Macquarie
West Australian Forum
4 December 2019
Global force
Thriving communities
Forward looking statement
Disclaimer
Important Notice
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.
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.
Additional Information
This presentation should be read in conjunction with the Annual Report at 30 June 2019 together with any announcements made by Fortescue in accordance with its continuous disclosure obligations arising under the Corporations Act 2001.
Any references to reserve and resources estimations should be read in conjunction with Fortescue's Ore Reserves and Mineral Resources statements released to the Australian Securities Exchange on 2 April 2019 for its Magnetite projects and on 23 August 2019 for its Haematite projects. Fortescue confirms in the subsequent public report that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and, in the case of estimates of mineral resources or ore reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.
All amounts within this presentation are stated in United States Dollars consistent with the functional | |
currency of Fortescue Metals Group Limited, unless otherwise stated. Tables contained within this | |
presentation may contain immaterial rounding differences. | 2 |
A world | |||||
class | |||||
company | |||||
>1.3 billion | ~170mtpa | ||||
Shipped | |||||
Wholly owned, | |||||
fully integrated | |||||
Core supplier | Low cost | ||||
supply chain | |||||
to China | producer |
3
FY19: a record year
Underpinned by record safety performance
167.7million tonnes
Shipped
US$3.2billion
Net profit after tax (NPAT)
US$2.1billion
Net debt
US$6.0billion
Underlying EBITDA
US$13.11/wmt
C1 cost
A $1.14per share
Total FY19 paid dividend
4
Increasing shareholder returns
A$0.24 per share | A$1.14 per share | |
Fully franked final dividend paid | Total FY19 dividends paid | |
in October | ||
78% of FY19 NPAT | Share buy-backs | |
A$139m completed, extended to | ||
Dividend pay-out ratio | October 2019 |
5
A strong start to FY20
First quarter of FY20 builds on record results in FY19
Safety 2.7 | 42.2mt | |
Total Recordable Injury Frequency Rate | Shipments for the quarter | |
US$12.95/wmt | US$85/dmt | |
C1 costs | Average revenue received | |
US$0.5 billion | US$3.4 billion | |
Net debt | Cash on hand |
6
Investment in growth
Unparalleled track record and capability in safely developing and operating major iron ore projects in the Pilbara
7
Building strong relationships with China
WA companies have forged strong connections with China
Major supplier | Investment and financing | |
of iron ore to China | relationships | |
Over US$1billion in | Academic, policy and |
procurement from China | community engagement |
8
Crude steel production
Strong growth in China's crude steel production
7.4% increase in steel production YTD Oct 2019
Million tonnes
China Monthly Crude Steel Output
95
90
85
80
75
70
65
60
55
50
Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | ||||
2017 | 2018 | 2019 | |||||||||||||
Source: China's National Bureau of Statistics
9
Strong demand for Fortescue products
China's iron ore port
stockpiles drawn down to
128mt (31 October 2019)
Peak stockpiles of 163mt
(March 2018)
China Q3 iron ore imports increased by 12.4Mt YoY
Mt | Total Chinese port stocks | |||||||||||
170 | ||||||||||||
150 | ||||||||||||
130 | ||||||||||||
110 | ||||||||||||
90 | ||||||||||||
70 | ||||||||||||
50 | ||||||||||||
Jan-18 | Apr-18 | Jul-18 | Oct-18 | Jan-19 | Apr-19 | Jul-19 | Oct-19 | |||||
Australia | Brazil | Other | ||||||||||
Source: Mysteel | 10 |
Enhanced product mix
Average realised price increased 48% in FY19
Introduction of West Pilbara
Fines
Production of Fortescue Lump Reduced Super Special Fines Strong customer engagement
Product mix optimisation delivers value:
Tonnes shipped millions (wmt) | FY19 | Product | FY18 | Product |
mix % | mix % | |||
West Pilbara Fines | 9.0 | 5% | - | - |
Kings Fines | 14.2 | 9% | 15.0 | 9% |
Fortescue Blend | 72.4 | 43% | 75.0 | 44% |
Fortescue Lump | 8.6 | 5% | - | - |
Super Special Fines | 61.7 | 37% | 80.0 | 47% |
Manganese Iron Ore | 1.8 | 1% | - | - |
Total | 167.7 | 100% | 170.0 | 100% |
11
Iron ore price
Key drivers contributing to Fortescue's average price received increase with 89% contractual price realisation in Sept Q
Optimising product mix
Steel mill margins
Strength in Chinese steel production
Global supply disruptions
USD/dmt
140 | |||
120 | |||
100 | |||
80 | |||
60 | |||
40 | |||
20 | |||
0 | |||
Jan-16May-16Sep-16 | Jan-17May-17Sep-17 | Jan-18May-18Sep-18 | Jan-19May-19Sep-19 |
SSF (portside) | FB (portside) | Platts 62% IODEX | Platts 65% IODEX |
Pricing at 29 November 2019 | 12 |
Financial results
13
Sustainable low cost producer
Industry leading cost position
C1 US$/wmt
60
Structural improvements
Solomon + blending + processing
50
48
4044
Productivity and efficiency
Utilisation, recoveries, maintenance
Innovation and technology
