Highlights
1.
Total Recordable Injury Frequency Rate (TRIFR) reduced to 2.4 in
the 12 months to 30 June 2020 (FY20), improving 14 per cent from 2.8 in
FY19
2.
A comprehensive COVID-19 risk management strategy remains in
place to safeguard Fortescue team members and communities
3.
Record iron
ore shipments of 47.3 million tonnes (mt) for the quarter and 178.2mt
for FY20, exceeding the top end of guidance of 177mt and six per cent
higher than FY19
4.
C1 costs for Q4 FY20 were US$13.02/wet metric tonne (wmt). C1
costs for FY20 were US$12.94/wmt inclusive of COVID-19 related costs of
approximately US$0.22/wmt
5.
Average revenue of US$81/dry metric tonne (dmt) in Q4 FY20,
realising 86 per cent of the average Platts 62% CFR Index, bringing
average revenue to US$79/dmt in FY20
6.
Cash on hand of US$4.9 billion at 30 June 2020 and net debt of
US$0.3 billion
7.
Total capital expenditure of US$2.0 billion in FY20 as investment
in major projects achieved key milestones
8.
Climate change target revised to achieve net zero operational
emissions by 2040, including a 26 per cent reduction in emissions from
existing operations from 2020 levels, by 2030
9.
FY21
guidance for shipments of 175 - 180mt and C1 costs of US$13.00 -
US$13.50/wmt
10.
FY21 capital expenditure guidance of US$3.0 - US$3.4 billion
including investment in growth projects and energy infrastructure. The
forecast investment in the Eliwana Mine and Rail Project is revised to
US$1.325 - US$1.375 billion (from US$1.275 billion).
Fortescue Chief Executive
Officer, Elizabeth Gaines, said “The entire Fortescue team has delivered
strong results for the June quarter, achieving our lowest TRIFR safety
performance of 2.4, as well as record quarterly shipments of 47.3mt. For
FY20 we also delivered record annual shipments of 178.2mt, while
maintaining our industry leading cost position of US$12.94/wmt.
“This was an outstanding
performance which underpinned the operational excellence we delivered in
FY20, particularly during a quarter when we implemented a range of
measures in response to COVID-19. I am very proud of the team’s
commitment and cooperation during this time which has sustained our
contribution to the Western Australian and national economies through
the reliable and secure supply of iron ore to our customers.
“The impact of COVID-19
continues to be well managed across our operations, ensuring the safety
and wellbeing of our team members, their families and our communities.
“During the quarter we announced
important targets to achieve net zero operational emissions by 2040 and
a 26 per cent reduction in our Scope 1 and 2 emissions by 2030,
positioning Fortescue to address the global climate change challenge
with a sense of urgency. Our pathway will include investments in energy
infrastructure to increase our use of renewables, as well as a focus on
technology and innovation to decarbonise through hydrogen and battery
energy solutions.
“Our guidance for FY21 builds on
the momentum of a record FY20 as we optimise our integrated operations
and marketing strategy, with shipments in the range of 175 - 180mt. We
have a strong balance sheet and clear focus to reinvest in the business,
develop our major growth projects and continue to deliver enhanced
shareholder returns” Ms Gaines said.
Operations
Production summary (wmt) |
FY20 |
FY19 |
Var (%) |
Q4
FY20 |
Q4
FY19 |
Var (%) |
Ore
mined |
204.3 |
206.7 |
-1 |
57.2 |
57.6 |
-1 |
Overburden removed |
318.9 |
303.7 |
5 |
84.7 |
79 |
7 |
Ore
processed |
176.3 |
176.9 |
0 |
42.7 |
48.5 |
-12 |
Total
ore shipped |
178.2 |
167.7 |
6 |
47.3 |
46.6 |
2 |
C1
(US$/wmt) |
12.94 |
13.11 |
-1 |
13.02 |
12.78 |
2 |
Volume references are based on
wet metric tonnes (wmt). Product is shipped with about 8-9 per cent
moisture.
Fortescue’s safety culture is
embedded across existing operations and the major growth projects as
construction ramps up, demonstrated by the reduction in the TRIFR to 2.4
in FY20, improving 14 per cent from 2.8 in FY19.
The temporary changes to site
operational rosters in response to COVID-19 have reverted and Fortescue
is participating in the State Government’s DETECT program for fly-in,
fly-out (FIFO) workers with Polymerase Chain Reaction (PCR) testing.
There have been no cases of COVID-19 across Fortescue’s operational
sites.
Building on the results achieved
for the first nine months of the financial year, Fortescue’s outstanding
operating performance was sustained in Q4 FY20 with mining, processing,
rail and shipping combining to deliver record shipments of 178.2mt in
FY20, six per cent higher than FY19 and exceeding the top end of
guidance of 177mt. Record quarterly shipments were achieved in Q4 FY20
with 47.3mt shipped.
The FY20 strip ratio of 1.56 was
in line with guidance of 1.5 and is expected to average approximately
1.5 in the current five year mine plan, excluding the Iron Bridge
Magnetite project.
C1 costs of US$13.02/wmt in Q4
FY20 were two per cent higher than Q4 FY19 due to costs related to
COVID-19, with full year C1 costs of US$12.94/wmt including COVID-19
related costs of approximately US$0.22/wmt. The reduction in full year
C1 costs reflects the continued focus on cost management and innovation.
