109 109 FORTESCUE METALS GROUP ANNUAL REPORT 2010 106 ANNUAL REPORT 2010 ANNUAL FORTESCUE METALS GROUP FORTESCUE METALS FORTESCUE METALS GROUP LTD IS THE WORLD’S FOURTH LARGEST PRODUCER AND EXPORTER OF IRON ORE. Since loading our first iron ore shipment bound Further expansion of the Chichester Hub is also for China in May 2008, Fortescue has become the on the drawing board with plans to lift total third largest iron ore producer in Australia and we production to 90Mtpa. are still growing. Fortescue has an enviable record of rapidly bringing new projects online and we At the Solomon Hub, a feasibility study is being are continuing to unlock the significant potential concluded with plans for a two stage development. of the Pilbara’s vast resources. Fortescue is an Some 2.86 billion tonnes (Bt) of resource has integrated business comprised of mine, rail and port already been delineated of which 1.86Bt will operations based in the Pilbara region of Western underwrite the commencement of Stage One which has a production target of 60Mtpa. Product 106 Australia, with our head office located in Perth. will be transported along a 140 kilometre rail In the Chichester Hub, our first minesite at spur linking to Fortescue’s existing supply chain Cloudbreak is producing at a rate of 40 million through to Port Hedland. Studies for Solomon tonnes per annum (Mtpa). The operations at our Stage Two are progressing, noting that these are second minesite Christmas Creek are currently based on the development of a new port facility at expanding with a new ore processing facility Anketell Point. This strategically located export hub under construction as well as a rail spur to connect is well positioned to take iron ore from Fortescue’s the site with Fortescue’s existing rail and port central Solomon and Western Hub tenements as supply chain. When completed in early 2011, the the business moves to take full advantage of its expanded Chichester Hub operation has a targeted extensive tenement footprint across the Pilbara. run rate of 55Mtpa. 1 ANNUAL REPORT 2010 ANNUAL FORTESCUE METALS GROUP FORTESCUE METALS Vision CONTENTS Fortescue’s vision is to be the lowest cost, most profitable and safest iron ore producer. 2 Chairman’s statement 3 Chief Executive Officer’s All Fortescue team members are focused on statement ensuring the millions of tonnes of iron ore mined, processed, railed and shipped each month are 4 Operations report handled safely and efficiently for the benefit 8 Reserves and Resources report of all stakeholders, including our employees, 10 Sustainability report contractors, the communities in which we live and work and our shareholders. 16 ASX Best Practice Recommendations Sustainability 25 Financial report We consider sustainability to be business as usual. 26 Directors’ report That is, it is integrated into everything we do. We recognise that in order to grow our business we 35 Remuneration report have to continuously improve our sustainability 47 Auditor’s Independence capabilities, manage our risks and realise the Declaration opportunities that sustainability presents. We are 48 Financial statements proud of our sustainability achievements so far. Our family of stakeholders expect the very best 97 Directors’ Declaration performance from us. We insist on the same from 98 Independent Auditor’s report ourselves. to the Members 1 This annual report is printed using vegetable 100 Shareholder information based inks on paper that is chlorine free and manufactured from pulp sourced from plantation 102 Tenement report grown timber. Paper manufacturer and printer are certified to ISO 1400l, the international standard 105 Corporate directory for environmental management. A stacker and reclaimer in action at Fortescue’s Herb Elliott Port. 2 Fortescue people working across exploration, our mine, CHAIRMAN’S rail and port operations and in head office. Regardless of the size of the team, all members find time to complete our cross cultural awareness training which gives them ANNUAL REPORT 2010 ANNUAL STATEMENT a great understanding of the history and culture of our traditional land owners in the Pilbara. A world class resource in the world’s best address for iron ore, Through the Vocational, Training and Employment reliable and growing production Centre (VTEC) and our Summit 300 program, Fortescue levels from two expanding also continues to train and employ Aboriginal people minesites, rising commodity from the Pilbara and beyond. The Summit 300 program FORTESCUE METALS GROUP FORTESCUE METALS prices, strong and increasing commits Fortescue to employing an additional 300 cash flow and an enthusiastic Aboriginal people by 30 June 2011. In June 2010, we and tireless team have delivered Fortescue to the were well on our way to achieving that target with enviable position we now hold and put your Company 193 Aboriginal employees part of our team across all firmly on the front foot for the