hy16 results · any new information or data that materially affects the information included ......

HY16 Results

Working together. Delivering results.

www.Telegram.me/Commodities



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 2015, the Interim Financial Report for the half year ended 31 December

2015 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

statement for its Hematite and Magnetite projects at 30 June 2015 as

released to the Australian Securities Exchange on 21 August 2015.

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

Forward looking statements


Building a world class company

Core supplier to China’s growth

Safety focus

Shipped over

620mt

First ore

in 2008

Unique culture

165mtProduction rate

Low cost

producer

3

Engagement

Empowerment

Leadership


4www.Telegram.me/Commodities

5

Strategic delivery of targets

Culture, continuous improvement, speed and flexibility maximise asset base

FY11 Consistent dividend policy

FY13-16 Net debt $4.4bn lower

FY15-16 Capex lowered < $2/t

FY12-16 Costs to $13/t FY16 exit

FY14 165mt achieved & maintained


1HY16 Earnings

Operational performance + sustainable cost reductions support financial results

Capex $88m

1HFY16

NPAT

6

Underlying

EBITDA1

US$1.3bn84mt shippedRate maintained

Interim dividend

A$0.03/share

US$319m

Net debtUS$1.1bn lower

1 Refer to attached glossary for definition of non-IFRS terms www.Telegram.me/Commodities

Through development of assets, efficiencies, productivity and cost savings

Continuous + sustainable cost improvements

Solomon operations

Blending strategy 58% Fe

Processing, wet plants + de-sands

Operational efficiencies

Fx and fuel decreases

1

2

3

4

5

7

US$/wmt

4844

34

27

15

0

10

20

30

40

50

60

FY12 FY13 FY14 FY15 FY16Guidance

Exit FY16 at

$13


Continuing efficiency and productivity improvements

Delivering US$13/wmt

Savings initiativesSavings

(US$/wmt)

Processing

• Improved upgrades and yield

• Shutdown optimisation

• Enhanced plant reliability

0.70

Mining

• Maximising equipment productivity

• Enhancements to mine plans – ore definition,

haul route optimisation, pit design

• Site-wide efficiencies, maintenance, fleet

productivity

• Product optimisation + blending

1.30

Procurement • Deflation and contract re-negotiations 0.50

Inventory + Fx• High-cost inventory flow through

• Fx to US$0.710.50

TOTAL 3.00

8

Sustainable cost reductions

US$/wmt

Based on average strip ratio of 1.4

3

1

15

13

0

2

4

6

8

10

12

14

16

Dec 15 exitrate

Initiatives Strip ratio FY16 exitrate


Continuing to reduce breakeven price

Breakeven index price

US$/t

9

USD:AUD 0.71

18.3

23.0

28.8

13.0

3.51.4

0.4

3.21.5

2.5

3.3

0

10

20

30

40

C1 exit rate Shipping Royalty Admin Deliveredcost to China

Interest Sustainingcapex

Total wmtcost

Moisture Dmtuadjustments

Breakevenprice


Operating and financial performance


Financial keys

Maintaining margins through cost + production performance

US$3.5bn Operating cost savings

FY14 - FY16

11

C1 cost

$16/wmt1HFY16

Operating cashflow

US$1.4bn

US$1.1bnDebt repurchased

US$200mSustaining capital FY16

Net debt US$6.1bn


Operational performance supports strong financial results

Earnings

Revenue and Price

Net profit after tax, US$ millions

Underlying EBITDA, US$ millions

Operating cash flows, US$ millions

1,723

1,017

331

(15)

