Working together. Delivering results.
ABN 57 002 594 872 I 2015 Annual Report
THE YEAR AT A GLANCE
SAFETY
Total Recordable
Injury Frequency Rate (TRIFR)
5.1
165.4
million tonnes shipped for FY15
13%
Aboriginal
employment
achieved
Fifth berth
at Herb Elliott Port
Commissioned March 2015
Operating cost
21%
Revenue
US$8.6
billion
Fortescue River
Gas Pipeline
construction completed
Contracts to Aboriginal companies and JVs
A$1.8 billion
2.4
Ore Reserves
17.3
billion tonnes
Mineral Resources
ABOUT FORTESCUE
Overview
3
Fortescue Metals Group is a global leader in the iron ore industry,
recognised for its culture, innovation and industry-leading
development of world class infrastructure and mining assets in
the Pilbara, Western Australia.
Since it was founded in 2003, Fortescue has discovered and
developed significant iron ore deposits and constructed some
of the largest mines in the world.
The Chichester Hub, which includes the Cloudbreak and Christmas
Creek mines, is located in the Chichester Ranges, and produces
more than 90 million tonnes per annum (mtpa) of iron ore and an
additional six mtpa from Fortescue’s joint venture with BC Iron.
The Solomon Hub is located in the Hamersley Ranges, and includes
the Firetail and Kings Valley mines which produce in excess of
70 mtpa. Fortescue has constructed world class facilities at its five
berth Herb Elliott Port in Port Hedland, and operates the fastest,
heavy haul railway in the world with up to 42 tonne axle load
capacity over 620km of track, including 12 bridges.
The company is now producing 165 million tonnes of iron
ore per annum and is focused on being the safest, lowest cost,
most profitable iron ore producer.
As a proud West Australian company, Fortescue values its
relationship with key stakeholders by working together to
positively manage and create opportunities for Aboriginal
people, communities, the environment and the broader
Australian economy.
ABOUT THIS REPORT
This report has been prepared for Fortescue’s stakeholders in line
with our statutory and regulatory obligations. The Company is
committed to becoming the safest, lowest cost, most profitable
iron ore producer and the information within this report outlines
Fortescue’s performance and the journey to realising this vision in
a manner that reflects the Company’s core values.
This report provides a summary of Fortescue’s operations and
financial position for the financial year ended 30 June 2015.
All references to Fortescue, the Group, the Company, we, us and
our refer to Fortescue Metals Group Limited (ABN 57 002 594 872)
and its subsidiaries. All references to a year are the financial year
ended 30 June 2015 unless otherwise stated. All dollar figures are
in US currency unless otherwise stated.
Operating and Financial Review
19
Reserves and Resources
33
Corporate Social Responsibility
45
Governance
Financial Report
75
93
Remuneration Report
143
Corporate Information
163
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 1
The best address for iron ore
OPERATING AND FINANCIAL REVIEW HIGHLIGHTS
Fortescue holds the largest tenement position in the Pilbara.
2 I FORTESCUE METALS GROUP LIMITED OVERVIEW
OVERVIEW
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 3
CHAIRMAN’S MESSAGE
Andrew Forrest
I am delighted to provide the Chairman’s Report on your Company’s
performance during the 2014-15 financial year. Our operations are
mining, processing, shipping and exploring our valuable iron ore at
a steady canter of 165 million tonnes per annum. Sitting within our
arsenal is the ability to accelerate production significantly, quickly
and very cost efficiently. Operating costs, which continue to fall, are
already a match for the best in the industry.
At Fortescue, you “always do what you say you are going to do”. As a
shareholder, I am grateful for that attitude because during a year of
intense price volatility in the iron ore market, our Company has delivered
outstanding results across the key performance measures of safety,
production and cost, and accumulated substantial cash on our balance
sheet. The strength of the relationships we enjoy with our customers are
driven not only because we produce exactly the product they need, but
also because the substantial market share they have given us is met
with deep respect. They can and do rely on us because our product is
predictable, excellent value, and our team is great to deal with.
As of 30 June 2015 we have US$2.4bn in cash and as such net debt
of US$7.2bn. Our world class assets are worth in the tens of $billions.
Today, like every other, we will add several million dollars to that
balance sheet - while employing some 8,600 people. Your Company is
in great shape and, of all the majors, we are proud to pay our fair share
of tax. We are the only iron ore major to not channel iron ore through
offshore tax minimising marketing hubs.
Australia must ask itself if the skewed business playing field working
against locals is what it wants? In our industry multinational
competitors pay less tax per iron ore production unit than their major
local competitor. Is this the industry playing field it expects Australian
based taxpayers to successfully compete in, or to level the playing
field are we being in effect encouraged to move offshore as well?
When the market turns and does require additional iron ore, we will
be there, fast and inexpensively. Yet it won’t be Fortescue that pushes
the iron ore price down in weak markets to the detriment of the
economy, simply because our machines have spare capacity. Fortescue
grew to this very strong base in equally strong markets. We met
real demand with real production. In weak markets we also act in a
rational manner and slow or even stop expansion.
While we too can make good money on incremental expansion tonnes,
we fail to see any logic in doing so when we lower the value for all our
tonnes we produce on your behalf. The net gain on the extra tonne is
completely overwhelmed by the overall loss caused by lowering the iron
ore price, by pushing incremental tonnes into a market that doesn’t want
them. The logic that you keep expanding just because you can squeeze
an extra tonne out of your machines, applies well to mining juniors that
won’t put a dent in the market, but is market vandalism and self harm
when industry leaders do it. The buyers make a picnic out of you and
that’s exactly what happened to the Australian iron ore industry.
And that industry is massive. It impacts every Australian and every
Australian is a stakeholder. At Fortescue we have worked hard to educate
the media, government and the broader community of the importance
of iron ore to the Australian economy, responding to the urgent need
for much greater transparency on the practices, contribution and
challenges for the industry as a whole. It’s only fair the public receives
the same level of information as well run national industries. Previously
the iron ore industry has studiously resisted such transparency, using
industry bodies and lobbyists to pursue this objective.
Iron ore is inelastic in demand. That simply means our customers have
a strong need for the product to a point and are not particularly price
sensitive up to reaching that point. However, once that need has been
realised, any further product offering will see the price collapse. We have
seen that this year. Our customers won’t take more iron ore even if our
competitors offered to give it away. All the arguments we have seen this
year trying to explain away overproduction into weak markets don’t hold
water. Stepping back it is easy to see that the logic of demand inelasticity
overwhelms the excuses given by multinationals for expanding into a
weak market, which has so diminished Australia’s national income.
Earlier this year, iron ore demand and supply was in balance, with
stockpiles declining and all shipments being sold. However downward
price volatility was driven by the expectation of irrational oversupply
behaviour. Sophisticated markets predicted multinational iron ore
producers would be driven by the market share ambitions of their
corporate managers, who, in attempting to explain their behaviour,
would argue they are simply running their machines hard. In other
words, seemingly suggesting that their machines set their corporate
supply strategy.
4 I FORTESCUE METALS GROUP LIMITED OVERVIEW
The markets predicted that the multinationals would pursue market
share ahead of total returns for shareholders and public stakeholders,
and they were right.
Against this backdrop, we remain confident in our own competitiveness
and the strong fundamentals of the Chinese market. Projected GDP
remains strong and the important US$140 billion “Belt & Road”
infrastructure plan will drive solid growth and demand for steel for
decades to come. To this end, our longstanding relationships with
our customers and stakeholders in China are all part of what makes
Fortescue unique. Your board visited China for a series of significant
meetings with steel mills, shareholders and government during March.
We then returned to the Boao Forum as a Diamond Sponsor for the
seventh consecutive year, with the theme of this year’s Forum, “Asia’s
New Future: Towards a Community of Common Destiny”. The relationship
is symbiotic. Chinese leaders expect our contribution in expert panels
and high profile political and economic events, and we learn invaluable
lessons from them that help shape our strategy and our company.
Since 2013 we have facilitated the Australia-China Senior Business
Leaders’ Forum (“SBLF”) at the Boao Forum and its formal meetings
have again demonstrated the strong value to Fortescue of our
participation. In particular, prior to this year’s Forum, I was honoured
to accept on behalf of all Fortescue stakeholders an appointment to
the Boao Forum for Asia Advisory Board, and inaugural Co-Chair of its
Expert Committee on Energy, Resources and Sustainable Development.
This will make a positive contribution to policy throughout the region
and further deepen our Asian relationships, and led to the launch of the
Australia Sino Hundred Year Agricultural and Food Safety Partnership
(“ASA100”). This will help cement Australia as the safest, secure
and premium quality food supplier partner to Asia. Now launched
and successful, Fortescue is stepping back and we wish the new
permanent team sponsored by the Business Council of Australia well.
During the 2015 financial year, Fortescue has continued to provide
important support to key philanthropic ventures. Its support
of the Minderoo Foundation through providing the Chairman,
office administration and of course paying dividends, has seen
your Company supporting over 230 initiatives across Australia
and internationally. Philanthropic investments have ranged
from donations to local organisations, supporting the Australian
community in times of hardship, to the establishment of Walk Free,
a global initiative to end modern slavery. Focus areas remain slavery,
indigenous Australians, early childhood, arts and culture, and leading
edge research. As examples:
Walk Free Foundation
The Global Freedom Network’s joint venture with the major faiths,
facilitated the Islamic world’s first official fatwa to clarify its Holy
Text and condemn modern slavery. Then the coming together of the
world’s major faith leaders at the Vatican on 2 December 2014 made
history through the unprecedented nature of their first meeting, and
their formal agreement clarifying all Holy Text’s through their unified
Global Proclamation against slavery.
The four other institutions of Walk Free also performed well. The
second edition of the Global Slavery Index (“GSI”) was released with
the third due in early 2016. This latest edition will have unprecedented
detail with more than 50 countries subject to independent expert
surveys. Through all the initiatives of Walk Free, governments and
companies around the world have received much better data and solid
popular support for taking their own steps to eliminate slavery within
their communities.
The Freedom Fund has liberated over 2,000 people from slavery
and impacted on a further 55,000 lives in Northern India and Nepal.
While the Walk Free Movement, working with our partners, have had
successful campaign with 11 governments, the European Parliament,
the International Labour Organization and eight major companies
have also adopted our anti-slavery recommendations.
GenerationOne
GenerationOne, the Foundation’s vehicle to help eliminate the
indigenous disparity through employment, entered a new phase in
2015. Some 24,000 jobs have been filled from over 50,000 guaranteed
job opportunities. Now, as part of an A$45 million Federal Government
funded pilot, GenerationOne is on track to meet its goal of long-
term sustainable employment for a further 5,000 disadvantaged
and unemployed first Australians. Together with this, the Federal
Government has also announced its plan to operationalise the
initiatives under the 27 recommendations of the Foundation’s Creating
Parity Review, written for the Prime Minister and Cabinet.
Thrive by Five
The Commonwealth Government announced a $20 million commitment
to improve early childhood service delivery in the child care sector, in
response to recommendations from the Minderoo Foundation under the
Creating Parity Review. In addition to this, the Foundation is continuing
to consolidate strategic partnerships with stakeholders across the
research community, government and service sectors to demonstrate
how effective service delivery (at a community and policy level) can
significantly enhance the lives of vulnerable children and their families.
Forrest Research Foundation
The first scholarships as part of an A$65 million partnership across
all five Western Australian universities were awarded. Outstanding
students are commencing research into Australian plant biology,
seismic imaging of the earth, responses for neurological disorders,
the influence of DNA in cancer development and metabolic function.
Culture and Arts
A collaboration with the Jackman Furness Foundation for Performing
Arts was initiated with 10 projects funded by the Foundation to
enhance the learning and teaching experience of the Western
Australian Academy for Performing Arts.
Conclusion
I reference the work of the Foundation to make the point that it is
the ongoing success of your Company, Fortescue, enables both your
Company and the Foundation to contribute to all levels of community.
During the year we made a number of changes to the Board. Dr Jean
Baderschneider joined us and Herb Elliott, Bud Scruggs and Graeme
Rowley retired. We have expressed our gratitude to the new and retired
directors for their service and immeasurable contributions. Owen
Hegarty has stepped up very well to the role of Vice Chairman and
equally Mark Barnaba is doing a great job as our new Lead Independent
Director. Through these changes, our Board will sustain its outstanding
technical, financial and corporate expertise as it drives Fortescue on its
journey to becoming the safest, lowest cost iron ore producer.
Nev Power has continued to provide outstanding thinking, cultural
and operational leadership, and I would like to thank him, his leading
Executive team and all of the Fortescue family for their tremendous
efforts and dedication. Together with my fellow directors, I look
forward to another outstanding year in FY16. As each year passes my
commitment and confidence in the truth of the statement, “the best is
definitely in front of us”, grows.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 5
CHIEF EXECUTIVE OFFICER’S REPORT
Nev Power
Overview – Our Team
During 2015, Fortescue’s dedicated team of employees, suppliers and
contracting partners have worked tirelessly to deliver excellent results
against our three key areas of focus: safety, production and costs.
Production
After achieving our targeted production rate in the fourth quarter
of FY14, Fortescue has maintained production at 165mtpa across
FY15 and plans to continue production at that rate through FY16.
We continue to strive towards our vision of being the safest, lowest
cost, most profitable iron ore producer.
As a business, we emphasise the importance of doing what we say we
will do and by maintaining our focus and leveraging our company’s
unique culture and values we have again achieved our stretch targets.
Our unwavering commitment to the journey of becoming global
leaders in safety performance continues with a core focus for all of us
– taking responsibility to look after ourselves and our mates.
Safety
Our team’s focus on safety throughout FY15 has seen the Total
Recordable Injury Frequency Rate (TRIFR) improve 65 per cent
over the last four years, taking us a further step on our journey to
achieving safety leadership in every aspect of our operations.
Our culture and values place the highest emphasis on the safety
of our people, and through coaching, mentoring and constant
reinforcement of safety as a core value we empower our people
to look after their own safety and to be their brothers’ and
sisters’ keepers.
For FY16, we have set challenging targets to inspire sustained
improvement in safety across all of our operations with particular
emphasis on helping our contracting partners achieve the same
safety standards and performance.
We have completed our growth capital expansion phase and
are now well positioned to fully optimise our world class assets.
Our position in support of responsible and rational market behaviour
during a period of market volatility had the effect of drawing much
needed public scrutiny to the behaviour and rhetoric of some of the
key market producers which was exacerbating the price volatility,
speculative trading and destruction of industry value.
Fortescue’s strategy of using wet processing to upgrade our ore
and reduce impurities is a key element of our ongoing cost reduction
strategy. Our West Australian designed and built Ore Processing
Facilities (OPFs) are achieving ongoing improvements in efficiency
and productivity with sustainable cost savings through our blending
strategy facilitating lower mining cut off grades.
With production costs forecast to average US$18/wmt in
FY16, the performance of the OPFs has been complemented by
a range of cost initiatives, including consolidation of contractors,
procurement, mining upgrades and efficiency initiatives. Every
fibre of our business is focused on productivity and sustained
improvement.
Going forward, the innovative design and attention to detail in
developing our world class mines and infrastructure underpins this
production performance, with significant upside in capacity available
to meet market demand as required.
6 I FORTESCUE METALS GROUP LIMITED OVERVIEW
Market
The market in FY15 has been impacted significantly by threats of
oversupply made by some of the large iron ore producers, and this in
turn contributed to the dramatic volatility in the iron ore price during
FY15. Fortescue has supported the need to raise public awareness of
the impact of this issue, including the importance of holding other
organisations accountable.
We have focused on what we can control to ensure Fortescue has
emerged from this period, and the ensuing market speculation
shorting the iron ore futures price, with even greater resilience.
Despite the damaging impact of the oversupply commentary,
FY15 has seen both iron ore and steel stocks reduce, indicating the
physical market has rebalanced with the exit of some higher cost
production. Fortescue has optimised its product suite to match
customer requirements and maximise the value from our ore bodies,
and on average we expect price realisation to continue at 85-90
per cent of the Platts 62 per cent index through FY16.
China outlook
China’s economic growth through urbanisation and infrastructure
development continues to drive strong demand for steel and iron
ore with Fortescue achieving a major milestone of over 550 million
tonnes of iron ore shipped to our Chinese customers to date.
In 2015, Fortescue accounted for 18 per cent of China’s total iron ore
imports and we have developed relationships with China through
four key areas of engagement:
• Core supplier of iron ore to China: over 550 million tonnes
of iron ore shipped to date
• Procurement: large quantity of consumables and equipment
sourced from China, over $1 billion in Chinese contracts since
commencement of operations
• Investment partner: highly successful direct investment by
Hunan Valin Steel Group
• Community engagement: longstanding funding of scholarships
at Central South University (CSU), member of the Lingnan College
International Advisory Board, sponsorship of Boao Forum for Asia
and the Senior Business Leaders Forum (SBLF).
Fortescue has now funded in excess of 100 scholarships at CSU,
and has provided over RMB 18 million in research funding. In FY15,
for the seventh consecutive year, Fortescue was a Diamond sponsor of
the prestigious and globally significant Boao Forum for Asia.
Our participation in the prestigious Boao Forum for Asia and a
number of visits to our customers and other stakeholders in China
during the year underpinned these important relationships.
Costs
Fortescue’s commitment to cost reduction has resulted in C1 cost
exiting FY15 at US$19/wmt for the month of June. Since 2012, we
have more than halved our production costs from US$48/wmt and
guidance for FY16 C1 cost of US$18/wmt places us firmly at the
low cost end of the industry curve with targets in place to drive our
competitive position further.
Our achievements in cost reduction reflect our ability to leverage
economies of scale, as well as our core capability in identifying and
delivering sustainable cost improvements, focused in three broad areas:
• Operational improvements across our mining operations and
processing facilities
• Securing competitive rates from our contractors and suppliers
and, in some circumstances, insourcing services
• Improving labour productivity
These key focus areas were complemented by the Company’s successful
‘Have a Crack’ program which provides a framework for employees to
identify and implement innovative cost initiatives. We’re continuing to
drive a smarter, more efficient and cost effective way of operating at
Fortescue, with US$1.6 billion in cost savings achieved over the last
two years and a further US$1.4 billion projected for FY16.
Aboriginal Development
Fortescue’s industry leading commitment to creating economic
opportunities for Aboriginal people through training, employment
and business development continued during the year, with direct
employment of Aboriginal people equalling 13 per cent and a total
of around 1,000 Aboriginal people employed across our sites.
Our Vocational Training and Employment Centres (VTEC) in South
Hedland and Roebourne provided training and subsequent
employment with Fortescue for approximately 80 Aboriginal people
during the year.
Another significant milestone for Aboriginal business development
was achieved when Fortescue facilitated a 50/50 joint venture
agreement between the Wirlu-murra Yindjibarndi Aboriginal
Corporation and mining services provider Thiess Pty Ltd for
maintenance of non-processing infrastructure at the Solomon Hub.
The contract, worth approximately A$85 million over three years,
brings the total value of contracts awarded through the Billion
Opportunities program to over A$1.8 billion.
Community
Fortescue’s work with our valued community partners continued
through FY15 with our team providing great support for fundraising
efforts with Ronald McDonald House and the Royal Flying Doctor
Service as well as providing smaller community grants to a number
of organisations in the Pilbara.
We value our communities and the organisations we work with and
we’re proud of the difference we can make together.
Outlook
The excellent results achieved by Fortescue in FY15 have further
cemented a strong and resilient foundation for our business,
positioning us to build on our significant achievements in safety,
cost and productivity for the year ahead.
I take this opportunity to thank all of our dedicated and passionate
people for their excellent contribution to our business and look
forward to continuing our journey together to become the safest,
lowest cost, most profitable iron ore producer.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 7
VISION, STRATEGY AND OUTLOOK
Fortescue Metals Group Ltd
Vision
To be the safest, lowest cost, most profitable iron ore producer.
Production
Strategy
Fortescue’s strategy to achieve its vision is built on a foundation
of assuring reliable and sustainable throughput, driving down
costs, reducing debt and increasing shareholder value. The Company’s
differentiating “can-do” culture, shaped by its values, is the key to its
continued strong performance against stretch targets.
Safety
FY15 marked the first full year of production following completion
of the US$9.2 billion T155 Project. Sanctioned in 2010 to capture
unmet demand and building on the initial T45 Project, the T155
Project delivered a fully integrated, state of the art, globally
competitive suite of mining and infrastructure assets from ore
processing to the fastest, heaviest haul rail line in the world and
the world’s most advanced iron ore port. These outstanding assets,
coupled with the Company’s unique culture of determination and
innovation, have seen Fortescue safely and efficiently deliver record
performances across all facets of the business.
Fortescue is targeting production of 165mtpa of iron ore in FY16.
At the core of Fortescue’s values is safety, with the focus being
on empowering everyone to look after themselves and to look after
their mates.
Financial performance
In February 2014, an independent review of safety performance
and management was undertaken, confirming the leading edge
practices in place across the business. Building on this strong base,
a number of areas for improvement are now being implemented.
Employees and contractors are engaged to actively participate in
Fortescue’s Life Saving Choices programe and encouraged to speak up
and identify any potential or real hazards or risks.
Having turned its focus to optimisation and efficiency in 2012,
Fortescue made further strong progress in driving down costs
during FY15. The cash cost across the ship’s rail (C1) was lowered
to US$27/wmt, a reduction of more than 21 per cent over the prior
year. For FY16, Fortescue has provided guidance for C1 of
US$18/wmt and will maintain its unwavering focus on further
improving its competitiveness.
While FY15 delivered a reduction in the TRIFR from 6.0 per million
hours worked to 5.1 per million hours worked, the entire Fortescue
team are continually striving for improvement.
In order to assure the sustainability of its cost out programs,
Fortescue has developed an umbrella project to identify, assess, rank
and provide visibility to key cost out initiatives. Fortescue’s Advanced
Business Drivers program, combined with its ‘Have a Crack’ Innovation
program ensure initiatives generated from all parts of the business
are assessed, prioritised and tracked through implementation in a
disciplined way.
8 I FORTESCUE METALS GROUP LIMITED OVERVIEW
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Despite market volatility through FY15, Fortescue continued to
enjoy strong support from its customers. The latter part of FY15 has
seen the market rebalance as port stocks and steel stock volumes
returned to lower levels consistent with historic averages. While
ongoing balance in the physical market is anticipated, Fortescue
expects continued volatility through FY16 to be amplified as
sentiment continues to be a major driver of unprecedented churn
in Chinese derivatives.
Working together. Delivering results.
Fortescue believes that by leveraging the unique and differentiating
culture of its greatest asset, its people, it will achieve stretch targets
in its key strategic pillars of safety leadership, assuring reliable and
sustainable production, driving down operating costs and reducing
gearing, to deliver outstanding value to its shareholders.
Vision, strategy and outlook (continued)
The transition from construction and ramp up to a focus on
operational excellence, coupled with a decision to defer further
low cost expansion projects, has resulted in significantly lower
capital expenditure of US$626 million in FY15. With steady state
operations for FY16, the quality of the newly commissioned
assets will allow for capital expenditure to be reduced further
to approximately US$330 million.
Strong operating cash flows have allowed the Company to reduce
gearing levels and repay more than US$3.7 billion of debt since late
2013 with US$500 million repaid during the financial year. In FY15
Fortescue also successfully refinanced US$2.3 billion of near term
debt, with the earliest debt now maturing in 2019. This provides
the Company with greater flexibility over the next four years to
actively manage its debt portfolio as it targets a gearing level of
approximately 40 per cent.
Outlook
Market
As a core supplier to China, with a market share of imported ore
of about 18 per cent, Fortescue maintains confidence in China’s
growth as long term fundamentals remain positive. With more than
RMB 10 trillion in approved projects, pro-business structural reform
and continued urbanisation at a rate of 10 million people per year,
China has reaffirmed its objective of ensuring ongoing GDP growth of
seven percent. Further easing measures have been announced aimed
at stabilising and supporting the Chinese property market which
remains a major driver of steel demand.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 9
Fortescue’s Value Chain
Innovation in process and design has been a key component of Fortescue’s strategy
in challenging industry standards to more efficiently and effectively deliver
our product suite from mine to market
1
Exploration and discovery
• Challenging geological thinking to identify valuable deposits
2
Extraction and Recovery
• Innovative use of technology suitable
to our deposits
3
PROCESSSING
• Ore processing facility
design and wet
processing optimise
output
4
MINE TO PORT
• Heaviest haul rail
at 42t axle load
5
Blending and Stockpiling
• Port design facilities blending and stockpiling of product suite
7
MARKETING
• Helping customers achieve
best value in use
6
Ship Loading
• 3 shiploaders
• 5 berths maximise outload capacity
and utilisation
Delivery
8
• Delivery to our international customers’
specifications
10 I FORTESCUE METALS GROUP LIMITED OVERVIEW
FORTESCUE BOARD OF DIRECTORS AND EXECUTIVE TEAM
Fortescue leaders are accountable to live and behave in line with Company values, and to act with integrity
and honesty while striving to protect the safety of our people and drive long term shareholder value.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 11
THE BOARD
Andrew Forrest
Chairman, Non-Executive Director
Owen Hegarty
Vice Chairman
Mark Barnaba
Lead Independent Director
Appointed Chairman in July 2003,
Chief Executive Officer in 2005 resuming
Non-Executive responsibilities as
Chairman (elect) in July 2011.
Experience:
Founder and Chairman of the
Company, and Founder and Chairman
of Minderoo Foundation, Australia’s
largest philanthropic organisation,
operating GenerationOne, The Australian
Employment Covenant and Walk Free,
a global campaign to end slavery.
Appointed by the Prime Minister as
Chair of the Indigenous Jobs and Training
Review in 2013 (the Forrest Review).
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Chairman Minderoo Foundation
• Chairman Global Freedom Network
• Councillor Global Citizen Commission
• Commonwealth ambassador for
employment and engagement with
disadvantaged communities
• Vice Patron of the SAS Resources Fund
• Chair of the Foundation of the Art
Gallery of Western Australia
• Adjunct Professor of the China
Southern University
Appointed as Vice Chairman in November
2014 having served as a Non-Executive
Director since October 2008.
Experience:
40 years experience in the global mining
industry, 25 years with the Rio Tinto group
including Managing Director of Rio Tinto
Asia and Managing Director of the Group’s
Australian copper and gold business.
Founder and CEO of the Oxiana Ltd Group
(now OZ Minerals Ltd).
Awarded Australian Institute of Mining
and Metallurgy Institute Medal
in 2006 and G.J. Stokes Memorial Award
in 2008 for achievements in the
mining industry.
Current directorships (ASX listed
entities) and other interests:
• Chairman, Tigers Realm Minerals Pty Ltd
• Chairman, EMR Capital
• Non-Executive Director, Tigers Realm
Coal Limited
• Non-Executive Director, Highfield
Resources Limited
Other Directorships and interests:
• Executive Vice Chairman of Hong Kong
listed G-Resources Group Ltd
• Director, AusIMM
• Member of a number of Government
• Fellow of the Australian Institute of
and industry advisory groups
Mining and Metallurgy
• Co-Chairman of the China Australia
Senior Business Leaders’ Forum
Committee membership:
• Member, Remuneration and
Nomination Committee
• Member, Finance Committee
Committee membership:
• Member, Remuneration and
Nomination Committee
Appointed Lead Independent Director
in November 2014, having served as a
Non-Executive Director since
February 2010.
Experience:
Serves as both Chairman of Macquarie
Group, Western Australia and as Chairman
and Global Head, Resources Group,
Macquarie Capital, co-founder (and
previously Co-Executive Chairman)
of Azure Capital, previously the Chairman
of Western Power, Edge Employment
Solutions, the West Coast Eagles Football
Club and Alinta Infrastructure Holdings.
Appointed by the Premier to chair
the WA Steering Committee of the
Commonwealth Business Forum in
CHOGM in 2011.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Chairman of The University of Western
Australia’s Business School Board
• Adjunct Professor in Investment
Banking and Finance at the UWA
Business School
• Chairman of Black Swan State Theatre
Company
• Member of the Advisory Council for the
Hugh Jackman Deborah-lee Furness
Foundation for the Performing Arts
Committee membership:
• Chair, Audit and Risk Management
Committee
• Chair, Finance Committee
• Member, Remuneration and
Nomination Committee
12 I FORTESCUE METALS GROUP LIMITED OVERVIEW
12 I FORTESCUE METALS GROUP LIMITED OVERVIEW
Nev Power
Chief Executive Officer, Executive Director
Peter Meurs
Executive Director
Jean Baderschneider
Non-Executive Director
Appointed Chief Executive Officer
in July 2011, and Executive Director
in September 2011.
Experience:
More than 30 years’ experience in
the mining, steel and construction
industries including as Chief Executive
Australian Operations for Thiess Pty Ltd,
a wholly-owned subsidiary of Leighton
Holdings, and as Chief Executive of the
Reinforcing and Steel Products Division
of the Smorgon Steel Group.
As Chief Executive Officer, Nev has led
Fortescue’s growth to 165mtpa, as
well as its commitment to safety
excellence and the Billion
Opportunities program.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Fellow, Engineers Australia
• Fellow, Australian Institute of Metals
and Mining
• Member, Australian Institute of
Company Directors
Committee membership:
• Attends all Committee meetings
of the Board as applicable
Appointed as an Executive Director of the
Company in February 2013.
Appointed as a Non-Executive Director in
January 2015.
Experience:
Director Development for Fortescue.
Previously Managing Director at
WorleyParsons with senior project
management and company development
experience in hydrocarbons, minerals
and metals.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Fellow, Engineers Australia
• Member, Australian Institute of
Company Directors
Experience:
30 years of experience with ExxonMobil
in global operations, strategic sourcing
and supply chain management roles
including as Vice-President, Global
Procurement.
Previously member of the Board of
Directors of the Institute for Supply
Management and the Executive Board
of the National Minority Supplier
Development Council (NMSDC) and
Presidential appointee to the US
Department of Commerce’s National
Advisory Council of Minority Business
Enterprises in February 2011.
Past Board member of The Center of
Advanced Purchasing Studies (CAPS) and
Procurement Councils of The Conference
Board and the Corporate Executive Board.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Member, Advisory Councils of President
Lincoln’s Cottage (Executive Committee)
• Member, Ford’s Theatre, and the ILR
School at Cornell University
• Member, Cornell’s President’s Council
of Cornell Women and the Board
of Trustees of the Maret School in
Washington, D.C.
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FORTESCUE METALS GROUP LIMITED ANNUAL REPORT 2015 I 13
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 13
THE BOARD (CONTINUED)
Elizabeth Gaines
Non-Executive Director
Cao Huiquan
Non-Executive Director
Geoff Raby
Non-Executive Director
Nominated by Hunan Valin Iron & Steel
Group Company Ltd as a Non-Executive
Director in February 2012.
Experience:
Joined Hunan Xiangtan Iron & Steel Co.
Ltd in 1991, appointed General Manager
in 2003 and General Manager of Hunan
Valin Iron & Steel Co Ltd in 2005.
Appointed Chairman of Hunan Valin Iron
& Steel Group, Chairman and CEO of
Hunan Valin Steel Co Ltd in 2011.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Chairman of Hunan Valin Iron &
Steel Group Co Ltd
• Chairman and CEO of Valin Iron
& Steel Co Ltd
Appointed as a Non-Executive Director
in February 2013.
