Innovation powers multi-mine, multi-hub Force
Presentation to Sydney Mining Club, November 12, 2009 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. Overview Last quarterly – key points
• Record quarterly shipments of 9.526 million tonnes • Larger more efficient Surface Miner introduced • Efficiencies increasing with continued cost focus • Strong cash position of US$704 million • Second processing plant commitment optimises Chichester Hub Low cost operation – >42mt shipped Innovation: fast, reliable ramp up
50,000
45,000 FMG Cloudbreak 40,000
35,000
30,000
25,000
20,000
15,000
Annual Production Annual (kt) 10,000
5,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
RIO Hope Downs RIO IOC (pellets and concentrate) RIO Robe River RIO Channar RIO Eastern Range BHP Mt Newman Joint Venture BHP Goldsworthy Joint Venture BHP Area C Joint Venture BHP Yandi Joint Venture BHP Jimblebar BHP Samarco FMG Cloudbreak
Source: Credit Suisse estimates Summary - 55mtpa run rate and growing
• 18 months of highly efficient ramp up • On track for 55mtpa run rate by end 2010 • 95mtpa from Chichester Hub advancing • Solomon Hub under fast-track management, initially 60mtpa, then expanding • Infrastructure planned to 155mtpa • Strong balance sheet Technical innovation drove success
• A new exploration model – microplaty hematite and supergene ores below cover
• A new mining production method – surface miners
• Overburden removal – New fully automated single handle conveyor overburden removal system
• 40 tonne axle loads for the heavy haul railway
• A high capacity, highly automated, blending port facility Innovation drove success
• A new product – ‘Rocket Fines’
• Innovation – Design of the flowsheet reduced footprint size but significantly increased capacity
• Low capex / tonne – Compared to the last major wet plant built in the Pilbara, the Desand Plant is half the price – and double the capacity (and built >10 years later!) World class asset operating low on the cost curve
Iron Ore Cash Costs for 2009 - Saleable Mine and Pellet by Company
90 Port Costs 80 Royalties Transport Pelletizing 70 Processing Mining
60 Pellets LKAB:
50 Vale:Pellets
40
30 &PF Fines Lumps, BHPBilliton: Fortescue Metals: Lumps, Fines Rio Tinto: Lumps, Fines &PF Fines RioLumps, Tinto: Vale: Lumps, Fines &PF Vale:Fines Lumps,
20
10 US$/dry in terms real tonne US$/dry 0 0 200 400 600 800 1,000 Cumulative Production Capability - wet Mt Chichester and Solomon ore bodies
Investigator
Firetail
Solomon East Serenity
Cloudbreak
Christmas Creek Chichester Hub 1 Port Hedland
Bedded Iron Deposits
Channel Iron Deposits Chichester – forging on to
Solomon 95mtpa Hub
Chichester Hub Chichester hub – current status
Optimising Cloudbreak operations • Record quarterly shipments of 9.526 million tonnes • Efficiencies increasing with continued cost focus – US$26.60 / ton • Focus on safety and organisational foundations
Ore mined Ore processed Ore shipped Mt (wet) Mt (wet) Mt (wet) 12 12 12 10 10 10 8 8 8 6 6 6 4 4 4 2 2 2 0 0 0 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 09 09 09 09 10 09 09 09 09 10 09 09 09 09 10 Predictable ramp up growth
Q3FY10 target 42 mtpa
Current 38 mtpa Pit operations Employing techniques matched to our ore body characteristics
Overburden trucks Excavator
Surface miner
OVERBURDEN
Ore trucks ORE BODY Innovation: Surface mining operations then Innovation: Surface mining operations now Innovation: Overburden removal Development of leading solutions to dramatically reduce cost Innovation: Pilbara’s largest ore processing plant OPF average daily production – rising
120,000
100,000
80,000
Tonnes per day 60,000
40,000
20,000
0
Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Train load out – highly efficient
• Surge capacity 360,000 tonnes • 2 bins x 400 tonne capacity • Feed rate to bin 14,000 tonnes per hour • Load rate 12,000 tonnes per hour • Capability 9 – 10 trains/day Chichester optimisation (short term) to 55mtpa
50 km rail spur Haul 16
Rail
39 RoM tonnes Christmas Creek Cloudbreak dry Port 55 wet de-sand de-sand plant plant Product tonnes
34 8 19 Construct second plant at Christmas Creek
Christmas Creek Cloudbreak mine mine Ramp up Christmas Creek production Christmas Creek on the move
October 2009 Christmas Creek operations
• Currently producing 6Mtpa from Eyre pit. • Operation established without a lost time injury. • Wholly established as a small operation to supplement Cloudbreak with low Alumina, higher Phos blend. • Cloudbreak no longer requires this feed so the operation now has to compete on $ for $ basis with Cloudbreak. Christmas Creek operations
• Approval received to expand operation to build 19Mtpa ore processing facility at Christmas Creek
• An initial capacity of 16Mtpa of product and 8Mtpa haul to Cloudbreak.
