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

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.

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).