fortescue investor presentation and site visit
TRANSCRIPT
Fortescue Investor Presentation and Site Visit
10-11 August 2010
DisclaimerImportant NoticeThe 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 beachieved 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 madeavailable to a person nor any obligation to furnish the person with any further information.
Competent Persons StatementThe 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.
WelcomeRod Campbell
Agenda1. Company Overview
2. Operational Update
3. Marketing, Shipping and Metallurgy
4. Development Strategy
5. Financial Snapshot
6. BC Iron Joint Venture
Company OverviewAndrew 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
FACT: Fortescue built its infrastructure faster than any other mining companyFACT: Fortescue ramped up production faster than any other mining company
Port
Rail
Mine
Herb Elliott Port
FortescueRailway
CloudbreakMinesite
From concept To reality
2006
2007
2006
2008
2008
2008
• 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 at work
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 railGuinness Book of Records
Innovation
Australia’s largest shiploaderHerb Elliott Port – Over 72Mt Shipped
Innovation
Fortescue – forging ahead
Operational UpdatePaul 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
• 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.
Growth story without Parallel
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Annu
al P
rodu
ctio
n (k
t)
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
Ramp up without Parallel
Fortescue Cloudbreak
Fortescue Christmas Creek
FortescueChristmas 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
0
2
4
6
8
10
12
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Ore Mined
0
10
20
30
40
50
60
70
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Total Movement
Processing
Million Tonnes
0
2
4
6
8
10
12
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Ore Processed
Million Tonnes
0
2
4
6
8
10
12
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Ore Railed
Rail
Port
Million Tonnes
0
2
4
6
8
10
12
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Ore Shipped
FMG Ore 3rd Party Ore
• 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.
Production forecast
• 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
Efficiency Improvements
Marketing & ShippingRussell Scrimshaw
• 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
Chinese steel industry and economy
Shanghai spot rebar v 62% ore spot index (10 Aug)
Source: GFI
• 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
Market Pricing for Iron Ore
China Spot Ore & Shipping Prices (10 Aug)
Source: GFI
• 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.
Non China Iron Ore demand
China's iron ore imports to June 2010
Source: GAC
Country Imports, Jun ('000 tons)
M-o-m change (%)
Imports, Jan - Jun ('000
tons) Y-o-y change
(%)
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
• 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
Fortescue current market status
China Forecast: Iron Ore Supply by Country
Source: AME
0
200
400
600
800
1000
1200
1400
2004
2006
2008
2010
2012
2014
2016
2018
2020
Volu
me (
Mt)
Contained Fe: Dom.Contained Fe: Imp.
*Grade of Chinese Domestic Production is
Domestic vs. Imported Ores (Mt)
Source: Citi Investment Research & Analysis
2010 2011 2012 2013 2014 2015 2015 Target
Cumulative New Capacity
82 131 205 303 456 615 870
Seaborne Iron Ore growth
Fortescue creating Quality ‘Index’ to underpin our price
• 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.
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
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
ShippingMark Davidson
• 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
Load Port Characteristics
• High volatility due to short term vessel supply/demand imbalance
• Recent $/t Port Hedland to China (C5) fluctuated between US$6-US$24.36 pwmt. This volatility must be managed
• Fast growing demand for vessels driven by greatly increased demand for iron ore, coking and thermal coal
• Large increase in new build vessels. Expected increase of 27 per cent in capesize fleet and further 24.6 per cent in 2011
Freight Market
0.00
5.00
10.00
15.00
20.00
25.00
3/08
/200
920
/08/
2009
9/09
/200
928
/09/
2009
15/1
0/20
093/
11/2
009
20/1
1/20
099/
12/2
009
5/01
/201
022
/01/
2010
10/0
2/20
101/
03/2
010
18/0
3/20
108/
04/2
010
27/0
4/20
1017
/05/
2010
4/06
/201
023
/06/
2010
12/0
7/20
1029
/07/
2010
$/Mt Rate Shipping Cost Western Australia to China
• 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)
CFR Sales Policy
• 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 Contracts
• 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.