• This equates to 27Mtpa ROM feed, we have assumed 30Mtpa.
• Initial 11Mtpa optimisation program will be achieved in January 2010 Christmas Creek operations
• Competition between Christmas Creek and Cloudbreak drives lowest cost basis across both operations. • EOI issued for big picture mining contract • Rates based with incremental haulage pricing mechanisms to allow for flexibility of operations. • Our strategy is to have Christmas Creek as a contract operation to benchmark against the owner operator at Cloudbreak. Chichester 55mtpa to 95mtpa Ramp Up Chichester hub – growth pathway to 95mtpa
Expansion 55 to 95 mtpa
Ramp up 35 to 55 mtpa • Expansion of port and mainline rail infrastructure Start up to 35 mtpa • Construction of second • Cost and efficiency focus plant at Christmas Creek • Fleet • Further ramp up of expansion, introduction Christmas Creek mining • Focus on safety and of SM4200s and M.S.C. organisational foundations • Extension of rail to connect Christmas Creek • Construction of rail and to Cloudbreak port infrastructure • Addition of Christmas • Construction of Creek plant Cloudbreak plant • Ramp up of mining • Start of mining operations at Christmas operations at Cloudbreak Creek and Christmas Creek Solomon Hub 2 Port Hedland Dampier
Solomon Hub Solomon – Chichester the only Hub multiple ore type hub Tom Price
Paraburdoo Newman Solomon – the next generation
• Targeting 4 billion tonnes of resource
• Firetail and other Brockman targets should deliver >300mt of DSO product
• Brockman is dry and has a strip ratio of less than 2:1 Solomon – the next generation
• CID deposits will deliver 600mt of DSO product
• CID requires modest moisture management with a strip ratio of <3:1
• Planning for production of 30mtpa of Brockman, expanding to 50mtpa with further exploration
• Planning for production of 30mtpa of CID, expanding to 60mtpa Solomon – tier one mining hub
Mining Centre Bedded Iron Channel Iron Resource / Production Deposits Deposits Reserve (Mt) Current/ Target (Mtpa) Fortescue Chichester Hub 2,227 38 / 95
Solomon Hub 1,366 2,223 - / 60 /100 Rio Tinto Tom Price 1,030 Paraburdoo / Channar 359 Brockman 2 / 4 985 114 Marandoo 464 Yandicoogina 1,045 West Angela 573 51 Pannawonica 392 Hope Downs 448 11 BHP Billiton Jimblebar 1,622 5 Area C 2,220 36 Yandi 1,844 38 Yarrie 171 1.4 Newman 4,087 26 Solomon – world class iron ore production hub Solomon – Firetail (Brockman) Project
• Firetail north (including Joffre) and Firetail south all within close proximity
FIRETAIL
Additional BID targets in region from drilling of mapped mineralisation Solomon – Valley of the Kings (CID) Project • More than 30 km strike length of CID in valleys • Additional tonnages to be gained by exploring other valleys and infill areas
VALLEY OF THE KINGS Solomon expansion Capex / Opex Decision to mine in 2010 / 2011
• Additional product stream of up to 60mtpa to Port Hedland • Growing to 110mtpa on further expansions • Further expansion planned beyond 60mtpa at (new) Pilbara Port at Anketell Point (not Port Hedland) Item Capex Opex Port A$1,200m A$1.53/tonne
Rail A$850m A$2.40/tonne (Solomon Rail Spur, not including rolling stock which will be leased) Mine A$850m A$19.56/tonne
Plant A$700m A$2.20/tonne
All figures are represented by Scoping estimates or Prefeasibility Studies only. Estimates may vary +/- 30% as a result of the Definitive Feasibility Study currently underway Infrastructure
Quality that leads industry FMG runs off world’s best infrastructure
Port Hedland
World’s leading port and
Bedded Iron Deposits rail, linking two Channel Iron Deposits hubs
Solomon Hub Chichester Hub Rail Site – rapid development January 2007 Rail Site – rapid development February 2008 Proven skills in construction and operations
From concept To reality
Herb Elliott Port Port 2006 2008
Rail Fortescue Railway 2007 2008
Cloudbreak Mine 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 Rail Highlights
• Trains started running on 5 April 2008 • 1,650 trains delivering over 42 million tonnes to date • Driver only operations – 240 car trains • Train control in Perth 1,600 km away • 4 x 240 car train sets (55 mtpa) • Cycle time <20 hours
