stock Exchange listing

42 Baltic Capesize Index (C5) WA to China US$ Per Tonne /03/1999 1/03/2000 1/03/2001 1/03/2002 1/03/2003 1/03/2004 1/03/2005 1/03/2006 1/03/2007 1/03/2008 1/03/2009

43 FMG Shipping In late 2008 FMG suspended 9 Contracts of Affreightment (COA) with Ship owner/operators. We have since reached a settlement with 5 of these COAs 2 with Bocimar and 3 with Classic. Of the remaining 4 COAs, one has gone into scheme of arrangement protection (which we believe nullifies our agreement) and others remain subject to Arbitration later in We remain confident of either a successful arbitration result or settlement on acceptable terms. We have also cancelled one Time Charter vessel. Our right to do this is being challenged by the owner although we are confident of our position. 3 rd Bocimar ship under documentation

44 The Heng Shan Project 55 to 95 to 155 mtpa

45 Fortescue has a dominant Pilbara land position FMG: 71,400 km 2 Rio: 11,000 km 2 (Robe 4,200 km 2 ) BHP: 6,500 km 2 45

46 Project pipeline is underpinned by geology HI reserve Robe resource Robe reserve 3000 FMG resource 2500 HI resource million tonnes BHPB reserve BHPB resource Others Hancock FMG reserve Chichester Range Solomon Project Yandi Bungaroo Ck Area C Yandicoogina West Angelas Note: - Total resources are exclusive of total reserves - Data derived or calculated from best available company, technical and government public report - Targets are hypothetical estimates and may not be achieved Roy Hill Brockman 4 Marandoo region Mt Whaleback Hope Downs AQA western CID Nammuldi / Brockman 2 Tom Price Mesa A OB29/30 Mesa J Jimblebar (W4) OB18 Eastern Ranges MIS Weld Range Channar OB25/23 Paraburdoo 46

47 Ore Reserve and Resource Inventory 5 billion tonnes in 4 years Christmas Creek drilling commenced May 2004; Cloudbreak commenced November 2004; Solomon drilling commenced June 2007 Reserves now 1.6 billion tonnes, resources 3.4 billion tonnes Discovery cost under 2 cents per tonne

48 Published Resource Data RESOURCE TYPE STATUS MT Chichester Range Marra Mamba Total Resource (Includes Reserve 1,625) 2,266 Investigator Marra Mamba Inferred 47 Firetail Brockman Inferred 125 Solomon East CID Indicated/Inferred 753 Serenity CID Inferred 1,014 Other CID/Marra Mamba Indicated/Inferred 660 TOTAL RESOURCES CID/Marra Mamba/Brockman Reserves and Resources 5,200

49 Chichester Reserves Total of 1.6 bt reserves Majority of the reserve will be beneficiated into rocket fines (59% Fe &1.9% Al2O3) Remainder of reserve will be crushed and screened into lump (61% Fe & 1.3 AI2O3) and rocket fines Unlike many other projects, quality and consistency have been in-built into the reserve process Deposit Mt Fe % SIO 2 % Al 2 O 3 % P % MnO % LOI % Calcined Fe % Cloudbreak Christmas Creek TOTAL 1,

50 Anticipated Mine Inventory RESOURCE TYPE MINE INVENTORY (mt) RATE (mtpa) LIFE OF MINE (years) Chichester Range Marra Mamba 1,625 (Reserve) 95 ~20 Investigator Marra Mamba Firetail Brockman Solomon East CID 428 (DSO ) Serenity CID 454 (DSO ) 45 10

51 Heng Shan additional infrastructure requirements PORT 95 mtpa 155 mtpa mtpa Train unloaders Stackers Reclaimers Shiploaders Dredging (million m 3 ) Stockyard earthwork (million m 3 ) Berths RAIL 95 mtpa 155 mtpa mtpa Spur line (km) Bridges Rail sidings Locos Wagons 1, ,248

52 2 Berths 1 Shiploader 2 Stackers 1 Reclaimer 1 Train Unloader Current Port infrastructure

53 3 Berths 2 Shiploaders Simple easy to operate and expand layout 3 Stackers 2 Reclaimers 2 Train Unloaders 95 Port infrastructure

54 5 Berths 3 Shiploaders Easy to operate layout 5 Stackers 3 Reclaimers 3 Train Unloaders 155 Port infrastructure

55 Heng Shan proposed development KEY 155 mpta Ore Processing Facility Deposit Camp Serenity Firetail Solomon East 60 mpta Investigator Cloudbreak 95 mpta Chichester Range Christmas Creek

56 Proven project management From concept To reality Port 2006 Herb Elliott Port 2008 Rail Fortescue Railway Mine Cloudbreak Minesite FACT: Fortescue built its major infrastructure faster than any other mining company.

57 Heng Shan potential timeframe Tonnes per annum Chichester Range Firetail Investigator Solmon East Months

58 58