FY15 Results
Important Notice
Additional Information
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 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.
This presentation should be read in conjunction with the Annual Financial
Report at 30 June 2015 together with any announcements made by
Fortescue in accordance with its continuous disclosure obligations arising
under the Corporations Act 2001.
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 therefrom.
Any references to reserve and resources estimations should be read in
conjunction with Fortescue’s Ore Reserves and Mineral Resources statement
for its Hematite and Magnetite projects at 30 June 2015 as released to the
Australian Securities Exchange on 21 August 2015.
All amounts within this presentation are stated in United States Dollars
consistent with the Functional Currency of Fortescue Metals Group Limited.
Tables contained within this presentation may contain immaterial
rounding differences.
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.
2
Building a world class company
Reliable and competitive supplier to Asia
3
Building a world class company
Reliable and competitive supplier to Asia
Founded
First ore
in 2003
in 2008
Shipped over
550mt
Low cost
producer
165mt
Production rate
Unique culture
4
Safety is at the heart of Fortescue’s values
My brothers’ / sisters’ keeper
•
Safety Priorities
1
Look after yourself
2
Look after your mates
•
Engagement active participation
•
Empowerment
•
Encouragement
•
Leadership strong and visible
to make decisions
to speak up
7
Operating performance FY15
Cost and efficiency focus
C1 $27/wmt
21% improvement
165
mtpa
Run rate maintained
US$2.4bn
cash on hand
 C1 $19/t in June
 Sustainable strip ratios
 Realised price 85%
C1 $18/wmt
US$39/dmt
FY16 Guidance
Breakeven price
8
Key C1 cost drivers
Tier 1 asset base, efficiency and productivity
C1 US$/wmt
1
Solomon operations
60
50
2
48
Blending strategy 58% Fe
44
40
3
4
Processing, wet plants + de-sands
Operational efficiencies
34
27
30
18
20
10
5
Fx and fuel decreases
0
FY2012
FY2013
FY2014
FY2015
FY2016
9
Delivering $18/wmt
Efficiencies + productivity to optimise and improve performance
Initiative
Implementation
Cost savings
US/wmt
30
Contractor consolidation
End April 2015
1.20
25
Roster changes
End May 2015
0.90
Procurement initiatives
50% complete
2.00
Mining initiatives
35% complete
1.50
OPF upgrades
50% complete
1.00
20
6.60
Inventory outflows
July-August ‘15
2.00
Total
8.60
15
10
5
0
Mar Q
Savings June cost Savings
FY16
10
Costs reduction momentum
FY16 guidance of $18/wmt long term sustainable
90
8
9
All in cost per wmt, inc
interest + sustaining capex
6
7
60
18
Delivered cost
5
9
6
6
18
20
16
4
13
2
4
8
2
7
30
50
39
33
34
C1 – mining processing
rail and port
4
2
30
24
18
1HY13
2HY13
C1 costs
1HY14
2HY14
Other operating costs
1HY15
Sustaining capex
2H15
FY16 Guidance
Interest
FY16 delivered cost of US$25/wmt
11
Break even price
Continuing to reduce breakeven price on 62% Platts equivalent basis
US$
50
USD:AUD of 0.77
5
40
4
30
5
20
2
0.5
25
Admin
Delivered
cost to
China
2
31
Sustaining
capex
Total wmt
cost
39
3
18
10
-
C1
Shipping
Royalty
Interest
Moisture
Price
Breakeven
adjustments
price
12
Financials
FY15 Earnings
Operational performance supporting financial results
Sustainable
cost savings
+US$2bn
operating
cashflows
Controlling the controllable
costs +
production
Further
improvements
US$18/wmt
C1 cost FY16
Final dividend
A$0.02/share
14
Earnings
Operational performance supports strong financial results
Underlying EBITDA1, US$ millions
16
160
11,753
12
8
5,442
6,716
120
8,574
8,120
80
4
40
0
0
FY11
FY12
Revenue
FY13
FY14
FY15
Price realisation, US$/dmt
Operating revenue, US$m
Revenue and price realisation
5,636
2,661
3,035
FY11
FY12
3,575
2,506
FY13
FY14
FY15
Realised CFR price
Net profit after tax, US$ millions
Operating cash flows, US$ millions
2,740
6,248
1,559
1,746
1,019
2,778
2,808
3,004
FY11
FY12
FY13
2,037
316
FY11
1 Refer
FY12
FY13
FY14
FY15
FY14
FY15
to attached glossary for definitions of non-IFRS terms
15
Underlying EBITDA
Production and cost management remain key focus
1,596
7,184
2,179
5,636
259
FY14
Volume
Cost
Price
Royalty
121
Fx
101
Other
•
165mt shipped
33%
•
Production costs C1 $27/wmt
21%
2,506
FY15
16
C1 cost transformation