319

1HY14 2HY14 1HY15 2HY15 1HY16

3,646

2,602

905 1,132

1,388

1HY14 2HY14 1HY15 2HY15 1HY16

3,220

2,416

1,440 1,066

1,301

1HY14 2HY14 1HY15 2HY15 1HY16

12

-

35

70

105

140

0

2

4

6

1HY14 2HY14 1HY15 2HY15 1HY16

Pri

ce r

ealisati

on

, U

S$/d

mt

Op

era

tin

g r

even

ue,

US

$b

n

Revenue Realised price


Cost + production performance offsetting price weakness

Underlying EBITDA

1,440 1,301

27

1,387

96

1,568 54 27

HY15 Volume Cost Price Royalty Fx Other HY16

13

Underlying EBITDA MarginUnderlying EBITDA, US$ millions

55%

41%

30% 29%

39%

1HY14 2HY14 1HY15 2HY15 1HY16

Average


14

FY14 – 16 cash savings since achieving full operating capacity

Cash savings

0.8

0.8

1.1

2.7

0.8

3.5

-

1.0

2.0

3.0

4.0

FY14 FY15 1HY16 Delivered savings Expected 2HY16 Savings FY14 - FY16

US$bn


Balance sheet


Operating cash flows supporting continuing debt repayments

Available cash balances

16

• US$2.3bn cash at 31 Dec

• Strong cash flows

• Target 40% gearing (Debt:Debt + equity)

• Target liquidity US$1-1.5bn0

0.5

1

1.5

2

2.5

1H16 cash balance Liquidity

US$bn

Base liquidity

Available for

debt repayment


Post expansion, capex is sustainable at current levels

Capital expenditure

Capital profile

17

• Sustaining capex US$200m

• Sustainable mine lives

• No expansion capex

• D&A ~US$7.50/wmt 0

35

70

105

140

175

0.0

1.5

3.0

4.5

6.0

7.5

FY10 FY11 FY12 FY13 FY14 FY15 FY16(guidance)

mt shippedUS$bn


Net debt reduced by US$4.4bn to date

Debt maturity profile

18

US$ millions

4,839

0

577 478

2,160

0

1,000

2,000

3,000

4,000

5,000

CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022

Senior Secured Credit Facility Senior Unsecured Notes Senior Secured Notes

Extended Runway


19

Free cash flows support debt reduction to initial 40% gearing target

Debt repayments

12,691

9,557 9,569 8,448

10,533

7,159 7,188 6,130

0

10

20

30

40

50

60

70

80

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY13 FY14 FY15 HY16

%US$ millions

Total Debt Net Debt Net Gearing (RHS)


Operating cash flows supporting metrics

Key credit metrics

Cash and debt (US$bn)

Underlying EBITDA / Interest

Gearing: Debt / (Debt + Equity)

Debt / Underlying EBITDA

2.0x1.7x

2.3x

3.8x3.6x

1HY14 2HY14 1HY15 2HY15 1HY16

5.9x

6.9x

5.9x

3.8x 3.5x

1HY14 2HY14 1HY15 2HY15 1HY16

63%56% 54% 56%

52%

1HY14 2HY14 1HY15 2HY15 1HY16

20

11.6

9.6 9.1 9.68.4

2.9 2.4 1.6 2.4 2.3

1HY14 2HY14 1HY15 2HY15 1HY16


Maximising value


• Optimised 58% product range

• Product blending

• Enhanced processing

• Improved ore body definition

Strategy continues to evolve to maximise value from asset base

Product strategy

22

Product

CostsMine Life

Solving to maximise


Maintained mine life

FY16 strip ratio remains consistent in 2HFY16 at 1.2

Revised strip ratios

Improvements to continue as ore processing

and blending optimised

C1

CostsStrip

ratios

23

FY17 - FY20 LOM

Chichester 1.6 2.3

Solomon 1.2 1.8

Combined 1.4 2.1


Market


Well established 17% market share of imported iron ore to China

Core supplier to Asia

• Low impurity 58% Fe average

• High value in use

• Large diverse customer base

• Reliable consistent delivery

• Proximity to high growth region


26

China’s long term growth remains strong

300 million people expected to be urbanised by 2030

• Steel stock-in-use 1/3 USA

• Steel demand above 800mtpa

• Competitive and rising steel exports:

