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Full Year Results – June 2010
26th
August 2010
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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.
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• Record underlying EBITDA of US$1,288m; +129%
• Cash flow from operating activities of US$1,107m; +134%
• Cash reserves of US$1,235m with increasing net assets
• Reduction in Lost Time Injury Frequency Rate of 65%
• Strengthening Balance Sheet sets platform for growth
FY2010 Highlights
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Financial Highlights – Income Statement
US$m FY10 FY09
Fortescue Tonnes Shipped (millions - wmt)1 38.9 27.3
Average CFR price (US$/dmt) 88.38 80.02
Total Revenue2 3,285 1,858
Cost of goods sold3 (1,973) (1,262)
Re-estimation of Leucadia (280) 1,124
Net foreign exchange gain/(loss) 99 (454)Administration costs (24) (34)
EBITDA 1,107 1,232
Finance costs net of interest received (375) (481)
Depreciation and amortisation (153) (89)
Profit before tax 579 662
1. Excludes third party ore;2. Excludes interest received3. Excludes depreciation and amortisation
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Underlying EBITDA Bridge
Volume and price the key drivers
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Underlying EBITDA and Earnings
US$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.
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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
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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
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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$100m
• Interest calculated at 4% of revenue net of royalties from sale of iron ore FOB Port Hedlandfrom the tenements of the Cloudbreak & Christmas Creek areas only.
• Accrued interest at 30 June 2010 was paid in July 2010. Interest payments will now be maderoutinely every six months.
• The AASB139 re-estimation of the carrying value is based on:
– Forecast production profile
– Forecast iron ore price – Royalty rates
– Cloudbreak and Christmas Creek reserve estimates
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• Fortescue adopted US Dollar as functional currency on 1 January2009 to reflect primary economic environment
• Change to US$ 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
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• 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
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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$1,235m at 30 June 2010
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Balance Sheet
US$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
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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
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• 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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