Cost savings FY12 to FY15 of $1.8bn + FY16 of $1.4bn
US$/wmt
60
50
48
44
40
30
20
CB + CC1
• 58mt shipped
• 2 OPF’s
• CC1 wet plant
• Three berths
• Multiple products
10
34
27
CC2 + Firetail
•
•
•
•
•
•
81mt shipped
4 OPF’s
3 wet plants
Jigs plant
Hamersley line
Three berths
Kings, AP4 + ITCS,
• 124mt shipped
• 155mtpa run rate
• 5 OPF’s
• 4 wet plants
• Berth 4
18
AP5 + 165mt run rate
• 165mt shipped,
• Berth 5
• Gas pipeline
• Efficiency focus
• Cost savings
0
FY2012
FY2013
FY2014
FY2015
165mt target
• OPF upgrades
• Strip ratio
• Mining initiatives
• Procurement savings
FY2016
17
Balance sheet
Capital expenditure
US$2/wmt post expansion sustainable capex
FY15 Capital – US$626m
Capital profile
mt shipped
US$bn
7.5
175
6.0
140
4.5
105
3.0
70
1.5
35
0.0
Exploration
47
Operational capital
271
308
Development and
optimisation
projects
0
FY10
FY11
•
•
FY12
FY13
FY14
FY15
FY16
(guidance)
FY16 guidance of $2/wmt or $330m p.a
Depreciation and amortisation charge ~US$8.50/wmt
19
Debt maturity profile
No repayments due until June 2019 with flexibility for early repayments
Extended Runway
$2.4bn cash on hand at 30 June 2015
20
Key credit metrics
Operating cashflows supporting metrics
Cash and debt (US$bn)
Gearing: Debt / (Debt+Equity)
12.7
67%
9.6
69%
71%
9.6
56%
56%
FY14
FY15
8.5
4.9
2.7
FY11
2.3
FY12
2.2
FY13
2.4
FY14
2.4
FY15
FY11
Underlying EBITDA / Interest
FY12
FY13
Debt / Underlying EBITDA
6.9x
3.8x
3.5x
5.4x
2.8x
4.0x
3.9x
3.8x
1.8x
FY11
FY12
FY13
FY14
FY15
FY11
1.7x
FY12
FY13
FY14
FY15
21
Maximising value
Maximise asset base
Maintaining mine lives +20 years 165mtpa
Mt / grade
• Maintained ~58% Fe product grade
• Strategic investments in:
 Lower cost Solomon mines
 OPF upgrade
 Fortescue blend
•
Improved ore body definition
• Future technology
+ blending
Strip ratio
200
5
160
4
120
3
80
2
40
1
0
0
FY12
Shipments mt
FY13
FY14
FY15
Ave product grade %
FY16
Strip ratio (RHS)
23
Product strategy
Strategy continues to evolve to maximise value from asset base
•
Product consistency
•
Enhanced processing ability
Solving to maximise
Product
•
Fortescue blend
•
Lowering
•
cut off grades
Life of
mine
Costs
Improved understanding
24
Step 1. Product from single mine source…
Dry plant only with product grade of 59%
Strip ratio
5.4
Production inventory at cut off grade 57.5%
Pit
limit
25
Step 2. Blending with Firetail…
Dry plant + blending with Firetail, product grade of 57.5%
Strip ratio
3.5
New pit
limit
+
= Product inventory at cut off grade 55%
26
Step 3. Blending + wet processing
Blending with Firetail + wet processing, product grade 57.5%
Strip ratio
2.3
New pit
limit
+
+
= Production inventory at cut off grade of 54%
27
Maximising flat tonnes / grade
OPF upgrade and blending reduces cut-off grade + strip ratios
Fe content
Fe cut-off grade
Dry processing
Wet processing
Step 1
Step 2
Step 3
Based on Cloudbreak production inventory
28
Wet process beneficiation
Extracting more Fe and removing Si & Al to improve cut off grades
29
Hematite reserves
Reserve life maintained through improved recovery + blending
3,000
180
165
150
2,000
716
827
592
903
791
120
1,500
90
1,000
60
1,540
1,547
1,495
1,517
1,470
1,609
500
30
-
0
2010
2011
Chichester Hub
2012
2013
Solomon Hub
2014
Tonnes shipped mt
Hematite reserves mt
2,500
2015
Tonnes shipped
30
Revised strip ratios
Mining presents greatest opportunity to reduce operating costs
Maintained mine life
C1
Costs
Revised strip ratio
Years 1-5
Life of mine
Chichester Hub
1.6
2.3
Solomon Hub
2.0
1.7
Strip
ratios
Expect improvements to continue
31
Market
Core supplier to China
Well established 17% market share of imported iron ore to China
•
Optimised product range
•
Low impurity 58% Fe
average product
•
High value
in use
•
Large diverse customer
•
Reliable consistent delivery
base
33
China’s long term growth remains strong
300 million people to urbanise
•
Economic reform
•
Steel demand 800mtpa level
•
GDP growth ~7% (2015) ~6.5% (2016)
•
One Belt One Road US$1.6 trillion
•
RMB 10 trillion in projects approved
•
Property market key driver of demand
process
34
Demand for seaborne supply
New coastal capacity moving away from domestic iron ore
Iron Ore
Reserves
New/proposed
steel capacity
Seaborne
iron ore
Source: ANZ Research
Seaborne iron ore imports (Ex. Australia, Brazil etc.)