Experience:
Currently Chief Executive Officer of
Helloworld Limited. Previous roles include
Chief Financial Officer of the Stella Group,
Chief Finance and Operations Director of
UK-based Entertainment Rights Plc and
Chief Executive Officer of Heytesbury Pty
Limited. Senior treasury and finance roles
at BankWest, Kleinwort Benson UK and
Ernst & Young.
Current directorships (ASX listed
entities) and other interests:
• Executive Director, Helloworld Limited
• Non-Executive Director of
NEXTDC Limited
Other Directorships and interests:
• Member, Institute of Chartered
Accountants in Australia
• Member, Australian Institute of Company
Directors and Chief Executive Women
• Director and Vice Chairperson of the
Australian Federation of Travel
Agents Limited
Committee membership:
• Member, Audit and Risk Management
Committee
• Member, Finance Committee
Appointed as a Non-Executive Director
in August 2011.
Experience:
Australia’s Ambassador to the People’s
Republic of China (2007-2011). Previously
Deputy Secretary in the Department
of Foreign Affairs and Trade (DFAT),
Australia’s Ambassador to the World Trade
Organisation (1998-2001), Australia’s
APEC Ambassador (2003-2005), and Head
of DFAT’s Office of Trade Negotiations and
Head of the Trade Policy Issues Division
at the OECD, Paris.
Chair of DFAT’s Audit Committee and
an ex officio member of the Boards
of Austrade and Export Finance and
Insurance Corporation.
Current directorships (ASX listed
entities) and other interests:
• Non-Executive Director, Oceana
Gold Corporation
• Non-Executive Director, SmartTrans
Holdings Limited
• Non-Executive Director, Yancoal
Australia Limited
• Non-Executive Director, iSentia
Group Limited
Other Directorships and interests:
• None
14 I FORTESCUE METALS GROUP LIMITED OVERVIEW
Mark Thomas
Group Manager Infrastructure Services,
Company Secretary
Mr Thomas was appointed as Company
Secretary in June 2010, joining Fortescue
in April 2004 as Group Financial Controller.
Mark has recently been appointed as the
Group Manager of Infrastructure Services
and acts as joint Company Secretary.
He has extensive experience in
accounting and finance, IT and business
administration in the mining and
professional service industries.
Mr Thomas has a Bachelor of Commerce,
Graduate Diploma in Applied Corporate
Governance and an MBA. He is a Certified
Practising Accountant and a Fellow of
Chartered Secretaries Australia.
Sharon Warburton
Non-Executive Director
Ian Wells
Company Secretary
Mr Wells was appointed as Company
Secretary in February 2015 after joining
Fortescue in 2010 as Group Manager,
Treasury and Business Planning.
With more than 20 years’ experience in
senior finance and management roles
in the mining, energy infrastructure and
healthcare industries, Ian was previously
Chief Financial Officer at Singapore Power
subsidiary Jemena Limited, and also held
senior executive roles at Alinta Limited.
Mr Wells holds a Bachelor of Business in
Accounting, is a Fellow of CPA Australia,
and a Certified Finance and Treasury
Professional. He is also a Director of not-
for-profit Alzheimer’s Australia WA and a
member of the Salvation Army business
advisory committee.
Appointed as a Non-Executive Director
in November 2013.
Experience:
Executive Director of Strategy and Finance
with Brookfield Multiplex.
Previously Chief Planning and Strategy
Officer of UAE based, ALDAR Properties
PJSC, and senior executive roles with
Brookfield, Citigroup and Rio Tinto.
Current directorships (ASX listed
entities) and other interests:
• None
Other Directorships and interests:
• Member, Institute of Chartered
Accountants in Australia
• Graduate Member, Australian Institute
of Company Directors
• Part-time member, Takeovers Panel
Committee membership:
• Chair, Remuneration and Nomination
Committee
• Member, Audit and Risk Management
Committee
Full biographies of the Board members are available on the Fortescue website.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 15
EXECUTIVE TEAM
Nev Power
Chief Executive Officer, Executive Director
Stephen Pearce
Chief Financial Officer
Nick Cernotta
Director Operations
Mr Power was appointed as Chief
Executive Officer in July 2011 and has
over 30 years’ experience in the mining,
steel and construction industries.
Mr Pearce joined Fortescue in March 2010
with more than 20 years’ experience in
senior management roles in the mining,
oil and gas and utilities industries.
Please refer to the Board of
Directors section for more details
on Mr Power’s experience.
He previously held the position of
Managing Director and CEO of Southern
Cross Electrical Engineering Limited and
prior to that Chief Financial Officer of
Alinta Limited.
He has a Bachelor of Business from RMIT, a
Graduate Diploma in Company Secretarial
Practice and is a fellow of the Institute
of Chartered Accountants Australia and
New Zealand, a Chartered Secretary and a
member of the Australian Institute of Company
Directors. Stephen served as a member of the
Western Australian Business and Industry
Committee for the Salvation Army for seven
years. He is currently Chairman of the Lions Eye
Institute and a Non-Executive Director of
Cedar Woods Limited.
Mr Cernotta was appointed as Director,
Operations in March 2014 with more
than 30 years’ experience in the mining
industry, spanning various commodities
and operations in Australia, Africa, South
East and Central Asia, Saudi Arabia and
Papua New Guinea.
Prior to joining Fortescue Mr Cernotta
held the position of Chief Operating
Officer, Macmahon Contracting and prior
to that Director of Operations for the
Barrick Gold Australia Pacific Regional
Business Unit.
He has extensive experience in health,
safety and environmental, maintenance,
engineering, business improvement and
technical services.
16 I FORTESCUE METALS GROUP LIMITED OVERVIEW
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Peter Meurs
Director Development, Executive Director
David Liu
Director of Sales and Marketing
Peter Huston
Director Corporate Services, Chief General Counsel
Mr Meurs joined Fortescue in May 2010
and was later appointed as an Executive
Director of the Company in February 2013.
Please refer to the Board of
Directors section for more details
on Mr Meurs’s experience.
Mr Liu joined Fortescue in 2003 and
was appointed as Director of Sales and
Marketing in 2011. As one of the earliest
privately funded students from China,
completing his post-graduate studies
at the University of Western Australia,
David has spent nearly 30 years in Perth.
His previous roles have involved trade
and investment projects between
Australia and China. He brings a deep
understanding of Asian, particularly
Chinese, culture and business practices
to Fortescue’s strategy of securing long
term partnerships with the major steel
mills in Asia.
Mr Huston joined Fortescue in January
2005 with over 20 years’ experience in
legal and corporate advisory roles. Prior to
joining Fortescue, he spent 12 years’ as a
Partner of the law firm now known as
Norton Rose and 10 years in private equity,
mergers and acquisitions.
Mr Huston is admitted as a Solicitor and
Barrister of the Supreme Court of
Western Australia, the Federal and High
Court of Australia and has a Bachelor of
Jurisprudence, Bachelor of Laws (with
Honours), Bachelor of Commerce and
a Master of Laws.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 17
EXECUTIVE TEAM (CONTINUED)
Tim Langmead
Director External Relations
Linda O’Farrell
Group Manager Fortescue People
Simon Carter
Group Manager Development
Mr Langmead was appointed Director
External Relations in January 2014 after
joining Fortescue in January 2013 as
Group Manager Corporate Affairs.
Previously Mr Langmead held senior
corporate affairs roles in the Australian
business units of global oil and gas
companies. He served in senior staff
roles for Ministers in the Howard-
Anderson and Howard-Vaile
governments and commenced his career
as an agribusiness journalist.
Ms O’Farrell joined Fortescue in October
2013 as Group Manager Fortescue People,
joining the Executive team in December
2014. Ms O’Farrell has previously held
executive human resources roles in major
Australian resources companies, and
brings deep experience in strategic
people management, diversity and
Aboriginal employment.
She holds a Bachelor of Economics degree
(Honours in Industrial Relations) from the
University of Western Australia.
Mr Carter joined Fortescue in 2011.
He was appointed Group Manager,
Development in November 2014 following
the delivery of the Solomon Project, for
which he was the Project Director. He holds
bachelor degrees with honours in Electrical
Engineering and Law, and has over
25 years of engineering, construction and
project experience in Africa, South
America, Europe, New Zealand and
Australia. Immediately prior to joining
Fortescue Mr Carter was a Senior Vice
President and General Manager with
WorleyParsons in the USA.
Gerhard Veldsman
Co-ordinating General Manager Port
and Rail Operations
Mr Veldsman was appointed as Co-
ordinating General Manager, Port and Rail
in December 2014 with more than 15
years’ experience in the mining industry,
spanning various commodities and
operations in Australia and South Africa.
Before joining Fortescue in 2011,
Mr Veldsman held the position of Manager,
Nelson Point Operations at BHP Billiton Iron
Ore in Port Hedland and brings previous
expertise in asset reliability, supply chain
optimisation and overseeing mechanical,
structural and expansion projects.
Mr Veldsman holds a Bachelor of Engineering,
Masters of Engineering, and is registered as
a Professional Engineer in South Africa.
Rob Watson
Group Manager Health and Safety
Mr Watson joined Fortescue in 2011
and was appointed Group Manager
Health and Safety in 2014.
Mr Watson has held a number of senior
corporate health and safety roles in large
mining companies over the last 15 years.
His total career in health and safety
spans over 25 years in a number of
industries and commodities.
Mr Watson holds a Masters in
Occupational Health and Safety.
18 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
OPERATING AND FINANCIAL REVIEW
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
OPERATING AND FINANCIAL REVIEW HIGHLIGHTS
n 165.4Million tonnes
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Consistently delivering at 165mt run rate
for the whole of FY15
US$8.6 Billion
Continued as a core supplier to China
US$2.5 Billion
Increased shipments and lower costs underpin
financial performance
US$0.3 Billion
Net earnings significantly impacted by the fall
in iron ore market prices
US$27
/wmt
A 21 per cent reduction from the prior year with
guidance of US$18/wmt in FY16
US$0.6 Billion
Sustaining capital expenditure reduced
to US$2/wmt
US$2.4 Billion
at 30 June 2015
Sustainable cost reductions and strong
operational performance support generation
of positive cash margins
US$3.7 Billion
repaid since
November 2013
Significant flexibility across debt portfolio with
no maintenance covenants and the earliest debt
maturing in 2019
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20 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
OVERVIEW OF OPERATIONS
Fortescue is the world’s fourth largest iron ore producer, the owner
and operator of an integrated supply chain comprising iron ore
mines in the Chichester and Hamersley Ranges, 620km of the world’s
heaviest haul railway and the Herb Elliott Port in Port Hedland,
using the latest technology and operating five berths.
The 2015 financial year marked the first full year of production
following completion of a major expansion program approved by
the Board in 2010, with strong and consistent performance delivered
by all areas of the business resulting in 165 million tonnes of ore
shipped for the year.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 21
Chichester Hub
The Chichester Hub in the Chichester ranges, comprising the Cloudbreak
and Christmas Creek mines, has an annual production capacity in excess
of 90 million tonnes (mt) from three Ore Processing Facilities (OPFs).
Consistent and sustained output delivered from the OPFs has
allowed Fortescue to continue optimisation of its product strategy
through enhanced blending and beneficiation. As a result, Fortescue
has been able to increase iron upgrades reducing impurities and
lower mining cut-off grades, further optimising ore bodies and
sustainably reducing strip ratios, whilst maintaining and improving
final product specifications.
In addition to the benefits achieved through improved OPF upgrades,
Fortescue implemented a number of strategies delivering further
cost savings to its mining and processing operations. These include
enhanced mining hygiene and ore recovery, optimisation of mining
fleet, operational efficiencies and productivity enhancements.
During the year, Fortescue consolidated mining contractors at
Christmas Creek into a single mining services contract. This decision
resulted in considerable cost savings and enabled a consolidated
approach to safety, planning and maintenance, providing the
foundation to further improve mining efficiency.
Solomon Hub
The Solomon Hub in the Hamersley Ranges, 60km north of
Tom Price and 120km to the west of the Chichester Hub, comprises
the Firetail and Kings mines. Together, Firetail and Kings have an
annual production capacity in excess of 70mt. Low phosphorous
Kings ore is a stand-alone product, while higher grade Firetail ore
is blended with low impurity Chichester ore allowing Fortescue to
maximise the benefits of both ore bodies and reduce cut-off grades.
FY15 represented the first full year of production out of the
Solomon Hub, with naturally lower strip ratios playing an important
role in reducing Fortescue’s overall strip ratios and, consequently,
operating costs.
During the year, Fortescue continued to expand the use of
autonomous haulage at both Kings and Firetail mines, delivering
further performance and safety improvements.
In March 2015, Fortescue completed the construction of the Fortescue
River Gas Pipeline, connecting the Solomon Power Station to the
Dampier to Bunbury Pipeline. Conversion of the power station to gas,
completed in May 2015, is expected to have a positive impact on the
Group’s energy costs and carbon footprint. This most important gas
pipeline built in Western Australia in a decade lays the foundation
to extend the infrastructure in future years, as an alternate energy
source for Fortescue’s and third party operations in the Pilbara.
22 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
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Fortescue now has 13 train sets operating daily from Christmas Creek,
Cloudbreak and Solomon, each train hauling approximately
36,000 tonnes of iron ore to Herb Elliott Port in Port Hedland at an
average cycle time of less than 23 hours.
Further efficiencies have been delivered at the Port,
with additional outload capacity as a result of construction of
the fifth berth completed during the year providing greater
flexibility for optimal ship fleet utilisation.
Rail and Port Infrastructure
Fortescue wholly owns its purpose designed rail and port facilities,
constructed to support the production and sale of iron ore from its
mines in the remote areas of Pilbara, Western Australia.
The Company’s railway consists of 620km of heavy haul rail track and
is the fastest and heaviest haul line in the world. During the year,
Fortescue successfully increased the axle loads of its ore cars from
40 tonnes to 42 tonnes and the number of cars per train set from
240 to 250. These initiatives further reduced train cycle times and
average load out times, improving efficiency and increasing the
capacity of the rail line.
Iron Bridge
The Iron Bridge Magnetite project, 100km south of Port Hedland,
incorporating the North Star and Glacier Valley ore bodies, is being
developed in conjunction with Taiwan’s Formosa Group and China’s
Baosteel Group. Stage 1 of the project, consisting of a 1.5mtpa OPF,
was completed in March 2015 and is undergoing a period of rigorous
testing and process validation.
Stage 2 of the Iron Bridge project remains subject to successful Stage 1
process validation and approval by the joint venture partners.
Exploration
Fortescue has a large tenement portfolio in the Pilbara, with the
details of the Ore Reserves and Mineral Resources summarised in
the Ore Reserves and Resources Report on page 33 to 44.
The exploration drilling program, focused primarily on identifying
and defining new targets for bedded mineralisation in and around
the existing Chichester and Solomon Hubs, continued through FY15.
Fortescue has continued to evaluate opportunities that afford low
cost entry to exploration potential in a range of commodities.
A co-funded drilling grant from the WA State Government of up to
A$150,000 for the Trifecta base metals project in the West Pilbara
was received, and a Fortescue managed joint venture covering
approximately 320 square kilometres near Orange in central NSW
extends exploration into an area prospective for copper.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 23
KEY PERFORMANCE INDICATORS
Fortescue’s operations are absolutely focused on the key areas within
the Company’s control that support its strategy to become the safest,
lowest cost, most profitable iron ore producer:
• Continuous improvements in safety
• Sustainable production delivering maximum value from the
Company’s assets
• Driving down costs.
In FY15, Fortescue delivered on all three of its key performance targets,
comprising safety, production and costs. In doing so, Fortescue further increased
its competitiveness and ability to withstand uncertainty and volatility in the
iron ore market.
Safety
Fortescue has continued to reinforce safety as its highest priority and remains
committed to becoming a global leader in safety.
The Company uses TRIFR as a measure of its safety performance. During the
year, TRIFR improved by 15 per cent to 5.1, demonstrating the results achieved
through a number of safety initiatives, including focus on field leadership and
the Life Saving Choices programe.
During the year, a comprehensive safety survey was undertaken across
every business area to ensure all safety standards, systems and processes are
understood and remain current and effective. The results of this survey, with
over 8,000 respondents, demonstrated a strong improvement in culture and
key safety performance measures.
Always look after the
safety
of ourselves and our mates
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21
24 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
Production
Having completed all expansion activity, Fortescue has acted to maximise value for its shareholders by maintaining shipments at
a 165 million tonne annualised rate over the 12 month period, delivering record shipments of 165.4mt in FY15.
12 months to 30 June 2015 (millions of tonnes)
Ore mined
Overburden removed
Ore processed
Ore shipped – Fortescue mined ore
Ore shipped – Fortescue equity ore
Total ore shipped including third party product
2015
164.1
300.0
153.6
160.2
161.4
165.4
2014
140.4
404.5
126.0
118.4
119.9
124.2
Movement, %
+17
-26
+22
+35
+35
+33
Mining, million tonnes (wmt)
Processing, million tonnes (wmt)
Shipping, million tonnes (wmt)
164.1
140.4
153.6
126.0
94.6
64.6
44.2
76.1
40.6
53.9
57.5
40.9
165.4
124.2
80.9
FY11
FY12
FY13
FY14
FY15
FY11
FY12
FY13
FY14
FY15
FY11
FY12
FY13
FY14
FY15
The life of mine strip ratios have been revised and are expected to
average 2.3 at the Chichester Hub and 1.7 at the Solomon Hub over
a 20 year period. These sustainable improvements to the strip ratio
reflect the strategic investment made by Fortescue in processing
capacity together with the focus on mining efficiencies, improved
ore body modelling and ore recovery.
Fortescue’s rail and port infrastructure have been consistently
supporting the Company’s mining operations during the year.
Reduced rail cycle times and additional port capacity following
commissioning of the fifth berth have further improved flexibility
and increased efficiencies delivered by Fortescue’s integrated
supply chain.
During the year, Fortescue significantly reduced its iron ore
inventories, which have been drawn down to efficient and sustainable
levels to support shipments of 165 million tonnes per annum on an
ongoing basis.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 25
Costs
Sustainable improvements in operating costs delivered during
FY15 lowered Fortescue’s average C1 cost for FY15 to US$27/wmt,
a 21 per cent reduction from US$34/wmt in the prior year.
Total delivered costs to customers, inclusive of C1 cost, shipping,
state government royalties and administration charges, were
US$38/wmt (FY14: US$52/wmt).
Fortescue’s operating costs are sensitive to movements in the
exchange rate, with approximately 70 to 80 per cent of C1 operating
costs paid in Australian dollars. The US to Australian dollar exchange
rate averaged 0.84 for the financial year (FY14: 0.92). Each one cent
movement in the exchange rate has a US$0.20/wmt to US$0.25/wmt
impact on C1 costs.
67
23
44
FY11
C1
Total delivered cost, US$/wmt
69
21
62
18
48
44
52
18
34
38
11
27
FY12
FY13
FY14
FY15
Shipping, royalty and administration
Total delivered costs
The US$27/wmt average C1 cost for the full year incorporates US$22/wmt C1 achieved in the June 2015 quarter, delivered through:
FY15 quarterly C1 costs journey, US$/wmt
32
28
26
22
Q1
Q2
Q3
Q4
• The Group’s blending strategy, realising the full benefits of
higher grade Firetail and lower impurity Chichester ore
• Volume benefits derived from the first full year of production
from the lower strip Solomon operations
• Enhanced processing capacity with 85 per cent of product
beneficiated
• Consistent delivery of iron upgrades of 103 to 104 per cent
and significant reduction in alumina and silica
• Procurement initiatives
• Mining efficiencies
• Changes to the standard mining rosters
• Improved ore body modelling and recovery
• Consolidation of Christmas Creek mining contractors.
18
FY16
outlook
The full impact of these sustainable improvements to operating costs embedded in the cost structure will lower C1 cost in FY16 to US$18/wmt.
26 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
FINANCIAL RESULTS AND POSITION
Fortescue’s FY15 financial results reflect the overall improvement delivered in areas within the Company’s control, being safety, production
and costs.
Fortescue’s focus on optimisation and efficiency remains key to operations and in FY15 the Company delivered a significant reduction to operating
and capital costs with a clear path to continue driving costs down further in FY16.
This has established a strong foundation for generation of positive cash margins, as Fortescue continues to provide solid earnings and deliver
long term value to shareholders.
Strong cash flows generated by operations, a disciplined approach to capital management and working capital efficiencies allowed Fortescue to
continue debt repayments in FY15.
In addition, a recently completed refinancing further strengthened the Company’s financial position, extending debt maturity.
Key metrics
Revenue
Underlying EBITDA1
Net profit after tax
Earnings per share
Cash from operating activities
Capital expenditure – Fortescue
Cash and cash equivalents
Debt
Net debt
C1 costs
Key ratios
Gearing
Return on equity
US cents
US$/wmt
2015
US$m
8,574
2,506
316
10.18
2,037
626
2,381
9,569
7,188
27
2014
US$m
11,753
5,636
2,740
88.00
6,248
1,931
2,398
9,557
7,159
34
56%
4%
56%
42%
1 Refer to page 28 for reconciliation of Underlying EBITDA to the financial metrics reported in the financial statements under Australian
Accounting Standards.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 27
Financial performance
In FY15 Fortescue delivered net profit after tax of US$316 million and earnings per share of 10.18 cents (FY14: US$2,740 million and 88.00 cents).
The benefits of cost savings delivered during the year and improved operational performance were offset by lower revenues from a 41 per cent fall
in iron ore prices.
Underlying EBITDA
Fortescue uses Underlying EBITDA defined as earnings before interest, tax, depreciation and amortisation, exploration, development and other
expenses as a key measure of its financial performance. In FY15, Fortescue’s operations generated Underlying EBITDA of US$2,506 million
(FY14: US$5,636 million). The reconciliation of Underlying EBITDA to the financial metrics reported in the financial statements under Australian
Accounting Standards is presented below.
Operating sales revenue
Cost of sales excluding depreciation and amortisation
Gains on disposal of assets
Net foreign exchange gain (loss)
Administration expenses
Other income
Underlying EBITDA
Finance income2
Finance expenses
Depreciation and amortisation
Exploration, development and other
Net profit before tax
Income tax expense
Net profit after tax
1 Notes to the accompanying consolidated financial statements.
2 Refer to the consolidated income statement.
Note1
3
5
4
4,6
6
4
7
5,6
6
8
2015
US$m
8,574
(6,051)
3
68
(94)
6
2,506
15
(644)
(1,405)
(52)
420
(104)
316
2014
US$m
11,753
(6,078)
109
(53)
(112)
17
5,636
21
(741)
(965)
(38)
3,913
(1,173)
2,740
As illustrated in the chart below, a significant improvement to Underlying EBITDA has been achieved in areas within Fortescue’s control, with a
33 per cent increase in shipping volumes contributing US$2,179 million and a 21 per cent reduction in C1 operating costs, together with shipping
cost reductions, contributing a further US$1,596 million. These improvements have been offset by a 41 per cent decrease in iron ore market prices
reducing the Underlying EBITDA by US$7,184 million.
Underlying EBITDA, US$million
1,596
7,184
2,179
5,636
259
121
101
2,506
FY14
Volume
Costs
Price
Royalty
Fx
Other
FY15
28 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
Revenue
Sale of iron ore
Sale of joint venture ore
Other revenue
Operating sales revenue
Ore shipped - Fortescue mined ore
Fortescue’s share of joint venture ore
62% CFR Platts index
Realised price
16,000
12,000
8,000
4,000
m
$
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11,753
8,120
8,574
6,716
5,442
160
120
80
40
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2.3
2.4
FY11
FY12
2.4
FY13
FY14
FY15
Revenue
Realised CFR price
Production costs
2015
US$m
8,323
67
184
8,574
160.2
1.2
72
57
2014
US$m
11,485
126
142
11,753
118.4
1.5
123
106
mt
mt
US$/dmt
US$/dmt
Revenue from the sale of iron ore decreased by
28 per cent, reflecting the impact of lower realised
price of US$7,184 million, offset by US$4,022 million
increase generated from higher shipments.
In FY15, Fortescue realised US$57/dmt
(2014: US$106/dmt), based on the 62 per cent
CFR Platts index of US$72/dmt (2014: US$123/dmt).
Fortescue refers to operating costs of mining, processing, rail and port on a per tonne basis as C1 cost. The reconciliation of C1 cost and total
delivered costs to the customers to the amounts disclosed in the financial statements is shown below.
Mining and processing costs
Rail costs
Port costs
Operating leases
C1 cost, US$million
Ore shipped – Fortescue mined ore
C1, US$/wmt
Shipping costs
Government royalty
Administration expenses
Shipping, royalty and administration, US$/wmt
Total delivered cost, US$/wmt
Note1
2015
US$m
2014
US$m
5
5
5
5
5
5
6
3,765
230
274
80
4,349
160.2
27
1,112
516
94
11
38
3,442
238
252
74
4,006
118.4
34
1,210
775
112
18
52
1 Notes to the accompanying consolidated financial statements.
Fortescue’s average C1 costs for FY15 decreased to US$27/wmt, a 21 per cent reduction from US$34/wmt in the prior year. Total delivered costs
to customers, inclusive of C1 costs, shipping, state government royalties and administration charges, were US$38/wmt (FY14: US$52/wmt).
Key factors contributing to the FY15 operating costs performance are discussed on page 26.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 29
Royalty
Fortescue pays 7.5 per cent state government royalty for a majority of its products, with a concession rate of 5 per cent applicable for beneficiated
fines. Royalty charges decreased to US$516 million from US$775 million in prior year consistent with the lower revenue base.
Non-operating events
Other non-operating matters forming part of the financial result include:
• Finance expenses of US$644 million (2014: US$741 million), largely interest expense
• Depreciation and amortisation expense of US$1,405 million (2014: US$965 million), reflecting completion and full commissioning of the
expansion projects and ramp up of operations
• Income tax expense for the year of US$104 million (2014: US$1,173 million), with a lower effective rate of 25 per cent
(2014: 30 per cent) attributable to permanent differences as a result of foreign exchange gains arising on settlement of the FY14
current tax liability.
The number of shares on issue at 30 June 2015 was 3.1 billion and remained unchanged since last year.
30 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
Balance sheet strength
At 30 June 2015, Fortescue’s net debt position was US$7,188 million (FY14: US$7,159 million), inclusive of finance leases and cash on hand.
Cash and debt, US$billion
12.7
Gearing: Debt / (Debt + Equity), %
8.5
9.6
9.6
67
4.9
2.7
44
2.3
2.2
2.4
2.4
71
56
56
69
44
FY11
FY12
FY13
FY14
FY15
FY11
FY12
FY13
FY14
FY15
Borrowings and finance lease liabilities
Cash on hand
Fortescue has a highly flexible debt profile with no maintenance covenants and the earliest debt maturing in 2019.
During the financial year Fortescue further enhanced its capital structure through:
• Voluntary debt repayment of US$500 million in senior unsecured notes ahead of maturity in 2018
• Extension of the period to the first debt maturity to 2019 through refinancing via an issue of US$2,300 million senior secured notes,
full redemption of the remaining 2017 and 2018 and partial redemption of the 2019 senior unsecured notes.
Fortescue continues to explore a number of options to further enhance its debt structure with a broad initial target of reducing its gearing to 40 per cent.
The following chart illustrates Fortescue’s debt maturity profile at 30 June 2015 and highlights the benefits of the refinancing and early debt repayments.
US$m
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
4,863
Pre-payable at Fortescue’s option
2,300
Pre-payable at
Fortescue’s option
from Mar 2018
Extended runway
1,050
Pre-payable at
Fortescue’s option
from Nov 2015
1,000
Pre-payable at
Fortescue’s option
from Apr 2017
CY2015
CY2016
CY2017
CY2018
CY2019
CY2020
CY2021
CY2022
CY2023
Senior Secured Credit Facility
Senior Unsecured Notes
Senior Secured Notes
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 31
Cash flow generation
Fortescue continues to generate steady, consistent cash flows
achieved through delivery on production targets, continued focus
on operational cost reductions, disciplined capital management
and working capital efficiencies.
Having fully completed its capital expansion program in FY15, Fortescue
is not planning to invest in any additional production capacity. Capital
expenditure in FY16 will be limited to sustainably support the existing
operations, estimated at US$2/wmt.
Cash and cash equivalents at 30 June 2015 were US$2,381 million
compared to US$2,398 million at 30 June 2014, with the key cash
flow movements for the year are outlined below.
Operating cash flows for the financial year were US$2,037 million
(2014: US$6,248 million):
• The positive impact of higher shipments and a significant reduction
in the cost base offset by the adverse impact of a fall in the iron ore
market price
• Successful strategy of mine stocks reduction, releasing
US$623 million out of working capital
• Net reduction in customer prepayments, including US$669 million
amortisation through delivery of iron ore offset by US$500 million
received during the year
• Income tax paid of US$529 million, largely attributable to the
FY14 final income tax instalment.
Investing cash flows reduced to US$726 million (2014: US$1,392 million),
including Fortescue’s capital expenditure of US$626 million
(2014: US$1,931 million), reflecting the ex-growth nature of
Fortescue’s capital profile with the stay in business capital reduced
to US$2/wmt going forward.
The key factors contributing to the net financing outflows of
US$1,235 million (2014: US$4,625 million) were:
• Early repayment of the 2019 senior unsecured notes of
US$500 million
• Refinancing completed during the year with the proceeds of
US$2,300 million used to redeem outstanding 2017, 2018 and
partially the 2019 senior unsecured notes, with the remaining
US$320 million reserved for early retirement of the 2019 senior
unsecured notes
• Interest and finance cost paid of US$605 million
(2014: US$853 million)
• Dividend payments of US$343 million (2014: US$581 million),
including the payment of a final dividend of 10 Australian cents
per share for the 2014 financial year in October 2014 and an interim
dividend of three Australian cents per share for the 2015 financial
year in April 2015.
32 I FORTESCUE METALS GROUP LIMITED OPERATING AND FINANCIAL REVIEW
RESERVES AND RESOURCES
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 33
ORE RESERVES AND RESOURCES REPORT
Ore Reserves and Mineral Resources
Ore Reserves Operating Properties – Hematite
Reporting is grouped by operating and development properties
and includes both hematite and magnetite deposits.
Hematite Ore Reserves total 2.4 billion tonnes (bt) at an average
iron (Fe) grade of 57.3 per cent. Combined hematite Mineral
Resources total 11.6bt at an average Fe of 56.9 per cent.
Magnetite Ore Reserves total 0.7bt at an average mass recovery of
27.2 per cent. Magnetite Mineral Resources total 5.5bt at an average
mass recovery of 23.2 per cent.
Operating property Ore Reserves and Mineral Resources have all been
reported to the Joint Ore Reserves Committee (JORC) 2012 standard.
Accordingly, the information in these sections should be read in
conjunction with the respective explanatory Resource and Reserve
information (Fortescue ASX release dated 21 August 2015).
Development property Mineral Resources are a combination of
JORC 2012 and JORC 2004 estimates. Those development property
resources reported to JORC 2012 standard are identified in the
Fortescue ASX release on 21 August 2015 that includes the supporting
technical data. The remaining JORC 2004 resource estimates will be
progressively updated to the JORC 2012 standard
as development priorities dictate.