300km of track, 20,000 tonnes of rail, 400,000 sleepers 7 million cubic metres of earth and almost 1,000 ore cars Train loading speed – accelerating
140
120
100
Seconds per 80 dual wagon pair 60
40
20
0
Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 World’s most efficient rolling stock, ballast and fuel cars State of the art rail operations Target - Lowest cost transport in the Pilbara
Rail • Clean sheet design takes existing technology to the next step: – Bigger carrying capacity – Electronic braking system – Aerodynamics • 40 tonne axle loads • Low centre of gravity, long wheel base, means capable of higher speeds • Shorter distance means shorter cycle times • Designed to reduce maintenance costs Ore cars (manufactured in China) – top quality The world’s heaviest haul ore cars Locomotives (manufactured by GE) 15 x 44CW GE Dash – 9 (4,400HP) Higher axle loads mean greater productivity and lower running costs
Trains/day to achieve 55mtpa* Axle loads (t) Fortescue (2010) 40 Fortescue (2010) 4.6 Fortescue 38 Fortescue 4.9 BHP 37.5 BHP 5.0 Rio 35.7 Rio 5.3 Vale 31.5 Vale 6.2 China 28 China 7.2
South Africa 28 South Africa 7.2 India 23 India 9.3
* Assume 240 car trains, ore car weight is 25t (an average although FMG’s cars actually weigh 22.8t) Train unloading speeds – accelerating
200
180
160
140
Seconds per 120 dual wagon 100 pair 80
60
40
20
0
Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 World wide recognition
International rail journal
• Cover of world’s No. 1 industry journal
• Noted Fortescue’s ingenuity in constructing and operating the world’s heaviest haul railway
• Key design objectives to challenge the dominance of industry heavy weights From rail to port – the train unloader
• 2 x Cell Rotary Dumper • Train unloaded 1 x rake • 2 x cars every 90 seconds • 2.6 hours/train • 11,000 tonnes per hour TRAIN UNLOADER STACKER
RECLAIMER SHIP LOADER Two berth operation at Herb Elliott Port Target - Lowest cost transport in the Pilbara
Port • Significant expansion area • Highly automated • Extensive use of conveyors • Largest shiploader in Australia Two berth operation at Herb Elliott Port
Ship 2 – high in the Ship 1 – water, wait nearly ing for loaded loading and low in the water Herb Elliott Port Facility
• Rapidly executing construction and operations
• Port Construction commenced February 2006
• First train tipped 6th April 08
• Unloading rates achieving nameplate capacity Herb Elliott Port Facility
• Highly automated process – central control position • Only 2 manned positions in entire Port facility • Continuous loading from 2 berths – minimal changeover time • Stockyard expansion will have minimal impact on operations • Wharf extension modular, for rapid tie-in Herb Elliott Port Facility
• Exported more than 42Mt to date
• Facility record of 7337 GLR one cape size in one day
• Tonnes per FTE at Port Operations is currently more than 460,000 per person
• The best in the Pilbara Iron Ore Ports
• Highest capacity equipment in Australian Iron ore operations: – Inload at 11,000tph – Outloading at 13,500tph Shiploading rates – accelerating
7,000
6,000
5,000
4,000 Tonnes per hour 3,000 (GLR)
2,000
1,000
0
Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Current port infrastructure
2 Berths 1 Shiploader
2 Stackers 1 Reclaimer
1 Train Unloader Port infrastructure, 55, 95, 155mtpa
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
5th berth at South West Creek awaiting approval by Port Authority 155Mtpa Anderson Point
• 5 x Cape size
• 3 x Rail Loop
• 3 x Train Unloader
• 155 Mtpa stock yard expandable to 200+mtpa FMG Ores
Asia’s highest growth steel making product Rocket Fines
Why is it so competitive:
• Competitive with Brazil and other Australian fines - 64.6% Fe calcined
• Low in contaminants - (4.4% SiO2, 1.9% Al2O3 and 0.054% P)
• Ideal for China - Coarse size and low ultrafines content
• Strong sintering properties – fast sintering speed (‘fires like a rocket’)
• Durable - less sensitive to over-melting compared to CID fines