35
Days Coverage
30
$130
20
$100
10
$70
0
$40
IO Inventory days coverage (days)
Aug-15
Jun-15
Apr-15
Mar-15
Jan-15
Nov-14
Oct-14
Aug-14
Jun-14
May-14
Mar-14
Jan-14
Dec-13
Oct-13
Sep-13
Jul-13
May-13
Apr-13
Feb-13
Dec-12
Nov-12
Sep-12
Jul-12
Jun-12
Apr-12
Feb-12
Jan-12
Nov-11
Oct-11
Aug-11
Jun-11
May-11
Mar-11
Jan-11
Dec-10
Oct-10
Aug-10
Jul-10
Iron ore supply in balance…sentiment driving price
Port stocks continuing to decline, currently at 80mt
50
$190
40
$160
62% Fe CFR (RHS)
Source: Bloomberg and Umetal
36
Platts 62 CFR
MBIO58 [P] CFR
13/08/2015
25/07/2015
6/07/2015
17/06/2015
29/05/2015
10/05/2015
21/04/2015
2/04/2015
14/03/2015
23/02/2015
4/02/2015
16/01/2015
28/12/2014
9/12/2014
20/11/2014
1/11/2014
13/10/2014
24/09/2014
5/09/2014
17/08/2014
29/07/2014
Price realisation
Realising consistently at 85-90% of Platts 62%
100
100%
90
80
95%
70
60
90%
50
40
85%
30
20
80%
10
0
75%
62% v 58% [P] price realisation (RHS)
37
Reserves and resources
Resource portfolio supports asset base
Drilling as required and extend through near mine exploration
Mineral Resources dry in situ (Mt)
12,000
2,463
2,463
740
740
4,877
4,793
303
491
10,000
2,463
8,000
2,013
624
1,032
624
624
6,000
3,504
3,070
4,000
2,224
1,715
3,070
2,860
695
695
695
695
695
2,266
2,227
2,143
695
1,230
-
2,550 2,465
2,550
5,504
5,205
2,000
3,237
3,222
4,676
3,328
3,280
1,230
-
2008
2009
Chichester Hub
2010
Chichester Other
2011
2012
Solomon Hub
2013
Western Hub
2014
2015
Nyidinghu
Magnetite
39
Supporting our local community
Ending Aboriginal disparity in the Pilbara
Creating opportunities through training, employment and business opportunity
41
Clear strategy
Moving down the global cost curve
China's 2015 Iron Ore Supply CFR Costs (including royalties & ocean freight)
China Domestic Concentrate
Australia
Brazil
India
South Africa
Other
100
0
100
300
400
500
Vale
BHPB
200
Other Australia DSO
0
Fortescue
50
Rio Tinto
Pilbara
US$/dry tonne
150
600
700
800
900
1,000
1,100
1,200
Cumulative Mt (wet, as delivered)
Source: Metalytics August 2015.
43
The new force in iron ore
Unique culture drives performance
Reliable
Efficient
Delivery
Low cost
producer
World class
assets +
people
165mt
Production rate
44
www.fmgl.com.au
@FortescueNews
Proudly supporting:
Glossary
C1:
CFR:
mtpa:
HY:
FY:
dmt:
Debt coverage ratio:
Interest coverage ratio:
NPAT:
Underlying EBITDA:
wmt:
Operating costs of mining, processing, rail
and port. The reconciliation of C1 to the
amounts disclosed in the financial
statements prepared under the Australian
accounting standards is provided in the
Financial Report for the full year ended
30 June 2015 accompanying this
announcement.
Cost and freight rate.
million tonnes per annum.
Half year.
Full year.
dry metric tonnes.
debt / Underlying EBITDA
Underlying EBITDA / Interest
Net profit after tax. The reconciliation of
Underlying EBITDA to the financial metrics
disclosed in the financial statements
prepared under the Australian accounting
standards is presented below.
Earnings before interest, tax, depreciation
and amortisation, exploration, development
and other expenses.
wet metric tonnes.
Reconciliation of Underlying
EBITDA to IFRS measures
Profit before income tax
Finance income
Finance expenses
Depreciation and amortisation
Exploration, development and other
Underlying EBITDA
30 June 2015
US$m
420
(15)
644
1,405
52
2,506
30 June 2014
US$m
3,913
(21)
741
965
38
5,636