Magnetite resources have been updated and reported to the JORC
2012 standards. The resources quoted in this report should be read
in conjunction with the supporting technical data contained in the
corresponding ASX release dated 21 August 2015.
Audit of the estimation of Mineral Resources and Ore Reserves is
addressed as a sub-set of the annual internal audit plan approved by
the Board Audit and Risk Management committee (ARMC). Specific
audit of the Ore Reserve process was performed in 2011, 2013 and
2015. These audits were managed by Fortescue’s internal audit
service provider with external technical subject experts.
In addition to routine internal audit, the ARMC monitors the Ore
Reserve and Mineral Resource status and approves the final outcome.
The annual Ore Reserves and Mineral Resource update is a prescribed
activity within the annual Corporate Planning Calendar that includes
a schedule of regular Executive engagement meetings to approve
assumptions and guide the overall process.
The Ore Resource and Mineral Resource estimation processes followed
internally are well established and are subject to systematic internal
peer review, including calibration against operational outcomes.
Independent technical reviews and audits are undertaken on an
as-required basis as an outcome of risk assessment.
Tonnage and quality information contained in the following tables
has been rounded and as a result the figures may not add up to the
totals quoted.
The 2015 combined Chichester and Solomon Hematite Ore Reserve is
a total of 2,400 million dry tonnes (mt) at an average iron (Fe) grade
of 57.3 per cent.
The Ore Reserve is quoted as at June 30, 2015 and is inclusive of ore
stockpiles. Ore Reserves are quoted on a dry product basis while
Mineral Resources are quoted on a dry in-situ basis.
Company production and sales reporting is based on wet tonnes.
The typical free moisture content of shipped products is nine per cent.
The proportion of higher confidence Proved Ore Reserve has been
increased from 587mt to 726mt as a result of ongoing in-fill drilling
at both the Solomon and the Chichester deposits.
The Chichester Hub (Cloudbreak and Christmas Creek deposits)
contains 1,609mt at an average Fe grade of 57.6 per cent, an increase
of 139mt due to additions from grade control and in-fill drilling.
Proven Ore Reserve constitutes 38 per cent of Chichester Ore Reserve.
While the Cloudbreak and Christmas Creek deposits are quoted
separately for historical reasons, they effectively represent a single
deposit with ore generally directed to the most proximal of the three
available ore processing facilities (OPFs).
The Ore Reserve estimate for the Solomon Hub is 791mt at an average
Fe of 56.7 per cent, a decrease of 112mt due to production depletion
and application of revised OPF performance factors. Solomon Ore
Reserve consists of 14 per cent of the tonnage in the Proved Ore
Reserve category.
The 2015 hematite Ore Reserve estimates were subject to
comprehensive review and update addressing:
• Revisions to the Cloudbreak Resource model and to grade
control models in all near-term mining areas
• Revisions of ore loss and dilution factors based on last
two years of operational history
• Revisions to the processing response through all Ore
Processing Facilities (OPFs) based on updated test work
(Kings OPF) and operational history (Cloudbreak OPF)
• Ore depletion as a result of sales
• Exclusion of low margin mineralisation to enhance
financial outcomes
• A revised life of mine (LOM) plan that addresses the
listed items and incorporates the latest information on
long term product strategy and mining and processing
reconciliation trends.
34 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
Hematite Ore Reserves – as at 30 June 2015
Hematite Ore Reserves – as at 30 June 2015
Hematite Ore Reserves – as at 30 June 2014
Product
tonnes
(mt)
268
265
533
346
730
Category
Proved
Probable
Total
Proved
Probable
Total
1,076
Proved
Probable
615
994
Total
1,609
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
23
118
142
89
561
650
111
680
791
726
1,674
2,400
Iron
Fe%
57.3
57.1
57.2
57.9
57.8
57.8
57.6
57.6
57.6
58.2
58.7
58.6
56.6
56.2
56.3
57.0
56.7
56.7
57.5
57.2
57.3
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
Product
tonnes
(mt)
Cloudbreak
8.5
8.1
8.3
132
368
500
Christmas Creek
7.9
8.0
8.0
312
659
970
0.052
0.052
0.052
0.046
0.047
0.047
Subtotal Chichester Hub
0.049
0.049
0.049
0.142
0.109
0.115
0.067
0.064
0.064
8.1
8.0
8.1
Firetail
6.8
6.4
6.5
444
1,026
1,470
39
136
174
Kings and Queens
9.0
8.9
8.9
105
624
729
Subtotal Solomon Hub
0.084
0.072
0.073
0.054
0.058
0.057
8.5
8.4
8.5
143
760
903
Combined
8.2
8.2
8.2
587
1,786
2,374
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
4.20
4.55
4.46
5.72
4.91
5.17
5.27
4.78
4.93
5.66
6.84
6.58
6.14
6.57
6.50
6.01
6.61
6.52
5.45
5.56
5.53
2.35
2.33
2.33
2.45
2.62
2.57
2.42
2.52
2.49
2.66
2.63
2.64
2.22
2.67
2.61
2.34
2.66
2.61
2.40
2.58
2.54
0.048
0.052
0.051
0.043
0.044
0.044
0.045
0.047
0.046
0.133
0.106
0.112
0.061
0.064
0.064
0.081
0.072
0.073
0.053
0.057
0.056
8.7
8.1
8.3
7.9
7.9
7.9
8.2
7.9
8.0
6.4
6.2
6.3
8.5
8.9
8.8
7.9
8.4
8.3
8.1
8.1
8.1
Iron
Fe%
57.7
57.5
57.6
57.3
57.3
57.3
57.4
57.4
57.4
59.2
58.5
58.7
57.6
56.7
56.9
58.0
57.1
57.2
57.6
57.3
57.3
4.99
5.25
5.12
5.60
5.01
5.20
5.33
5.07
5.17
5.99
6.42
6.35
7.23
7.09
7.11
6.96
6.97
6.97
5.58
5.84
5.77
2.83
2.85
2.84
2.62
2.80
2.74
2.71
2.81
2.77
3.22
2.46
2.58
2.29
2.80
2.73
2.49
2.74
2.70
2.68
2.78
2.75
1 The diluted mining models used to report the 2015 Ore Reserves are based on Christmas Creek Mineral Resource model reported in 2012,
Solomon Mineral Resource models revised in 2014 and Cloudbreak Resource model completed 2015. Diluted mining models are validated by
reconciliation against historical production.
2 Proved Reserves are inclusive of ore stockpiles at the mines and port totalling approximately 22.6mt on dry product basis.
3 The Chichester Ore Reserve is inclusive of the Cloudbreak and Christmas Creek BID deposits. Selected Christmas Creek Ore Reserve will be directed
to the Cloudbreak OPF to optimise upgrade performance and balance Cloudbreak and Christmas Creek OPF lives.
4 Reserve in-situ Fe cut-off grades are approximately 53.5 per cent for BID deposits and 51 per cent for CID deposits.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 35
Ore Reserve – Magnetite (Maiden Reserve)
The 2015 Ore reserves for Magnetite are from the Iron Bridge project.
They are the first (maiden) Ore Reserves announced for the project totalling
705mt at an average mass recovery of 27.2 per cent.
The Magnetite Ore Reserve is quoted as at June 30, 2015. Ore
Reserves are quoted on a dry in-situ tonnes basis prior to processing.
No company sales or production have occurred for Magnetite as of
30 June 2015, when shipping occurs production will be quoted in wet
tonnes. The typical free moisture content of shipped products is below
eight per cent.
Magnetite Ore Reserves – as at 30 June 2015
All Magnetite Ore Reserves are classified as Probable Ore Reserves.
These are estimated from utilising a portion of the Indicated plus
Measured Mineral Resources from within the North Star mining study
pit. Additional processing Indicated Resources from outside the study
pit and the Glacier Valley area have not been included in this Ore
Reserve study.
The Magnetite Ore Reserves have been estimated by independent
consultants (Golder Associates) using detailed information on mining
parameters, geotechnical studies, metallurgical processing, and
financial analysis information. This was gained from the Iron Bridge
feasibility study.
Magnetite Ore Reserves – as at 30 June 2015
Magnetite Ore Reserves – as at 30 June 2014
In-situ
tonnes
(mt)
DTR mass
recovery
%
Product
iron
Fe%
Product
silica
SiO2%
Product
alumina
Al2O3%
In-situ
tonnes
(mt)
DTR mass
recovery
%
Product
iron
Fe%
Product
silica
SiO2%
Product
alumina
Al2O3%
North Star (60.72% Fortescue)
-
705
705
-
27.2
27.2
-
67.2
67.2
-
5.5
5.5
-
0.25
0.25
-
-
-
Glacier Valley (60.72% Fortescue)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
West Star (60.72% Fortescue)
-
-
-
-
-
-
Total Magnetite Ore Reserves
705
705
27.2
27.2
67.2
67.2
5.5
5.5
-
0.25
0.25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Category
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
1 Magnetite Ore Reserves are a result of a mining study only upon the North Star deposit. Utilising 705.4mt of Measured plus Indicated Mineral
Resources within a defined optimal pit design.
2 All reporting is based on Mass Recovery expressed as a 9 per cent Davis Tube Recovery (DTR) cut-off.
3 All Ore Reserves are reported on a dry-tonnage basis.
Mineral Resources Operating Properties – Hematite
Mineral Resources for the operating properties including the
Chichester and Solomon hubs are stated on a dry in-situ basis.
The Mineral Resources are inclusive of that portion converted to
Ore Reserves, including stockpiles.
As of 30 June 2015, the total Mineral Resource for the Chichester
and Solomon hubs was 5,415mt at an average Fe grade of 56.2 per
cent, a slight decrease over that stated in the prior year. This was
accompanied by a slight increase in the proportion of higher
confidence Measured and Indicated Mineral Resource mineralisation
from 63 per cent to 67 per cent as a result of infill drilling and changes
to reporting cut-offs.
The Chichester Hub Mineral Resource totalled 3,280mt at an average
Fe grade of 56.5 per cent, with 76 per cent of the tonnage in the
Measured and Indicated Mineral Resource categories.
The total Solomon Hub Mineral Resource totalled 2,135mt at an
average Fe grade of 55.9 per cent, with 53 per cent of the tonnage in
the Measured and Indicated Mineral Resource categories.
36 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
Hematite Mineral Resources – as at 30 June 2015
Hematite Mineral Resources – as at 8 January 2015 (Chichester Hub) and 30 June 2014 (Solomon Hub)
Mineral Resources – as at 30 June 2015
Mineral Resources – as at 8 January 2015 and 30 June 2014
In-situ
tonnes
(mt)
386
374
280
1,039
Category
Measured
Indicated
Inferred
Total
Measured
499
Indicated
1,237
Inferred
Total
505
2,241
Measured
885
Indicated
1,610
Inferred
Total
785
3,280
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
32
152
157
341
119
817
858
1,794
150
970
1,015
2,135
1,035
2,580
1,800
5,415
Iron
Fe%
57.2
56.5
56.0
56.6
57.0
56.3
55.9
56.4
57.1
56.4
56.0
56.5
57.7
59.0
57.5
58.2
53.8
55.7
55.6
55.5
54.6
56.2
55.9
55.9
56.7
56.3
55.9
56.2
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
In-situ
tonnes
(mt)
Cloudbreak
8.6
8.2
8.1
8.3
274
457
499
1,230
Christmas Creek
8.1
8.0
7.3
7.8
516
1,082
500
2,098
0.052
0.053
0.052
0.053
0.047
0.048
0.059
0.050
Subtotal Chichester Hub
0.049
0.049
0.056
0.051
0.140
0.110
0.108
0.112
0.071
0.065
0.077
0.071
8.3
8.0
7.6
8.0
Firetail
7.3
6.4
6.9
6.7
790
1,539
999
3,328
45
155
170
371
Kings and Queens
8.6
8.8
8.6
8.7
121
818
909
1,848
Subtotal Solomon Hub
0.086
0.072
0.081
0.078
0.055
0.058
0.071
0.061
8.3
8.4
8.4
8.4
167
973
1,079
2,219
Combined
8.3
8.2
8.0
8.1
957
2,512
2,078
5,548
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
4.86
5.80
6.11
5.72
5.93
5.97
6.55
6.10
5.56
5.92
6.33
5.96
5.80
6.11
6.85
6.41
7.43
7.75
7.86
7.78
6.99
7.49
7.70
7.55
5.81
6.53
7.04
6.60
3.06
3.34
3.36
0.054
0.059
0.057
3.29
0.057
2.97
3.37
3.21
3.23
3.00
3.36
3.28
0.047
0.049
0.059
0.051
0.049
0.052
0.058
3.25
0.053
3.35
2.64
3.25
0.141
0.107
0.110
3.00
0.112
2.87
3.22
3.41
0.068
0.065
0.076
3.29
0.071
3.00
3.12
3.38
0.088
0.072
0.082
3.24
0.078
3.00
3.27
3.34
0.056
0.059
0.070
3.25
0.063
8.7
8.2
8.3
8.4
8.0
7.9
7.2
7.7
8.2
8.0
7.8
8.0
7.3
6.4
6.9
6.7
8.5
8.8
8.6
8.7
8.2
8.4
8.3
8.3
8.2
8.1
8.1
8.1
Iron
Fe%
57.5
56.7
56.3
56.7
57.3
56.6
56.4
56.7
57.4
56.6
56.3
56.7
58.0
58.9
57.6
58.2
56.4
55.7
55.6
55.7
56.8
56.2
55.9
56.1
57.3
56.5
56.1
56.5
5.25
6.38
6.82
6.08
6.11
6.12
6.92
6.30
5.74
6.18
6.88
6.23
6.00
6.09
6.89
6.45
7.30
7.75
7.83
7.76
7.03
7.49
7.69
7.55
5.92
6.67
7.34
6.75
3.29
3.32
3.60
3.39
3.09
3.52
3.35
3.39
3.18
3.47
3.44
3.39
3.57
2.54
3.29
2.98
2.56
3.21
3.43
3.28
2.78
3.11
3.41
3.23
3.12
3.34
3.42
3.32
1 Chichester Hub Mineral Resources are quoted at a cut-off grade of 53.5 per cent Fe while Solomon Hub Mineral Resources are quoted
at a cut-off grade of 51 per cent Fe.
2 The Measured Mineral Resource estimate includes mine and port ore stockpiles totalling 27mt.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 37
Mineral Resources Development Properties – Hematite
Development property Mineral Resources are a combination of JORC
2012 and JORC 2004 estimates. Those development property resources
reported to JORC 2012 standard are identified in the Fortescue
ASX releases of 20 May 2014 and 8 January 2015 that includes
the supporting technical data. The remaining JORC 2004 resource
estimates will be progressively updated to the JORC 2012 standard
as development priorities dictate.
Hematite Mineral Resources – as at 30 June 2015
Mineral Resources – as at 30 June 2015
Mineral Resources – as at 30 June 2014
In-situ
tonnes
(mt)
-
82
409
491
-
254
2,404
2,658
-
-
740
740
23
580
1,860
2,463
23
916
5,413
6,353
Category
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Iron
Fe%
-
57.9
57.0
57.1
-
56.6
56.8
56.8
-
-
59.1
59.1
59.6
58.1
57.2
57.4
59.6
57.6
57.3
57.4
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
In-situ
tonnes
(mt)
Greater Chichester
-
2.99
3.61
3.51
-
3.45
3.71
3.69
-
-
2.88
2.88
2.21
2.95
3.36
3.25
-
0.053
0.059
0.058
-
0.083
0.081
0.082
-
6.8
6.8
6.8
-
-
303
303
Greater Solomon
-
8.3
7.2
7.3
-
254
2,404
2,658
Eliwana and Flying Fish
-
-
0.091
0.091
0.139
0.148
0.147
0.147
-
-
6.5
6.5
-
-
740
740
Nydinghu
8.0
8.6
8.8
8.8
23
580
1,860
2,463
Iron
Fe%
-
-
57.1
57.1
-
56.6
56.8
56.8
-
-
59.1
59.1
59.6
58.1
57.2
57.4
Total Development Property Mineral Resources
2.21
3.09
3.47
3.41
0.139
0.121
0.104
0.107
8.0
8.3
7.6
7.7
23
834
5,307
6,165
59.6
57.6
57.3
57.3
Silica
SiO2%
Alumina
Al2O3%
Phos
P%
Loss on
ignition
LOI%
-
-
5.90
5.90
-
6.70
6.93
6.91
-
-
5.21
5.21
3.56
4.52
5.00
4.87
3.56
5.18
5.95
5.85
-
-
3.25
3.25
-
3.45
3.71
3.69
-
-
2.88
2.88
2.21
2.95
3.36
3.25
2.21
3.10
3.45
3.40
-
-
0.067
0.067
-
0.083
0.081
0.082
-
-
0.091
0.091
0.139
0.148
0.147
0.147
0.139
0.128
0.105
0.108
-
-
7.1
7.1
-
8.3
7.2
7.3
-
-
6.5
6.5
8.0
8.6
8.8
8.8
8.0
8.5
7.7
7.8
-
6.30
6.66
6.60
-
6.70
6.93
6.91
-
-
5.21
5.21
3.56
4.52
5.00
4.87
3.56
5.28
6.01
5.90
1 The Greater Chichester Mineral Resource includes the Investigator, White Knight, Kutayi and Mt Lewin deposits. Additional material is from
extensions at Mount Lewin and the maiden Mineral Resource for Kutyai announced on 8 January 2015, these estimates are in compliance with
the 2012 Edition of the JORC Code.
2 The Greater Solomon Mineral Resource includes the Serenity, Sheila Valley, Mount MacLeod, Queens Extension, Cerberus, Stingray and
Raven deposits.
3 All Mineral Resources are quoted on an in-situ basis after applying an appropriate cut-off for each deposit. Details relating to the cut-offs were
provided when the Mineral Resource was first announced.
38 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
Mineral Resources Development Properties – Magnetite
Mineral Resource updates for the North Star, West Star and Glacier
Valley deposits (60.72 per cent Fortescue) were completed in 2015,
incorporating additional drilling, including the results of an infill
reverse circulation drilling campaign across all areas. This drilling
has confirmed the tonnage of higher confidence Measured and
Indicated Mineral Resource at North Star and Glacier Valley, which
can potentially be converted to an Ore Reserve at an improved mass
recovery. Peripheral Inferred mineralisation contained in the prior
estimate has been re-assessed based on the improved understanding
of the mineralisation controls and continuity. Increased Mineral
Resources are observed over all deposits, with a maiden Mineral
Resource being estimated for the West Star deposit. Infill drilling
has allowed an increase in the Indicated and Measured Resources at
North Star, plus maiden Indicated Mineral Resources at Glacier Valley.
Magnetite Mineral Resources – as at 30 June 2015
Magnetite Mineral Resources – as at 30 June 2015
Magnetite Mineral Resources – as at 30 June 2014
In-situ
tonnes
(mt)
DTR mass
recovery
%
In-situ
iron
Fe%
In-situ
silica
SiO2%
In-situ
alumina
Al2O3%
In-situ
tonnes
(mt)
DTR mass
recovery
%
In-situ
iron
Fe%
In-situ
silica
SiO2%
In-situ
alumina
Al2O3%
Category
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
77
708
1,877
2,663
-
343
2,238
2,581
-
-
261
261
Measured
77
Indicated
Inferred
Total
1,051
4,376
5,504
North Star (60.72% Fortescue)
39.45
39.85
41.97
40.63
1.90
2.02
2.52
2.37
44
679
1,926
2,648
27.2
28.0
23.4
24.6
Glacier Valley (60.72% Fortescue)
-
39.10
39.26
39.24
-
1.72
1.78
1.77
-
-
2,028
2,028
West Star (60.72% Fortescue)
-
-
43.35
43.35
-
-
3.40
3.40
-
-
-
-
-
-
23.5
23.5
-
-
-
-
Total Magnetite Mineral Resource
39.45
39.61
40.23
40.10
1.90
1.92
2.19
2.14
44
679
3,953
4,676
27.2
28.0
23.5
24.2
32.4
31.7
30.5
30.9
-
32.6
32.2
32.2
-
-
28.3
28.3
32.4
32.0
31.2
31.4
28.5
26.6
23.6
24.5
-
24.3
21.5
21.9
-
-
21.7
21.7
28.5
25.9
22.4
23.2
32.2
29.8
32.2
30.6
31.0
-
-
32.8
32.8
-
-
-
-
32.2
32.2
31.7
31.8
39.6
40.9
40.6
-
-
38.7
38.7
-
-
-
-
39.8
39.6
39.8
39.8
2.0
1.9
2.5
2.3
-
-
1.6
1.6
-
-
-
-
2.0
1.9
2.1
2.0
1 Magnetite Mineral Resource estimates, including the North Star, Glacier Valley and West Star deposits, are reported according
to JORC 2012 standards.
2 All reporting is based on Mass Recovery expressed as a 9 per cent Davis Tube Recovery (DTR) cut-off.
3 All Mineral Resources are reported on a dry-tonnage basis.
4 See Ore Reserves for product grades representing processing plant performance.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 39
2.4bt
ore reserves
Competent Persons Statement
The detail in this report that relates to Mineral Resources is based on
information compiled by Mr Stuart Robinson, Mr Nicholas Nitschke,
Mr David Frost-Barnes and Mr Lynn Widenbar. Messrs Robinson,
Nitschke and Frost-Barnes are all full-time employees of Fortescue
while Mr Widenbar is an independent consultant. Each provided
technical input for Mineral Resources estimations and compilations
of exploration results.
Estimated Ore Reserves for the Chichester and Solomon Hubs for fiscal
year 2015 were compiled by Mr Martin Slavik, a full-time employee
of Fortescue. Estimated Magnetite Ore Reserves for the Iron Bridge
project for fiscal year 2015 were compiled by Mr Iain Cooper, an
independent consultant for Golder Associates.
Mr Robinson is a Fellow of, and Messrs Nitschke, Slavik, Cooper and
Widenbar are Members of, the Australasian Institute of Mining and
Metallurgy. Mr Frost-Barnes is a member of the Institute of Materials,
Minerals and Mining. Messrs Robinson, Nitschke, Slavik, Frost-Barnes,
Cooper and Widenbar have sufficient experience relevant to the type
of mineralisation and type of deposit under consideration to each be
qualified as a Competent Person as defined in the JORC Code.
Messrs Robinson, Nitschke, Frost-Barnes, Widenbar, Cooper and Slavik
have each consented to the inclusion in this report of the matters
based on their information in the form and context in
which it appears.