• Flexible - can be used in large quantity of customer blends – Used at 20-45% level in many Chinese customer sinter blends (vs 12% for other MM fines) Steel mills love coarse fines – they sinter fast
Fine Ore Size - % <1.0 mm
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% % Passing % 30.0% 20.0% 10.0% PFCJ - Vale PFCJ - SFSC - Vale SFSC - Indian Pilbara Blend Rio - Tinto FMG Rocket FMG CJF - Vale 0.0% BHPBIO - Yandi Tinto Rio - Yandi BHPBIONewman - Vale - Carajs BHPBIO - MAC Fine Ore Product1 Strong product acceptance
• High calcined iron • Mills can use up to 50%, vs15% • Low in contaminants max for MAC, 35% Pilbara Blend • Coarse size with low ultrafines • Less sensitive to over-melting • Very fast sintering speed/high compared to Yandi production rate (“Fires like a • Stable uniform sintering rocket!”) characteristics Rocket Fines has high (>64%) calcined Fe once crystal water is removed during sintering
Calcined Fine Iron Ores Iron 70.0
69.0
68.0
67.0
66.0 <2.6% Fe difference
65.0
64.0
% Fe 63.0
62.0
61.0
60.0
59.0 HG Brazilian - Southern Brazilian - HG B-MM
58.0 HG CID 2 LG IndianLG Fines LGCID MM-B HG Brazilian HG HG Indian Fines MM FMG - Rocket Fines Rocket - Fines FMG HG CID 57.0 Small Fe difference between FMG Rocket Fines and Brazilian HG fines Very high percentage use per customer
Rocket Fines Usage at Customer Steel Mills
30%
25%
20%
15%
10%
% of Fortescue Customers
5%
0% 0-10 10-20 20-30 30-40 40-50 50 - 80 >80 % Rocket Fines Used in Customer Sinter Blend (Ore Basis)
Most mills using Rocket Fines at 30-45% of their sinter blend with 57.3-58.3% sinter Fe. Larger size mills using 20-35% Iron ore for generations Fortescue has a dominant Pilbara land position
FMG: 71,400 km2 Rio: 11,000 km2 (Robe 4,200 km2)
BHP: 6,500 km2 71 Exploration 6.3 billion tonnes in 5 years
• Christmas Creek drilling commenced May 2004; • Cloudbreak commenced November 2004; • Solomon drilling commenced June 2007. • Reserves now1.6 billion tonnes • Resources now 5.1 billion tonnes • Additional 1.2 billion tonnes of magnetite • Discovery cost under 2 cents per tonne. Project pipeline underpinned by geology
• The largest bedrock hosted iron ore discovery in Australia • New exploration Chichester 3500 Robe resource Robe reserve
HI reserve
3000 FMG resource
HI resource 2500
FMG reserve
BHPB reserve 2000 Hancock BHPB resource Others 1500 million tonnes million
1000
500
0 Yandi OB18 Area C Roy Hill Mesa A Mesa J Channar OB29/30 OB25/23 Tom Price Paraburdoo Brockman 4 Bungaroo Ck Hope DownsHope Yandicoogina Solomon Hub West Angelas Mt Whaleback Nammuldi / B2 Jimblebar (W4) Chichester Hub Eastern Ranges Marandoo region MIS Weld Range Note: AQA western CID - Total resources are exclusive of total reserves Note: Targets are hypothetical estimates - Data derived or calculated from best available company, technical and government public reports and may not be achieved FMG Pilbara resources and targets to underpin the project pipeline
Current Current Further TOTAL Area Resources Targets Potential
Chichester Hub 2.81 1.8 1.3 6.0
Solomon Hub 2.27 1.1 1.5 4.9
Jeerinah Anticline 1.5 1.1 2.6
Western CID 1.0 1.0 2.0
Southern Pilbara 0.4 0.8 1.2
Eastern Pilbara 0.5 0.5 1.0
Magnetite 1.23 1.0 >1 3.2
TOTAL 6.31 7.3 7.2 21
Note: All figures are billions of tonnes of iron ore Targets and further potential are hypothetical estimates and may not be achieved Expansion risk considerations
Risk Mitigant • Proven management expertise and capability across all Execution areas to implement expansion • Massive JORC resource base of 6 billion tonnes Resource • Underpin planned production for in the order of 30 years and beyond with further exploration • Low tech civil works Construction • Very similar to works recently completed • Simple civil earth works via truck and shovel and surface Operations miners • Benefit of recent experiences • Reserve and resource base of highly marketable iron ore Market • Proven value in use Port Pilbara Hedland Port Expansion beyond 155mtpa?
Will rely on 2nd Port at Anketell Point, the Pilbara Port
Solomon Hub
Chichester Hub Australia’s own emerging resource major
www.fmgl.com.au
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