Shipping Strategy
Technical MarketingJohn Clout
Target versus Actual Grades – Rocket Fines
Product Target Grade
and Limits
Chemical Analysis dry weight %Totals
(Wt %)
Free Moisture (Wt %)Fe SiO2 Al2O3 TiO2 Mn CaO P S MgO K2O Na2O
LOI Total
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
FY10 - YTD Totals/
Fe SiO2 Al2O3 TiO2 Mn CaO P S MgO K2O Na2OLOITotal
Total(Wt %) Fecalc
Free moisture
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%
Product Size FY09/10
+6.3mmcontent
(Dry basis)
-0.150mm content
(Drybasis)
Weighted Average 13.9% 6.8%Standard Deviation 2.4% 0.8%
Weighted Mean Shipped Grade for Rocket Fines – 1/07/2009 to 30/06/2010
Brand FeSiO2 Al2O3 P Mn LOI Total Fe SiO2* Al2O3 P Mn
SiO2+ 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
Uncalcined (Wt %) Calcined* (Wt %)
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
How does Rocket Fines grade compare with BHPB, Rio?
* Calcined is when the crystal water or Loss On Ignition (LOI) Is removed as steam above 300oC
Rocket Fines Fe with Pilbara competitor fines
Appears to be a big difference in natural Fe content compared to HG Brazilian fines and HG Indian fines.
Rio
-M
esa
J
LG In
dian
Fin
es
BH
PB -
Yand
i
Rio
-Yan
dico
ogin
a
FMG
-R
ocke
t
BH
PB -
MA
C
Rio
-Pilb
ara
Ble
nd
BH
PB -
Prem
ium
HG
Indi
an F
ines
Vale
-PF
Vale
-Ita
bira
52.0
53.0
54.0
55.0
56.0
57.0
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
% F
e
Uncalcined Fine Iron OresIron
7.0% Fe dif ference
LG In
dian
Fin
es
Rio
-M
esa
J
BH
PB -
Yand
i
FMG
-R
ocke
t Fin
es
BH
PB -
MA
C
BH
PB -
Prem
ium
Rio
-Yan
dico
ogin
a
Rio
-Pilb
ara
Ble
nd
HG
Indi
an F
ines
Vale
-Ita
bira
Vale
-PF
57.0
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
% F
e
Calcined Fine Iron OresIron
<2.6% Fe dif ference
Once crystal water is removed as steam during sintering, small Fe difference between Fortescue Rocket Fines and Brazilian HG fines
Al2O3, SiO2 and P in Rocket Fines is lowVa
le -P
F
HG
Indi
an F
ines
Rio
-Pilb
ara
Ble
nd
BH
PB -
MA
C
BH
PB -
Prem
ium
Rio
-Yan
dico
ogin
a
FMG
-R
ocke
t Fin
es
LG In
dian
Fin
es
BH
PB -
Yand
i
Rio
-M
esa
J
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
% S
iO2
Calcined Fine Iron Ores Silica
<1.2% SiO2 dif ference
Vale
-Ita
bira
Vale
-PF
BHPB
-Ya
ndi
Rio-
Yand
icoog
ina
FMG
-R
ocke
t
Rio-
Pilb
ara
Blen
d
BHPB
-M
AC
BHPB
-Pr
emiu
m
HG
Indi
an F
ines
Rio
-Mes
a J
LG In
dian
Fin
es
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
% A
l2O
3
Calcined Fine Iron Ores Alumina
<0.6% Al2O3 dif ferenceVa
le -I
tabi
ra
Vale
-PF
BH
PB -
Yand
i
Rio
-M
esa
J
Rio
-Yan
dico
ogin
a
FMG
-R
ocke
t Fin
es
BH
PB -
MA
C
HG
Indi
an F
ines
LG In
dian
Fin
es
BH
PB -
Prem
ium
Rio
-Pilb
ara
Ble
nd0.000
0.010
0.020
0.030
0.040
0.050
0.060
0.070
0.080
0.090
0.100
% P
Calcined Fine Iron Ores Phosphorus
<0.02% P dif ference
Rocket Fines has favourably coarse size
Rocket has a coarse size – which improves productivity for sintering
Vale
-PF
CJ
Rio
-Pi
lbar
a B
lend
Vale
-C
JF
MA
C -
BH
PBIO
Vale
-SF
SC
HG
Indi
an
Vale
-C
araj
as
BH
PBIO
-Pr
emiu
m
Rio
-Ya
ndic
oogi
na
FMG
Roc
ket F
ines
BH
PBIO
-Ya
ndi
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
1
% R
etai
ned
Fine Ore Product
Fine Ore Size - % >1.0 mm
Proven Value in Use for CustomersSummary: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 fines4. Low in contaminants - (4.4%) SiO2, 1.9% Al2O3 and 0.054% P5. Coarse size and low ultrafines content so ideal for China
0%
5%
10%
15%
20%
25%
30%
0-10 10-20 20-30 30-40 40-50 50 - 80 >80
% o
f For
tesc
ue C
usto
mer
s
% Rocket Fines in Sinter Blend (Ore Basis)
Rocket Fines Usage at Customer Steel Mills
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.