40 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
TENEMENT REPORT AS AT 30 JUNE 2015
Western Australia Tenure
Status: Granted
E 45/2499
E 46/467
E 46/567
E 46/600
E 46/623
E 47/1387
Holder: Chichester Metals Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 45/2498
E 45/2651
E 45/2593
E 45/2497
E 46/413
E 46/518
E 46/516
E 45/2652
E 46/566
E 46/569
E 46/568
E 46/519
E 46/595
E 46/610
E 46/601
E 46/590
E 46/612
E 46/666
E 46/664
E 46/611
E 47/1434
E 47/1320
E 47/1388
E 46/675
E 47/2177
M 45/1082 M 45/1083 M 45/1084 M 45/1085
M 45/1086 M 45/1087 M 45/1088 M 45/1089 M 45/1090
M 45/1091 M 45/1092 M 45/1093 M 45/1094 M 45/1102
M 45/1103 M 45/1104 M 45/1105 M 45/1106 M 45/1107
M 45/1124 M 45/1125 M 45/1126 M 45/1127 M 45/1128
M 45/1138 M 45/1139 M 45/1140 M 45/1141 M 45/1142
M 46/316
M 46/314
M 46/292
M 46/321
M 46/319
M 46/317
M 46/326
M 46/324
M 46/322
M 46/331
M 46/329
M 46/327
M 46/336
M 46/334
M 46/332
M 46/341
M 46/339
M 46/337
M 46/346
M 46/344
M 46/342
M 46/351
M 46/349
M 46/347
M 46/356
M 46/354
M 46/352
M 46/404
M 46/402
M 46/357
M 46/409
M 46/407
M 46/405
M 46/415
M 46/412
M 46/410
M 46/420
M 46/418
M 46/416
M 46/449
M 46/423
M 46/421
M 46/450
M 46/454
M 46/452
M 47/1461
M 46/315
M 46/320
M 46/325
M 46/330
M 46/335
M 46/340
M 46/345
M 46/350
M 46/355
M 46/403
M 46/408
M 46/414
M 46/419
M 46/424
M 46/453
M 46/293
M 46/318
M 46/323
M 46/328
M 46/333
M 46/338
M 46/343
M 46/348
M 46/353
M 46/401
M 46/406
M 46/411
M 46/417
M 46/422
M 46/451
Holder: Chichester Metals Pty Ltd
FMG mineral rights status: 100% iron ore rights
E 46/413-I
Status: Granted
Holder: Chichester Metals Pty Ltd
FMG mineral rights status: n/a
G 46/7
L 46/40
L 46/51
L 46/56
L 46/66
L 47/193
L 47/711
L 45/152
L 46/46
L 46/52
L 46/57
L 46/99
L 47/197
L 46/35
L 46/47
L 46/53
L 46/58
L 46/100
L 47/198
Status: Granted
L 46/36
L 46/48
L 46/54
L 46/62
L 46/111
L 47/693
L 46/37
L 46/49
L 46/55
L 46/64
L 46/112
L 47/710
Holder: Chichester Metals Pty Ltd
FMG mineral rights status: 100% all mineral rights
M 45/1147 M 45/1148 M 45/1149 M 45/1150
Status: Application
Holder: Chichester Metals Pty Ltd
FMG mineral rights status: n/a
L 46/60
L 47/656
L 47/204
L 47/657
L 47/653
L 47/658
Status: Application
L 47/654
L 47/659
L 47/655
L 47/660
Holder: FMG Magnetite Pty Ltd
FMG mineral rights status: 100% all mineral rights (Note 1)
E 45/2510
Status: Granted
M 45/1226
E 45/2535
Holder: FMG Magnetite Pty Ltd
FMG mineral rights status: n/a (Note 1)
L 45/257
L 45/294
L 45/293
Status: Granted
L 45/318
L 45/331
Holder: FMG Magnetite Pty Ltd and Formosa Steel IB Pty Ltd
Status: Granted
FMG mineral rights status: n/a (Note 1 and Note 2)
L 45/386
L 45/359
L 45/367
L 45/366
Holder: FMG Magnetite Pty Ltd
FMG mineral rights status: n/a (Note 1)
L 45/317
L 45/320
L 45/319
Status: Application
Holder: FMG North Pilbara Pty Ltd
Status: Granted
FMG mineral rights status: 100% all mineral rights (Note 1)
E 45/3084-I M 45/1244-I
Status: Granted
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights
E 08/1548
E 08/1432
E 08/1627
E 08/1585
E 08/1942
E 08/1633
E 08/2004
E 08/1959
E 08/2137
E 08/2063
E 08/2284
E 08/2175
E 08/2490
E 08/2353
E 08/2557
E 08/2498
E 45/2860
E 08/2577
E 45/2920
E 45/2862
E 45/3310
E 45/2946
E 45/3426
E 45/3328
E 45/3535
E 45/3445
E 45/3641
E 45/3545
E 45/3697
E 45/3659
E 45/3767
E 45/3705
E 45/4040
E 45/3817
E 45/4191
E 45/4125
E 45/4227
E 45/4202
E 45/4265
E 45/4250
E 45/4356
E 45/4304
E 45/4418
E 45/4380
E 46/1012
E 46/1000
E 46/621
E 46/1024
E 46/728
E 46/708
E 46/799
E 46/741
E 46/964
E 46/861
E 46/994
E 46/967
E 47/1196
E 47/1155
E 47/1319
E 47/1300
E 47/1357
E 47/1349
E 47/1383
E 47/1363
E 47/1393
E 47/1390
E 47/1420
E 47/1397
E 47/1447
E 47/1433
E 47/1461
E 47/1449
E 47/1533
E 47/1480
E 47/1611
E 47/1543
E 47/1669
E 47/1614
E 47/1679
E 47/1673
E 47/1686
E 47/1682
E 08/1439
E 08/1623
E 08/1878
E 08/1961
E 08/2072
E 08/2200
E 08/2364
E 08/2512
E 08/2649
E 45/2867
E 45/2972
E 45/3414
E 45/3463
E 45/3561
E 45/3663
E 45/3746
E 45/3845
E 45/4126
E 45/4203
E 45/4253
E 45/4330
E 45/4384
E 46/1009
E 46/1034
E 46/711
E 46/743
E 46/862
E 46/986
E 47/1194
E 47/1301
E 47/1351
E 47/1370
E 47/1391
E 47/1404
E 47/1435
E 47/1453
E 47/1500
E 47/1578
E 47/1623
E 47/1674
E 47/1684
E 08/1440
E 08/1626
E 08/1933
E 08/1962
E 08/2118
E 08/2218
E 08/2398
E 08/2550
E 08/2658
E 45/2870
E 45/3191
E 45/3417
E 45/3473
E 45/3591
E 45/3664
E 45/3760
E 45/3866
E 45/4148
E 45/4204
E 45/4254
E 45/4338
E 45/4412
E 46/1010
E 46/517
E 46/727
E 46/776
E 46/958
E 46/991
E 47/1195
E 47/1302
E 47/1355
E 47/1373
E 47/1392
E 47/1419
E 47/1446
E 47/1455
E 47/1532
E 47/1579
E 47/1668
E 47/1675
E 47/1685
E 08/1550
E 08/1630
E 08/1943
E 08/2034
E 08/2157
E 08/2298
E 08/2497
E 08/2562
E 45/2861
E 45/2945
E 45/3318
E 45/3438
E 45/3536
E 45/3654
E 45/3698
E 45/3816
E 45/4083
E 45/4192
E 45/4239
E 45/4277
E 45/4373
E 45/4441
E 46/1013
E 46/706
E 46/735
E 46/859
E 46/965
E 47/1136
E 47/1299
E 47/1342
E 47/1361
E 47/1384
E 47/1396
E 47/1423
E 47/1448
E 47/1479
E 47/1535
E 47/1613
E 47/1670
E 47/1681
E 47/1687
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 41
TENEMENT REPORT AS AT 30 JUNE 2015
Western Australia Tenure (continued)
Status: Granted
E 47/1703
E 47/1763
E 47/1821
E 47/1920
E 47/1988
E 47/2080
E 47/2143
E 47/2229
E 47/2239
E 47/2244
E 47/2379
E 47/2490
E 47/2546
E 47/2638
E 47/2729
E 47/2940
E 47/3001
E 47/3117
E 52/1788
E 52/2382
E 52/2731
E 52/2924
E 52/2989
E 52/3060
E 52/3108
E 52/3164
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights (continued)
E 47/1728
E 47/1690
E 47/1702
E 47/1688
E 47/1764
E 47/1761
E 47/1762
E 47/1741
E 47/1832
E 47/1809
E 47/1818
E 47/1772
E 47/1921
E 47/1846
E 47/1855
E 47/1843
E 47/2020
E 47/1927
E 47/1944
E 47/1923
E 47/2085
E 47/2046
E 47/2062
E 47/2037
E 47/2146
E 47/2137
E 47/2138
E 47/2119
E 47/2234
E 47/2172
E 47/2173
E 47/2160
E 47/2240
E 47/2237
E 47/2238
E 47/2235
E 47/2285
E 47/2242
E 47/2243
E 47/2241
E 47/2442
E 47/2333
E 47/2378
E 47/2331
E 47/2496
E 47/2475
E 47/2476
E 47/2465
E 47/2619
E 47/2507
E 47/2538
E 47/2506
E 47/2664
E 47/2636
E 47/2637
E 47/2632
E 47/2739
E 47/2666
E 47/2675
E 47/2665
E 47/2941
E 47/2879
E 47/2914
E 47/2759
E 47/3004
E 47/2960
E 47/2982
E 47/2958
E 47/3133
E 47/3080
E 47/3081
E 47/3056
E 52/1789
E 47/3179
E 47/3201
E 47/3150
E 52/2486
E 52/2113
E 52/2114
E 52/1790
E 52/2793
E 52/2522
E 52/2527
E 52/2521
E 52/2928
E 52/2892
E 52/2917
E 52/2890
E 52/2991
E 52/2933
E 52/2988
E 52/2929
E 52/3085
E 52/3000
E 52/3016
E 52/2995
E 52/3158
E 52/3097
E 52/3107
E 52/3093
E 52/3160
E 52/3175
E 52/3159
E 52/3163
E 59/1934
M 45/1177 M 47/1408 M 47/1409 M 47/1410
M 47/1411 M 47/1413 M 47/1417 M 47/1431 M 47/1433
M 47/1434 M 47/1453 M 47/1466 M 47/1473 M 47/1474
M 47/1475 M 47/1488 M 47/1489 M 47/1492
P 45/2862
P 08/532
P 46/1812
P 45/2864
P 47/1257
P 46/1814
P 47/1280
P 47/1270
P 47/1285
P 47/1282
P 47/1306
P 47/1287
P 47/1316
P 47/1308
P 47/1392
P 47/1318
P 47/1397
P 47/1394
P 47/1402
P 47/1399
P 47/1409
P 47/1404
P 47/1427
P 47/1411
P 47/1552
P 47/1469
P 47/1605
P 47/1554
P 47/1617
P 47/1607
P 47/1638
P 47/1626
P 47/1643
P 47/1640
P 47/1649
P 47/1645
P 47/1666
P 47/1663
P 47/1671
P 47/1668
P 47/1692
P 47/1673
P 47/1719
P 47/1694
P 52/1485
P 47/1734
P 45/2748
P 45/2922
P 47/1237
P 47/1279
P 47/1284
P 47/1305
P 47/1315
P 47/1391
P 47/1396
P 47/1401
P 47/1408
P 47/1423
P 47/1545
P 47/1604
P 47/1609
P 47/1634
P 47/1642
P 47/1647
P 47/1665
P 47/1670
P 47/1675
P 47/1697
P 47/1736
P 08/624
P 45/2865
P 46/1815
P 47/1278
P 47/1283
P 47/1304
P 47/1309
P 47/1390
P 47/1395
P 47/1400
P 47/1407
P 47/1412
P 47/1470
P 47/1581
P 47/1608
P 47/1633
P 47/1641
P 47/1646
P 47/1664
P 47/1669
P 47/1674
P 47/1696
P 47/1735
P 08/531
P 45/2863
P 46/1813
P 47/1269
P 47/1281
P 47/1286
P 47/1307
P 47/1317
P 47/1393
P 47/1398
P 47/1403
P 47/1410
P 47/1468
P 47/1553
P 47/1606
P 47/1623
P 47/1639
P 47/1644
P 47/1650
P 47/1667
P 47/1672
P 47/1693
P 47/1722
42 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
Holder: FMG Pilbara Pty Ltd
Status: Granted
FMG mineral rights status: 100% all mineral rights (Note 3)
E 46/694
E 46/699
E 46/715
E 46/870
E 46/966
E 52/1779
E 52/2035
E 52/2416
E 52/2620
E 52/2737
E 52/2749
P 52/1415
E 46/696
E 46/701
E 46/729
E 46/878
E 46/975
E 52/1977
E 52/2347
E 52/2555
E 52/2637
E 52/2739
E 52/2854
P 52/1422
E 46/695
E 46/700
E 46/716
E 46/871
E 46/974
E 52/1937
E 52/2311
E 52/2470
E 52/2626
E 52/2738
E 52/2830
P 52/1421
E 46/697
E 46/702
E 46/799
E 46/882
E 46/980
E 52/1984
E 52/2414
E 52/2576
E 52/2696
E 52/2745
E 52/2856
E 46/698
E 46/703
E 46/805
E 46/889
E 46/989
E 52/2034
E 52/2415
E 52/2594
E 52/2699
E 52/2748
E 52/2857
Status: Granted
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% iron ore rights, 40% non-iron (Note 4)
E 08/1628
E 08/1915
E 08/1986
E 08/2065
E 08/2293
E 47/1395
E 47/1833
E 47/2292
E 08/1632
E 08/1950
E 08/2038
E 08/2250
E 08/2296
E 47/1735
E 47/2171
E 52/2730
E 08/1631
E 08/1949
E 08/2003
E 08/2114
E 08/2295
E 47/1677
E 47/2035
E 52/2484
E 08/1629
E 08/1916
E 08/2000
E 08/2067
E 08/2294
E 47/1549
E 47/1879
E 47/2587
E 08/1741
E 08/1985
E 08/2039
E 08/2258
E 08/2354
E 47/1773
E 47/2236
E 52/2786
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights except diamonds
E 47/1333
E 47/1399
E 47/1372
E 47/1524
E 47/1334
E 47/1436
E 47/1352
E 47/1523
Status: Granted
E 47/1398
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights except tiger eye
P 47/1695
Status: Granted
Holder: FMG Pilbara Pty Ltd
FMG mineral rights status: n/a
G 45/275
L 47/232
L 47/351
L 47/367
L 47/397
G 45/285
L 47/293
L 47/360
L 47/381
L 47/471
L 45/158
L 47/294
L 47/361
L 47/382
L 47/472
Status: Granted
L 45/191
L 47/296
L 47/362
L 47/391
L 47/700
L 45/240
L 47/301
L 47/363
L 47/392
Status: Application
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights
E 08/2536
E 08/2088
E 08/2626
E 08/2595
E 08/2683
E 08/2652
E 08/2690
E 08/2687
E 08/2699
E 08/2696
E 08/2721
E 08/2704
E 45/4428
E 45/4337
E 45/4466
E 45/4448
E 45/4497
E 45/4481
E 45/4528
E 45/4525
E 45/4537
E 45/4530
E 45/4575
E 45/4545
E 45/4582
E 45/4579
E 46/1006
E 45/4589
E 46/1046
E 46/1039
E 08/2491
E 08/2609
E 08/2653
E 08/2688
E 08/2697
E 08/2705
E 45/4339
E 45/4450
E 45/4489
E 45/4526
E 45/4531
E 45/4549
E 45/4580
E 45/4590
E 46/1043
E 08/2513
E 08/2625
E 08/2662
E 08/2689
E 08/2698
E 08/2706
E 45/4369
E 45/4451
E 45/4491
E 45/4527
E 45/4532
E 45/4559
E 45/4581
E 45/4591
E 46/1045
E 08/2594
E 08/2627
E 08/2686
E 08/2691
E 08/2700
E 08/2728
E 45/4429
E 45/4479
E 45/4498
E 45/4529
E 45/4542
E 45/4578
E 45/4583
E 46/1037
E 46/1047
TENEMENT REPORT AS AT 30 JUNE 2015
Western Australia Tenure (continued)
Status: Application
E 46/1049
E 46/1061
E 46/1073
E 46/1078
E 47/2918
E 47/2975
E 47/3013
E 47/3097
E 47/3154
E 47/3162
E 47/3205
E 47/3218
E 47/3224
E 47/3230
E 47/3245
E 47/3253
E 47/3263
E 47/3277
E 47/3282
E 47/3291
E 47/3304
E 47/3315
E 47/3334
E 52/3134
E 52/3193
E 52/3206
E 52/3211
E 52/3244
E 52/3264
E 52/3312
Holder: FMG Pilbara Pty Ltd
FMG Mineral rights status: 100% all mineral rights (continued)
E 46/1059
E 46/1053
E 46/1048
E 46/1071
E 46/1063
E 46/1060
E 46/1076
E 46/1074
E 46/1072
E 46/1081
E 46/1079
E 46/1077
E 47/2921
E 47/2919
E 47/2061
E 47/3000
E 47/2985
E 47/2922
E 47/3051
E 47/3014
E 47/3009
E 47/3126
E 47/3098
E 47/3069
E 47/3159
E 47/3155
E 47/3153
E 47/3186
E 47/3163
E 47/3161
E 47/3209
E 47/3206
E 47/3194
E 47/3222
E 47/3219
E 47/3211
E 47/3227
E 47/3225
E 47/3223
E 47/3243
E 47/3239
E 47/3228
E 47/3250
E 47/3246
E 47/3244
E 47/3258
E 47/3254
E 47/3252
E 47/3268
E 47/3264
E 47/3262
E 47/3280
E 47/3278
E 47/3270
E 47/3286
E 47/3283
E 47/3281
E 47/3302
E 47/3292
E 47/3287
E 47/3311
E 47/3306
E 47/3303
E 47/3332
E 47/3318
E 47/3313
E 47/3337
E 47/3335
E 47/3333
E 52/3178
E 52/3135
E 52/3030
E 52/3204
E 52/3194
E 52/3184
E 52/3209
E 52/3207
E 52/3205
E 52/3233
E 52/3212
E 52/3210
E 52/3256
E 52/3245
E 52/3243
E 52/3309
E 52/3294
E 52/3261
E 52/3310
E 69/3384
E 52/3314
M 47/1456 M 47/1457 M 47/1458 M 47/1459 M 47/1476
M 47/1477 M 47/1478 M 47/1481 M 47/1493 M 47/1497
P 45/2934
P 45/2932
P 47/1731
P 47/1747
P 47/1745
E 46/1055
E 46/1068
E 46/1075
E 46/1080
E 47/2920
E 47/2986
E 47/3016
E 47/3125
E 47/3158
E 47/3171
E 47/3207
E 47/3220
E 47/3226
E 47/3242
E 47/3248
E 47/3255
E 47/3265
E 47/3279
E 47/3284
E 47/3296
E 47/3307
E 47/3321
E 47/3336
E 52/3143
E 52/3198
E 52/3208
E 52/3213
E 52/3247
E 52/3303
E 69/2722
P 47/1729
P 52/1515
P 45/2933
P 47/1746
Status: Application
Holder: FMG Resources Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 29/929
E 04/2129
E 69/3296
E 29/946
E 69/3326
E 69/3299
P 29/2359
E 69/3383
E 04/2323
E 45/4577
E 69/3324
E 77/2292
E 04/2322
E 45/4576
E 69/3310
E 69/3385
E 29/938
E 69/3297
E 69/3382
Holder: Pilbara Gas Pipeline Pty Ltd
FMG mineral rights status: n/a
L 45/334
L 45/344
L 45/352
L 45/339
L 45/346
L 47/696
L 45/336
L 45/345
L 45/353
Holder: Pilbara Gas Pipeline Pty Ltd
FMG mineral rights status: n/a
L 45/332
L 45/340
L 45/335
L 45/348
L 45/333
L 45/341
Status: Granted
L 45/342
L 45/347
L 47/697
L 45/343
L 45/349
Status: Application
L 45/337
L 47/695
L 45/338
Holder: Pilbara Iron Ore Pty Ltd
Status: Granted
FMG mineral rights status: 50% all mineral rights (Note 6)
E 47/1192
E 47/1191
E 47/1380-I M 47/580-I
E 47/1224-I
P 47/1414
E 47/1225-I
E 47/1235
Holder: Pilbara Iron Ore Pty Ltd
FMG mineral rights status: n/a (NB.6)
L 47/205
Status: Application
Holder: Pilbara Water and Power Pty Ltd
FMG mineral rights status: n/a
L 45/272
L 45/360
L 45/291
L 45/364
L 45/289
L 45/361
Status: Granted
L 45/292
L 45/325
Holder: The Pilbara Infrastructure Pty Ltd Status: Granted
FMG mineral rights status: n/a
AL 70/1 (L 1SA) G 45/286
L 46/86
L 45/224
L 45/222
L 46/96
L 45/199
L 46/87
L 45/223
L 47/375
Holder: FMG Pilbara Pty Ltd
FMG mineral rights status: n/a
L 47/713
L 47/714
L 47/716
Status: Application
L 47/718
L 47/719
Holder: The Pilbara Infrastructure Pty Ltd Status: Application
FMG mineral rights status: n/a
L 47/661
Status: Granted
Holder: FMG Resources Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 45/4350
E 08/2281
E 52/2966
E 52/2963
E 57/992
E 52/2968
E 69/2993
E 59/1360
E 69/3199
E 69/3177
E 69/3236
E 69/3305
E 77/2158
E 45/4349
E 52/2965
E 52/2981
E 69/2953
E 69/3198
E 69/3304
E 77/2262
E 45/4150
E 52/2964
E 52/2979
E 59/1956
E 69/3178
E 69/3237
E 77/2159
E 52/2962
E 52/2967
E 59/1275
E 69/3176
E 69/3201
E 77/2157
Holder: FMG Resources Pty Ltd
Status: Granted
FMG mineral rights status: 100% all mineral rights (Note 3)
E 52/2621-I
Holder: FMG Resources Pty Ltd
FMG Mineral rights status: 100% iron ore rights, 40% non-iron (Note 4)
E 08/2280-I
Status: Granted
E 08/2282-I
Status: Granted
Holder: FMG Resources Pty Ltd
FMG mineral rights status: 100% all mineral rights (Note 5)
E 57/738
E 57/756
Third Party Tenure (WA)
Holder: Aldershot Resources Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 52/1763
Status: Granted
Holder: Archipelago Nominees Pty Ltd
FMG mineral rights status: 100% all mineral rights except rock products
M 45/1229
Status: Application
Holder: Audax Minerals Pty Ltd
FMG mineral rights status: Earning 80% interest all mineral rights
E 45/2763
Status: Granted
Status: Granted
Holder: BC Iron Ltd
FMG mineral rights status: 25% iron ore rights
E 45/2717
E 46/653
M 46/515
E 46/522
E 46/654
M 46/522
E 46/523
E 46/655
M 46/523
E 46/651
E 46/656
E 46/652
E 46/663
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 43
TENEMENT REPORT AS AT 30 JUNE 2015
Third Party Tenure (WA) (continued)
New South Wales Tenure
Holder: BC Iron Ltd
FMG mineral rights status: n/a
G 46/9
G 46/8
L 46/76
L 46/75
L 46/82
L 46/68
L 46/79
Status: Granted
L 46/73
L 46/80
L 46/74
L 46/81
Holder: BC Iron Nullagine Pty Ltd
FMG mineral rights status: 25% iron ore rights
E 45/3790-I
E 46/969-I
E 46/928-I
E 46/970-I
E 46/929-I
Status: Granted
E 46/930-I
E 46/931-I
Holder: BC Iron Nullagine Pty Ltd
FMG mineral rights status: n/a
L 46/83
L 46/95
L 46/84
L 46/85
Status: Granted
L 46/93
L 46/94
Holder: Blue Mist Enterprises Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 47/1861
E 47/1863
Status: Granted
Holder: Cullen Exploration Pty Ltd
FMG mineral rights status: 51% iron ore rights
E 08/1393-I
E 47/1154-I
E 47/1649-I
E 47/1650-I
Status: Granted
Holder: Gold and Copper Resources Pty Ltd Status: Granted
FMG mineral rights status: Earning 51% metallic mineral rights (Note 8)
EL 6040
EL 8331
EL 6588
EL 8332
EL 7599
EL 7194
EL 8330
Holder: Gosling Creek Pty Ld
FMG mineral rights status: Earning 51% metallic mineral rights
(Note 8)
EL 6481
Status: Granted
Holder: Gum Ridge Mining Pty Ltd
FMG mineral rights status: Earning 51% metallic mineral rights (Note 8)
EL 6249
Status: Granted
EL 6562
Holder: Lucknow Gold Limited
FMG mineral rights status: Earning 51% metallic mineral rights (Note 8)
EL 6455 (partial)
Status: Granted
Holder: Tom’s Waterhole Pty Ltd
FMG mineral rights status: Earning 51% metallic mineral rights (Note 8)
EL 6456
Status: Granted
P 08/556-I
South Australia Tenure
Holder: Cullen Exploration Pty Ltd
FMG mineral rights status: Earning 51% iron ore rights
E 52/1667-I
Status: Granted
Holder: Cullen Exploration Pty Ltd
FMG mineral rights status: 51% iron ore rights
M 08/502
M 47/1490
Status: Application
Status: Granted
Holder: FMG Resources Pty Ltd
FMG mineral rights status: 100% all mineral rights
EL 5023
EL 5237
EL 5028
EL 5061
EL 5600
EL 5024
EL 5338
EL 5030
EL 5394
EL 5197
EL 5027
EL 5031
EL 5449
EL 5063
EL 5026
EL 5029
EL 5062
EL 5025
EL 5467
EL 5032
EL 5451
Holder: David Ryan
FMG mineral rights status: Option for 100% all mineral rights
P47/1275
Status: Granted
Holder: Derek Ammon
Status: Granted
FMG mineral rights status: 40% all mineral rights (Note 7)
E 47/1140-I
Holder: Derek Ammon
FMG mineral rights status: 40% all mineral rights (Note 7)
M 47/583
Status: Application
Holder: Flinders Mines Ltd
FMG mineral rights status: 100% all mineral rights
E 47/1306-I M 47/1407-I
E 47/1011-I
E 47/1016-I
Status: Granted
Holder: Global Advanced Metals Wodgina Pty Ltd
Status: Granted
FMG mineral rights status: 100% iron ore rights
E 45/4024
E 45/4025
Holder: Livno Consolidated Pty Ltd
FMG mineral rights status: Beneficial right to earn 100% mineral rights
E 45/4021
Status: Granted
Holder: Maincoast Pty Ltd
FMG mineral rights status: 100% all mineral rights
E 70/2596
Status: Application
44 I FORTESCUE METALS GROUP LIMITED RESERVES AND RESOURCES
Notes
1 FMG Magnetite Pty Ltd, FMG North Pilbara Pty Ltd and Pilbara Water and
Power Pty Ltd are subsidiaries of FMG Iron Bridge Limited which is owned
88 per cent by Fortescue Metals Group Ltd and 12 per cent by Baosteel
Resources International Co. Ltd.
2 Joint Venture with FMG Magnetite Pty Ltd and Formosa Steel IB Pty Ltd.
Formosa holds 31 per cent interest in title.
3 Joint Venture with Iron Bull Ashburton Pty Ltd. Iron Bull are farming-in to
earn up to an 50 per cent interest in the non-iron mineral rights.
4 Joint Venture with Northern Star Resources Ltd. Northern Star Resources
hold 60 per cent beneficial interest in non-iron mineral rights.
5 Exclusive Option of 6 months for Mabrouk Minerals Limited to purchase
100 per cent all mineral rights.
6 Unincorporated Joint Venture between Fortescue Metals Limited and
Consolidated Minerals Limited.
7 Title has been contested and is currently being litigated.
8 Joint Venture with FMG Resources Pty Ltd and Gold and Copper Resources
Pty Ltd, Gosling Creek Pty Ld, Gum Ridge Mining Pty Ltd, Lucknow Gold
Limited, Tom’s Waterhole Pty Ltd. FMG are farming-in to earn up to a
51 per cent interest in the metallic mineral rights.
CORPORATE SOCIAL RESPONSIBILITY
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 45
CONTENTS
Corporate Social Responsibility
What does CSR mean to Fortescue?
Approach to CSR
Business ethics and governance
CSR reporting
Engaging with stakeholders
Safety
A safe and healthy workforce
Approach to safety
Case study: Safer, more efficient and accurate
surveying at Fortescue
Step Right program
People
Maintaining a high performance culture
Fortescue’s workforce
Graduate and Apprenticeship Program
Case study: Speak Up program
Workforce equality and diversity
Diversity objectives
Gender initiatives for FY16
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Aboriginal Development & community
Aboriginal Heritage and Native Title
Case study: CEO for the day
Creating employment opportunities through
education and training
Case study: Fortescue wins Supply Nation Corporate
Member of the Year 2015
Aboriginal Business Development
Working with the community
Case study: A proud sponsor of the National
Indigenous Hockey Program
Environment
Reducing Fortescue’s environmental impact
Environmental management systems
Greenhouse gas emissions and energy
Climate change
Water management
Case study: Night Parrot
Biodiversity and land rehabilitation
Waste and recycling
Case study: Controlling feral cats
Closure planning
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46 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
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CORPORATE SOCIAL RESPONSIBILITY (CSR)
What does CSR mean to Fortescue?
Fortescue aspires to be a corporate citizen of choice, welcomed by the
communities that host its activities, generating long term value for all
of its stakeholders.
To achieve its vision of being the safest, lowest cost, most profitable
iron ore producer, Fortescue must operate in a way that integrates
Corporate Social Responsibility (CSR) principles into all aspects of
its operations. Fortescue does this by empowering communities,
providing economic opportunity, behaving with respect and care for
people and the environment, taking responsibility for its presence
and doing what it says it will do. Fortescue’s values, such as safety,
integrity, empowerment and family, are aligned with these principles
to ensure all Fortescue team members embrace the expectation to
operate in a socially responsible manner.
Approach to CSR
This report provides an overview of how Fortescue approaches and
manages CSR.
The company draws on a number of global and national frameworks
to guide business strategies and operations, as well as reporting
requirements. In 2013, Fortescue became a signatory to the United
Nations Global Compact (UNGC), and also aligns to the International
Council on Mining and Metals (ICMM) Sustainable Development
Principles. The CSR section of this report communicates progress
against these principles to stakeholders as well as the UNGC.
This report contains Standard Disclosures from the GRI Sustainability
Reporting Guidelines, which is also referenced in the ASX Corporate
Governance Principles and Recommendations. A copy of the GRI index
is available on Fortescue’s website at www.fmgl.com.au.
The overall approach to audit and assurance is outlined in the
Governance section of this report, with the data on greenhouse gas
emissions, total energy consumption and total energy production
independently assured. This information was the subject of a limited
assurance by our auditors, PricewaterhouseCoopers, in accordance
with the National Greenhouse and Energy Reporting (Audit)
Determination 2009 and the Australian Standard on Assurance
Engagements ASAE 3410: Assurance Engagements on Greenhouse
Gas Statements (ASAE 3410).
Business ethics and governance
Fortescue clearly articulates ethical business principles and practices
and implements sound systems of corporate governance. Business
risks are identified and managed, with CSR incorporated into decision
making processes. Fortescue implements effective engagement and
communication practices with key stakeholder groups and commits
to transparently reporting on performance to stakeholders.
Fortescue is committed to ethical business practices, strong corporate
governance and honest stakeholder engagement. Transparency,
accountability, stewardship and integrity are essential elements
of the approach. More detailed information can be found in the
Corporate Governance section of this report.
Fortescue has a number of policies in place which are specific to its
CSR agenda. These policies help govern business activities and clear
expectations regarding business practices. They are supported by
established management systems which assist the business in the
day to day management of CSR issues and performance.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 47
Business ethics and governance (continued)
Fortescue’s policies are available on its website including:
• Employee Code of Conduct
• Director’s Code of Conduct
• Risk Management Policy
• Strategic Procurement and Supply Chain Policy
• Safety Policy
• Diversity Policy
• Anti-Bribery and Corruption Policy
• Environment Policy
The Employee Code of Conduct embraces the company’s values and
provides guidance on the standards of behaviour expected from the
entire Fortescue family including directors, employees, contractors,
suppliers and business partners. Fortescue has also established
a separate Directors’ Code of Conduct and directors are bound by
both Codes. Fortescue is committed to achieving and maintaining a
reputation as an employer of choice, an ethical business partner and
a good corporate citizen, with both codes aligned with the UNGC
principles on human rights.
Fortescue prides itself on an established reputation for acting with
integrity, honesty and in compliance with all applicable laws and
regulations. The company maintains a formal policy of zero-tolerance
of corruption in all its forms, including bribery, and has established a
Business Integrity and Ethics Committee and appointed a specialist
Business Integrity Manager. In addition, Fortescue participates in
voluntary anti-corruption initiatives including the Australian Business
Integrity Council, and delivers role-specific anti-fraud and corruption
training and certification.
The Anti-Bribery and Corruption compliance program includes regular
and specialist fraud and corruption risk assessments that consider
the potential fraud, bribery and corruption risks associated with the
business, employees, third-party partners and geographic locations in
which the company operates.
Fortescue has a process in place for investigating allegations as well
as numerous channels for employees and others to confidentially
report suspected or actual misconduct or violations of company
policy, such as the whistleblower hotline and Speak Up program.
This year, some employees and contractors were terminated
following investigation.
CSR reporting
Fortescue’s CSR disclosures have been informed by:
•
•
•
•
•
Review and prioritisation of issues identified in Fortescue’s Risk
Management Framework
The content of public disclosure on key issues within the
industry
Fortescue’s commitments and policies which guide its
CSR agenda
Requirements of relevant global frameworks such as the UNGC,
ICMM and GRI
Stakeholder interests and concerns based on Fortescue’s existing
stakeholder engagement programs.
Based on these considerations, the following environmental, social
and broader economic issues ranked most highly this year:
• Economic performance
• Employee health and safety
• Workforce
• Local community development
• Local employment and business development
• Heritage and land use
• Biodiversity
• Land rehabilitation
• Resource management
• Compliance
• Bribery and corruption.
The aspect boundaries are within the narrative of this report.
48 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Engaging with stakeholders
Understanding the long term needs of stakeholders helps to better meet accepted social norms and needs over the long term so that Fortescue can
continue to operate and share the value we create. While Fortescue did not undertake any specific stakeholder engagement for the purpose
of preparing this report, key stakeholders concerns and how we regularly engage with them is outlined below.
Engaging with stakeholders
Customers
Stakeholders: Steel mills in China and South East Asia
Interests and concerns:
• Safe, reliable and consistent supply and delivery
of quality products
• Maintain strong technical and commercial
relationships through open and honest
communication and delivering on our promise
Stakeholder engagement and response:
• Regular communication
• Shanghai and Singapore offices with in-country employees
• Highly skilled and experienced marketing team
• Quality control of Fortescue products
• Targeted continuous improvement programs
• Visits to operations
Employees
Stakeholders: Employees working across Fortescue’s operations
Interests and concerns:
• Providing employees with a safe and rewarding
work environment, where they feel empowered
through career development and opportunities
• Fostering a strong and unique culture through
a values-driven approach
Engagement:
• Annual Future Forum with the CEO and executive leadership team
• Leadership Excellence Pathway
• Annual safety survey and monthly safety campaigns
• Employee recognition program
• Internal communications channels including prestart meetings,
company emails, site notices, intranet, Fortescue TV and events
Local and Aboriginal communities
Stakeholders: Local and Aboriginal communities in close proximity to Fortescue’s operations and the broader
Western Australian community
Interests and concerns:
• Potential environmental and social impacts
associated with Fortescue’s operations
• Sustainable community development through
local content, employment, training and
education, business development and
opportunities, and investment in services and
amenities
• Culture and heritage impacts
Engagement:
• Dedicated community office
• Community consultation and engagement
• Fortescue-hosted community events
• Fortescue Community Support program
• Partnerships and investments in major projects
• Fortescue Vocational Training and Employment Centres (VTEC)
• Dedicated heritage, pastoralist and Aboriginal
development teams
Traditional Owners
Stakeholders: Traditional Owners and Native Title groups of the land on which Fortescue operates
Interests and concerns:
• Compliance with Land Access agreements,
including heritage and Native Title compliance
• Strengthening cultural awareness and
understanding and creating opportunities
through training, employment, and business
development
Engagement:
• Dedicated heritage and Aboriginal development teams
• Regular communication and consultation with Native Title groups
and prescribed working group committees
• Fortescue Vocational Training and Employment Centres (VTEC)
• Targeted and tailored business development meetings
• Fortescue hosted business and employment expos and events
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 49
Engaging our stakeholders
Government and regulators
Stakeholders: Federal, State and Local Government agencies and regulators
Interests and concerns:
• Environmental, social and fiscal performance
and compliance
• Legislative and regulatory policy frameworks
• Land access and approvals
• Community development
Engagement:
• Regular engagement with Government and regulators at
Federal, State and Local levels
• Regulatory information
• Public information including financial results and
community reports
Suppliers and contractors
Stakeholders: Businesses local to Fortescue’s operations in the Pilbara, Western Australia and Australia, as well as
international business.
Interests and concerns:
• Working closely with suppliers and contractors
to achieve mutually beneficial outcomes
• Transparent communication throughout contract
award process and meeting agreements and
processes on an ongoing basis
Engagement:
• Regular meetings, communication and reviews with
strategic suppliers and contractors
• Strategic relationships with contractors and suppliers
• Early engagement with key contractors and suppliers for
major projects
Educational institutions
Stakeholders: Local schools, universities, and other educational institutions
Interests and concerns:
• Creating career pathways and opportunities
Engagement:
• Scholarships, cadetships, traineeships and
apprenticeships
• University graduate program
• Involvement in local career expos
• Site visits
Non-government organisations
Stakeholders: Local, regional and international organisations concerning environmental, human rights, sustainability
and corporate social responsibility
Interests and concerns:
• Risk management
• Community engagement
• Environmental performance
• Human rights
• Compliance
Engagement:
• Annual report
• Sustainability reporting
• State Agreement reporting,
• Media releases
• ASX announcements
• Environment and community departments
50 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
SAFETY
Global safety leadership is inherent in Fortescue’s vision to be the safest, lowest cost, most profitable
iron ore producer
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 51
safety
is the number one priority
SAFETY
A safe and healthy workforce
At Fortescue, safety is the number one priority. The focus on safety
leadership and culture empowers everyone to take whatever action is
required to ensure safe operations, including stopping production
when necessary.
The health and wellbeing of all employees and contractors is never
to be compromised, and Fortescue’s people are committed to providing
a safe workplace for themselves and each other as they work together
to become global leaders in safety.
Approach to safety
Fortescue recognises health and safety is inherent in the business
and across the entire mining sector. Safety is identified in Fortescue’s
Risk Management Framework and the management system is focused
on all operations that have potential to impact health and safety.
Fortescue’s people are committed to continually improve safety
performance and provide a safe workplace for fellow employees,
business partners and contractors.
Fortescue’s Health and Safety Program
Vision
and Values
Health, Safety
and
Environment Policy
Health, Safety, Environment
and
Security Management Standards
Major Hazard Control Standards
HSES Plans, Procedures, Forms, Systems
HSES Management Systems, Management Plans, Procedures,
Standard Work Instructions and JHAs
52 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Fortescue’s health and safety program is represented as a tiered system
which provides a common approach across the business.