Autonomy, conveyor, ore carriers, data analysis
30 | 34 | ||||||||||
27 | |||||||||||
20 | |||||||||||
15 | 12.95 | ||||||||||
10 | 13 | 12 | 13 | ||||||||
- | |||||||||||
FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | Q1 FY20 | |||
14
Price and margins
Cost leadership and efficient operations underpin resilience in earnings through all market cycles
US$/dmt 90
80
70
60
50
40
30
20
10
17 | 21 | 30 | 20 | 39 | |||
- | |||||||
FY15 | FY16 | FY17 | FY18 | FY19 | |||
Underlying EBITDA per dmt | Platts 62% CFR Index | Average Underlying EBITDA per dmt | Fortescue realised price | Average Fortescue realised price | |||
15
Capital expenditure
Disciplined allocation to core business, innovation and growth
FY19 Capital expenditure - US$1,040m | FY20 Capital expenditure guidance - US$2,400m | ||||
Sustaining | 612 | Sustaining | 700 | ||
Development* | 206 | Development | 360 | ||
Exploration | 105 | Exploration | 140 | ||
Eliwana | 102 | Eliwana | 700 | ||
Iron Bridge | 15 | Iron Bridge | 500 | ||
* Includes ore carrier and towage expenditure of US$80 million | 16 |
Capital allocation
Disciplined allocation to capital investment and shareholder returns
Capital allocation of debt and dividends | Cumulative allocation of NPAT: FY05-19 | ||||
US$m | US$m | ||||
4,000 | 15,000 | ||||
Capital Allocation | |||||
3,000 | 11,000 | ||||
7,000 | |||||
2,000 | |||||
3,000 | |||||
1,000 | |||||
- | -1,000 | ||||
FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 | ||||||||||||
Debt Repayment | Dividends | NPAT | |||||||||||||||||
Dividend | Share Buy Back | Debt Repayment | 17 | ||||||||||||||||
Credit metrics
Investment grade metrics support financial strength Earliest debt maturity in 2022
Gearing %
56%
49%
45%
38%
31% | 29% | 27% | ||
24% | ||||
21% | ||||
16%
FY15 | FY16 | FY17 | FY18 | FY19 | ||
Gross gearing (%) | Net gearing (%) | |||||
Debt to EBITDA (x)
3.8x
2.9x | |||||
2.1x | |||||
1.6x | |||||
1.2x | |||||
0.9x | 1.0x | 0.7x | 0.3x | ||
0.6x | |||||
FY15 | FY16 | FY17 | FY18 | FY19 |
Debt maturity profile
1,000 | |||||||||||||||||||
(US$m) | 750 | ||||||||||||||||||
500 | |||||||||||||||||||
Volume | 750 | 500 | 750 | 600 | 600 | ||||||||||||||
250 | |||||||||||||||||||
0 | |||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | ||||||||||
Senior Unsecured Notes | Term Loan | 18 | |||||||||||||||||
Gross debt to underlying EBITDA (x) | Net debt to underlying EBITDA (x) | |
Iron ore growth projects
Eliwana and Iron Bridge
19
Eliwana project
US$1.275 billion capital investment
Progressing on schedule and budget
Infrastructure | Latest technology | |
143km rail; 30mtpa dry OPF | Driving low cost operation | |
First ore on train | West Pilbara Fines | |
December 2020 | Increasing production and mine life | |
20
Iron Bridge
Magnetite Project
US$2.6 billion investment delivering enhanced returns to shareholders and JV partners
22 mpta | 67% Fe | |
First ore scheduled mid-2022 | Low impurity premium product | |
Low capital | Energy efficient | |
intensity and operating cost | Industry leading, proven design | |
21
Achieving our strategy to deliver majority of product over 60% Fe
Aligned with customer requirements
Competitively positioned across all key segments
Flexibility to optimise product mix to meet customer requirements
Highest grade Australian product
with global scale in magnetite
22
Growth and development
23
World class exploration
Opportunities that will be driven by market demand
Pilbara
Largest tenement holder
Australia
NSW ~3,000km2 tenure
SA ~15,000km2 tenure
South America
Ecuador, Argentina
Colombia
24
Automated mining
Innovation delivering safety and productivity improvements
AHS operation | Autonomous drills | |
>37 million km safely travelled | 8 drills in operation | |
AHS conversion | Relocatable conveyor | |
147 trucks in operation | Operating at full capacity | |
25
Chichester Solar
Gas Hybrid
100 per cent of daytime stationary energy requirements at Fortescue's Chichester Hub will be powered by renewable energy
60MW solar PV | 60-kilometre | |
generation facility | transmission line | |
Displace around 100 | Pilbara Energy Connect | |
million litres of diesel | ||
26
Ambition for hydrogen
Hydrogen is part of a broader energy strategy
Technology
Research, study and commercialise
Domestic industry
Develop, partner or participate in hydrogen related projects
Our operations
Reduce carbon footprint and cost of energy
Global supply chain
Supporting export of green hydrogen
27
FY20 Guidance
170-175mt | US$13.25-13.75 | |
Shipments | C1 cost / wmt | |
US $2.4 billion | 50-80%FY NPAT | |
Capital investment | Dividend policy |
28
Key strategic focus
Balance sheet | Long term | |
strength | sustainability | |
Growth and | Returns to | |
development | shareholders | |
29
30
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Disclaimer
Fortescue Metals Group Ltd. published this content on 04 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 December 2019 00:42:04 UTC