Fortescue Investor Presentation and Site Visit
10-11 August 2010 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 therefrom. 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 information in the report to which this statement is attached that relates to Mineral Resources is based on information compiled by Mr Stuart Robinson, Mr Mark Glassock and Mr Clayton Simpson who are all Members of The Australasian Institute of Mining and Metallurgy.
Mr Stuart Robinson, Mr Mark Glassock and Mr Clayton Simpson are full time employees of Fortescue Metals Group Ltd and provided geological interpretations for Mineral Resource calculations and compiled the exploration results. Mr Robinson, who is a Fellow of The Australasian Institute of Mining and Metallurgy, and Mr Glassock and Mr Simpson who are Members of The Australasian Institute of Mining and Metallurgy, have sufficient experience which is 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, Mr Glassock and Mr Simpson consent to the inclusion in this report of the matters based on their information in the form and context in which it appears. Welcome Rod Campbell Agenda 1. Company Overview
2. Operational Update
3. Marketing, Shipping and Metallurgy 4. Development Strategy 5. Financial Snapshot
6. BC Iron Joint Venture Company Overview Andrew Forrest Fortescue has a dominant Pilbara land position
Fortescue: 71,400km2 Rio: 11,000km2 (Robe 4,200km2) BHP: 6,500km2 Integrated Business – over 72Mt shipped
Ownership of infrastructure is the key Proven skills in Construction – Completion Records From concept To reality
Port Herb Elliott Port 2006 2008
Rail Fortescue Railway 2007 2008
Mine Cloudbreak Minesite 2006 2008
FACT: Fortescue built its infrastructure faster than any other mining company FACT: Fortescue ramped up production faster than any other mining company Innovation at work
• New exploration model applied • Surface miners optimise grade control • Automated overburden removal systems • Largest ore processing plant in the Pilbara • Fastest heaviest haul rail system • Port out-load rates highest in Australia • Energised and flat structured management team
GROWTH STORY WITHOUT PARALLEL Innovation
4200 Surface Miner Innovation Automated overburden removal system
– in operation mid September Innovation
The largest Ore Processing Facility (OPF) in the Pilbara Innovation
Fastest heaviest haul rail Guinness Book of Records Innovation
Australia’s largest shiploader Herb Elliott Port – Over 72Mt Shipped Fortescue – forging ahead Operational Update Paul Hallam Key Points
• Significantly improved safety performance. • Improved and Solid FY10 operational performance. • June Qtr 2010 was best sustained operational performance to date. • 40Mtpa rate until Christmas Creek expansion. • FY11 Exciting & Challenging Year; – Commissioning of overburden handling equipment; – Expansion of Christmas Creek (1 to 5 pits); – Commencement of Christmas Creek ore processing; – Innovation being applied to counter increased strip ratio costs. Safety
• Management led focus on reducing safety incidents and injuries. • Significantly improved safety outcomes across all operational areas. • Hazard Management Program Lost Time Injury Frequency Rate - LTIFR Total Recordable Injury Frequency Rate - TRIFR Growth story without Parallel
• Fastest ramp up of any Pilbara mine. • Surface miners optimise grade control. • Largest ore processing plant in the Pilbara. • Fastest Heaviest haul rail system. • Port out-load rates highest in Australia. • Energised management team. • Soon to be replicated at Christmas Creek. Ramp up without Parallel
50,000
45,000 Fortescue 40,000 Cloudbreak
35,000
30,000
25,000
20,000
15,000 Fortescue Christmas Creek 10,000
5,000 Annual Annual Production(kt)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