• Global safety leadership is inherent in Fortescue’s vision to be
the safest, lowest cost, most profitable iron ore producer
•
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Safety is Fortescue’s highest priority and one of its company values
The Health and Safety Management System is the overarching
framework which includes thousands of controls, processes
and guidelines
The Major Hazard Control Standards Management Program was
built on eliminating fatality risk at all stages of the mine lifecycle and
features 58 common and 14 site-specific critical controls
Life Saving Choices, launched in 2013, empowers individuals
to manage the safety risk where they have direct control on the
job. They consist of a set of 12 memorable, simple rules for all
employees and contractors and are the last line of defence, with
suspected breaches investigated and disciplinary action applying
to cases of serious misconduct. More than 16,000 employees and
contractors have been trained in the Life Saving Choices program
with another 10,620 receiving additional safety leadership training.
HEALTH AND SAFETY
MANAGEMENT SYSTEM
MAJOR HAZARD CONTROLS
LIFE SAVING CHOICES
TRIFR 5.1
15 %
Fortescue and contractor safety performance
TRIFR
Fatalities
9.2
7.6
6.0
5.1
14.4
14
12
10
8
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2
FY11
FY12
FY13
FY14
FY15
Fortescue’s reporting on safety is aligned with the United States
Government Occupational Safety and Health Administration (OSHA)
guidelines for the recording and reporting of occupational injuries
and illnesses.
In FY15, Fortescue’s TRIFR reduced to 5.1 per million hours worked,
a 15 per cent improvement compared to the previous year and a
65 per cent improvement in the past four years.
In 2014, an independent, external review of safety performance
and management across Fortescue operations was conducted.
In March this year, an independent, external safety survey of
employees and contractors was again conducted with over
8,200 responses, identifying an improvement across all
parameters achieved compared to the previous year.
Field interactions are a key component of Fortescue’s safety
program and are an integrated part of daily work at its operations.
Leaders conduct daily field interactions to demonstrate the value
Fortescue places on safety and to encourage safety awareness
and a thoughtful approach to managing the risks.
Positive safety behaviour is commended and encouraged, while
leaders take the time to discuss at risk behaviour which may
compromise safety.
The tragic loss of two contractors in separate incidents at the
Christmas Creek operations in FY14 prompted Fortescue to instigate
an external third party review of safety systems, processes and
culture. Employees were empowered to direct implementation of
changes to reinforce the company’s commitment to safety.
Following an investigation into the August 2013 fatal injury
of electrician Kurt Williams in the ore processing facility, the WA
Department of Mines and Petroleum charged Crushing Services
International Pty Ltd (CSI) for failing to provide a safe working
environment. CSI pleaded guilty and was fined A$115,000
in October 2014. An investigation into the fatal injury
of Alan Zuvela in an accident in the heavy vehicle workshop
in December 2013 is yet to be concluded.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 53
CASE STUDY
Safer, more efficient and accurate surveying at Fortescue
Surveying iron ore stockpiles using traditional
methods is no easy task. At Fortescue’s
Cloudbreak operations, the survey team
previously spent five days each month
surveying more than 100 stockpiles, 85 per
cent active with heavy machinery each day,
by walking and scanning the stockpiles.
This task presented numerous risks to
the team’s health and safety including
injury from tripping on uneven and loose
material, falling from height, dehydration,
fatigue, interaction with heavy vehicles and
machinery, engulfment and crushing. Often
the crest of stockpiles would be too unsafe
to walk, meaning the surveyor was unable
to determine the accurate volume of the
stockpile and had to rely on existing data to
estimate and project its volume.
Safety controls were in place to minimise
the risk to Fortescue’s people such as dozers
to flatten stockpiles, heavy machinery to
cease working during surveying activities
and the use of existing data to estimate
volumes, however these presented new
challenges including interruption to
operations and inaccurate data.
Unmanned Aerial Vehicle systems have
now revolutionised surveying at Fortescue’s
Cloudbreak mine, providing a safer, more
efficient and more accurate method. The
technology completely removes Fortescue’s
surveyors from the risks associated with
traversing stockpiles and its successful
application at Cloudbreak resulted in
Fortescue being awarded first place in the
Systems category at the 2015 Chamber
of Minerals and Energy (CME) Safety and
Health Innovation Awards.
Step Right program
During FY15, Fortescue implemented a musculoskeletal injury prevention
program for sprains and strains to reduce the number of injuries related
to posture, lifting, lowering and twisting.
The program targets at risk behaviours and follows a set of five
core principles:
1 Manage your health
Fitness, sleep, hydration and diet
2 Plan your work
Identify risks and plan breaks in repetitive tasks
3 Operate tools and equipment safely
Adjust tools and seats, use the right tools for the job
4 Work in a safe posture
Understand good posture and support
5 Keep moving
Incorporate movement and stretching into the working day
Employees are encouraged to assess and manage their risks and discuss
possible changes to work practices with their supervisors.
54 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Manage your health
Plan your work
Operate tools
and equipment safely
Work in a safe posture
Keep moving
PEOPLE
Fortescue’s unique culture, shaped by its values, is the key to strong performance against stretch targets
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 55
VALUES
PEOPLE
Safety
• Working together to be global safety leaders
• We care about the health and wellbeing of people
• I am my brothers’ and sisters’ keeper
Family
• Care for your work mates
• Think of the whole business - not just your part
• Be committed as one
• Celebrate success
Integrity
• Honesty in our words and actions
• Doing what we say we will do
Determination
• Drive for outcomes
• Never give up
Generating ideas
• Never accept the status quo
• Always be on the lookout for better ways
Empowerment
• Always take action
• Authority to do what you said you would do
• Ability to act in the best interest of the business
Frugality
• Use your brains not your cheque book
• Save every dollar you can
• Find a way to do the same job for less money
Set yourself Stretch Targets
Enthusiasm
• Be enthusiastic
• Be energetic
• Be positive
Maintaining a high performance culture
In FY15, Fortescue maintained a strong focus on developing internal
talent and leveraging its unique culture, shaped by its values, to support
the delivery of high performance outcomes. The company recognises that
the investment in its people and a strong leadership team is paramount
for ongoing success.
Fortescue introduced a Leadership Excellence Pathway in early 2015
to expand the leadership development curriculum and strengthen
the internal leadership pipeline. The Pathway comprises several core
initiatives to provide leaders with critical skills and knowledge, including
a 4-day Leadership Fundamentals Program, Leadership Development
Program and external leader forums. During the year, 311 leaders
completed formal leadership development training.
The performance review process was further embedded during the
year to ensure all employees have clear objectives and are provided
with performance feedback aligned to business targets, including the
assessment of employees’ behaviour against the values.
Fortescue’s workforce
As Fortescue has moved from the construction phase to steady state
operations, at a time of volatility in the iron ore market, the Company has
been focused on operating as efficiently and productively as possible.
A thorough organisational review was performed, initiating a number of
key projects.
Fortescue’s predominant operational rosters moved from an
eight days on, six days off cycle to a two weeks on, one week off cycle,
with residential rosters moving to a seven and three, seven and four cycle.
The roster was fully implemented by the end of May 2015, bringing work
rosters across Fortescue’s operations into line with the majority of Pilbara
iron ore industry operations. Opportunities for internal transfers for those
impacted by the roster change were prioritised for affected employees.
The decision to change the roster was particularly challenging and
followed considerable work on a number of other changes across the
business being implemented before this was considered.
However despite these changes, Fortescue’s commitment to stretch
targets for Aboriginal employment and supporting gender diversity
was maintained.
As at 30 June 2015, Fortescue employed 4,057 direct employees, with
contractors employing a further 4,436 people at operational sites. In total,
55 per cent of employees are covered by enterprise agreements.
Employee engagement is measured in a number of ways at Fortescue, with
voluntary employee turnover rate recorded at 10.8 per cent, less than the
industry average of 11.5 per cent. A number of internal channels are used
to regularly communicate transparent, accurate and timely information
to employees such as the intranet, digital TV screens, weekly town hall
meetings, leadership forums and eNewsletters.
56 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
56 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
New and emerging leaders
Online leader induction
Cultural leadership framework
Supervisors and superintendents
Leadership fundamentals
Site leadership development
Building diversity
Career resiliency
Aboriginal leaders program
High performance leaders
Stretch and challenge program
Tertiary education support
Ongoing learning
Ground breakers and company makers
Mentoring program
Voluntary employee turnover (%)
15.0
14.2
10.8
9.7
7.0
FY11
FY12
FY13
FY14
FY15
Graduate and apprenticeship program
Fortescue’s graduate program has been running for five years with
100 per cent of graduates securing permanent employment at the
end of the program.
In addition, Fortescue has a three month vacation program,
with 33 participants working FIFO at the operational sites in their
field of study.
Over the two year program, graduates experience working on at least
four of the operational locations in a variety of teams to ensure they
receive a thorough understanding of the business before they embark
on their careers.
Fortescue has run an apprenticeship program for five years
and to date, 17 successful tradespeople graduates have secured
permanent employment on completion. In FY15, there were
67 apprentices with 35 per cent Aboriginal participation.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 57
Speak Up program
During the year Fortescue launched its ‘Speak Up’ campaign
as part of the commitment to living the values. The focus on
ensuring Fortescue is a safe and happy workplace means everyone
has to take responsibility for looking after themselves and
their mates.
Whether it’s about a safety breach, bullying and harassment or
inappropriate use of alcohol and drugs, employees feel empowered
to ‘speak up’. The program provides a number of confidential channels
for people to share their concerns in a fair, balanced and confidential
manner. It’s all about employees being their brother’s and sister’s keeper.
Workforce profile: gender
Workforce profile: Aboriginal diversity
Workforce equality and diversity
5000
4000
3000
2000
1000
0
10%
21
8%
21
92%
241
FY11
FY12
FY13
FY14
FY15
FY12
FY13
Female
FY14
Male
FY15
10%
21
9.58%
8%
21
92%
10.34%
241
12.37%
12.31%
12.82%
Fortescue is committed to providing a safe, balanced and fair working environment where core values drive behaviour and a strong culture.
For example, the company’s Diversity Policy and Plan not only supports employees and related initiatives, but also aligns with ASX requirements.
A breakdown of female representation across the whole of Fortescue, and at senior levels is listed below:
Female
Female %
Male
Male %
Group
FY14
FY15
FY14
All employees
Senior Executive*
Board
793
4
2
657
5
3
17.4
10.0
20.0
FY15
16.2
16.0
30.0
FY14
3,770
36
8
FY15
3,400
26
7
FY14
82.6
90.0
80.0
FY15
83.8
84
70.0
58 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Workforce equality and diversity (continued)
Each year the Board review and approve measurable diversity objectives. The objectives for FY15 and progress against these is summarised below,
together with objectives for FY16:
* Senior Executive means a leadership position title of Director, Group Manager or General Manager.
Measurable objectives for FY15
Progress
Highlight diversity in key company communications
Career Resiliency Program:
• Pilot a career resiliency program to provide mentoring support
for women in professional and operational roles seeking
to further their careers in technical roles or management
positions.
• Communicate the outcomes of the pilot career resiliency
program.
Diversity initiatives and stories are regularly published on Fortescue’s
intranet site and shared across the company via email communications
and site notices.
A pilot career resiliency program was run in FY15 with feedback and
results communicated to the Executive team, with support for the
program to continue in FY16.
Include diversity in the online leadership induction program being
implemented in FY15.
Online leadership induction program updated to include diversity.
Nominate women for industry recognition awards.
Fortescue women were nominated for the Chamber of Minerals and
Energy (CME)Women in Resources awards, with Linda O’Farrell, Group
Manager Fortescue People, being awarded the ‘WA Women in Resources
Champion’ for 2015. Other awards in FY15 included:
• Julie Shuttleworth, Solomon General Manager, awarded a scholarship
at the Harvard Women’s Leadership Forum in Boston, USA
• Sharon Warburton, Non-Executive Director, named WA’s Telstra
Business Woman of the Year 2014
Report on diversity metrics on a quarterly basis and provide
reports to leaders.
Female and Aboriginal participation rates are internally reported on
a monthly basis.
Monitor tenure data and collect exit interview data to understand
reasons for leaving the business.
Data on women leaving the business was regularly analysed, with
key reasons related to personal circumstances, relocation and career
development opportunities.
Monitor female participation in senior leadership roles through
bi-annual talent reviews.
Talent reviews were completed in February 2015 and are on track for
the next six month period. One new female Board member and one new
female Group Manager have joined Fortescue, along with one female
Manager promoted to General Manager.
Encourage women to participate in company leadership programs.
Female representation in the company leadership program was 16 per cent.
Participate in key diversity networking groups.
Fortescue participated in external diversity networking groups including
sponsoring UWA Women in Engineering.
Target equal representation of women in the graduate/vacation
student intake.
One third of the vacation student intake was female. Over half of the
graduate program places were offered to female candidates.
Encourage women to participate in graduate and vacation
programs, apprenticeships and traineeships.
Remuneration:
• Refresh workforce profile and job evaluation
• Complete a more detailed gender equity analysis
Fortescue actively encouraged women to apply for its graduate and
vacation, apprenticeship and traineeship programs, however saw low
application rates for the apprenticeship program.
A detailed review was completed with recommendations provided to
the Board.
Increase the number of employees and contractors to complete
Respect training.
• 94 per cent completion of Respect for employees
• 92 per cent completion of Respect for leaders
• 4003 contractors completed Respect training
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 59
Measureable objectives for FY15
Progress
Job share:
• Assess the effectiveness of the pilot job share arrangements
• Identify further opportunities to extend flexible work
The job share trial program has proven successful and will be expanded
to include Christmas Creek, Port and Rail sites in FY16. Job share
participation increased from 20 people in FY14 to 47 people in FY15.
arrangements
• Policy developed and implemented
• Evaluate job share arrangements increase and measure
percentage of uptake
Request feedback from employees on their priority areas for
improving workplace flexibility.
Ongoing communication and training on the following:
• Respect
• Code of Conduct
• Equal opportunity, harassment and bullying
• Fair treatment
• Whistleblowing
During the transition to the 2/1 roster employees provided feedback about
alternative options for workplace flexibility. The ability to access job share
arrangements was the most requested option.
Ongoing training and communication on these key policies was
provided in FY15.
Gender initiatives for FY16
Identified opportunity
Build on female participation rates.
Improvement in overall
participation rate and
participation rates within
identified departments.
Desired state
Recommended measurable objectives
Improve retention rate of women.
Female voluntary turnover
rate decreases to match or
better the male turnover
rate.
Continue to build awareness of the
benefits of gender diversity within
the business.
Increase awareness of the
contribution females make
to our workforce.
• Establish a Diversity Stakeholder Group with representatives from senior
management to provide guidance on the FY16 plan, monitor progress
and champion actions.
• Further increase female participation through targeted recruitment and
development practices ensuring female candidates are shortlisted
for all roles.
• Establish a dedicated apprenticeship program to increase female
and Aboriginal participation in trade roles. Target 25 per cent in
apprenticeship, traineeship and graduate positions.
• Establish diversity targets for major contracting partners.
• Review recruitment practices to ensure female participation goals
are set for hiring or insourcing programs.
• Pilot a mentoring program for women with leadership potential.
• Increase the retention rate of women in the workforce, with particular
focus on site-based women returning from parental leave, by identifying
opportunities to extend flexible work arrangements.
• Identify women with leadership potential through talent reviews and
ensure their participation in leadership development programs.
• Provide diversity updates, including participation and turnover rates, at
bi-monthly leadership meetings and quarterly presentations.
• Continue to nominate women for internal and industry awards focussed on:
- Northern Spirits awards program
- CME Women in Resources awards
• Ongoing diversity and equal opportunity communication
and training including:
- Respect
- Code of Conduct
- Equal Opportunity, Harassment and Bullying
- Fair Treatment
- Whistleblowing
• Review and update Fortescue’s Diversity Policy
• Obtain employee feedback on diversity via the annual values survey.
Ensure remuneration outcomes
are based on job value.
All employees are paid based
on their skills and experience
they bring to the role.
• Complete annual gender remuneration parity review and implement
recommended actions.
60 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Aboriginal Development AND COMMUNITY
Creating training, employment and business development opportunities for Aboriginal people supports
Fortescue’s commitment to end Aboriginal disparity
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 61
A$1.8 billion
Contracts to Aboriginal companies and JVs
ABORIGINAL DEVELOPMENT AND COMMUNITY
Fortescue is committed to creating economic opportunities for
Aboriginal people through training, employment and business
development. By providing training for guaranteed jobs and developing
business capacity, Fortescue is partnering with the Traditional Owners
of the Pilbara to end the disparity between Aboriginal and non-
Aboriginal Australians in socio-economic outcomes.
With more than 5,000 heritage places in the vicinity of Fortescue’s
developments and operations, the surveys ensure continued protection
and promotion of Aboriginal history and culture in operations, such as
protection of the Kakutangutanta rock shelter adjacent to a mining area
at Christmas Creek and Satellite Springs ethnographic site at the Kings
Valley mine.
Fortescue’s approach to Aboriginal development is aligned with its
policy on human rights within the Code of Conduct and is consistent
with global frameworks including the United Nations Guiding Principles
on Business and Human Rights, the United Nations Global Compact and
the International Council on Mining and Metals (ICMM) Principles.
Aboriginal Heritage and Native Title
Fortescue has active Land Access Agreements in place with seven
Traditional Owner groups in the Pilbara region, specifically the Palyku,
Kariyarra, Nyiyaparli, Banjima, Eastern Guruma, Puuti Kunti Kuruma
Pinikura and Njamal People, and works closely with the Wirlu-murra
Yindjibarndi Aboriginal Corporation (WMYAC) representing the
Yindjibarndi people of Western Australia. The company also provides
production-based royalties to four Traditional Owner groups where
its operations fall on their traditional land. The business takes a
consultative approach to Native Title and places significant importance
on the creation of long term employment opportunities for local
Traditional Owner groups.
The identification and management of Aboriginal cultural heritage
sites is fundamental to Fortescue’s approach to sustainable operations
and the company’s commitment to protect and promote Aboriginal
history and culture. Fortescue reviews the agreements and consults
with the Traditional Owner groups to ensure effective heritage
management and meet compliance requirements under the Western
Australian Aboriginal Heritage Act 1972 (AHA). Fortescue is proud to
report there were no incidents impacting on Aboriginal heritage sites
during the year.
The company works closely with its Traditional Owner partners to
conduct heritage surveys and consult extensively on heritage approvals
and compliance matters. In FY15, Fortescue ethnographically surveyed
300,000 hectares and archaeologically surveyed more than 11,900
hectares of tenure. Since establishment, Fortescue has ethnographically
surveyed more than 1,230,000 hectares and archaeologically
surveyed more than 160,000 hectares of land.
In FY15, Fortescue finalised new Heritage Consultant Standards
which apply to all heritage consultants working on Fortescue projects,
developments and exploration areas. Since implementation, the
Standards have resulted in an improvement in the quality and
transparency of heritage survey outcomes, aligning with recent
changes to the administration and application of the legislation.
In consultation with Native Title partners, Fortescue delivers
a comprehensive program of cross cultural education for all employees
and contractors. In FY15, close to 9000 employees and contractors
participated in Fortescue’s Aboriginal Engagement sessions provided
in the Perth Training Centre and over 550 employees and contractors
engaged in the Company’s cross cultural awareness program. A
review of the site-specific cross cultural awareness training program
for the Solomon Hub was also completed this year in collaboration
with Traditional Owner representatives, and Fortescue’s first outdoor,
interactive cultural heritage space was established. Similar spaces are
proposed at Cloudbreak and Christmas Creek over the coming year.
Fortescue also works with Native Title partners on broader cultural,
community and research projects. In August 2014 the Gamburlarna
Project was launched with the Wirlu-murra Yindjibarndi Aboriginal
Corporation to further identify, record and protect important
Yindjibarndi cultural heritage. Fortescue’s initial contribution of
A$1.2 million will be supplemented by a further commitment of
A$1.8 million over the coming years. Early phases of the project have
resulted in significant outcomes achieved with the development of
an interactive cultural map of Yindjibarndi Country, which will be
made available to the wider community.
In April 2015 Fortescue stood alongside the Nyiyaparli People to
celebrate the launch of an official publication – Kakutungutanta to
Warrie Outcamp: 40,000 years in Nyiyaparli Country. The book is part of
a wider cultural project, funded by Fortescue, researching heritage sites
discovered in Nyiyaparli country during development at Fortescue’s
Christmas Creek and Cloudbreak operations.
62 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
“It’s my dream to become Fortescue’s first female
Aboriginal senior executive.
This is a company making a difference to Western
Australian and Aboriginal people’s lives and I want
to play a major role in that.”
Paula Hicks
CASE STUDY
CEO for a Day
Earlier this year a determined, young Aboriginal
woman came one step closer to realising her
dream of becoming a senior executive with
Fortescue Metals Group as she shadowed
Chief Executive Officer Nev Power as part of
GenerationOne’s CEO for a Day campaign.
Paula Hicks, a 31 year old Banyjima woman
from Geraldton, Western Australia spent the
day with Mr Power learning what it takes to
lead an S&P/ASX 50 listed company.
Having worked her way up the career
ladder, the mother and foster carer
is taking the next step by undertaking
a Bachelor of Business in Management
at Murdoch University. She has also secured
an Aboriginal cadetship through
Fortescue’s FIVE STAR program, involving a
paid work placement with Fortescue for
12 weeks each year over the next three
years of her degree.Chief Executive Officer
Nev Power said, “I am very proud to
be involved in GenerationOne’s CEO for
a Day initiative.
Together we’re helping to empower
aspiring Aboriginal people to challenge the
status quo and take positive steps towards
becoming our future business leaders.”
To assess the impact of all of its Aboriginal engagement programs,
Fortescue engaged Deloitte Access Economics to conduct a socio-
economic impact study. The report found that while all of the programs
provide benefits to the Aboriginal community in terms of direct spend,
those programs which focus on improving the employment prospects
(supply side issues) have substantial flow-through benefits
to Aboriginal communities. In particular, the VTEC and Billion
Opportunities programs set a benchmark for a best practice approach in
improving Indigenous quality of life. Through the Billion Opportunities
program, for example, the community reaps 15 times more value from
every dollar spent when compared to a dollar provided in the form of
mining royalties.
In FY15, Fortescue’s VTECs trained 97 Aboriginal people with another
78 participants successfully gaining entry level employment at
Fortescue’s operations. In recognition of the program’s success, the
Federal Government committed to building 29 VTECs across Australia
based on Fortescue’s model.
Fortescue also runs a FIVE STAR program to provide a professional
career pathway for Aboriginal employees. The program provides
traineeships, secondary, tertiary and vocational scholarships,
cadetships and leadership development and since its inception two
years ago, 40 Aboriginal people have participated in the program
including 22 in FY15.
Creating employment opportunities through
education and training
Fortescue strongly values the link between education and employment
for Aboriginal people, demonstrated through the VTECs in Port Hedland
and Roebourne. The Centres train and facilitate employment for
Aboriginal people by delivering industry, company and job-specific
pre-employment programs for Aboriginal people, and help to address
personal barriers to employment such as health concerns, literacy
and numeracy development and personal issues. For example, VTECs
provide driving lessons with qualified instructors so Aboriginal people
can obtain a drivers licence in order to operate mining equipment.
In FY15, there were 67 apprentices with 35 per cent Aboriginal
participation. During FY16, Fortescue is implementing Trade Up –
an innovative training program designed to increase the number
of Aboriginal trades people in the workplace. Fortescue and its
contracting partners will select up to 40 Aboriginal employees annually
to take part in a 12 month traineeship providing a pathway into a
four year apprenticeship program, further demonstrating Fortescue’s
commitment to creating training and employment opportunities for
Aboriginal people.
In November 2014, Fortescue launched a Fresh Start program in
partnership with the Department of Corrective Services to provide
employment opportunities for Aboriginal prisoners. Under the
Memorandum of Understanding signed by Fortescue Chairman Andrew
Forrest and WA’s Commissioner of Corrective Services James McMahon,
low-risk Aboriginal prisoners at Roebourne Prison in the state’s north-
west complete vocational training courses while in prison to create
future employment opportunities.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 63
Percentage spend Australia and overseas
1.15%
98.85%
Billion Opportunities contract value (A$ millions)
10%
21
36.0
88.2
584.8
FY13
29.0
184.9
299.0
FY14
12.7
241
186.8
175.9
FY15
Billion Opportunities contracts awarded
10%
21
22
17
11
FY13
21
24
15
FY14
20
27
11
FY15
Fortescue supplier spend profile (A$ billions)
10%
21
32.0
60.4
181.9
FY12
23
10
7
FY12
Australia
Overseas
Native Title Group
Traditional Owner
Aboriginal contractor
Native Title Group
Traditional Owner
Aboriginal contractor
Local suppliers - Pilbara
Overseas suppliers
Australian suppliers
800
600
400
200
0
80
60
40
20
0
8
6
4
2
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64 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
FY14
FY15
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CASE STUDY
Fortescue wins Supply Nation Corporate Member of the Year 2015
Fortescue was recognised for its
achievements in Aboriginal Business
Development, winning in the categories
‘Corporate Member of the Year’ and
‘Supplier Diversity Advocate of the Year’
at the annual Supply Nation Diversity
Awards in May 2015. Fortescue’s Billion
Opportunities initiative has awarded
200 contracts and subcontracts worth
A$1.8 billion to Aboriginal-owned
businesses and joint ventures since 2011.
The commitment of the entire Fortescue
family has been embodied by Community
Development Manager Heath Nelson, who
was named Supplier Diversity Advocate of the
Year at the awards. “It’s incredibly rewarding
to acknowledge how far Aboriginal
businesses have come on this
journey with us – it’s about
giving a ‘hand-up’ instead of a ‘hand-
out’. To see Aboriginal business owners
seizing those opportunities, delivering
on their commitments, growing their
businesses and employing local Aboriginal
people demonstrates how those positive
outcomes flow right through to the broader
community,” Mr Nelson said.
Aboriginal Business Development
Fortescue’s Billion Opportunities program has awarded 200 contracts
and sub-contracts worth more than A$1.8 billion to Aboriginal-owned
businesses and joint ventures since December 2011, with a particular
focus on traditional owner involvement.
The Company’s commitment to Aboriginal business development forms
a critical element of its approach to ensure economic opportunity is the
key benefit to flow from Native Title agreements.
In FY15, Fortescue awarded 48 contracts and sub-contracts worth over
A$375 million to Aboriginal owned businesses and joint ventures.
COMMUNITY
Working with the community
Fortescue aspires to be a corporate citizen of choice, welcomed by
the communities that host its activities, and believes in generating
long term value for all of its stakeholders. Fortescue does this by
empowering communities, providing economic opportunity, behaving
with respect and care for people and the environment, taking
responsibility for its presence and doing what it says it will do. This
approach is underpinned by Fortescue’s commitment to the Western
Australian Government to contribute to sustainable community and
social benefits as outlined in the company’s Community Development
Plans and Reports.
Fortescue actively encourages community feedback and consultation
and engages with communities through a variety of activities, including
maintaining a dedicated shop front in the South Hedland shopping
centre, formal consultations, community open days, involvement in
community events and conducting a bi-annual community survey.
Understanding community views informs decision making processes
and enables investment in projects and programs that deliver the
greatest benefits to the community.
Fortescue has partnered with the Town of Port Hedland to deliver a
South Hedland Youth Space, the largest skate park in Australia, and to
support the operation of Wanangkura Stadium, a 24-hour gymnasium
and recreation facility. Fortescue is also an operational sponsor of the
Hedland Senior High School’s Trade Training Centre, providing students
with a pathway into the mining industry. In FY16, three new family
day cares will be established under the Child Services Support Unit
(CSSU) framework with financial assistance from Fortescue to support
Fortescue families and the wider community.
Under the ‘Helping Others’ program, Fortescue provides a community
support program which awards financial and in-kind support to
community projects in the Pilbara. During the year Fortescue provided
over A$150,000 in community grants to local organisations in the Town
of Port Hedland, Shire of East Pilbara and Tom Price area including the
Marble Bar Museum, East Pilbara Softball Association, WA Country
Health Service Pilbara - Newman Hospital, and Aboriginal Family Law
Services. Eligibility is based on set criteria, which is outlined in the
Community Support applications available on the Fortescue website.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 65
CASE STUDY
A proud sponsor of the National Indigenous Hockey Program
Since 2011, Fortescue has partnered with
Hockey Australia as the principal sponsor of
the National Indigenous Hockey Program
to bring the world’s number one hockey
team and Olympic gold medallists, the
Kookaburras, to the Pilbara Aboriginal
community and wider community.
The program is developing one of
international sport’s most inclusive games,
hockey, in the Pilbara region while building
leadership skills, encouraging active
participation, engaging the community
and identifying local talent.
Through the program, local kids are exposed
to great role models and a game that
encourages team work, a healthy lifestyle,
initiative, determination and a strong sense
of purpose. Four years into the program we
continue to see positive outcomes in terms
of participants developing confidence and
individuality to stand on their own two feet
and carve their own futures.
As part of Fortescue’s ongoing support for
the National Indigenous Hockey Program,
the company helped 16 year old Indigenous
student Hallee Collard from Kondinin
compete in the 19th International Youth
Hockey Easter Tournament in Amsterdam
in March 2015.
Leading up to the tournament, Fortescue
arranged a mentor session for Hallee with
Aboriginal representative hockey players,
Brooke Peris and Joel Carroll.
“It was really exciting,” Hallee said.
“ I love playing hockey and coming to
Perth has given me more opportunities.
I hope to play for the Hockeyroos one
day, it’s my biggest dream.”
Working with the community (continued)
Fortescue is committed to developing permanent, residential
workforces in Port Hedland, Karratha and Roebourne. Through the
Fortescue Home Ownership Assistance Scheme, the company has
helped to increase the availability of affordable, local housing
in the Pilbara.
To date, 141 houses in South Hedland have been constructed,
52 of which have been purchased through Fortescue’s Pilbara Home
Ownership Scheme available to Fortescue employees. An additional
30 homes have been purchased from the open market through the
scheme, which together with 487 rental properties house Fortescue’s
residential workforce of over 500 employees.
The entire Fortescue team works hard to volunteer and raise funds
within the communities in which it lives and operates, with a focus
on ending Aboriginal disparity through events such as the annual
Roebourne Working Bee. Other areas of focus include the ‘Stronger
Together’ campaign for Ronald McDonald House and raising funds for
the Royal Flying Doctor Service.
Fortescue is the proud Gold Sponsor of the national men’s hockey
team, the Kookaburras, and the principal sponsor of the National
Indigenous Hockey Program. Fortescue is a jersey sponsor of the
Western Force Rugby Union team, while on a local level the company’s
sponsorship of the South Hedland Swans Australian Rules Football
Club enters its fifth year.
66 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
ENVIRONMENT
Fortescue continues to invest in an innovative approach to minimise its environmental impact and contribute
to sustainable environmental benefits
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 67
ENVIRONMENT
Reducing Fortescue’s environmental impact
Fortescue is committed to responsibly managing its environmental
impacts and meeting all of its licence requirements. The company
takes a precautionary approach to environmental challenges and
continues to invest in initiatives and technologies that minimise its
environmental impacts and contribute to sustainable
environmental benefits.
Central to Fortescue’s steadfast approach to environmental
management is the company’s Environment Policy which focuses on
minimising, mitigating and remediating the impacts of its operations
from project exploration through to rehabilitation. As a responsible
corporate citizen, compliance with all relevant environmental laws
and obligations is the minimum standard to which Fortescue operates
and the minimum requirement against which the Company measures
environmental performance.