exciting year ahead. sections of the business. This financial year has been a year of significant This year has not been without its challenges. Just as achievement for Fortescue. Your Company returned a we rode out the last of the shockwaves from the global strong financial performance with record underlying financial crisis, Fortescue and the mining industry faced EBITDA of US$1,288 million, an increase of 129 per an even more insidious attack from within our own cent. Cash flow from operations rose 134 per cent to country. The Labor Government’s decision to introduce US$1,107 million and we shipped 40.1 million tonnes, a Resource Super Profits Tax took us by surprise and up 44 per cent on the previous year. threatened to destroy our great resources sector and undermine the strength it had lent the Australian These outstanding achievements are a true reflection of economy. Your team did not hesitate to stand up against Fortescue’s ability to generate exceptional returns and this ill-conceived tax. While the slightly more reasonable they build a strong base for our future expansion. Mineral Resources Rent Tax has now been proposed, Fortescue is still advocating for a complete review of the Growing and expanding will always be a vision and taxation system and the introduction of a fairer regime reality for your Company. Work is underway on the for all industries. expansion of the Christmas Creek minesite with the first phase to be complete by early 2011. Planning is Our whole Fortescue team farewelled retiring Executive also underway for what is the world’s best undeveloped Director Graeme Rowley in March. One of our founding major mineral resource, Fortescue’s Solomon Hub. With team members, Graeme has fortunately remained on the almost twice the resource of our first two minesites Fortescue Board but retired from his day to day role with Cloudbreak and Christmas Creek combined, the our Company delivering on our dreams to chase a few of 2 Solomon Hub will be a massive step forward for your his own. Company. Endorsement by the Western Australian Government of Anketell Point as the next port On behalf of your Board, thank you all for your development in the Pilbara paved the way for the continuing support. Company’s “Three Hubs – Two Ports” strategy. All of these business achievements are an important part of the Fortescue story over the past 12 months but as always, our most valuable and powerful asset is our people and our culture. We continued to grow our Herb Elliott Fortescue team during the year and now have 2,225 Further expansion is CHIEF EXECUTIVE also planned for our existing operations; in fact, a significant amount of the work to OFFICER’S STATEMENT grow our Christmas Creek mine site was completed 2010 marked a major turning point for your Company. during the financial year. After seven years of planning, building and ramping up By December this year, a 50 our mines and infrastructure, Fortescue has matured into kilometre extension of the a strong and sustainable iron ore producing company. existing Port Hedland to In the 2010 financial year, we delivered strong cashflows Cloudbreak rail line will be with production and price increases generating linked through to Christmas significant revenues and rising cash balances. Creek. Wet commissioning of a new ore processing 3 The growth story of our flagship mine Cloudbreak is facility currently under construction at Christmas without parallel. It has been the fastest ramp up of Creek is scheduled for the March Quarter 2011. Once any Pilbara mine. In two years, your team has achieved completed, the combined Chichester Hub will produce results which took other major mining companies at a minimum targeted rate of 55Mtpa by the June decades. During the year, Cloudbreak matured into a Quarter 2011. stable operation delivering reliable tonnes. Safety continues to be an integral part of the Fortescue Along our railway and at our Herb Elliott Port, our story. During the year we reduced our Lost Time Injury Hedland Operations Team also hit stretch targets. Frequency Rate (LTIFR) 12 month rolling average by 65 per cent to below iron ore industry levels. REPORT 2010 ANNUAL Running the world’s heaviest haul railway, the Rail Team increased axle loads to the 40 tonne design rate and Looking further afield to our export market, demand continued to reduce cycle times. Our Port Team logged for Fortescue ore remains very healthy. During the shipments at rates up to 44Mtpa and delivered the best year we shipped to more than 45 Chinese steel mill gross load rates in the Pilbara. They are well on the way customers and created other markets beyond China, to hit their short term target of 55Mtpa as shown in the across Asia and Europe. Your Company has enthusiastic post reporting date performance in September 2010 when customers now around the world who applaud GROUP FORTESCUE METALS a run rate for the month of over 50Mtpa was achieved.