RIO Hope Downs RIO IOC (pellets and concentrate) RIO Robe River RIO Channar RIO Eastern Range BHP Mt Newman Joint Venture BHP Goldsworthy Joint Venture BHP Area C Joint Venture BHP Yandi Joint Venture BHP Jimblebar BHP Samarco Fortescue Cloudbreak
Source: Credit Suisse estimates Fortescue Christmas Creek Operational update – June Qtr 2010
Mining • Ore production combined rate of >45Mtpa. • Christmas Creek >6Mt in first year of operation. • Commencement of mobile equipment upscaling. Processing • Processing at Cloudbreak at rate of 42Mtpa. • New oversized crusher to commission in September. Rail • Heaviest haul and most efficient Pilbara rail infrastructure. • 40t axle loads, 240 cars and >35,500t/consist. • Best consist utilisation at >10Mt/consist. Port • Shipments at 44 and 50Mtpa rate for June Qtr 2010 and June. • Gross load rates in excess of 7,500 tonnes per hour (Pilbara best). Mining – Chichester
Ore Mined 12
10
8
6
4
2 Total Movement 0 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 70
60
50
40
30
20
10
0 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Processing
Ore Processed 12
10
Million 8 Tonnes 6
4
2
0 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Rail
Ore Railed 12
10
8 Million Tonnes 6
4
2
0 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Port
Ore Shipped 12
10
8 Million Tonnes 6
4
2
0 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
FMG Ore 3rd Party Ore Production forecast
• Production and shipments to be maintained at rate of around 40Mtpa until the Christmas Creek OPF is commissioned. • Wet commissioning of Christmas Creek OPF to commence February 2011. • Expansion to 55Mtpa run rate for June Qtr 2011. Efficiency Improvements
• Reduce rehandle • Overburden handling equipment • Next generation surface miners • Larger scale trucks & shovels • Permanent primary crusher • Ore conveyor system • OPF enhancements (FY12) – CB: Wet Front End; – CC: Additional Scrubbers Marketing & Shipping Russell Scrimshaw Chinese steel industry and economy
• Current forecast of around 620-630Mt of steel production for 2010. • Year on Year rise of over 10 per cent (2009 568Mt) • China cooling construction and inflation (above average two per cent). • Real economy still growing at over 10 per cent pa. • Construction bubble (construction 55-60 per cent of GDP) prompted tightened credit rules • Chinese consumer demand strengthening after recent large ‘minimum salary’ rises • Government allocating large amounts of land to support continued large scale rural migration to cities. • Infrastructure stimulus program of $101bn pushing ahead in Central and Western areas • Steel exports recovering very well. • Steel prices generally falling to flat since April. Futures curve looking strong. Rebars from 4500rmb/t to 3700rmb/t in late July, recovered slightly to around 4100rmb/t Shanghai spot rebar v 62% ore spot index (10 Aug)
Source: GFI Market Pricing for Iron Ore
• Big 3 migrated market in June Qtr 2010 to lagging ‘Index average’ for majority of shipments
• BHPB offering customers choice of the previous 30, 60, or 90 day average of the Platts Index for each subsequent quarter. Vale and Rio offering 90 days. Shipping currently around $9/wmt.
• Key factors influencing recent Index price and volume movements - low shipping rates - declining China domestic ore Fe grade - India including monsoon season, export taxes and state export bans - recovery of other Asian and European steel makers - generally weak international steel prices - destocking by Chinese mills in response to high 3Q10 quarterly Index prices China Spot Ore & Shipping Prices (10 Aug)
Source: GFI Non China Iron Ore demand
• Japan and Korea are back to pre-GFC production levels
• Many large European and Asian steel makers are keen for a supply relationship as a result of Fortescue market credibility, proposed BHBP/Rio iron ore merger and expiring current LTAs
• Fortescue expects several new non-China ‘blue chip’ customers in the half year.