Fortescue’s environmental management includes the development of
impact assessments, management plans, monitoring programs and
detailed reports and registers. An extensive library of these resources
is available on the Fortescue website.
In FY15, Fortescue did not record any material off-site impact incidents
and audits conducted on Ministerial Statements by the Western
Australia Environmental Protection Authority did not identify any
material non-compliances.
Environmental management systems
Fortescue’s Environment Policy outlines the Company’s mission to
maintain sound environmental management procedures to minimise
its impact. The objectives of this Policy are achieved through effective
implementation of the Company’s environmental management
system and subject matter specific management plans. Fortescue’s
environmental commitments also align with those required by the
ICMM and UNGC principles.
The Company’s operations are strongly aligned with the ISO 14001
standard for environmental management systems, which focuses
on the principles of assessment, control, monitoring and review.
Fortescue applies a project life cycle approach to environmental
management and strives for continuous improvement in this area.
The business has undertaken a extensive internal audits of its
environmental systems and will finalise the transition to third party
audits by late 2015.
Greenhouse gas emissions and energy
As an organisation operating in an energy intensive industry,
Fortescue recognises its responsibility to actively improve energy
use and minimise greenhouse gas (GHG) emissions to reduce its
contribution to climate change and impact on the environment. The
company continues its pursuit to identify and implement targeted
initiatives to sustainably reduce its energy and emissions intensity for
the benefit of the environment and the business.
Fortescue’s operations are guided by its Climate Change and Energy
Management Policy, and in compliance with the Australian Federal
Government’s National Greenhouse and Energy Reporting (NGER) Act
2007, the business reports on energy use and GHG emissions on a
financial year basis. Each year the Company’s total emissions, energy
use and energy production are independently audited, to a limited
scope, to ensure the business reports accurately and reliably. Data
is collected according to Fortescue’s Greenhouse Gas Emissions and
Energy Reporting Management Plan, which is consistent with NGER
requirements. The business also participates in the international Carbon
Disclosure Project and the report is accessible at www.cdp.net.
Fortescue’s total scope one and two GHG emissions for the FY15
reporting period were 1.924 million tonnes of CO2e representing a
net increase of 3.83 per cent compared with the previous 12 months,
relative to an increase in production by 35 per cent. Although total
emissions have increased, they have done so at a rate significantly
less than the previous five year-on-year average of 40 per cent,
representing a stabilised operation.
GHG and energy intensities associated with Fortescue’s operations
in FY15 have stabilised with a less than 1 per cent variation from
intensities reported in FY14. Monitoring intensity provides a more
practical indication of GHG performance as it takes into account the
effects of the company’s entire operations on energy consumption.
Fortescue’s GHG and energy intensities are expected to improve,
with the Company having completed its capital expansion program
and transitioned into a phase of steady production, allowing for an
even greater focus on energy efficiency and providing a consistent
baseline to help determine overall GHG and energy intensity targets in
the near future. Improvement in strip ratios across Fortescue’s mines,
meaning less energy consumed per tonne of material removed, is also
expected to contribute to a reduction in emissions.
Diesel continues to be Fortescue’s largest fuel source and is used
across the company’s mining fleet, heavy hauling locomotive fleet,
processing plants and generators. The Company is committed to
further reductions in diesel consumption and emissions and will
continue to implement its strategy to target opportunities to replace
diesel with gas.
In May 2015 the Fortescue River Gas Pipeline, a 270km natural gas
pipeline to the Solomon power station, was completed. Combined
with the Dampier to Bunbury Natural Gas Pipeline, it is expected to
reduce Fortescue’s diesel consumption by 80 million litres per annum,
representing a saving of US$20 million annually. Today, the company’s
Solomon and Port operations are powered by natural gas. This is a
key aspect of Fortescue’s approach to reduce energy costs and GHG
emissions and secure lower cost energy supply to the region.
Fortescue is also a founding partner in the Pilbara Power Project in
which TransAlta will build a highly efficient 150 megawatt power
station in South Hedland to supply electricity to residents and industry
in the Pilbara for the next 25 years. The combined cycle gas power
station will be fully commissioned in 2017.
68 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
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Scope 1
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Scope 1
Scope 2
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 69
Climate change
Water management
Fortescue remains focused on addressing the impacts of climate
change through taking positive action to reduce its emissions
and investment in low-emission technology. The company is also
committed to ensuring the resilience of its operations under various
climate change scenarios.
Fortescue has undertaken considerable research on the exposure
of existing infrastructure and planned projects to potential climate
change impacts through to 2030. The findings determined that
Fortescue’s existing assets have limited exposure to interruptions
arising from predicted outcomes such as extreme weather events,
increasing average temperatures and water scarcity.
Changes in rainfall intensity and frequency have the potential
to increase both the duration and frequency of downtime across
Fortescue’s operations. Each year the Company plans for lost time due
to severe weather events including cyclones, storm surges, lightning,
and flooding. To improve the accuracy of this process and validate
current understanding of the effects of climate change, the Company
utilises continuous weather monitoring and literature scans and
conducts regular business impact and risk assessment studies.
The availability of suitable quality process water for plant and
operations to sustain production is another key consideration in
preparing the business for the potential physical effects of climate
change. During planning and risk assessment work, the predicted
volume and quality of water supply from dewatering is simulated for
two year, five year and life of mine timeframes and compared against
predicted and forecast demand growth.
Potential deficiencies in supply to meet demand are evaluated as
part of the risk assessment process and financial analysis is
completed on these options to mitigate this deficit. Alternative
water management practices, such as improved efficiency measures
or additional supply options, are incorporated into the planned
development and construction schedules where cost effective to the
Company’s growth strategy.
Fortescue has ongoing programs in place to monitor the potential for
any long term change in the local ecosystem and habitat health in the
areas in which it operates. Groundwater monitoring has consistently
shown that Fortescue manages its groundwater effectively with
minimal impact on natural water sources in the region.
Effective management of water resources is fundamental to the
sustainability of Fortescue’s operations, the environment and,
most importantly, the communities within which the business
operates. Fortescue takes a proactive approach to responsible
water management and complies with all relevant water licensing
requirements set by Government and industry regulators.
Managing water resources involves numerous challenges for mining
operators, the dominant users of water in the Pilbara, with mining operations,
dewatering and other related water uses accounting for the majority of all
water abstracted or produced in the region. Fortescue continually assesses
and manages its water risks applying adaptive responses to water
excess, water scarcity, water quality and waste water treatment.
Fortescue’s operations are guided by site-specific Groundwater
Management Plans and informed by the Department of Water
2013 Strategic Policy 2.09. Use of mine dewatering surplus which
recommends a hierarchical approach for dewatering. In line with
this, Fortescue prioritises dewatering volumes, followed by fit for
purpose applications on site such as ore processing, and any additional
dewatering surplus is then re-injected into an aquifer as part of
Fortescue’s internationally recognised Managed Aquifer Recharge
(MAR) program.
The MAR is focused on the injection of:
• Extracted groundwater into the original aquifer once it has
been used
• Reducing Fortescue’s net groundwater use
• Conserving process water
• Significantly reducing the company’s impact on the natural
groundwater table.
The MAR removes the requirement for surface discharge and
minimises potential indirect impacts to neighbouring mines,
groundwater dependent ecosystems and the Fortescue Marsh. The
Fortescue Marsh is listed on the Directory of Important Wetlands
of Australia as a wetland of national significance and is considered
to be a unique wetland landform in Western Australia. Significant
monitoring is in place to ensure that the groundwater returned to the
aquifer is of acceptable quality.
Wherever possible, waste water treatment plant discharge is
recycled for other on site applications including dust suppression and
landscape irrigation.
70 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Water use
Site
Type
Volume (kL)
2014
Volume (kL)
2015
Use
Herb Elliott Port
Railway
Scheme water
Groundwater abstraction
Desalination
Groundwater abstraction
Not tracked
600,000
n/a
207,000
7,636
625,187
280,457
265,000
Mining operations
Groundwater abstraction
138,613,000
169,074,323
Potable supply
Process and dust suppression
Fill compaction, dust suppression for rail
construction and potable water supply to
construction camps
Dewatering to allow for mining below water
table, potable water supply and non-dewatering
abstraction for mine use
Returns to the environment
Groundwater reinjection
101,776,000
115,954,853 Water is injected into aquifers to minimise
Surface water discharge
-
-
Evaporation and seepage
253,714
255,000
environmental impacts and maintain
water balance
No excess groundwater was discharged to
surface during FY15
Evaporative losses from uncovered transfer ponds
and seepage from unlined brackish ponds
Groundwater use
Wastewater data
Site
Cloudbreak
Christmas Creek
Solomon
Ore processing facilities
Camp supply and construction
20,415,274
2,607,814
27,641,559
870,131
Dust suppression
24,995,755
8,845,326
Processing and refining ore
Potable supply includes water use during
construction at Christmas Creek
Dust suppression on roads
Wastewater discharge (kL)
2014 2015
134,552
276,899
140,257
123,234
242,158
135,566
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 71
NIGHT PARROT
World’s most mysterious bird
CASE STUDY
Night Parrot research plan
The Night Parrot is commonly recognised
as the world’s most mysterious bird,
native to the Australian continent and
was until recently, considered likely to
be extinct.
Following confirmed sightings in
2013, Fortescue has been implementing
a Night Parrot Research Plan at an
undisclosed site in south-west
Queensland with significant progress
made on all four key research objectives.
1 Develop reliable survey methods
2 Describe key habitats
3 Describe threatening processes
4 Identify new populations
This data, together with ongoing
vegetation surveys and archived imagery
analysis, is helping to describe critical
habitats, behaviours and threatening
processes, such as wildfire frequency, to
better understand this enigmatic bird.
In April 2015, a Night Parrot was successfully
captured, fitted with a radio tracking device,
and released back into the environment. The
parrot was then followed for 21 days providing
important insights including habitat range,
roosting and ranging behaviour, and
new vocalisations.
The combination of newly developed survey
protocols, plus a greater understanding
of habitats and site histories allows
more reliable surveys to be conducted
throughout central Australia, which will
continue to build an ecological picture of
this most elusive species.
Biodiversity and land rehabilitation
The Pilbara region is home to a diverse range of flora and fauna
species including nationally listed wetlands and unique ecological
systems. Across the business, Fortescue acknowledges the importance
of conserving the biodiversity of plant and animal life in the regions
that host its operations, and continually improving its sustainable
management of land.
Fortescue seeks to ensure it understands and manages the full extent
of its envionmental impacts at all stages of operation. Extensive flora
and fauna surveys catalogue the species present in the region prior
to the development and construction of any mine site or individual
operation with ongoing research and monitoring programs.
The company prioritises species which are classified as significant
under the Commonwealth Environment Protection and Biodiversity
Conservation Act 1999, the Wildlife Conservation Act 1950 and the
International Union for Conservation of Nature (IUCN) Red List. While
there are currently no recorded observations of rare or threatened
flora, there are 28 species of fauna recorded in, or likely to occur in,
Fortescue’s operational areas.
These include endangered, threatened or vulnerable species such as
the Greater Bilby, Northern Quoll, Pilbara Leaf-nosed Bat and Night
Parrot, which require site specific fauna management plans and, in
some cases, offset or research plans developed in consultation with
relevant state and federal agencies. Fortescue’s offset programs are
guided by the Company’s Environment Policy through minimising and
mitigating net environmental impacts. Such projects include invasive
species management conducted in partnership with the Department
of Parks and Wildlife and research funding to implement threatened
species recovery programs.
Fortescue provides funding towards an external full time Conservation
Officer dedicated to the protection and ongoing improvement of the
current habitat and conservation values of the Fortescue Marsh.
A key responsibility of this role is to identify and understand the key
risks threatening biodiversity in the area and implement effective
management and control programs to mitigate these risks.
Fortescue has also invested in two research projects through
the Centre of Evolutionary Biology at the University of Western
Australia, which focus on the reproductive biology of small
Pilbara ground mammals.
72 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
Biodiversity and land rehabilitation (continued)
Fortescue’s support for important biodiversity research and
conservation in the Fortescue Marsh continues. Part of an ancient
and complex array of alluvial aquifers and groundwater systems
and considered an area of high conservation value, the Marsh
extends over approximately 1,048 square kilometres (km2) within a
management area of 5,836 km2 and a broader catchment area of the
upper Fortescue River of 29,791 km2.
Fortescue applies an integrated approach to land management
to ensure responsible rehabilitation practices are reflected throughout
every stage of the mining life cycle. Rehabilitation monitoring is
conducted in accordance with the company’s rehabilitation and
revegetation monitoring procedure, which incorporates the assessment
of various indices, such as species diversity and composition as well as
nutrient cycling, infiltration and erosion assessments.
Fortescue’s environmental assessment studies have played an
important role in creating a greater understanding of the hydrology
of the Marsh. The company also works closely with state agencies
and academic institutions on dedicated research projects in the
area, including surveying and mapping, to help the business better
understand and responsibly manage the relationship between the
Marsh and its activities. This cooperative approach has provided a
framework for the Western Australian Environmental Protection
Agency’s (EPA) approach to assessing the cumulative impacts of
development projects in the Pilbara.
In FY15, rehabilitation monitoring of 87 sites (63 monitoring and
24 control) continued along the Hamersley and Main line to provide
guidance on the recovery success of land disturbed during Fortescue’s
construction phase. Over 85 per cent of the impact sites monitored
recorded a presence of the stabilising grass species Triodia, which
given the relatively short timeframe between disturbance and
rehabilitation, is very encouraging and demonstrates the company’s
ability to return disturbed lands back to functioning ecosystems.
Fortescue’s data on land disturbance and rehabilitation is presented for 1 January 2014 to 31 December 2014.
Land disturbance and rehabilitation in 2014
Total area
disturbed
(ha)
369
3,613
17,186
2013
Rehabilitation
(ha)
2014
Rehabilitation
(ha)
Total
rehabilitation to date
(ha)
-
-
75
-
148
13
-
1,037
88
Site
Herb Elliott Port
Railway corridor
Mining operations
Waste and recycling
Fortescue generates various types of waste during exploration,
construction, operation and closure activities across its mining, rail
and port facilities. Non-product materials, including overburden, need
to be removed to gain access to higher quality ores which are then
processed into product. Both non-hazardous and hazardous waste is
generated across Fortescue’s operations, managed by Fortescue’s Waste
Management Plan and Hazardous Materials Management Procedure
respectively. No hazardous wastes classified under the Basel Convention
were generated or disposed of by Fortescue during FY15.
Site
Total overburden mined
Total ore mined
Total tailings
Waste rock 2015
(tonnes)
299,953,840
164,074,192
19,207,698
Wherever possible Fortescue segregates recyclable materials and
engages specialist contractors for collection and reprocessing.
This year, the company’s landfill (1,495 tonnes) to recycled waste
(9,470 tonnes) ratio reduced considerably to 13 per cent. This result is
a further reduction in the volume of waste going to landfill reported
as 25 per cent in FY14 and has been achieved through an expansion
in the types of waste streams recycled over the year, as well as
large-scale waste reduction initiatives implemented at Fortescue’s
Cloudbreak and Christmas Creek landfill facilities. These facilities are
managed in partnership with a joint venture between Pilbara Logistics
Western Australia and Toxfree, which employs local Aboriginal people
and is dedicated to continuous improvement in environmental
compliance, recycling outcomes and general reduction of waste
to landfill.
The Landfill Space Saved graphs depict the weight of materials
recycled across the Chichester Hub, which is further explained in
broad categories and volumes of materials recycled. In FY15,
9,771m3 of space was saved in the Christmas Creek landfill,
compared with 4,836 m3 in FY14.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 73
CASE STUDY
Controlling feral cats at Fortescue Marsh
Fortescue continues to partner with Parks
and Wildlife in a feral cat baiting program
at the Fortescue Marsh, a program that the
company has been involved in since 2012.
The program is focused on the long term
protection of species in the area that are
listed in the Commonwealth Environment
Protection and Biodiversity Conservation
Act including the Bilby, Night Parrot and
migratory bird species.
For a minimum of five years, the program
will involve baiting by plane to predetermined
drop locations across an area of approximately
1,000 km2. The impact of the program was
initially monitored by camera traps alone,
but today radio collars are also providing
valuable information on the habits of feral
cats in the Marsh and contributing to the
long term conservation of the area and its
native species.
Landfill space saved at Cloudbreak
7,268.4
6,528.9
)
3
m
(
d
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v
a
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10.8
276.0
442.9
Aluminium
Paper/cardboard
HDPE
9.8
PET
Steel
Total savings
Landfill space saved at Christmas Creek
2,503.8
1,949.5
429.8
2.8
Aluminium
Paper/cardboard
91.5
HDPE
30.3
PET
Steel
Total savings
)
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Closure planning
Closure plans and financial provisions to execute these plans are
developed and maintained for all of Fortescue’s operational sites.
Closure planning plays an important role in the planning and
development of Fortescue’s projects and operations to ensure that
the legacy impacts of its operations are minimised and mitigated.
Fortescue’s closure plans, which are subject to external review
and approval, are implemented progressively over time and are
regularly updated with findings from targeted research and
trials to ensure maximum effectiveness in rehabilitation and
remediation activities.
A key component in the development and fulfilment of the Company’s
closure plans is the consultation and engagement of local stakeholders,
including Traditional Owners, to ensure that land is returned in a state that
supports future opportunity and long-term benefit.
The Company has comprehensive rehabilitation and revegetation
plans in place that focus on stabilising disturbed land and returning
land to functioning ecosystems. The established infrastructure at these
facilities is expected to retain value beyond the current mine life.
74 I FORTESCUE METALS GROUP LIMITED CORPORATE SOCIAL RESPONSIBILITY
GOVERNANCE
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 75
CONTENTS
1
2
OVERVIEW OF GOVERNANCE
77
Board of Directors
Role and responsibilities
2.1
2.2
Board composition
2.3 Meeting attendance
2.4
2.5
2.6
2.7
2.8
2.9
2.10 Use of information
2.11
Independent advice
2.12 Remuneration
2.13 Company Secretary
78
78
78
79
80
Board skills matrix
81
Diversity
81
Appointment and induction of Directors
81
Chairman
Independence
82
Evaluating Board and Committee performance 83
83
83
83
83
3
Board Committees
External auditor
3.1
84
84
4
5
6
SECURITY HOLDERS
Risk Management
5.1 Material risk exposures
5.2
5.3
5.4
Fortescue Risk Management Framework
Internal audit
Annual Executive declarations
Business Ethics AND Integrity
6.1
6.2
Code of Conduct
Securities trading
7 Market Disclosures
8
Compliance with Corporate
Governance Standards
85
85
85
87
88
88
89
89
89
89
90
76 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
1 OVERVIEW OF GOVERNANCE
Effective corporate governance is a critical element contributing
to the longer term success of Fortescue. The Board and all levels
of management are fully committed to maintaining and
enhancing our corporate governance so that it continues to
contribute to our vision to be the safest, lowest cost, most
profitable iron ore producer.
Fortescue is committed to meeting the requirements
of the ASX Corporate Governance Council Principles and
Recommendations 3rd Edition (Principles and Recommendations).
The cornerstone principles of corporate governance at Fortescue are:
Transparency: Being clear and unambiguous about the
Company’s structure, operations and performance, both
externally and internally, and maintaining a genuine dialogue
with, and providing insight to, legitimate stakeholders and
the market generally.
Integrity: Developing and maintaining a corporate
culture committed to ethical behaviour and compliance
with the law.
Corporate accountability: Ensuring that there is
clarity of decision making within the Company, with processes
in place to ensure that the right people have the right authority
to make effective and efficient decisions, with appropriate
consequences delivered for failures to follow
those processes.
Stewardship: Developing and maintaining a company-wide
recognition that the Group is managed for the benefit of its
shareholders, taking reasonable account of the interests of
other legitimate stakeholders.
Fortescue’s governance framework is illustrated below.
Shareholders
BOARD OF DIRECTORS
Ensures appropriate Corporate
Governance Practices
are in place
Board Remuneration
and Nominations Committee
Board Audit and Risk
Management Committee
Responsible for remuneration
policy and practice and
Board Member Nominations
Responsible for all matters related
to financial reporting,
audit and risk management
FINANCE Committee
Material investment
and financing decisions
CHIEF EXECUTIVE OFFICER
The Board delegates authority to the CEO
for all matters that are not reserved for
the Board or one of its committees
EXECUTIVE COMMITTEE
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 77
2 BOARD OF DIRECTORS
2.1 Role and responsibilities
The Board is responsible to the shareholders for the performance
of the Company. The Board’s focus is to enhance and protect
the interests of shareholders and other key stakeholders and
to ensure that the Company is properly managed. The Board
understands the critical importance of a strong and healthy
working relationship between it and the executive management
team and works hard to foster and grow that relationship.
The Board ensures that the management team is appropriately
qualified and experienced to discharge
their responsibilities.
The Board has established a Statement of Matters Reserved for
the Board which states that the key responsibilities of the Board
are as follows:
• Appointing, evaluating the performance of,
rewarding and, if necessary, removing the Chief
Executive Officer (CEO)
• Developing corporate objectives and strategies with
management and approving plans, new investments,
major capital and operating expenditures and major
funding activities proposed by management
• Monitoring performance against defined performance
expectations and reviewing operational information to
understand at all times the state of health of the Company
• Overseeing management of business risks, including safety
and occupational health risks, environmental management
issues and community development issues arising from
interaction with the several communities living or located
in Fortescue’s geographic areas of operation
• Satisfying itself that the annual financial statements of the
Company fairly and accurately disclose its financial position
and performance
• Satisfying itself that there are appropriate reporting
systems and controls in place and gaining acceptable levels
of assurance that proper operational, financial, compliance,
risk management and internal control processes are in
place and functioning appropriately. Further, approving
and monitoring financial and
other reporting
• Gaining assurance that appropriate audit arrangements are
in place
• Ensuring that the Company acts legally and responsibly on
all matters and gaining assurance that the Company has
adopted an appropriate Code of Conduct and that Group
practice is consistent with that Code
• Reporting to and advising shareholders.
The Board has also established Delegations of Authority for
matters delegated to the authority of the CEO and hence
the CEO remains accountable to the Board through those
delegations for the performance of the Company. Whilst
the CEO remains accountable to the Board, he is free to
make whatever decisions he believes are appropriate for the
business within the boundaries established by the Board.
A key focus of Board meetings is monitoring the decisions
of the CEO. Appropriate time is allocated during Board
meetings for consideration of the CEO’s report to the Board
on key operational issues and progress towards achievement
of corporate objectives. The Board has established the
Key Performance Indicators (KPI’s) against which the
performance of the CEO is evaluated. These KPI’s are
discussed in the Remuneration Report in this Annual Report.
Both the Statement of Matters Reserved for the Board
and the Delegations of Authority are reviewed annually
to assess continued relevance and to identify any areas
requiring improvement or change. Where changes are
required to these documents, such changes are approved
by the Board.
2.2 Board composition
Under the Company’s Constitution, the Board must have
a minimum of three and a maximum of twelve directors.
No director, other than a Managing Director, may retain
office without re-election for more than three years or past
the third annual general meeting following the director’s
appointment, whichever is the longer. Additionally, any
new director, with the exception of the Managing Director,
appointed by the Board must retire and may seek re-
election in the year of appointment.
The Board believes that its composition represents an
appropriate balance of executive and non-executive
directors to achieve the promotion of shareholder interests
and effective governance of the business.
The Board also has access to senior executives who attend
Board meetings and Board Committee meetings by
invitation and who are available at other times as required
by Board members.
78 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
2 Board of Directors (continued)
The Directors of the Company during FY15:
Name
A Forrest (Chairman)
O Hegarty (Deputy Chairman)
M Barnaba (Lead Independent Director)
N Power (Managing Director and Chief Executive Officer)
P Meurs
J Baderschneider
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott1
G Rowley1
H Scruggs1
Date of Initial
appointment
18 July 2013
14 October 2008
19 February 2010
2 September 2011
22 February 2013
19 January 2015
22 February 2013
27 February 2012
18 August 2011
13 November 2013
16 October 2003
16 October 2003
26 August 2011
Period of office
Full year
Full year
Full year
Full year
Full year
Since 19 January 2015
Full year
Full year
Full year
Full year
Retired at the AGM
Retired at the AGM
Retired at the AGM
Due for re-election
2017
2016
2015
Yes
No
No
Yes
No
No
No
Yes
No
n/a - Managing Director
No
Yes
No
No
No
Yes
No
Yes
No
No
No
Yes
Yes
No
No
Yes
No
No
n/a - Retired
n/a - Retired
n/a - Retired
1 Mr Herbert Elliott , Mr Graeme Rowley and Mr Herbert Scruggs retired from the Board and Committees at the AGM held on 12 November 2014.
2.3 Meeting attendance
The Board and its Committees meet as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Company to
discharge their responsibilities effectively, including adequate time to prepare for Board and Committee meetings and
in joining visits to the Company’s operational sites.
Attendance at Board and committee meetings during FY15 is summarised below:
Director
A Forrest (Chairman)
O Hegarty (Deputy Chairman)
M Barnaba (Lead Independent Director)
N Power (Managing Director and Chief Executive Officer)
P Meurs
J Baderschneider3
E Gaines
C Huiquan1
G Raby
S Warburton2
H Elliott4
G Rowley4
H Scruggs4
Audit and Risk
Management
Committee
Remuneration
and Nominations
Committee
Finance
Committee
Board
Held Attended Held
Attended Held Attended Held Attended
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
4*
7
3
6
7
2
2
2
-
-
4
-
-
-
4
-
-
4
-
4
4
-
-
4
-
-
-
4
-
-
2*
-
2*
2*
4
4
4
-
-
-
-
-
4
4
4
4
-
3
4
4
-
-
-
-
-
4
4
2*
2*
-
1
-
1
-
-
-
1
-
-
-
-
-
1
1
-
1
-
-
-
1
-
-
-
-
-
-
* Attendance rate reflects date of appointment/resignation during FY15.
1 Mr Cao Huiquan was unable to attend numerous meetings during the year due to potential conflict of interests in his role as Chairman Valin
Iron and Steel Co. Ltd.
2 Ms Sharon Warburton was appointed as Chair of the Remuneration and Nominations Committee on 12 November 2014.
3 Dr Jean Baderschneider was appointed as a Director on 19 January 2015.
4 Mr Herbert Elliott , Mr Graeme Rowley and Mr Herbert Scruggs retired from the Board and Committees at the AGM held on 12 November 2014.
Generally Board meetings are of one day’s duration and Board Committee meetings precede Board meetings on the previous day.
At least once per year the Board visits each of the major operations prior to one of the Board meetings.
In addition, Board members hold meetings with management as required.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 79
2 Board of Directors (continued)
2.4 Board Skills Matrix
The primary driver for the Board in seeking new directors
has been, and continues to be, the skills, experience,
knowledge and other important attributes which are
relevant to the needs of the Board in discharging its
responsibilities to shareholders. As with all roles in the
company, our policy is to recruit the best person for each
role regardless of race, gender, age, physical ability,
sexuality, nationality, religious beliefs, or any other factor
not relevant to their competence and performance.
The Board is committed to ensuring that an environment
of equal opportunity is in place and that all decisions are
based on merit.
The Board believes that collectively the directors have a diverse
and relevant range of skills, backgrounds, knowledge and
experience to ensure effective governance of the business.
The members of the Board contribute a range of industry
knowledge, international experience perspectives and
specific subject matter expertise in a range of strategic,
operational and financial aspects that are critical to the
long term success of Fortescue. This means that the
Board maintains a focus on its composition, thereby
working to ensure that the executive and non-executive
directors continue to have an appropriate balance of skills,
experience and independence.
The following table sets out the composition of skills and experience of the Board.
Leadership
Capital projects
• Successful history in business
at a senior executive level
• Public listed company experience
• Understanding/influencing
organisational culture
• Experience in the delivery of
large-scale capital projects
• Experience in project governance
and risk management
Strategy
Mining, resources and infrastructure
• Experience in developing and
implementing successful strategy
• Ability to provide oversight of
management for the delivery of
strategic objectives
• Large mining organisation experience
• Large infrastructure organisation
experience
International experience
Financial acumen
• Experience in and exposure
to multiple cultural, regulatory
and business environments
• Experience with doing business
in China and the Asian region
• Experience in financial accounting
and reporting, corporate finance
and internal financial controls
• Experience in business analysis
and financial forecasting
Governance
Sales and marketing
• Experience in governance
with complex organisations
• Commitment to ensuring effective
governance structures
• Maintaining effective risk
management and internal
control
• Senior executive experience in sales
and marketing
• Building long-term, sustainable
customer relations across a diverse
customer base
• Detailed knowledge of the Company’s
strategy, markets and competitors
Health, safety and environment
Stakeholder management
• Experience with community relations
and government affairs
• Executive experience with industrial
relations
HSE
• Experience related to workplace
health and safety
• Experience with environmental
and community issues in a large
organisation
Public policy and regulation
• Experience in managing how
organisations adapt and respond to
changing public policy settings
• Oversight and management of
regulatory frameworks and processes
designed to ensure that all regulatory
obligations are met
80 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
2 Board of Directors (continued)
2.5 Diversity
Fortescue is committed to providing a balanced and
inclusive working environment. Fortescue has a
documented Diversity Policy and Plan that is built on our
values. The Board has implemented a Diversity Policy
and measurable objectives which reflect Fortescue’s
commitment to ensuring that there are no impediments
to diversity at any level of the company. The policy sets
targets and practices that promote diversity in both
gender mix and Aboriginal employment across all areas
of the business.
The policy can be accessed through the corporate
governance section of the company’s web site.
Further information on Fortescue’s diversity outcomes
is included in the Corporate Social Responsibility section
of this report.
2.6 Appointment and induction of Directors
Directors, with the exception of the Managing Director,
are required to retire by rotation at least once every three
years and are able to offer themselves for re-election. The
Board has adopted a letter of appointment that contains
the terms on which directors are appointed, including the
basis of remuneration. Prior to appointment, or offering
themselves for re-election, non-executive directors are
required to specifically acknowledge that they have the
time available to fully discharge their responsibilities to
the Company.
Prior to appointing a director, the Company undertakes
a rigorous process of evaluation and checks to ensure their
suitability and capacity to discharge their duties as a
Board member. This evaluation covers matters such as:
• Skills and experience including the expected
contribution to the collective skills and experience
of the Board
• Current and prior directorships and/or executive roles
• Independence
• Any other matters (including interests, positions
and associations) which could adversely affect their
ability to effectively discharge their duties as a
Board member.
Following appointment, directors are supported through
a formal induction program that seeks to familiarise them
with the operations of the business. This typically involves
a combination of meetings with senior management,
site visits and briefings on specific issues. This process
continues throughout the tenure of the director.
Directors are expected to contribute to the Company
primarily in relation to the matters set out in the
Statement of Matters Reserved for the Board, which can
also be accessed through the corporate governance section
of the company’s website.
In addition, directors are expected to contribute to
the business of the Board Committees where they are
members of a Board Committee. It is recognised that
directors have a diverse range of skills, experience and
knowledge and they are expected to contribute their
considerable expertise at the boardroom table and at
other times as required.