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.
Development
Execution Strategy Implementation Plan
Peter Meurs
• Production to 55Mtpa Board Approved• Production beyond 55Mtpa still subject to
Board Approval
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
SolomonHub
Karratha
New Pilbara Port (Anketell)
Fortescue Infrastructure
Fortescue Rail
Proposed Fortescue Rail
API Joint Venture
Rio Tinto Rail
BHP Rail
WesternHub
Three Hub Mining StrategyChichester, Solomon and Western
Solomon Resources have now been expanded to 2.86 billion tonnes, with 786 million tonnes in Indicated and
Inferred category.
Chichester Hub
Port Hedland
Dampier
40
Paraburdoo
Tom Price
Newman
32
8
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP Rail
Execution Strategy – Production – June 2010Chichester, Solomon and Western
Karratha
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
36
16
At Capacity
Hopper 5Jaw Crusher
OPF 1Expanded Mine
3 BCIJV
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
55
Execution Strategy – Production – June 2011Chichester, Solomon and Western
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
39
24
Berth 3Shiploader 2Train Unloader 2Stockyard 2
OPF 1 ExpandedExpanded Mine
5
BCIJV Expanded
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
Wet Plant
80
12
Solomon Hub
Firetail Brockman Early Production
Execution Strategy – Production – June 2012Chichester, Solomon and Western
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
35
40
Berth 4 (SW Creek)Shiploader 3Train Unloader 3Stockyard 3
OPF 2 addedExpanded Mine
5
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
120
40
OPF 1 Firetail Brockman 20OPF 2 Kings CID 20
Solomon Hub
Execution Strategy – Production – June 2013Chichester, Solomon and Western
BCIJV Expanded
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
35
55
Berth 5 (SW Creek)
Expanded Mine
5 BCIJV
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
New Pilbara Port (Anketell)
20
Solomon 2
155
Early Production
Solomon Hub
20 60
Brockman 20CID 40
Execution Strategy – Production – June 2014Chichester, Solomon and Western
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
35
55
5 BCIJV
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
New Pilbara Port (Anketell)
80
155
20
WesternHub
Solomon Hub
60 60
Execution Strategy – Production – June 2015Chichester, Solomon and Western
Early Production
Expansion
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
35
55
5 BCI
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
New Pilbara Port (Anketell)
150
155
WesternHub
50
Solomon Hub
100 60
Execution Strategy – Production – June 2016Chichester, Solomon and Western
Chichester Hub
Port Hedland
Dampier
Paraburdoo
Tom Price
Newman
35
55
5 BCI
Fortescue Infrastructure
Fortescue Rail
Rio Tinto Rail
BHP RailKarratha
New Pilbara Port (Anketell)
200
155
100
Solomon Hub
100 60
WesternHub
Execution Strategy – Production – June 2017Chichester, Solomon and Western
Solomon Phase 160mtpa
Brownfield Expansion
Bryan PearceChichester
Development55mtpa – 95mtpa
(+3mtpa BCI)
Brownfield Expansion
Peter Thomas
Port / Rail55mtpa – 155mtpa
Eamon Hannon
Progress 40Mtpa – 55Mtpa
Bryan Pearce
• 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 - Rail
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 - OPFMajor 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
• Christmas Creek current work areas:• Mine planning (5 year plan plus “life of mine”)• Hydrology• Materials handling• Process plant• Approvals road map• Risk identificationThis 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
T95 Progress
Christmas Creek 60Mtpa LOM
Cloudbreak current work areas:
• Work activities for the Cloudbreak wet scrubbing are well progressed with final control estimates and schedules are currently being validated.