China's iron ore imports to June 2010
Imports, Jan - Imports, Jun M-o-m Y-o-y change Country Jun ('000 ('000 tons) change (%) (%) tons) Australia 21,033.78 -6.12 128,020.52 5.17 Brazil 8,419.56 1.01 59,625.25 -1.9 India 8,293.91 -21 64,883.43 3.83 South Africa 2,211.15 -31.5 14,740.55 -9.17 Iran 1,305.71 19.82 6,749.61 184.53 Peru 754.43 12.69 3,659.9 30.99 Ukraine 731.64 -41.06 5,751.05 -23.31 Indonesia 616.92 0.4 4,302.92 63.08 Kazakhstan 585.09 2.69 3,101.13 6.54 Chile 513.07 11.53 2,885.4 43.84 Russia 382.97 -23.14 2,106.93 -38.02 Canada 317.57 64.71 1,324.59 -58.43 Mexico 302.76 46.78 1,250.24 47.11 Venezuela 261.15 -15.19 1,694.78 19.03 Malaysia 206.76 -2.98 1,086.12 204.79 Mongolia 199.39 -3.61 1,092.06 114.8 DPRK 198.93 35.4 749.02 52.79 Vietnam 153.93 -18.9 917.06 81.49 Total 47,173.39 -9.1 309,282.94 4.06
Source: GAC Fortescue current market status • Market demand for Fortescue ore remains very healthy. Shipped to over 45 steel mill customers; including 3 from outside China (expect this will more than double in this half year)
• Policy of CFR shipments to optimise port throughput
• Pricing using Platts dmtu price for 62 per cent ores averaged over a period
• June quarter averaged approx US$130 CFR and over 11m wmt shipped
• Expect September quarter volume to be >9.5m wmt
• Joined IOSDA to monitor development of derivatives market China Forecast: Iron Ore Supply by Country Domestic vs. Imported Ores (Mt)
1400
1200
1000
800
600 Volume (Mt) Volume
400
200
0 2004 2006 2008 2010 2012 2014 2016 2018 2020
Contained Fe: Dom. Contained Fe: Imp. *Grade of Chinese Domestic Production is Source: AME Seaborne Iron Ore growth
2010 2011 2012 2013 2014 2015 2015 Target
Cumulative New 82 131 205 303 456 615 870 Capacity
Source: Citi Investment Research & Analysis Fortescue creating Quality ‘Index’ to underpin our price
We are developing an “Iron Quality Index” to replace “Fe Content” to better correlate the market price of different ore types. This index would also be used as true determination of quality within Fortescue
• The quality of Iron Ore is not just determined by Natural Fe content; • Platts, TSI and MBI Indexes base price on Fe within tight Fe ranges and standard Si02, Al2O3, P, S and LOI content. Take no account of metallurgy or ore behaviour; • A Quality adjustment can be calculated based on market ‘Platts Index price’ plus technical correlations to sinter plant and BF productivity = “Iron Quality Index (IQI)”; • Developing a tool including all quality parameters towards Value in Use (VIU) of iron ore in a given mill using IQI and modelling of VIU; and • IQI is also an internal KPI for tracking and maximising ore value for a given Fortescue mine plan and schedule. Link to customer Value in Use (VIU)
• Market price for a given quality is a function of the VIU of the product and Market positioning/ strategy • The Iron Quality Index is a simplified correlation to the complex calculation of value in use. It is less accurate but valid for small changes in composition.
VIU Model design Shipping Mark Davidson Load Port Characteristics
• 20 nautical mile, draft restricted entry channel into Port Hedland
• 2 berth, 1 shiploader; continuous loading while full vessel waits to sail
• 19.7m available draft at Fortescue AP2 berth
• Sailing draft 14.1m + Tide – Under Keel Clearance. Average sailing draft since commencement 17.71m
• Very fast shiploader capable of loading in excess of 100kt in12 hour shift
• Specialised shallow draft, wide beam vessels will optimise output Freight Market $/Mt Rate Shipping Cost Western Australia to China • High volatility due to short term vessel 25.00 supply/demand imbalance