Directors are expected to act independently by challenging
the status quo constructively, to act ethically in all dealings
and assist in setting standards for the Company, as well as
being involved and contributing to all important decisions
before the Board.
Directors are expected to comply with all requirements
imposed upon them by the Corporations Act 2001, ASX
Listing Rules and the Company’s Constitution, a copy of
which can be obtained from the corporate governance
section of the Company’s website.
The letter of appointment also provides clear direction
about the amount of time that directors are required
to commit in order to adequately discharge their
responsibilities as directors.
It is Fortescue practice to allow its non-executive directors
to accept appointments outside the Company with prior
approval of the Board. The commitments of non-executive
directors are considered by the Board prior to a director’s
appointment to the Board and are reviewed annually.
2.7 Chairman
The Chairman of the Company has a primary responsibility
to lead the Board and promote the interests of the
Company, both internally and in the broader business
context. A key part of the Chairman’s role is to develop a
cohesive Board which operates effectively in protecting
shareholders’ interests and maintaining strong
relationships with the CEO and his executive team.
Mr Andrew Forrest, the founder of Fortescue, was
appointed to the role of Non-Executive Chairman
by the Board in August 2011. Mr Forrest succeeded
Mr Herb Elliott as Chairman and was previously the CEO.
Mr Forrest, whilst being a Non-Executive Director, is not
an independent director due to his previous role as CEO
and his significant shareholding in the company. Mr Owen
Hegarty assumed the role of Vice Chairman on
12 November 2014.
Mr Mark Barnaba assumed the role of the Lead
Independent Director on 12 November 2014. Both these
roles were previously held by Mr Herb Elliott, who retired
as a Director on the same date.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 81
2 Board of Directors (continued)
2.8 Independence
All Fortescue Directors have an obligation to be
independent in judgment and actions. The Board has
a majority of independent directors to ensure that the
interests of shareholders are always at the forefront when
important decisions are made by the Board. Directors are
considered to be independent if they satisfy established
criteria, including the following:
• They are a non-executive director of the company and
have not been a director for such a period that their
independence may have been compromised. Any fees
paid to them by the Company for services provided are
not of such amounts that could make the director reliant
on such remuneration. Directors must have no other
material contractual relationships with the Company
other than as directors of the Company
• They are not a substantial shareholder of the
Company, or an officer of, or otherwise associated
with, a substantial security holder of the entity
• They have not been employed in an executive capacity
by the Company or there has been a period of three
years between ceasing such employment and serving
on the Board
• They have not, within the last three years,
been a principal of a material adviser or consultant
to the Company
• They have not, within the last three years, been in a
material business relationship with the Company, or an
officer of or otherwise associated directly or indirectly
with, someone with such a relationship
• They are free from any interest which could reasonably
be perceived to materially interfere with their ability to
act in the best interests of the Company.
In essence the above guidance is designed to ensure that
all directors are able to act in the best interests of the
Company at all times.
Directors are required to disclose circumstances that may
affect, or be perceived to affect, their ability to exercise
independent judgement so that the Board can make
regular assessments of independence. If a circumstance
arises whereby a director may be required to consider
a matter in which the director has a material personal
interest, that director ceases to be involved in the decision
making regarding that matter.
At the date of this report, the Board has eight non-
executive directors. Of the eight non-executive directors,
based on the above criteria, six are considered to
be independent and two are considered to be non-
independent. The Board believes that it has independent
directors involved in all areas of Board activity where
director independence is critical, including chairmanship
via the deputy chair and involvement in the various Board
committees. The table below shows directors who are
considered to be independent and non-independent:
Director
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
J Baderschneider
E Gaines
C Huiquan
G Raby
S Warburton
Independent (Yes / No)
No
Yes
Yes
No
No
Yes
Yes
No
Yes
Yes
Mr Owen Hegarty assumed the role of Vice Chairman
during the year. The Vice Chairman’s role includes chairing
the Board and shareholder meetings when the Chairman
is unable to do so and approval of meeting agendas and
quality of information provided to the board.
Mr Barnaba was appointed as the Lead Independent
Director to represent the interests of shareholders
where the Chairman is unable to do so due to his non-
independent status. This role includes:
• Representing the Board as the senior independent
director when the Chairman is unable to do so due to
his non-independent status
• Acting as principal liaison between the Independent
Directors and the Chairman
• The roles of Vice Chairman and Lead Independent
Director have been separated to further strengthen
the overall independence of the Board and to allow
greater flexibility in responding to governance issues
and in supporting the interests of all shareholders.
Transactions during the year which are classified as
related party transactions with directors or director
related entities pursuant to International Financial
Reporting Standards are disclosed in the notes to the
financial statements.
82 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
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2 Board of Directors (continued)
2.9 Evaluating Board and Committee performance
The Board and each of its three primary committees
have established a process to evaluate their performance
annually. The process is based on a formal questionnaire
and interview conducted by an independent consultant
and supported by the Company Secretary. The most recent
review was undertaken by Ernst & Young in April 2015.
The results and recommendations from the evaluation
of the Board and committees are anonymised and
reported to the full Board for further consideration
and action where required. The entire Board agrees
improvement actions where appropriate and these are
acted upon utilising support from the Company Secretary.
The individual performance of directors is considered
during the Board and Committee performance evaluation
process in addition to ongoing consultation between the
Chairman, Vice Chairman and the relevant directors
as required.
2.10 Use of information
The Board has implemented a Code of Conduct designed
to ensure that all directors and employees of the Company
act ethically and do not use confidential information for
personal gain.
2.11 Independent advice
Directors and Board committees, in connection with
the discharge of their responsibilities, have the right to
seek independent professional advice at the expense of
the company. Prior written approval of the Chairman is
required in these circumstances, but such approval cannot
be unreasonable withheld.
2.12 Remuneration
Details of the remuneration policies and the remuneration
paid to directors (executive and non-executive) are set out
in the Remuneration Report in this annual report.
2.13 Company Secretary
The Company Secretary is directly accountable to the
Board through the Chairman on all matters to do with
the proper functioning of the Board. The Company
Secretary is appointed and removed by the Board.
The Company Secretary is also responsible for ensuring
that Board procedures are complied with and advising
the Board on governance matters. All directors have access
to the Company Secretary for advice and support services
as required. In addition to these responsibilities, the
Company Secretary is also responsible for oversight of the
share registry services provided by Link Market Services.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 83
3 BOARD COMMITTEES
The Board has established Committees to assist in the execution
of its duties and to ensure that important and complex
issues are given the detailed consideration they require. The
primary Committees of the Board are the Remuneration and
Nominations Committee, the Audit and Risk Management
Committee and the Finance Committee.
These Committees have their own Charters1 approved by the
Board, and under which authority is delegated by the Board.
Each Committee is required to report the outcomes of its
deliberations to the Board so that the Board is fully informed
on all important matters before matters are resolved.
Remuneration and Nominations Committee
Audit and Risk Management Committee
Finance Committee
The role of the RNC is to assist the Board in its
oversight of remuneration policy and practice
and Board member nominations.
The RNC considers a diverse range of
matters related to its role, including:
• Senior executive remuneration policy
• Chief Executive Officer, non-executive and
executive director remuneration policy
• Short term and long term incentive plans
• Recruitment, retention and termination policies
• Succession planning
• Nominations for Board positions and review
of applicants for Board positions
• Board Committee appointments.
Full details of the committee’s activities on behalf
of the Board related to remuneration matters are
set out in the Remuneration Report.
The role of the ARMC is to assist the Board in
ensuring that there is effective oversight of
published financial information, there are sound
systems of internal control and effective
management of risk.
The ARMC considers a diverse range of matters
related to its role including:
• Assisting the Board in its oversight responsibilities
for all matters related to financial management
and reporting of the Company
• Understanding and endorsing the Company’s
risk appetite
• Reviews the extent to which management
has established an effective system of risk
management and internal control
• Reviews the Company’s risk profile by
comparison to its risk appetite
• Undertakes periodic review of the Company’s
most significant risks and whether risk
management strategies are appropriate
• Oversight and monitoring the activities of
the corporate internal audit function and the
external auditors. The role and responsibilities
of the internal audit function are described
more fully in Section 5.3 of this Corporate
Governance Statement.
Membership as at 30 June 2015
The purpose of the Committee is to assist the
Board in considering matters associated with
material investment and financing decisions, as
delegated by the Board, affecting the Company.
Material investment and financing decisions are
those that have a potentially significant impact
on the Company including (but not limited to):
• Capital markets and other debt issues
or repayment
• Major acquisitions and disposals.
Specifically, the Committee’s role is to critically
review and challenge any proposals presented
by management that may significantly alter the
Company’s position in respect of the above areas.
The Committee will also consider any specific
matters as directed by the Board.
These responsibilities have been allocated to
the Committee on the basis that the primary
responsibility for management of these matters
sits with the Chief Executive Officer and the
management team. Ultimate responsibility
for oversight of these matters remains with
the Board.
Sharon Warburton (Chair)
Mark Barnaba
Andrew Forrest
Owen Hegarty
Graeme Rowley (Co Chair)
Herbert Scruggs
Herb Elliott
Mark Barnaba (Chair)
Elizabeth Gaines
Sharon Warburton
Mark Barnaba (Chair)
Andrew Forrest
Elizabeth Gaines
The following members retired on 12 November 2014
Graeme Rowley
Herbert Scruggs
Herbert Scruggs
1 Committee Charters are available in the Governance section of the Company’s website.
3.1 External Auditor
In accordance with the Corporations Act 2001, the
Company has appointed an external auditor whose
primary role is to form an opinion as to the truth and
fairness of the annual financial statements.
The Group appoints an external auditor who demonstrates
quality of service and independence.
PricewaterhouseCoopers (PwC) is the current external auditor of the
Fortescue Group. It is PwC’s policy to rotate audit engagement partners
every five years in accordance with the Corporations Act 2001. PwC attend
ARMC meetings by invitation and report annually to the Committee on its
independence and the outcomes of its audit. The Committee reviews the
scope of the annual audit plan and related audit fees.
The external auditor also attends the Annual General Meeting to
answer questions from shareholders in relation to the audit.
84 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
4 SECURITY HOLDERS
The Board represents the Company’s shareholders and is
accountable to them for delivering value through achievement
of strategic objectives and performance excellence.
Shareholders are encouraged to attend the Annual General
Meeting, which is the forum for shareholders to vote on key
business issues, including election of directors, changes to
the Company’s Constitution, adoption of the Company’s annual
financial statements and incentive arrangements.
The Company has implemented a Continuous Disclosure
and Market Communications Policy which is available on
the corporate governance section of the Company’s website.
The Board uses various formal and informal measures to
ensure that it communicates effectively with shareholders
and investors throughout the year including:
5 RISK MANAGEMENT
5.1 Material risk exposures
Fortescue operates in a dynamic business environment
that presents a range of uncertainties that have the
potential to impact, both positively and negatively, on
its corporate objectives. Fortescue acknowledges that
risk is inherent in all aspects of its business and that
effective management of risk and opportunity is essential
to Fortescue’s success and future growth. Fortescue is
committed to managing all material risks within the
tolerances set by the Board.
• A team of dedicated investor and media relations resources
• Regular briefings to the investment community and
investor representatives
• Presentations and question and answer sessions at
industry forums and conferences
• Periodic newsletters, production reports and media
announcements that are available either through the
ASX platform or through the Company’s website
• An email alert system that allows interested parties
to register for automated alerts of ASX lodgements and
other information related to the Company.
A range of material risks has been identified by management
and the Board that could substantively impact Fortescue’s
ability to create or preserve value for all of its key stakeholders
over the short, medium or long term.
The following material risks to the Company and how these
risks are managed are listed below.
Material risk
Economic risk
Fluctuations in commodity
prices (iron ore) may
adversely impact the
Company’s results and future
cash flows
Competitor actions
Deterioration in economic
conditions in China could
impact the demand for
Fortescue’s products
Estimates of reserves
and resources
Risk management strategy
Fortescue is subject to the prevailing market price of iron ore, which it has a limited ability to directly
influence. During FY15 the Company continued its focus on strengthening the corporate balance sheet
by repayment of debt and aggressively pursuing continued reduction of our cost base.
Volume and pricing strategies adopted by other iron ore suppliers have the potential to impact both
the spot and futures market of iron ore on recognised trading exchanges. Fortescue will continue to
act in an economically rational manner and is actively engaged with all of its stakeholders to highlight
the merit of the Company’s strategy.
Fortescue’s key trading partners are Chinese steel mills. Fortescue’s significant efforts in supporting
and enhancing Sino-Australian business relationships promote strong relationship with all levels of
the Chinese government as a partner in supporting the ongoing economic development within China
and resultant demand for the Company’s products.
There is a range of inherent uncertainties associated with the identification and measurement of
iron ore reserves and resources. Prior valid assumptions may change in light of new information
which may result in changes to the economic viability of some ore reserves. Additionally, volatility in
commodity prices may result in adjustments to Fortescue’s recognition of ore reserves.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 85
Material risk
Operational risks
Risk management strategy
Productivity and cost
pressures could impact profit
margins and future cash
flows
Fortescue is a global leader in a range of technical and operational solutions that have been deployed
across our business to maximise the value we obtain from the Company’s ore reserves.
We adopt a risk based approach to the approval of major capital and operational expenditure that
ensures the optimal allocation of financial resources to support the Company’s business strategy.
Fortescue does not fully
exploit existing reserves or
discover new reserves that
impacts on future results
Fortescue has a program of exploration and mining that identifies and exploits new ore bodies and
supports the expansion of existing ore bodies. Fortescue has also developed innovative exploration
techniques that have enabled us to commercialise previously unexploited tenements and invest in
new sources of ore including magnetite deposits.
Major, unplanned disruptions
to operations or supply chain
Any unplanned and sustained interruption to operations or supply chain has the potential to impact
our financial performance. Such disruptions can arise from natural events such as cyclones and
flooding, other accidents that result in damage to our port, rail or mine infrastructure or other factors
such as labour disputes that could also disrupt operations. While the likelihood of many of these risks is
considered rare, Fortescue has adopted a prudent approach that involves a combination of world-class
engineering design, a comprehensive crisis management strategy, operational contingency planning
and structured recovery process to mitigate the impact of such events should they occur. Our insurance
coverage also provides an element of financial protection associated with loss or damage to our assets.
Major development projects
experience delays to schedule
or increased costs
Fortescue has a robust and agile framework for the identification, assessment and delivery of all
major projects. This includes an uncompromising focus on operational and financial discipline
supplemented by a comprehensive project management capability.
Performance of key business
partners is not aligned with
Fortescue expectations
and they do not meet their
obligations
Information technology and
security
Fortescue works collaboratively with its business partners to achieve superior safety, operational
and financial performance. We have transitioned major elements of our mine sites to an owner/
operator model to better control performance and introduced greater flexibility within our contractual
arrangements, where appropriate. We have robust mechanisms in place to regularly review all major
contracts with a focus on performance.
The rapid pace of technological change and the sophistication of cyber security attacks pose
ongoing and real risks requiring the business to maintain a constant vigil. Fortescue maintains a
robust IT platform which provides resilience and recovery capability in the event of a system outage.
The Company monitors and controls access to sensitive and private information maintained
within its key systems.
Health and safety and
environmental incidents and/
or breaches of regulations
could adversely affect our
people, operations and
reputation
Safety is one of Fortescue’s core values and the Company has set the ambitious goal of being a
global leader in safety and environmental performance. Fortescue has a very comprehensive HSES
framework that promotes responsibility and accountability at all levels within the organisation.
Fortescue has an active program of education, training, monitoring and reporting within the business
that is focused on continuous improvements and learning from our experiences. The Company is
actively engaged at both a local and global level to identify and implement leading safety and
environmental practices operating within the mining and resources sector.
Environmental risks
Climate change resulting
in increased frequency and
severity of extreme weather
events
Climate change is recognised a real and evolving risk to our operations in the Pilbara. The physical
impacts of climate change are most likely to manifest in increased frequency and severity of extreme
weather events such as cyclones. Such events could negatively affect operations through production
interruptions, asset loss or damage and the physical well-being of our employees and contractors.
Fortescue has formal cyclone management plans, and incident and emergency response plans at all
its operating sites.
Fortescue’s operations
have the potential to lead
to adverse impact on local
flora, fauna and indigenous
heritage sites
Mining operations have the inherent potential to cause damage to flora, fauna and sites of
significance to aboriginal people located in the vicinity of the Company’s operations. This could
include adverse impacts on local ecosystems, biodiversity, water resources and designated
heritage sites. Fortescue has rigorous control and reporting processes to minimise the potential for
any adverse impacts. Fortescue consults with local communities, regulators and other stakeholder
groups to ensure that its operations are managed in an environmentally sustainable manner.
Further information on the Company’s approach to managing environment risk is included in the CSR section of this annual report.
Social sustainability risks
Breaches in our legal and
regulatory obligations may
lead to fines and potential
loss of licence to operate
Fortescue operates in a highly regulated industry with a complex regulatory environment at
both Federal and State level. Failure to comply with obligations can have a serious impact on the business
ranging from fines and reputation damage through to temporary or permanent loss of Fortescue’s licence
to operate. Compliance with the Company’s obligations is seen as a collective responsibility at all levels of
the organisation and there is clear accountability and responsibility for ongoing management.
86 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
RISK MANAGEMENT FRAMEWORK
Board and ARMC
Reporting
Executive Management
Decision making
Line Management
Risk Information Systems
Integrated Process
Identify
Monitor
Risks that are
critical to
Fortescue success
Assess
Respond
Strategic Planning
Annual planning and budgeting
Major Capital Expenditure
Business development and major projects
Business decision support
Health, Safety and Environment
Property damage and insurance
Business Continuity
Business Context
Fortescue Corporate Risk
Policy and Standards
Fortescue HSES Risk Policy
and Standards
Fortescue Vision and Values
Culture and Frameworks
5 Risk management (continued)
5.2 Fortescue Risk Management Framework
The Fortescue Risk Management Framework (FRMF)
explains the methodology, approach and responsibility
for the effective management and oversight of risk within
our business. The FRMF is aligned to ISO 31000, the
international standard for risk management, and provides
a consistent approach to the recognition, measurement
and evaluation of risks across our business. It also supports
Executive Management and the Board in meeting their
corporate governance responsibilities.
Fortescue’s approach to risk management is underpinned
by its values and culture. This emphasises that
management, employees and contractors are collectively
responsible for managing all material business risks and
there should be a clear understanding of responsibility and
accountability for risk management. Everyone at Fortescue
has a responsibility to be aware of the risks related to their
activities at every level and to be accountable for ensuring
those risks are effectively managed.
The FRMF sets a framework which aligns risk management
activity at all levels of the business with a three tiered
focus as follows:
• Achievement of the Company’s strategic, operational,
developmental and corporate objectives
• Maintaining a sustainable business that meets the
Company’s obligations for health and safety, the
environment, heritage and community
• Building and maintaining a resilient business that
is capable of achieving critical objectives in the face
of extreme events which may impact business as
usual conditions.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 87
5 Risk management (continued)
Fortescue does this by:
• Embedding risk management into critical business
activities and processes
• Understanding the threats to and opportunities for
achievement of corporate objectives
• Application of a structured approach to risk
management which establishes common
understanding, definitions and methodologies
• Consideration of all types of risks and how robust risk
analysis supports better informed decision making
• Using the outcomes of risk assessments to drive actions
and activities that mitigate risks to an acceptable level
• Maintaining a strong focus on the resilience of the
business through reliance on effective recovery plans
for material adverse events
• Reporting regularly to the Executive Committee and the
Board on the outcomes of risk management activity.
In addition, the Company’s Group Risk & Assurance
function is focussed on supporting each part of the
business to assist them to better manage their risks and
to align efforts across the business to facilitate a whole of
business view of risk.
The ARMC conducted a review of the risk management
framework during the year and is satisfied that it supports
a sound system of risk management and internal control.
5.3 Internal audit
A robust and risk based internal audit function is a
critical part of ensuring that a strong financial risk and
control environment is maintained across the Company.
Fortescue’s Group Risk and Assurance function is
responsible for the design and delivery of internal audit
activity, tailored to provide assurance that the Company’s
risk management and internal control frameworks
are appropriately designed and operating at the level
expected by the Board. Deloitte, Chartered Accountants,
has recently been appointed to provide the primary
support for the delivery of its internal audit program.
Other service providers are also used to support the
internal audit program.
88 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
The Audit and Risk Management Committee approves
the annual internal audit plan and monitors findings
from internal audit reviews, including actions proposed
by management to address issues reported by the
internal auditors.
The primary focus of the Company’s risk management
governance structure and internal control systems is to
identify, assess and mitigate material business risks
with the aim of enhancing value to shareholders and
protecting assets.
5.4 Annual Executive Declarations
In accordance with the requirements of ASX Principle 4
“Safeguard integrity in corporate reporting” and section
295(A) of the Corporations Act 2001, an extensive annual
certification process is undertaken at executive level.
The process requires declarations from the most senior
executives in the business to support the certifications
to the Board by the Chief Executive Officer and the Chief
Financial Officer pursuant to ASX Principle 4 and Section
295(A) of the Corporations Act 2001.
The executive declarations are broad and consider the
key elements of the control environment. In addition to
providing the support for the CEO and CFO certifications
as noted above, the Board, through the Audit and Risk
Management Committee, uses this process as a means of
identifying areas of the control environment where there
are opportunities for improvement. Improvement actions
identified through this process are monitored by the
Committee until actions are completed.
The ASX Principle 4 and Section 295(A) Corporations Act
2001 certifications by the CEO and CFO were received
by the Board prior to consideration and approval of the
annual financial statements for the year ended
30 June 2015.
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6 BUSINESS ETHICS AND INTEGRITY
7 MARKET DISCLOSURES
The Board understands the importance of keeping shareholders
and other stakeholders fully informed of material information
in relation to the Company’s activities on a timely basis. For this
purpose the Company has established a Continuous Disclosure
and Market Communications Policy, a copy of which is available
on the corporate governance section of the company’s web site.
This Continuous Disclosure and Market Communications Policy
summarises the processes that have been adopted to ensure
Fortescue complies with its disclosure obligations.
This policy applies to all directors, employees, contractors,
suppliers and business partners and is reviewed annually
to ensure that it remains effective in guiding disclosure in
accordance with Fortescue’s disclosure obligations.
With regard to general disclosures at media briefings or public
presentations, only the Chairman, the CEO or their delegated
persons are authorised to issue public comments on behalf
of the Company or provide journalists and members of the
investment community with information.
Copies of announcements to the ASX, investor briefings,
half yearly financial statements, quarterly production results,
the annual report and other relevant information are posted to
the Company’s website at www.fmgl.com.au.
6.1 Code of Conduct
Fortescue prides itself on its reputation for acting
with integrity, honesty and in compliance with all
applicable laws and regulations wherever it does business.
The Company maintains a publicly stated, formal policy
of zero-tolerance of corruption in all its forms, including
bribery. Fortescue’s reputation is built on its values
as a company, the professionalism of its employees
and a collective commitment to acting with integrity,
accountability and transparency at all times.
The Company actively promotes ethical and responsible
decision making through its values and the Code of
Conduct that embodies these values. The Code can be
accessed on the corporate governance section of the
Company’s website. Everyone who works for or with
Fortescue, including directors, employees, contractors,
suppliers and business partners is expected to comply
with the Code. In addition they are required to ensure that
employees, contractors, suppliers and any other parties
under their supervision or direction with whom Fortescue
does business are aware of and comply with the Code.
New employees are required to read and acknowledge the
requirements of the Code in writing before they commence
with the Company.
Further information on Fortescue’s approach to business
ethics and integrity is set out in the Corporate Social
Responsibility section of this Annual Report.
6.2 Securities Trading
The Board has established a Securities Trading Policy which
outlines the policy for directors and employees when
trading in shares of the company. Under the policy certain
people are identified as designated persons and they are
required to comply with the policy with regard to explicit
non-trading periods which are set around reporting
periods. All other employees are subject to the normal
insider trading restrictions with the policy containing a
recommendation of the preferred trading periods.
The policy sets out a brief summary of the law on insider
trading and other relevant laws and also sets out the
restrictions on dealing in securities by people who work
for, or who are associated with Fortescue.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 89
8
COMPLIANCE WITH CORPORATE GOVERNANCE STANDARDS
The following table cross-references the Principles and Recommendations to the relevant sections of the Corporate Governance Statement and
other areas of the annual report.
ASX Corporate Governance Council Recommendations checklist
Principle 1: Lay solid foundations for management and oversight
Reference
Comply
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Companies should disclose respective roles and responsibilities of its board and management particularly those
reserved for the board and those delegated to management.
Companies should undertake appropriate checks prior to appointing a person, or putting forward to security
holders a candidate for election as director. Company must provide material information to security holders to
decide whether or not to elect as director.
Companies should have a written agreement with each director and senior executive setting out the terms of
their appointment.
Company secretary should be accountable directly to the board through the Chairman on all matters to do with
the proper functioning of the board.
2.1
2.6
2.6
2.13
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy.
The policy should include requirements for the board and relevant committees of the board to establish
measurable objectives for achieving gender diversity for the board to assess annually both the objectives
and progress in achieving them.
Companies should disclose the process for evaluating the performance of the board, its committees and
individual directors and whether an evaluation was undertaken in the reporting period.
2.5
Corporate Social
Responsibility
section
2.9
Companies should disclose the process for evaluating the performance of senior executives and whether
an evaluation was undertaken in the reporting period.
Remuneration
Report
Principle 2: Structure the board to add value
2.1
2.2
2.3
2.4
2.5
2.6
The board should have a nomination committee that.
• has at least three members and consists of a majority of independent directors
• is chaired by an independent director
and disclose
• the charter of the committee
• disclose members of the committee
• number of times the committee met throughout the period and individual attendance of members
at the meeting.
Companies should disclose a board skills matrix setting out the mix of skills and diversity currently
and in the future.
Companies should disclose:
• names of independent directors,
• if a director has an interest, position, association or relationship that might cause doubts about the
independence of that director and the nature of interest, position, association or relationship in question
and an explanation of why the board is of that opinion
• length of service of each director
A majority of the company’s board should be independent directors.
The chair of the board should be an independent director and, in particular, should not be the same person as
the CEO.
Companies should have a program for inducting new directors and provide appropriate professional
development opportunities to develop and maintain the skills and knowledge needed.
Principle 3: Act ethically and responsibly
3.1
Companies should establish a code of conduct for its directors, senior executives and employees and disclose
the code or summary of the code.
90 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
3
2.4
2.2, 2.8
2.8
2.2, 2.7, 2.8
Yes
Partly
2.6
6.1
Yes
Yes
8 Compliance with corporate governance standards (continued)
ASX Corporate Governance Council Recommendations checklist
Principle 4: Safeguard integrity in corporate reporting
4.1
4.2
The board should establish an audit committee. The audit committee should be structured so that it:
• has at least three members and consists of a majority of independent directors
• i s chaired by an independent director who is not chair of the board
and disclose
• the charter of the committee
• relevant qualifications and experience of the members of the committee
• number of times the committee met throughout the period and individual attendance of members
at the meeting.
Companies board should prior to approving the financial statements for a financial period, receive from its
CEO and CFO a declaration that in their opinion, the financial records have been properly maintained and
comply with the appropriate accounting standards and give a true and fair view of the financial position
and performance of the entity and that the opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
Reference
Comply
3
Yes
Overview section
2.3
5.4
Yes
4.3
Companies should at the AGM ensure attendance of the external auditor to answer questions from security
holders relevant to the audit.
3.1
Principle 5: Make timely and balanced disclosure
5.1
Companies should have a written policy for complying with its continuous disclosure obligations under the
Listing Rules and disclose that policy or a summary of it.
Principle 6: Respect the rights of security holders
6.1
6.2
6.3
6.4
Companies should provide information about itself and its governance to investors via its website.
Companies should design and implement an investor relations program to facilitate effective communication
with investors.
Companies should disclose the policies and processes in place to facilitate and encourage participation
at meetings of security holders.
Companies should give security holders the option to send and receive communications to the entity
and its security registry electronically.
Principle 7: Recognise and manage risk
7.1
7.2
7.3
7.4
The board should establish a risk committee. The risk committee should be structured so that it:
• has at least three members who are independent directors
• is chaired by an independent director
and disclose
• the charter of the committee
• disclose members of the committee
• number of times the committee met throughout the period and individual attendance of members
at the meeting.
A company’s board or committee should review the risk management framework at least annually to satisfy
itself that it is sound and disclose in each reporting period such a review has taken place.
Company should disclose the role and structure of their internal audit function.
Company should disclose whether it has any material exposure to economic, environmental and social
sustainability risks.
7
7
4
4
4
3
2.3
5.2
5.3
5.1
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 91
8 Compliance with corporate governance standards (continued)
Principle 8: Remunerate fairly and responsibly
8.1
8.2
8.3
The remuneration committee should be structured so that it:
• has at least three members and consists of a majority of independent directors
• is chaired by an independent chair
and disclose
• the charter of the committee
• disclose members of the committee
• number of times the committee met throughout the period and individual attendance of members
at the meeting.
Companies should disclose the policies and practices regarding remuneration of non-executive directors’,
executive directors and senior executives.
Companies with equity based remuneration scheme should have a policy on whether participants are
permitted to enter into transactions which limit the economic risk of participating in the scheme and disclose
a policy or summary of it.
3
Yes
2.3
Remuneration
Report
Remuneration
Report
Yes
Yes
92 I FORTESCUE METALS GROUP LIMITED GOVERNANCE
FINANCIAL REPORT
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 93
DIRECTORS’ REPORT
Your Directors present their report on the Fortescue consolidated
group, comprising the Company and its controlled entities,
for the year ended 30 June 2015.
The information presented in sections Overview on pages 8 to 18,
Operational and Financial Review on pages 19 to 32, Governance
(sections 2.2 Board Composition and 2.3 Meeting Attendance) on pages
78 to 79, Financial Statements on pages 102 to 142 and Remuneration
Report on pages 143 to 162, form part of the Directors’ report.
Directors
The Directors of the Company in office during the financial year
and until the date of this report, their qualifications, experience and
directorships held in listed companies at any time during the last
three years, are set out on pages 11 to 18.
The details of the Directors’ meetings held, including the number
of meetings of the Company’s Board of Directors and of each Board
committee held during the year ended 30 June 2015 and the number
of meetings attended by each Director are shown on page 79.
The relevant interest of each Director in the shares, options and
performance rights issued by the Company as notified by the Directors to
the Australian Securities Exchange in accordance with section 5205G(1)
of the Corporations Act 2001, at the date of this report are as follows:
Operating and financial review
Fortescue’s principal activities during the financial year were
exploration, development, production, processing and sale of
iron ore. There were no significant changes to the nature of the
Group’s principal activities during FY15.
The Company overview, including the discussion of Fortescue’s
strategic priorities and outlook, key aspects of operational and
financial performance and key business risks are contained in
the following sections of this report: Overview on pages 8 to 18,
Operating and Financial Review on pages 19 to 32, Corporate
Governance (sections 5.1 Material Risk Exposures and 5.2
Fortescue Risk Management Framework) on pages 85 to 88.
