Fortescue 2010 Results Presentation

7/31/2019 Fortescue 2010 Results Presentation

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Full Year Results – June 2010

26th

August 2010



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 statementsare 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-lookingstatements.

No representation or warranty, express or implied, is made by Fortescue that the material contained in thispresentation 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 orcompleteness of the material contained in this presentation and excludes all liability whatsoever (including innegligence) for any loss or damage which may be suffered by any person as a consequence of any information in thispresentation or any error or omission therefrom. Fortescue accepts no responsibility to update any person regardingany inaccuracy, omission or change in information in this presentation or any other information made available to aperson nor any obligation to furnish the person with any further information.



• Record underlying EBITDA of US$1,288m; +129%

• Cash flow from operating activities of US$1,107m; +134%

• Cash reserves of US$1,235m with increasing net assets

• Reduction in Lost Time Injury Frequency Rate of 65%

• Strengthening Balance Sheet sets platform for growth

FY2010 Highlights



Financial Highlights – Income Statement

US$m FY10 FY09

Fortescue Tonnes Shipped (millions - wmt)1 38.9 27.3

Average CFR price (US$/dmt) 88.38 80.02

Total Revenue2 3,285 1,858

Cost of goods sold3 (1,973) (1,262)

Re-estimation of Leucadia (280) 1,124

Net foreign exchange gain/(loss) 99 (454)Administration costs (24) (34)

EBITDA 1,107 1,232

Finance costs net of interest received (375) (481)

Depreciation and amortisation (153) (89)

Profit before tax 579 662

1. Excludes third party ore;2. Excludes interest received3. Excludes depreciation and amortisation



Underlying EBITDA Bridge

Volume and price the key drivers



Underlying EBITDA and Earnings

US$m FY10 FY09

Underlying EBITDA 1,288 562

Re-estimation of Leucadia (280) 1,124

Net foreign exchange 99 (454)

Statutory EBITDA 1,107 1,232

Underlying earnings before tax 760 (8)

Re-estimation of Leucadia (280) 1,124Net foreign exchange 99 (454)

Statutory Earnings 579 662

Basic EPS - US Cents 18.85 17.77

Basic CFPS – US Cents1 35.92 16.54

1. Earnings and cash flow per share are calculated on an undiluted share basis. Cash flow per share iscalculated using cash flow from operations.



Revenue & Earnings

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2008 2009 2010

Millio

ns(USD)

Sales Revenue

0

200

400

600

800

1,000

1,200

1,400

2008 2009 2010

Millio

ns(USD)

Underlying EBITDA



Key Indicators

‐0.40

‐0.30

‐0.20

‐0.10

0.00

0.10

0.20

0.30

0.40

2008 2009 2010

Cents(USD)

CFPS

(60.00)

(50.00)

(40.00)

(30.00)

(20.00)

(10.00)

0.00

10.00

20.00

30.00

2008 2009 2010

Centrs(USD)

EPS

‐120%

‐100%

‐80%

‐60%

‐40%

‐

20%

0%

20%

40%

60%

2008 2009 2010

ROE



Subordinated Loan Note (Leucadia)

US$m FY10 FY09

Balance sheet value 826 382

Re-estimation - Income statement (280) 1,124

Effective interest expense (165) (259)

• Unsecured subordinated instrument with face value of US$100m

• Interest calculated at 4% of revenue net of royalties from sale of iron ore FOB Port Hedlandfrom the tenements of the Cloudbreak & Christmas Creek areas only.

• Accrued interest at 30 June 2010 was paid in July 2010. Interest payments will now be maderoutinely every six months.

• The AASB139 re-estimation of the carrying value is based on:

– Forecast production profile

– Forecast iron ore price – Royalty rates

– Cloudbreak and Christmas Creek reserve estimates



• Fortescue adopted US Dollar as functional currency on 1 January2009 to reflect primary economic environment

• Change to US$ reduces impact of currency volatility particularlyrevenue and US$ denominated borrowings

• FY2010 impact primarily revaluation of Euro denominated seniorsecured notes as follows:

FY10 FY09

A$/US$ Closing Rate 0.8523 0.8114

Net forex gain/(loss) – US$m 99 (454)

US$m FY10

Euro denominated senior secured notes 53

A$ and Euro denominated cash balances 40

Operating activities 6

Total foreign exchange impact 99

Foreign Exchange



• While we report in US$, tax returns are all prepared in A$

• US$62m translation effect on A$ tax / deferred balances

• US$83m additional tax losses available to be utilised

Tax

US$m FY10

Income Tax Position:

Tax on accounting profit at 30% (173)

Currency translation of tax base 62

Prior year tax losses recognised 83

Other 30

Income tax benefit 2

Tax Losses:

Utilisation of tax losses against taxable income (568)

Tax losses available for future utilisation 696



Cash Flow Statement

US$m FY10 FY09

Profit for the year 581 508

Add back: Depn and amortisation 153 89

Add back: Re-estimation Leucadia 280 (1,124)

Add back: Other non-cash items 93 1,000

Cash inflow from operating activities 1,107 473

Exploration and development (178) (417)

Capital expenditure net of proceeds (377) (324)

Other investing activities (28) -

Cash outflow from investing activities (583) (741)

Cash inflow from financing activities 17 701

Net increase in cash 541 433

Strong cash flows and cash on hand of US$1,235m at 30 June 2010



Balance Sheet

US$m FY10 FY09

Cash 1,235 655

PP&E, intangibles, development and exploration 3,476 3,102

Other assets 593 440

Total assets 5,304 4,197

Leucadia note (826) (382)

Senior secured note (2,029) (2,074)

Preference shares (120) (115)

Other liabilities (852) (775)

Total Liabilities (3,827) (3,346)

Net Assets 1,477 851

Strong balance sheet positions Fortescue for future growth



Investing Activities Cashflow

Cash Flow (US$m) FY10

Christmas Creek

Capex 91

Development 104

Total Christmas Creek 195

Cloudbreak

Capex 194

Development 56

Total Cloudbreak 250

General Expansion Capex *1 120

Exploration and Evaluation 17

Total Development, PPE Expenditure and Exploration 582

Cashflow funds ongoing Capex and Expansion

*1 Includes dredging works, wharf structures and port material handling equipment



• Current September Quarter 2010 production on target for ~9.5Mt shippedwith both scheduled plant shutdowns completed on time.

• Christmas Creek expansion on budget and on schedule for March Quarter2011 commissioning.

• Target 55Mtpa run rate scheduled for June Quarter 2011.

• Cash flow remains strong with operating margins currently exceeding US$60per tonne and cash at bank continuing to build.

• Feasibility reports for both Chichester and Solomon Stage One expansions

scheduled for Board review within the next few months.

Forging Ahead

Strong platform for growth



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Fortescue 2010 Results Presentation