T95 Progress
Cloudbreak 35Mtpa LOM
Solomon Project 60Mtpa
Eamon Hannon
Solomon MomentumDFS completion December Qtr 2010, engineering and design commenced.
• Exploration success 2.8 billion tonnes and growing. 1 billion tonnes in Solomon Stage 1;
• Land Access and Environmental consents / approval well advanced; and
• Mining leases applied for, engineering and metallurgy studies progressing.
• Early engagement of contractors and suppliers commenced.
20 Mtpa BID
40 Mtpa CID
5km
Project Targets – 60Mtpa• Early ore production (Firetail North and South) – June 2012• Project completion of Stage 1 (Firetail and Kings Production) – June 2013
• 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.
Study & Development Progress
• 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
Solomon competitive advantages
Port 55Mtpa – 155Mtpa
Peter Thomas
• 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
Port Expansion
Current Port infrastructure
2 Stackers1 Reclaimer
1 Train Unloader
2 Berths1 Shiploader
95 Port infrastructure
2 Stackers2 Reclaimers
2 Train Unloaders
3 Berths2 Shiploaders
155 Port infrastructure
3 Train Unloaders
4 Stackers3 Reclaimers
5 Berths3 Shiploaders
Port infrastructureCapacity (mtpa) 55 95 155Berths 2 3 5Shiploaders 1 2 3
Capacity (mtpa) 55 95 155Stackers 2 2 4Reclaimers 1 2 3
Capacity (mtpa) 55 95 155Train Unloaders 1 2 3
Rail ExpansionPeter Thomas
• 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
Rail Expansion
New Train Control SystemWayside Signal System
Existing Communication Tower
Interlocking Control
Axle Counters + Wayside Signals
Communication-Based Signalling
Full Capability of:
2 Point MachinesHundreds of meters of cabling and power
6 Routes 4 Signals4 Shunting Signals
The old way
Communication based TCS minimizes wayside equipment
The new way
Anketell Port
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
Two ports for three hubs
Financial SnapshotStephen Pearce
• Strong cashflow from Operations.
• Cash on hand at 30 June 2010 US$1.235Bn.
• Leucadia accrued payments made in full July 2010.
• Increased production/margins/cashflows in June Qtr 2010.
2010 Financial Highlights
Cash costs per tonne US$/t Q1FY10 Q2FY10 Q3FY10 Q4FY10 FY10
AverageMining 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
FY2010 Production costs
Increase in cost pressures:• Higher mine strip ratios;• Use of small crushers prior to commissioning
of primary crusher (September Qtr 2010);• Higher transfer costs associated with
Christmas Creek ore.
Improvements to efficiency• Reduction in rehandle and overburden handling;• Next Generation Surface Miners accompanied by
larger scale trucks and shovels;• Permanent primary crusher and ore conveyor
system:• OPF Enhancements.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2008 2009 2010
Mill
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(U
SD)
Sales Revenue
Indicative Range
0
200
400
600
800
1,000
1,200
1,400
1,600
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Mill
ions
(U
SD)
EBITDA
Indicative Range
-120%
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
2008 2009 2010
ROE
(60.00)(50.00)(40.00)(30.00)(20.00)(10.00)
0.0010.0020.0030.0040.00
2008 2009 2010
Cent
rs (U
SD)
EPS
Indicative Range
Indicative Range
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2008 2009 2010
Cent
s (U
SD)
CFPS
Indicative Range
BC IronMike Young
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