• Recent $/t Port Hedland to China (C5) 20.00 fluctuated between US$6-US$24.36 pwmt. This volatility must be managed 15.00
• Fast growing demand for vessels 10.00 driven by greatly increased demand for iron ore, coking and thermal coal 5.00 • Large increase in new build vessels. 0.00 Expected increase of 27 per cent in capesize fleet and further 24.6 per 3/08/2009 9/09/2009 3/11/2009 9/12/2009 5/01/2010 1/03/2010 8/04/2010 4/06/2010 cent in 2011 20/08/2009 28/09/2009 15/10/2009 20/11/2009 22/01/2010 10/02/2010 18/03/2010 27/04/2010 17/05/2010 23/06/2010 12/07/2010 29/07/2010 CFR Sales Policy • Implemented to drive efficiency of port and rail AND move to Index pricing • 55Mtpa requires 27 capesize shipments per month • Fortescue control of vessel schedules necessary to target 1-2 day loading slots • Specific vessel configurations targeted to maximise lift per vessel • Provides flexibility to swap vessels to meet cargo or grade requirements • Significantly minimises FOB ports demurrage eg Dalrymple Bay, Newcastle. As example, in June 2010 shipped 4.228Mt on 24 capesize vessels with minimal delays and minimal demurrage incurred (US$140k) Shipping Contracts
• Pre financial crisis, Fortescue concluded long term COA and Time Charter contracts to take advantage of lower forward rates compared to all time high spot rates
• GFC changed everything and certain contracts were suspended and subsequently renegotiated for approximately 12 vessels per month. Existing contracts today cover around 60-65 per cent of requirements at ~42Mtpa production
• Product CFR pricing has a portion linked to the Baltic Exchange C5 Index Shipping Strategy • Strategy to implement flexible arrangements that maximise ore throughput while building profitable shipping book. Key principles: • Suite of flexible contracts with rolling expiration; • Specific vessels targeted to take advantage of load port infrastructure; and • Develop relationships with first class owners, operators and ship yards. • Defined levels of long, medium and short terms contractual cover combined with spot market vessels • Trading period chartered vessels to take advantage of short term market volatility • “Fortescue Max” initiative underway to identify most efficient vessel as we expand from two berth/one loader to three berth/two loader scenario and beyond. Technical Marketing John Clout Target versus Actual Grades – Rocket Fines
Chemical Analysis dry weight % Product Totals Free Target Grade LOI (Wt Moisture
and Limits Fe SiO2 Al2O3 TiO2 Mn CaO P S MgO K2O Na2O Total %) (Wt %) Rocket Fines 59.0 4.4 1.9 0.080 0.50 0.08 0.054 0.030 0.09 0.030 0.030 8.5 100.29 10.5
Weighted Mean Shipped Grade for Rocket Fines – 1/07/2009 to 30/06/2010
LOI Total Free Fe SiO2 Al2O3 TiO2 Mn CaO P S MgO K2O Na2O Fecalc Total (Wt %) moisture FY10 - YTD Totals/
Weighted Average 59.17 4.26 1.93 0.070 0.480 0.08 0.051 0.028 0.07 0.022 0.028 8.14 100.06 64.41 9.2% Standard Deviation 0.29 0.32 0.08 0.005 0.130 0.02 0.003 0.003 0.01 0.004 0.006 0.24 0.08 0.30 0.6%
+6.3mm -0.150mm Product Size content content FY09/10 (Dry (Dry basis) basis) Weighted Average 13.9% 6.8% Standard Deviation 2.4% 0.8% How does Rocket Fines grade compare with BHPB, Rio?
Uncalcined (Wt %) Calcined* (Wt %)
SiO + SiO2 Al2O3 P Mn LOI Total 2 Brand Fe Fe SiO2* Al2O3 P Mn Al2O3 RM 57.0 5.7 2.7 0.040 0.08 9.2 62.8 6.3 3.0 0.044 0.09 9.2
BY 58.5 5.1 1.3 0.037 0.03 9.4 64.6 5.6 1.5 0.041 0.03 7.1
RY 58.7 4.2 1.4 0.044 0.04 9.9 65.1 4.7 1.5 0.049 0.05 6.2
Fortescue - Rocket Fines 59.0 4.4 1.9 0.054 0.50 8.5 64.5 4.8 2.0 0.059 0.55 6.9
BM 61.8 4.0 2.1 0.066 0.26 4.5 64.7 4.2 2.2 0.069 0.27 6.4