Autonomous haulage at the
Chichester Hub achieved a significant milestone in the quarter with the
conversion of the 100th autonomous truck. The autonomous haulage project
is progressing as planned and is expected to be completed in the second
half of calendar year 2020 (CY20).
Marketing
Chinese crude steel production
remained strong in the June quarter, rising to 268.9mt. Production
reached 499.0mt for the six months to June 2020, increasing 1.4 per cent
on the first half of CY19, according to China’s National Bureau of
Statistics. Market conditions continue to support ongoing demand for
iron ore with demand growth outpacing seaborne supply. Total iron ore
stocks at Chinese ports at 30 June 2020 were 108mt, 9mt lower than 31
March 2020.
Demand for Fortescue’s products
remains strong as shipments continue to China and other markets. Average
revenue for Q4 FY20 of US$80.64/dmt, represented revenue realisation of
86 per cent of the average Platts 62% CFR Index of US$93.30/dmt. The
Platts 62% CFR Index closed at US$101.05/dmt at 30 June 2020, compared
to US$83.70/dmt at 31 March 2020.
Fortescue’s average revenue of
US$78.62/dmt in FY20 represents revenue realisation of 84 per cent of
the average Platts 62% CFR Index of US$93.25/dmt. Revenue per tonne
increased by 21 per cent compared to FY19, higher than the 16 per cent
increase in the average Platts 62% CFR Index over the same period. This
reflects the successful execution of Fortescue’s integrated operations
and marketing strategy, improved product mix and demand for the
Company’s products.
Fortescue’s wholly owned Chinese
sales entity, FMG Trading Shanghai Co. Ltd (FMG Trading) commenced
operations in June 2019 and sold 6.5mt in FY20 to over 80 customers, in
Renminbi from regional ports in China.
Tonnes shipped (wmt) |
FY20 |
Mix
(%) |
FY19 |
Mix
(%) |
Q4
FY20 |
Mix
(%) |
West
Pilbara Fines |
17.9 |
10 |
9 |
5 |
4.9 |
10 |
Kings
Fines |
15.1 |
9 |
14.2 |
9 |
4.2 |
9 |
Fortescue Blend |
72.7 |
41 |
72.4 |
43 |
17.1 |
36 |
Fortescue Lump |
12.9 |
7 |
8.6 |
5 |
4.1 |
9 |
Super
Special Fines |
59.4 |
33 |
61.7 |
37 |
16.8 |
36 |
Manganese Iron Ore |
0.2 |
0 |
1.8 |
1 |
0.2 |
0 |
Total |
178.2 |
100 |
167.7 |
100 |
47.3 |
100 |
Iron ore projects
Eliwana Mine and Rail Project
The Eliwana
Mine and Rail project achieved key milestones
in the quarter including the commencement of tracklaying on the first
stage of the 143km railway and installation of over half of the
structural steel at the ore processing facility.
The construction workforce is
currently at peak levels, and earthworks, structural steel erection and
process equipment installation are advancing rapidly,
with pre-strip mining planned to commence in Q1 FY21.
The forecast total investment in
the Eliwana Mine and Rail project is revised to US$1.325 - US$1.375
billion (from US$1.275 billion) due to costs associated with mitigating
access delays and COVID-19 impacts. Acceleration measures have been
implemented to achieve first ore on train as scheduled in December 2020,
underpinning the delivery of Fortescue’s product strategy.
The project maintains an
industry leading capital intensity of approximately US$45 per tonne of
installed capacity for mine and rail.
Iron Bridge Magnetite Project
The US$2.6 billion
Iron Bridge Magnetite project is progressing on schedule and
budget, with first
concentrate production planned in the first half of calendar year 2022.
Key milestones in the quarter
include first earthworks on the ore processing facility, completion of
the mine access road and commencement of the permanent village
installation.
Bulk earthworks are over 50 per
cent complete and concrete works commenced during July 2020 as the
project progressed to construction phase, with activity focused on site
construction and major module fabrication.
Exploration
Total exploration and studies
capital expenditure for Q4 FY20 was US$26 million with FY20 expenditure
of US$116 million.
Iron ore exploration in the
Pilbara is ongoing, with activity in the quarter focused on resource
definition drilling at Eliwana and the restart of other exploration
programs in the Western and Solomon Hubs.
All field exploration activities
in the Paterson, Rudall and Goldfields regions of Western Australia were
suspended during the quarter, with activities expected to recommence in
Q1 FY21.
Exploration drilling resumed in
New South Wales and South Australia in June 2020.
Exploration and field activities
in Ecuador and Argentina remain suspended due to COVID-19, with
assessment of previous drilling results and various geological studies
ongoing.
FY21 guidance
Iron ore
shipments of 175 - 180mt
C1 costs of
US$13.00 - US$13.50/wmt, based on an assumed Australian dollar exchange
rate of $0.70
Capital expenditure of US$3.0 -
US$3.4 billion, which is inclusive of:
1.
Approximately US$1.0 billion of sustaining, operational and hub
development capital
2.
US$140 million on exploration expenditure and studies
3.
US$1.9 - US$2.3 billion on major projects (Eliwana, Iron Bridge
and Energy). |