- One Belt One Road over billion tonnes

• Short term growth stabilising

• Real estate market recovery


Above 800mtpa – driven by policy decisions

Steel consumption to build economy

Source: Wood Mackenzie 27www.Telegram.me/Commodities

300 million people still to urbanise – 16 million per year

Chinese cities in 2030

70% of the population (1bn)

will be living in cities

Source: Wood Mackenzie 2828www.Telegram.me/Commodities

Port stocks remaining stable

Iron ore supply in balance…sentiment driving price

Source: Bloomberg and Umetal 29

$30

$50

$70

$90

$110

$130

$150

$170

$190

$210

0

10

20

30

40

50

Ju

l-10

Oct-

10

Ja

n-1

1

Apr-

11

Ju

l-11

Oct-

11

Ja

n-1

2

Apr-

12

Ju

l-12

Oct-

12

Ja

n-1

3

Apr-

13

Ju

l-13

Oct-

13

Ja

n-1

4

Apr-

14

Ju

l-14

Oct-

14

Ja

n-1

5

Apr-

15

Ju

l-15

Oct-

15

Ja

n-1

6

US$Days Coverage

IO Inventory days coverage (days)

62% Fe CFR (RHS)


Consistently realising at 85-90% of 62 Platts index

Price realisation

30

US$/dmt

75%

80%

85%

90%

95%

100%

$0

$20

$40

$60

$80

$100

29/0

7/2

014

29/0

8/2

014

29/0

9/2

014

29/1

0/2

014

29/1

1/2

014

29/1

2/2

014

29/0

1/2

015

28/0

2/2

015

31/0

3/2

015

30/0

4/2

015

31/0

5/2

015

30/0

6/2

015

31/0

7/2

015

31/0

8/2

015

30/0

9/2

015

31/1

0/2

015

30/1

1/2

015

31/1

2/2

015

31/0

1/2

016

29/0

2/2

016

Platts 62 CFR MBIO58 [P] CFR 62% v 58% [P] price realisation (RHS)


Reserves and resources


Largest Pilbara tenement footprint

Resource portfolio supports asset baseM

ine

ral R

es

ou

rce

s d

ry i

n s

itu

(M

t)

2,266 2,227 2,143 2,550 2,550

3,222 3,328 3,280

695 695 695 695 695

695 303 491 1,715

2,224 2,860

3,070 3,070

3,504 4,877 4,793

624 624

624

740 740

1,032

2,013

2,463

2,463 2,463

-

1,230 1,230

2,465 3,237

5,205 4,676

5,504

-

2,000

4,000

6,000

8,000

10,000

12,000

2008 2009 2010 2011 2012 2013 2014 2015Chichester Hub Chichester Other Solomon Hub Western Hub Nyidinghu Magnetite


Supporting our local community


Ending Aboriginal disparity in the Pilbara

Creating opportunities through training, employment and business opportunity


Focused strategy


36

Strategic delivery

Culture, continuous improvement, speed and flexibility maximise asset base

Consistent 165mtpa

Lowering costs to US$13/wmt

Maximising cash flows

Debt repayment

Expect further improvements


The new force in iron ore

Continuous improvement, reliable + efficient delivery

165mtProduction rate

Sustainable

low cost

producer

World classassets & people

Unique culturedrives performance


www.fmgl.com.au@FortescueNews

Proudly supporting:


39

Glossary

C1: 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 half year ended

31 December 2015 accompanying this

announcement.

CFR: Cost and freight rate.

mtpa: Million tonnes per annum.

1HFY: Half year.

FY: Full year.

dmt: Dry metric tonnes.

NPAT: Net profit after tax.

Underlying EBITDA: Earnings before interest, tax, depreciation

and amortisation, exploration, development

and other expenses.

The reconciliation of underlying EBITDA to

the financial metrics disclosed in the

financial statements prepared under the

Australian accounting standards is

presented in the Financial Report for the

half year ended 31 December 2015

accompanying this announcement.

wmt: Wet metric tonnes.


hy16 results · any new information or data that materially affects the information included ......

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