RPB 62.2 3.6 2.1 0.082 0.12 4.7 65.3 3.8 2.2 0.086 0.13 5.9
BN- Premium 62.8 4.4 2.2 0.079 0.08 3.2 64.9 4.6 2.3 0.082 0.08 6.8
* Calcined is when the crystal water or Loss On Ignition (LOI) Is removed as steam above 300oC
MYTH – ‘Fortescue ores are low grade’
REALITY - >40 per cent of 2008/09 Pilbara iron ore fines production was lower in Fe than Fortescue Rocket Fines. Rocket sits in the middle in terms of Fe, silica and alumina Rocket Fines Fe with Pilbara competitor fines
Uncalcined Fine Iron Ores Calcined Fine Iron Ores Iron Iron
68.0 70.0 67.0 69.0 66.0 68.0 65.0 64.0 67.0 63.0 66.0 <2.6% Fe difference 7.0% Fe difference 62.0 65.0 61.0 64.0 60.0 % Fe % Fe 63.0 59.0 58.0 62.0
57.0 61.0 56.0 Premium MAC 60.0 Yandi Premium - - Yandi MAC - Rocket Rocket - Rocket Fines Fines Rocket
55.0 PF - PF Itabira - - - Mesa J Itabira - - - - Mesa J 59.0 Pilbara Blend Pilbara - Pilbara Blend Pilbara Yandicoogina - Yandicoogina - 54.0 - - - Vale Vale HG Indian Fines Indian HG
HG Indian Fines Indian HG 58.0 BHPB BHPB 53.0 BHPB FMG FMG LG LG Indian Fines Rio Rio Vale Vale Vale Vale Rio BHPB Rio Vale Vale LG LG Indian Fines Rio Rio BHPB BHPB Rio Rio 52.0 57.0
Once crystal water is removed as steam during sintering, Appears to be a big difference in natural Fe content small Fe difference between Fortescue Rocket Fines and compared to HG Brazilian fines and HG Indian fines. Brazilian HG fines Al2O3, SiO2 and P in Rocket Fines is low
Calcined Fine Iron Ores Calcined Fine Iron Ores Silica Alumina
5.00 7.0
4.50 6.0 4.00
5.0 3.50
<1.2% SiO2 difference 3.00 4.0 2.50 % Al2O3 % SiO2 3.0 2.00 <0.6% Al2O3 difference MAC
- 1.50
2.0 MAC - Premium Premium
Yandi 1.00 Yandi Rocket Fines Fines Rocket Rocket Rocket - - BHPB PF - - - Mesa J Mesa J - - Itabira Yandicoogina
1.0 PF - - - Pilbara Blend Pilbara Yandicoogina - Pilbara Blend Pilbara BHPB - -
- 0.50 - HG Indian Fines Indian HG Vale Vale FMG HG Indian Fines Indian HG Rio Rio Rio Rio BHPB LG LG Indian Fines BHPB Rio Rio Rio LG LG Indian Fines FMG BHPB Rio Vale Vale BHPB 0.0 Vale 0.00
Calcined Fine Iron Ores Phosphorus
0.100
0.090
0.080
0.070
0.060
0.050 <0.02% P difference % P
0.040
0.030 Yandi Premium Rocket Fines Fines Rocket 0.020 MAC - - - PF Mesa J - - Yandicoogina - Itabira - Pilbara Blend Pilbara - 0.010 - FMG Rio Rio Vale Vale HG Indian Fines Indian HG BHPB LG LG Indian Fines Rio BHPB Rio BHPB 0.000 Vale Rocket Fines has favourably coarse size
Fine Ore Size - % >1.0 mm 70.0%
60.0%
50.0%
40.0%
30.0% % Retained %
20.0% Premium Premium Yandi - - BHPBIO Carajas SFSC PFCJ CJF - Yandicoogina - Pilbara Blend Pilbara - - 10.0% - - - MAC BHPBIO Vale Vale BHPBIO Rio Rio Vale Vale Vale Vale Vale Vale FMG Rocket Rocket FMG Fines Rio Rio 0.0% Indian HG Fine Ore Product1
Rocket has a coarse size – which improves productivity for sintering Proven Value in Use for Customers Summary: 1. Very good sintering properties – fast sintering speed 2. Can be used in large per cent of customer blends - used at 20-45 per cent level in many Chinese customer sinter blends (vs 12 per cent for other MM fines) 3. 64.5 per cent Fe calcined – competitive with Brazil and other Australian fines 4. Low in contaminants - (4.4%) SiO2, 1.9% Al2O3 and 0.054% P 5. Coarse size and low ultrafines content so ideal for China
Rocket Fines Usage at Customer Steel Mills
30%
25%
20%
15%
10%
5% % % Customers of Fortescue
0% 0-10 10-20 20-30 30-40 40-50 50 - 80 >80 % Rocket Fines in Sinter Blend (Ore Basis) Proposed Product Mix for Solomon
Designing for:
• ~40Mtpa CID fines only product with Fe ~58%, similar to
Yandi but ~1.9-2.0% Al2O3. Competitive with existing Rio/BHPB CID products
• ~20Mtpa Brockman fines only product from mixing higher P Firetail BID with low P Detrital (DID) fines. Maximises use of DID resources and product physical quality. Blending completed at Solomon stockyard. Development
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. Target production estimates provided for Three Mining Hubs are hypothetical in nature and may not be achieved. Port capacity at Port Hedland has been allocated to 120Mtpa. Fortescue’s target of increasing this to 155Mtpa may not be achieved, however, the Company has made its intention known to the Port Authority to provide this increase and will continue to work towards this outcome. Execution Strategy Implementation Plan Peter Meurs
• Production to 55Mtpa Board Approved • Production beyond 55Mtpa still subject to Board Approval Three Hub Mining Strategy Chichester, Solomon and Western Fortescue Infrastructure
Fortescue Rail New Pilbara Port Hedland Proposed Port (Anketell) Fortescue Rail Dampier API Joint Venture Karratha Rio Tinto Rail
BHP Rail
Solomon Hub Chichester Western Hub Hub
Tom Price Solomon Resources have now been expanded to 2.86 billion tonnes, with 786 million tonnes in Indicated and Inferred category. Paraburdoo Newman Execution Strategy – Production – June 2010
Chichester, Solomon and Western Port Fortescue 40 Infrastructure Hedland Fortescue Rail Dampier Rio Tinto Rail Karratha BHP Rail
Chichester Hub 32
8
Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2011
Chichester, Solomon and Western At Capacity Port Fortescue 55 Infrastructure Hedland Fortescue Rail Dampier Rio Tinto Rail Karratha BHP Rail
Chichester Hub 3 BCIJV Hopper 5 36 Jaw Crusher 16 OPF 1 Expanded Mine Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2012
Chichester, Solomon and Western
Fortescue Berth 3 80 Port Infrastructure Shiploader 2 Hedland Train Unloader 2 Fortescue Rail Dampier Stockyard 2 Rio Tinto Rail Karratha BHP Rail
Solomon Hub Chichester BCIJV Expanded Hub 5 12 Wet Plant 39
Firetail Brockman 24 OPF 1 Expanded Early Production Expanded Mine Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2013
Chichester, Solomon and Western Port Fortescue Berth 4 (SW Creek) 120 Infrastructure Shiploader 3 Hedland Fortescue Rail Dampier Train Unloader 3 Stockyard 3 Rio Tinto Rail Karratha BHP Rail
Solomon Hub Chichester BCIJV Expanded Hub 5 40 35
OPF 1 Firetail Brockman 20 40 OPF 2 added OPF 2 Kings CID 20 Expanded Mine Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2014
Chichester, Solomon and Western Berth 5 (SW Creek) Port Fortescue New Pilbara 155 Infrastructure Port (Anketell) Hedland Fortescue Rail Dampier 20 Rio Tinto Rail Karratha BHP Rail
Solomon Hub Chichester Hub 5 BCIJV 35 20 60 Solomon 2 55 Expanded Mine Early Production Brockman 20 CID 40 Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2015
Chichester, Solomon and Western Port Fortescue New Pilbara 155 Infrastructure Port (Anketell) Hedland Fortescue Rail Dampier Rio Tinto Rail Karratha 80 BHP Rail
Solomon Western Hub Chichester Hub Hub 5 BCIJV 35 60 60 20 55 Early Expansion Production Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2016
Chichester, Solomon and Western Port Fortescue New Pilbara 155 Infrastructure Port (Anketell) Hedland Fortescue Rail Dampier Rio Tinto Rail Karratha 150 BHP Rail
Solomon Western Hub Chichester Hub Hub 5 BCI 35 60 100 50 55
Tom Price
Paraburdoo Newman Execution Strategy – Production – June 2017
Chichester, Solomon and Western Port Fortescue New Pilbara 155 Infrastructure Port (Anketell) Hedland Fortescue Rail Dampier Rio Tinto Rail Karratha 200 BHP Rail
Solomon Western Hub Chichester Hub Hub 5 BCI 35 60 100 100 55
Tom Price
Paraburdoo Newman Brownfield Expansion
Peter Thomas
Port / Rail 55mtpa – 155mtpa
Eamon Hannon Solomon Phase 1 60mtpa
Brownfield Expansion Bryan Pearce Chichester Development 55mtpa – 95mtpa (+3mtpa BCI) Progress 40Mtpa – 55Mtpa
Bryan Pearce T55 Progress - Rail
• Signaling design is 85 per cent complete
• Communication design is 75 per cent complete
• Track Construction: • 44/44 km formation completed and handed over • 23/44 km of sleepers have been laid • 4/44km of rail has been completed T55 Progress - OPF • The Christmas Creek Ore Processing Facility (OPF) is on schedule with work being undertaken in all areas of the plant. Construction work is 30 per cent complete. T55 Progress - OPF
Major works being undertaken are as follows: • All long lead equipment has been purchased with no delivery issue to date; • Primary Crusher concrete works are well progressed with the tunnel complete and concrete poured up to the crusher support level. Structural steelwork erection of conveyors is underway; • Screening building concrete works completed and structural steelwork erection is underway; • Major concrete works for secondary/tertiary crushing completed. Structural steelwork erection is underway. MP1000 secondary and tertiary crusher bases are in place. • Desands plant concrete works underway and footings for thickeners completed. T55 Progress Hopper 5 T55 Progress – Hopper 5
• Fabrication of the ROM bin has been completed and installation commenced
• Mechanical fit out of the tunnel has commenced (apron feeder on site)
• Mechanical fit out of conveyor CV004 is well advanced
• The additional switchroom has been installed and is being hooked-up Chichester Expansion 55Mtpa – 95Mtpa
Bryan Pearce T95 Progress • Christmas Creek current work areas: • Mine planning (5 year plan plus “life of mine”) • Hydrology • Materials handling • Process plant • Approvals road map • Risk identification This information will be integrated into the final Feasibility Study.
• Christmas Creek Expansion - Feasibility work covers: • Increase from current project capacity, 16Mtpa to 25Mtpa by addition additional crushing and screening • Additional processing plant capable of 30Mtpa Christmas Creek 60Mtpa LOM T95 Progress Cloudbreak current work areas: • Work activities for the Cloudbreak wet scrubbing are well progressed with final control estimates and schedules are currently being validated. Cloudbreak 35Mtpa LOM Solomon Project 60Mtpa
Eamon Hannon Solomon Momentum
DFS completion December Qtr 2010, engineering and design commenced. • Exploration success 2.8 billion tonnes and growing. 1 billion 5km
tonnes in Solomon 20 Mtpa BID Stage 1; • Land Access and 40 Mtpa CID Environmental consents / approval well advanced; and • Mining leases applied for, engineering and metallurgy studies progressing. • Early engagement of contractors and suppliers commenced. Project Targets – 60Mtpa
• Early ore production (Firetail North and South) – June 2012 • Project completion of Stage 1 (Firetail and Kings Production) – June 2013 Study & Development Progress
• Capital budget for release with DFS in December Qtr 2010. • Ore body development continuing. Mine planning and metallurgy progressing • Design and engineering progressing. Rail well advanced, OPF flowsheets established. • Contracting and procurement planning underway. Early engagement of contractors and suppliers commenced. • Plan includes Chinese procurement. Early orders from China to include construction camp accommodation modules. Solomon competitive advantages
• Firetail deposit less than 1:1 strip ratio and above water table • Kings CID less than 2.5:1 in part below water table, but fresh water • Traditional low cost mining methodology • Established and well accepted product type • 50 per cent exploration upside Port 55Mtpa – 155Mtpa
Peter Thomas Port Expansion • Expansion to 95Mtpa (3 berths) then 155Mtpa (5 berths) • 2nd outload circuit project commenced • 3rd berth • 2nd shiploader • 2nd reclaimer • WorleyParsons team re-engaged as EPCM team • ThyssenKrupp re-activated • Detailed engineering re-activated and midway • Forecast completion in December Qtr 2011 Port Expansion • 2nd and 3rd inload circuits work also underway
• 2nd and 3rd train unloaders
• South West Creek dredging environmental approvals progressing well
• Expected approval in June Qtr 2011
• Dredging is critical path and certain early works dredging can commence in Nov 2010 to sustain schedule 2 Berths 1 Shiploader
2 Stackers 1 Reclaimer
1 Train Unloader
Current Port infrastructure 3 Berths 2 Shiploaders
2 Stackers 2 Reclaimers
2 Train Unloaders
95 Port infrastructure 5 Berths 3 Shiploaders
4 Stackers 3 Reclaimers
3 Train Unloaders
155 Port infrastructure Port infrastructure
Capacity (mtpa) 55 95 155 Berths 2 3 5 Shiploaders 1 2 3
Capacity (mtpa) 55 95 155 Stackers 2 2 4 Reclaimers 1 2 3
Capacity (mtpa) 55 95 155 Train Unloaders 1 2 3 Rail Expansion Peter Thomas Rail Expansion
• Expansion to 95Mtpa then 155Mtpa • Effective duplication of rail to 129km mark with multiple additional crossing loops beyond 129km • New train control system • Additional rolling stock • Switch to AC locos • Expanded maintenance yard • Train cycle times expected to improve with enhanced train control system New Train Control System Wayside Signal System Existing Communication Tower
Interlocking Control
Axle Counters + Wayside Signals
Communication-Based Signalling The old way
Full Capability of: 6 Routes 4 Signals 4 Shunting Signals 2 Point Machines Hundreds of meters of cabling and power The new way
Communication based TCS minimizes wayside equipment Anketell Port Two ports for three hubs Anketell Port 350+ Mtpa Staged Multi-user port
• 3 Foundation Companies together with Government – Fortescue, API & MCCSJ
• Major Project Status
• Approvals & Land access commenced
• Operational target of 2014
• First stage estimate A$4B Financial Snapshot Stephen Pearce 2010 Financial Highlights
• Strong cashflow from Operations.
• Cash on hand at 30 June 2010 US$1.235Bn.
• Leucadia accrued payments made in full July 2010.
• Increased production/margins/cashflows in June Qtr 2010. FY2010 Production costs
Cash costs per FY10 Q1FY10 Q2FY10 Q3FY10 Q4FY10 tonne US$/t Average Mining and processing 21.24 22.04 24.37 27.20 23.81 Rail and port 5.36 5.39 5.06 5.05 5.21 Total Direct Costs 26.20 27.43 29.43 32.25 29.02
Increase in cost pressures: Improvements to efficiency • Higher mine strip ratios; • Reduction in rehandle and overburden handling; • Use of small crushers prior to commissioning • Next Generation Surface Miners accompanied by of primary crusher (September Qtr 2010); larger scale trucks and shovels; • Higher transfer costs associated with • Permanent primary crusher and ore conveyor Christmas Creek ore. system: • OPF Enhancements. Sales Revenue EBITDA 3,500 1,600
3,000 1,400 Indicative Indicative Range 1,200 Range 2,500 1,000 2,000 800 Millions (USD) Millions (USD) 1,500 600
1,000 400
500 200
0 0 2008 2009 2010 2008 2009 2010 CFPS EPS 0.40 40.00 0.35 30.00 Indicative 0.30 Indicative 20.00 Range Range 0.25 10.00 0.20 0.00 (10.00) 0.15 (20.00) 0.10 Centrs (USD)
Cents (USD) (30.00) 0.05 (40.00) 0.00 (50.00) -0.05 (60.00) -0.10 2008 2009 2010 2008 2009 2010 ROE 80% 60% 40% Indicative 20% Range 0% -20% -40% -60% -80% -100% -120% 2008 2009 2010 BC Iron Mike Young Sign up to alerts online www.fmgl.com.au