Dividends
NPAT
Interim dividend
Final dividend
US$m
A$ cents per share
A$ cents per share
2015
316
3
2
2014
2,740
10
10
The following dividend payments have been completed during
the year:
Director
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
J Baderschneider
E Gaines
C Huiquan
G Raby
S Warburton
Ordinary
shares
Options
Performance
rights
• Final fully franked dividend for the year ended 30 June 2014
of 10 Australian cents per share, paid in October 2014
• Interim fully franked dividend for the year ended 30 June 2015
of three Australian cents per share, paid in April 2015.
1,037,479,247
40,000
20,000
1,811,571
26,199,152
138,000
50,000
-
8,000
50,750
-
-
-
-
-
-
-
-
-
-
-
-
-
2,307,503
877,929
-
-
-
-
-
The remuneration of Directors and Key Management Personnel are
detailed in the Remuneration Report on page 143 to 162.
94 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
Environmental regulation and compliance
Greenhouse gas and energy reporting
Fortescue complies with the Australian Government’s National
Greenhouse and Energy Reporting Act 2007 (Cth) and will be subject to
the facility-level ‘baselines’ to be established under the Government’s
Emissions Reduction Fund – Safeguard Mechanism (ERF-SM) in
2016-17. Fortescue has been a keen participant this year in the
Government’s community development of the rules and regulation
that will govern the ERF-SM baselines in years to come.
Fortescue is committed to proactively managing energy consumption
and greenhouse gas emissions wherever practical and is guided by
a formal internal policy and management plans. The total Scope 1
and Scope 2 greenhouse gas emissions for the most recent reporting
period were 1.92 million tonnes of carbon dioxide equivalents.
Fortescue is committed to minimising the impact of its operations
on the environment, with an appropriate focus placed on continuous
monitoring of environmental matters and compliance with
environmental regulations.
Fortescue’s exploration, mining, rail and port activities are subject
to various environmental regulations under both State and
Commonwealth legislation.
Compliance with the environmental regulations is managed through
the Environmental Management System, used to identify key risks
associated with the environmental impact from the Company’s
operations, prioritisation of these risks and development of targets.
The environmental performance is monitored against these targets
with periodic internal environmental reviews, audits and inspections.
These reviews are designed to minimise or mitigate any potential
environmental impact and promote the culture of compliance.
Fortescue’s environmental performance, including the results of the
internal reviews, is regularly reported to the Board.
During the financial year, Fortescue submitted a number of
environmental reports and compliance statements to regulators
detailing Fortescue’s environmental performance and level of
compliance with relevant instruments. This includes Fortescue’s
Compliance Audit and Milestones Report dated August 2014, which
was provided to the Federal Department of the Environment, and the
Annual Audit and Compliance Reports submitted to the Department
of Environmental Regulation for Fortescue’s prescribed premises.
Fortescue also reported a small number of potential non-compliances
to the Office of the Environmental Protection Authority in relation
to Ministerial Conditions. All matters were minor in nature and have
been cooperatively resolved with the regulator.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 95
Unissued shares under options and performance rights
Details of the options and performance rights outstanding at 30 June 2015 are as follows:
Long term performance rights 2013
Long term performance rights 2014
Short term performance rights 2015
Long term performance rights 2015
Exercise price
A$
-
-
-
-
-
Balance at the
end of the year
(number)
2,497,299
4,144,145
1,439,173
3,542,275
11,622,892
Vested and exercisable
at the end of the year
(number)
-
-
-
-
-
Remaining
contractual life
(months)
3
15
3
27
In FY15, 2,808,395 of the 2014 short term performance rights were converted to shares, while the remaining 842,860 of the 2014 short term
performance rights lapsed during the year.
Company secretaries
Non-audit services
Ian Wells was appointed Company Secretary on 16 February 2015.
Ian Wells and Mark Thomas are joint Company Secretaries of
Fortescue. Details of their qualifications and experience are set
out on page 15.
The Company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor
has relevant expertise and experience and where the auditor’s
independence is not compromised.
Directors and officers indemnities and insurance
Since the end of the previous financial year, the Company has paid
premiums to insure the Directors and Officers of Fortescue.
The liabilities insured are legal costs that may be incurred in
defending civil proceedings that may be brought against the Officers
in their capacity as Officers of Fortescue, and any other payments
arising from liabilities incurred by the Officers in connection with such
proceedings, other than where such liabilities arise out of conduct
involving a wilful breach of duty by the Officers or the improper use
by the Officers of their position or of information to gain advantage
for themselves or someone else or to cause detriment to Fortescue.
It is not possible to apportion the premium between amounts relating
to the insurance against legal costs and those relating to other
liabilities. Conditions of the policy also preclude disclosure to third
parties of the amount paid for the policy.
Details of the amounts paid or payable to the auditor
PricewaterhouseCoopers Australia and related entities for audit and
non-audit services provided during the year are set out in note 20 to
the financial statements.
The Board of Directors has considered the position and, in accordance
with advice received from the Audit and Risk Management
Committee, is satisfied that the provision of the non-audit services is
compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001 and did not compromise the
auditor independence requirements of the Corporations Act 2001 for
the following reasons:
• all non-audit services have been reviewed by the Audit and
Risk Management Committee to ensure they do not impact
the impartiality and objectivity of the auditor
• none of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
The auditor’s independence declaration, as required under section
307C of the Corporations Act, is set out on page 98 and forms part
of this report.
96 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
Future developments
Rounding of amounts
The Vision, Strategy and Outlook section set out on pages 8 to 10 and
the Operating and Financial Review section set out on pages 19 to
32 of this Annual report, provide an indication of the Group’s likely
developments and expected results. In the opinion of the Directors,
disclosure of any further information about these matters and
the impact on Fortescue’s operations could result in unreasonable
prejudice to the Group and has not been included in this report.
The Company is of a kind referred to in Class order 98/100, issued by
the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the financial report. Amounts in the
Directors’ Report and the financial statements have been rounded
off in accordance with that Class Order to the nearest million dollars,
unless otherwise stated.
Significant changes in state of affairs
There have been no significant changes in the state of affairs of
Fortescue, other than those disclosed in this report.
Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf of the
Group, or to intervene in any proceedings to which the Group is a
party, for the purposes of taking responsibility on behalf of the Group
for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of
the Company with leave of the Court under section 237 of the
Corporations Act 2001.
Events occurring after the reporting period
On 24 August 2015, the Directors declared a final dividend of
two Australian cents per ordinary share payable in October 2015.
This report is made in accordance with a resolution of the Directors.
Andrew Forrest
Chairman
Dated in Perth this 24th day of August 2015.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 97
98 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 99
100 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 102 to 142 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position at 30 June 2015 and of its performance for the year
ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in
note 21 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 21.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Andrew Forrest
Chairman
Dated in Perth this 24th day of August 2015.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 101
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2015
Operating sales revenue
Cost of sales
Gross profit
Other income
Other expenses
Profit before income tax and net finance expenses
Finance income
Finance expenses
Profit before income tax
Income tax expense
Profit for the year after income tax
Profit for the year is attributable to:
Equity holders of the Company
Non-controlling interest
Profit for the year after income tax
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2015
Profit for the year after income tax
Other comprehensive income
Items that may be reclassified to profit or loss
Gains on cash flow hedges taken to equity
Losses transferred to the initial carrying amount of hedged items
Foreign exchange gain on translation of foreign operations
Total comprehensive income for the year, net of tax
Total comprehensive income for the year is attributable to:
Equity holders of the Company
Non-controlling interest
Total comprehensive income for the year, net of tax
Notes
3
5
4
6
7
8
2015
US$m
8,574
(7,427)
1,147
77
(175)
1,049
15
(644)
420
(104)
316
317
(1)
316
2014
US$m
11,753
(7,002)
4,751
126
(244)
4,633
21
(741)
3,913
(1,173)
2,740
2,730
10
2,740
2015
US$m
2014
US$m
316
2,740
-
-
-
316
317
(1)
316
23
67
2
2,832
2,822
10
2,832
Earnings per share for profit attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
9
9
10.18
10.16
88.00
87.85
Notes
Cents
Cents
The above consolidated income statement and consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
102 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2015
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivable
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Deferred income
Borrowings and finance lease liabilities
Provisions
Current tax payable
Total current liabilities
Non-current liabilities
Trade and other payables
Deferred income
Borrowings and finance lease liabilities
Provisions
Deferred joint venture contributions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Notes
2015
US$m
2014
US$m
10(b)
11(a)
11(c)
11(a)
13
11(b)
11(d)
10(a)
14
11(b)
11(d)
10(a)
14
23(b)
15
10(d)
2,381
291
773
35
49
3,529
6
17,729
44
52
17,831
21,360
739
620
155
174
-
1,688
69
591
9,414
428
261
1,372
12,135
13,823
7,537
1,294
46
6,184
7,524
13
7,537
2,398
585
1,467
-
27
4,477
5
18,068
67
77
18,217
22,694
1,338
936
154
176
666
3,270
101
556
9,403
467
160
1,154
11,841
15,111
7,583
1,289
69
6,211
7,569
14
7,583
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 103
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
Cash flows from operating activities
Cash receipts from customers
Payments to suppliers and employees
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment - Fortescue
Payments for property, plant and equipment - joint operations
Receipts of deposits and guarantees
Proceeds from disposal of plant and equipment
Contributions from joint venture partners
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings and finance leases
Interest and finance costs paid
Dividends paid
Repayment of customer deposits
Purchase of shares by employee share trust
Net cash outflow from financing activities
Notes
2015
US$m
2014
US$m
8,537
(5,971)
(529)
2,037
12,618
(6,220)
(150)
6,248
10(c)(i)
(626)
(223)
-
7
101
15
(726)
2,206
(2,367)
(605)
(343)
(96)
(30)
(1,235)
76
2,398
(93)
2,381
(1,931)
(64)
160
262
160
21
(1,392)
-
(3,092)
(853)
(581)
(82)
(17)
(4,625)
231
2,158
9
2,398
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Non-cash investing and financing activities are disclosed in Note 10(c)(ii).
10(b)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
104 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015
Attributable to equity holders of the Company
Contributed
equity
US$m
Reserves
US$m
Retained
earnings
US$m
Balance at 1 July 2013
Profit for the year
Other comprehensive income
Total comprehensive income for the year, net of tax
Transactions with owners in their capacity as owners, net of tax:
Purchase of shares under employee share plans
Employee share awards exercised net of employee contributions
Equity settled share-based payment transactions
Dividends paid
Balance at 30 June 2014
Profit (loss) for the year
Total comprehensive income for the year, net of tax
Transactions with owners in their capacity as owners, net of tax:
Purchase of shares under employee share plans
Employee share awards exercised net of employee contributions
Equity settled share-based payment transactions
Expired options
Dividends paid
Balance at 30 June 2015
1,291
-
-
-
(17)
15
-
-
1,289
-
-
(30)
35
-
-
-
1,294
(49)
-
92
92
-
(5)
31
-
69
-
-
-
(13)
9
(19)
-
46
Non-
controlling Total
interest equity
US$m
US$m
4
10
-
10
-
-
-
-
5,289
2,740
92
2,832
(17)
10
31
(562)
Total
US$m
5,285
2,730
92
2,822
4,043
2,730
-
2,730
-
-
-
(562)
(17)
10
31
(562)
6,211
317
317
7,569
317
317
14
(1)
(1)
7,583
316
316
-
-
-
19
(363)
6,184
(30)
22
9
-
(363)
7,524
-
-
-
-
-
13
(30)
22
9
-
(363)
7,537
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1
Basis of preparation
Financial performance
Segment information
2
Operating sales revenue
3
Other income
4
Cost of sales
5
Other expenses
6
Finance expenses
7
Income tax expense
8
Earnings per share
9
Capital management
Capital management
10
10(a) Borrowings and finance lease liabilities
10(b) Cash and cash equivalents
10(c) Cash flow information
10(d) Contributed equity
10(e) Dividends
11 Working capital
11(a) Trade and other receivables
11(b) Trade and other payables
11(c)
Inventories
11(d) Deferred income
Financial risk management
12
107
108
108
109
109
109
109
110
111
112
112
115
115
115
116
116
116
117
117
117
118
Key balance sheet items
Property, plant and equipment
13
Provisions
14
Deferred tax assets and liabilities
15
Unrecognised items
16
17
Commitments and contingencies
Events occurring after the reporting period
Other information
18
19
20
21
22
23
24
25
Related party transactions
Share-based payments
Remuneration of auditors
Deed of cross guarantee
Parent entity financial information
Interests in other entities
Summary of significant accounting policies
Critical accounting estimates and judgements
121
122
123
124
124
125
126
127
128
129
129
130
141
106 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I BASIS OF PREPARATION
For the year ended 30 June 2015
1 Basis of preparation
These financial statements cover the consolidated group consisting of Fortescue Metals Group Limited (the Company) and its subsidiaries,
together referred to as Fortescue or the Group.
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board (AASB), including Australian Interpretations, and the Corporations Act 2001.
(a) Compliance with IFRS
The financial statements of the Group also comply with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.
(b) Historical cost convention
The financial statements have been prepared under the historical cost convention, except for certain financial instruments,
which have been measured at fair value.
(c) Functional and presentation currency
The financial statements are presented in United States dollars, which is the Group’s reporting currency and the functional currency
of the parent and the majority of its subsidiaries.
(d) Critical accounting estimates
The preparation of financial statements requires management to use certain critical accounting estimates and to exercise their
judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to these financial statements are:
• Iron ore reserve estimates
• Exploration and evaluation expenditure
• Development expenditure
• Property, plant and equipment - recoverable amount
• Rehabilitation estimates
The accounting estimates and judgements applied to these areas are disclosed in note 25.
(e) Rounding of amounts
The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that
Class Order to the nearest million dollars, unless otherwise stated.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I FINANCIAL PERFORMANCE
For the year ended 30 June 2015
2 Segment information
Fortescue’s chief operating decision maker, identified as the Chief Executive Officer, reviews the Group’s financial performance and makes
significant operating decisions having regard to all aspects of the integrated operation, with the key financial information presented
internally for management purposes on a consolidated basis. Accordingly, no reportable operating segments have been identified in
presenting the Group’s consolidated financial performance.
Fortescue uses Underlying EBITDA defined as earnings before interest, tax, depreciation and amortisation, exploration, development and other
expenses, as a key measure of its financial performance. The reconciliation of Underlying EBITDA to the net profit after tax is presented below.
Underlying EBITDA
Finance income1
Finance expenses
Depreciation and amortisation
Exploration, development and other
Net profit before tax
Income tax expense
Net profit after tax
1 Refer to the consolidated income statement.
(a) Geographical information
Notes
7
5, 6
6
8
2015
US$m
2,506
15
(644)
(1,405)
(52)
420
(104)
316
2014
US$m
5,636
21
(741)
(965)
(38)
3,913
(1,173)
2,740
Fortescue operates predominantly in the geographical location of Australia, and this is the location of the vast majority of the Group’s
assets. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location
of customers.
Revenues from external customers
China
Other
(b) Major customer information
2015
US$m
2014
US$m
8,047
527
8,574
11,315
438
11,753
Revenue from one customer amounted to US$3,563 million (2014: US$2,347 million), arising from the sale of iron ore and related
shipment of the product.
3 Operating sales revenue
Sale of iron ore
Sale of joint venture iron ore
Other revenue
108 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
2015
US$m
8,323
67
184
8,574
2014
US$m
11,485
126
142
11,753
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I FINANCIAL PERFORMANCE
For the year ended 30 June 2015
4 Other income
Net foreign exchange gain
Gain on disposal of assets
Other
5 Cost of sales
Mining and processing costs
Rail costs
Port costs
Operating leases
Shipping costs
Government royalty
Depreciation and amortisation
Other operating expenses
2015
US$m
2014
US$m
68
3
6
77
2015
US$m
3,765
230
274
80
1,112
516
1,376
74
7,427
-
109
17
126
2014
US$m
3,442
238
252
74
1,210
775
924
87
7,002
Total employee benefits expense included in cost of sales and administration expenses is US$740 million (2014: US$675 million).
6 Other expenses
Administration expenses
Exploration, development and other
Net foreign exchange loss
Depreciation and amortisation
7 Finance expenses
Interest expense on borrowings and finance lease liabilities
Interest capitalised1
Loss on early redemption of borrowings and finance leases
Other
2015
US$m
2014
US$m
94
52
-
29
175
2015
US$m
590
(7)
45
16
644
112
38
53
41
244
2014
US$m
747
(75)
53
16
741
1 Borrowing costs capitalised in relation to major projects were determined using a weighted average capitalisation rate of 5.10 per cent
(2014: 6.90 per cent) for general borrowings and nil for specific borrowings (2014: 6.88 per cent).
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I FINANCIAL PERFORMANCE
For the year ended 30 June 2015
8
Income tax expense
(a) Income tax expense
Current tax
Deferred tax
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax
Tax at the Australian tax rate of 30 per cent (2014: 30 per cent)
Research and development
Adjustments in respect of income tax expense of prior periods
Foreign exchange variations and other translation adjustments
Tax impact of overseas jurisdiction
Share-based payments
Other
Income tax expense
2015
US$m
(112)
216
104
2015
US$m
420
126
(8)
6
(16)
1
3
(8)
104
2014
US$m
824
349
1,173
2014
US$m
3,913
1,174
(9)
(2)
11
9
1
(11)
1,173
110 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I FINANCIAL PERFORMANCE
For the year ended 30 June 2015
9 Earnings per share
(a) Earnings per share
Basic
Diluted
(b) Reconciliation of earnings used in calculating earnings per share
Profit attributable to the ordinary equity holders of the Company used in calculating basic
and diluted earnings per share
(c) Weighted average number of shares used as denominator
2015
Cents
10.18
10.16
2014
Cents
88.00
87.85
US$m
US$m
317
2,730
Number
Number
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
3,113,525,034
3,113,798,151
Adjustments for calculation of diluted earnings per share:
Potential ordinary shares
Weighted average number of ordinary and potential ordinary shares used
6,371,996
5,133,166
as the denominator in calculating diluted earnings per share
3,119,897,030
3,118,931,317
(d) Information on the classification of securities
(i) Options and rights
Options and rights granted to employees under the Fortescue incentive plan are considered to be potential ordinary shares and have
been included in the determination of diluted earnings per share to the extent to which they are dilutive. Details relating to the options
and rights are set out in note 19.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
10 Capital management
Fortescue’s capital management policy supports its strategic objectives and provides a framework to maintain a strong capital structure to
deliver consistent returns to its equity shareholders and sustain future developments and expansion of the business.
Fortescue’s capital includes shareholders’ equity, reserves and net debt. Net debt is defined as a combination of cash and cash equivalents,
borrowings and finance lease liabilities.
Borrowings and finance lease liabilities
Cash and cash equivalents
Net debt
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Capital management involves a continuous process of:
2015
US$m
9,569
(2,381)
7,188
7,524
13
7,537
2014
US$m
9,557
(2,398)
7,159
7,569
14
7,583
• Monitoring and controlling the capital structure
• Evaluating capital requirements against the risks arising from Fortescue’s activities and the environment it operates in
• Planning capital raisings and returning capital
• Raising, refinancing and repaying of debt
• Development, maintenance and implementation of the dividend policy, including the dividend reinvestment plan
• Ensuring adequate cover over any financial covenants.
To achieve its primary capital management objective of maintaining a strong capital structure, Fortescue has developed target ranges for a
number of financial indicators. These indicators include gearing, debt to Underlying EBITDA and interest coverage ratio, and are monitored
together with a number of other financial and non-financial indicators. Target ranges for the financial ratios vary upon the investment
and commodity cycles. During periods of intensive investment, for example expansion programs or a commodity downturn, the capital
management policy contemplates interim ratio levels moving to a targeted longer term level. Interim levels acknowledge and consider the
requirements, in certain circumstances, for remedial action to be taken.
Fortescue’s flexible debt profile does not contain any maintenance covenants and allows for voluntary debt repayments, refinancing of debt
prior to maturity and facilitates the debt repayment strategy to lower its gearing levels.
(a) Borrowings and finance lease liabilities
Senior secured credit facility
Senior notes
Finance lease liabilities
Total current borrowings and finance lease liabilities
Senior secured credit facility
Senior notes
Finance lease liabilities
Total non-current borrowings and finance lease liabilities
2015
US$m
2014
US$m
80
70
5
155
4,717
4,241
456
9,414
73
79
2
154
4,722
4,366
315
9,403
Total borrowings and finance lease liabilities
9,569
9,557
112 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
10 Capital management (continued)
(i)
Summary of movements in borrowings and finance lease liabilities
Senior secured
credit facility
US$m
Senior secured /
unsecured notes
US$m
Finance
leases
US$m
Preference
shares
US$m
Balance at 1 July 2013
Initial recognition
Interest expense
Interest and finance lease repayments
Transaction costs
Foreign exchange (gain) loss
Repayment
Balance at 30 June 2014
Initial recognition
Interest expense
Interest and finance lease repayments
Transaction costs
Repayment
Balance at 30 June 2015
4,828
-
248
(209)
(22)
-
(50)
4,795
-
223
(171)
-
(50)
4,797
7,091
-
437
(465)
22
-
(2,640)
4,445
2,300
321
(321)
(84)
(2,350)
4,311
642
13
57
(53)
(59)
(10)
(273)
317
141
46
(43)
-
-
461
130
-
5
(7)
-
3
(131)
-
-
-
-
-
-
-
Total
US$m
12,691
13
747
(734)
(59)
(7)
(3,094)
9,557
2,441
590
(535)
(84)
(2,400)
9,569
Information about Fortescue’s exposure to interest rate risk and foreign exchange rate risk is disclosed in note 12.
(ii) Refinancing
During the year ended 30 June 2015 Fortescue successfully completed a US$2.3 billion senior secured notes issue with the proceeds
applied as follows:
• Full redemption of the 2017 senior unsecured notes of US$1,000 million
• Full redemption of the 2018 senior unsecured notes of US$400 million
• Partial redemption of the 2019 senior unsecured notes of US$450 million
• The residual proceeds of US$320 million, following payment of the offering discounts, fees and commissions, are reserved for
retirement of the 2019 senior unsecured notes.
The US$2.3 billion senior secured notes have a seven year term maturing in April 2022 with a non-call period of three years and have
a coupon interest of 9.75 per cent per annum.
During the year ended 30 June 2014 Fortescue successfully completed the refinancing of the US$5.0 billion term loan, reducing the
margin by one per cent to 3.25 per cent, and extending the maturity date by 21 months to 30 June 2019. The total coupon payable on
this facility is calculated as LIBOR, with a LIBOR floor of 1.00 per cent, plus the margin. In May 2014, the margin reduced by a further
0.50 per cent, to 2.75 per cent.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
10 Capital management (continued)
(iii) Key terms of borrowings and finance lease liabilities
The key terms of borrowings and finance leases are summarised below.
Senior secured credit facility
Established in October 2012, a senior secured facility of US$5.0 billion was refinanced in November 2013. The facility is repayable at
Fortescue’s option with key terms prior to and after refinancing summarised below.
From
October 2012
November 2013
May 2014
To
November 2013
May 2014
Current
Face value,
US$m
5,000
4,950
4,9252
Interest rate1
LIBOR + 4.25%
LIBOR + 3.25%
LIBOR + 2.75%
Principal
repayments
0.25% quarterly
0.25% quarterly
0.25% quarterly
Maturity
18 October 2017
30 June 2019
30 June 2019
1 LIBOR with a floor of one per cent.
2 Following principal repayments of 0.25 per cent made quarterly, the face value of the facility at 30 June 2015 was US$4,863 million
(2014: US$4,913 million).
The facility is secured over principally all of the assets of the Company and its subsidiaries, subject to certain limited exceptions, with the
security shared on a pari passu basis with the senior secured notes.
Senior notes
Fortescue’s senior notes comprise a series of the following tranches which have early repayment options with interest payable bi-annually:
Date of issue
Date of maturity
Call date1
Secured/
unsecured
Face value
US$m
Carrying value
US$m
Interest
rate
Currency
25 October 2011
19 March 2012
27 April 2015
1 November 2019
1 April 2022
1 March 2022
November 2015
April 2017
March 2018
Unsecured
Unsecured
Secured2
1,050
1,000
2,300
4,350
1,054
1,009
2,247
4,310
8.250%
6.875%
9.750%
USD
USD
USD
1 The date when senior unsecured notes become repayable at Fortescue’s option.
2 The senior secured notes are secured over principally all of the assets of the Company and its subsidiaries, subject to certain limited
exceptions, with the security shared on a pari passu basis with the senior secured credit facility.
Finance lease liabilities
Finance lease liabilities largely relate to contractual commitments associated with the Solomon Power Station and the Fortescue River Gas
Pipeline. In the event of default, the assets revert to the lessor. Finance lease liabilities represent Fortescue’s commitments in relation to the
finance leases, incorporating the effect of discounting:
Within
one year
US$m
Between one
year and five years
US$m
After
five years
US$m
40
(40)
-
65
(62)
3
208
(199)
9
256
(241)
15
674
(366)
308
1,004
(561)
443
Total
US$m
922
(605)
317
1,325
(864)
461
30 June 2014
Lease expenditure commitments
Effect of discounting
Finance lease liabilities
30 June 2015
Lease expenditure commitments
Effect of discounting
Finance lease liabilities
114 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
10 Capital management (continued)
(b) Cash and cash equivalents
Cash at bank1
Short term deposits
2015
US$m
1,279
1,102
2,381
2014
US$m
1,541
857
2,398
1 Cash and cash equivalents include US$320 million restricted for repayment, redemption, repurchase or other forms of retirement of the
outstanding 2019 senior unsecured notes.
(c) Cash flow information
(i) Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year after income tax
Income tax expense
Depreciation and amortisation
Exploration, development and other
Share-based payment expense
Net unrealised foreign exchange loss
Finance expenses disclosed within financing activities
Finance income disclosed within investing activities
Gain on disposal of assets
Other non-cash items
Working capital adjustments:
(Decrease) increase in deferred income
(Decrease) increase in payables and provisions
Decrease (increase) in receivables
Decrease (increase) in inventories
Net cash inflow from operating activities
(ii) Non-cash investing and financing activities
Acquisition of plant and equipment by means of finance leases
Other
(d) Contributed equity
(i)
Share capital
Ordinary shares fully paid
2015
US$m
316
104
1,405
52
9
72
644
(15)
(3)
(6)
(281)
(1,074)
299
515
2,037
(141)
42
(99)
2014
US$m
2,740
1,173
965
38
31
34
741
(21)
(109)
(10)
1,123
250
(302)
(405)
6,248
(9)
(42)
(51)
30 June
2015
Number
30 June
2014
Number
3,113,798,151
3,113,798,151
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
10 Capital management (continued)
(ii) Movements in ordinary share capital
Opening balance 1 July 2013
Purchase of new shares under employee share plan
Employee share awards exercised net of employee contributions
Balance 30 June 2014
Purchase of new shares under employee share plan
Employee share awards exercised net of employee contributions
Balance 30 June 2015
Number
of shares
3,113,798,151
(3,605,211)
3,605,211
3,113,798,151
(8,082,221)
8,082,221
3,113,798,151
US$m
1,291
(17)
15
1,289
(30)
35
1,294
(iii) Ordinary shares
Ordinary shares are fully paid and entitle the holders to one vote per share and the rights to participate in dividends. Incremental costs
directly attributable to the issue of shares are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares participate
in the proceeds on winding up of the Company in proportion to the number of shares held.
(e) Dividends
(i) Dividends paid during the year
Final fully franked dividend for the year ended 30 June 2014: A$0.10 per share (30 June 2013: A$0.10 per share)
Interim fully franked dividend for the half-year ended 31 December 2014: A$0.03 per share
(31 December 2013: A$0.10 per share)
(ii) Dividends proposed and not recognised as a liability
Final fully franked dividend: A$0.02 per share (2014: A$0.10 per share)
2015
US$m
2014
US$m
290
73
363
46
46
282
280
562
290
290
(iii) Franking credits
At 30 June 2015, franking credits available were US$829 million (2014: US$539 million). The payment of the final dividend for the year
ended 30 June 2015 will reduce the franking account balance by US$20 million.
11 Working capital
(a) Trade and other receivables
Trade debtors - iron ore
Trade debtors - other
GST receivables
Other receivables
Total current receivables
Other receivables
Total non-current receivables
116 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
2015
US$m
2014
US$m
242
26
7
16
291
6
6
486
44
39
16
585
5
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
11 Working capital (continued)
The carrying value of the receivables approximates their fair value. Information about Fortescue’s exposure to foreign currency risk,
interest rate risk and price risk pertaining to the trade and other receivables balances is disclosed in note 12.
Disclosures relating to receivables from related parties are set out in note 18.
(b) Trade and other payables
Trade payables
Customer deposits
Other payables and accruals
Total current payables
Customer deposits
Other payables and accruals
Total non-current payables
(c)
Inventories
Iron ore stockpiles
Warehouse stores and materials
2015
US$m
178
5
556
739
50
19
69
2015
US$m
328
445
773
2014
US$m
397
65
876
1,338
55
46
101
2014
US$m
1,055
412
1,467
Iron ore stockpiles, warehouse stores and materials are stated at cost. Inventories expensed through cost of sales, including depreciation, during
the year ended 30 June 2015 amounted to US$5,725million (2014: US$4,930 million). During the year, inventory write-offs of US$22 million
(2014: US$22 million) were recognised in relation to specific items of warehouse stores and materials that were identified as obsolete.
(d) Deferred income
Iron ore prepayments
Port access prepayment
Total current deferred income
Iron ore prepayments
Port access prepayment
Total non-current deferred income
2015
US$m
2014
US$m
509
111
620
369
222
591
825
111
936
223
333
556
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
12 Financial risk management
Fortescue is exposed to a range of financial risks, including market risk, credit risk and liquidity risk. Fortescue established a risk management
framework that provides a structured approach to the identification and control of risks across the business, sets the appropriate risk tolerance
levels and incorporates active management of financial risks. The risk management framework has been approved by the Board of Directors,
through the Audit and Risk Management Committee. The day-to-day management responsibility for execution of the risk management
framework has been delegated to the CEO and the CFO. Periodically the CFO reports to the Audit and Risk Management Committee on risk
management performance, including management of financial risks.
The key elements of financial risk are further explained below.
(a) Market risk
Market risk arises from Fortescue’s exposure to commodity price risk and the use of interest bearing and foreign currency financial
instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in iron ore price
(commodity price risk), interest rates (interest rate risk) and foreign exchange rates (foreign currency exchange risk).
(i) Commodity price risk
Fortescue is exposed to the commodity price risk as its iron ore sales are predominantly subject to the prevailing market prices. Fortescue
has limited ability to directly influence the market prices of iron ore and manages the commodity price risk through focus on improving of
cash margins delivered by continued reductions in the cost base and strengthening corporate balance sheet through refinancing and early
debt repayments.
The majority of Fortescue’s iron ore sales contracts are structured on a provisional pricing basis, with the final sales price determined using
the iron ore price indices on or after the vessel arrival to the port of discharge. The estimated consideration in relation to the provisionally
priced contracts is marked to market using the spot iron ore price at the end of each reporting period with the impact of the iron ore price
movements recorded as an adjustment to operating sales revenue. At 30 June 2015, Fortescue had 16 million tonnes of ore sales
(2014: 18 million tonnes) that remained subject to provisional pricing, with the final price to be determined within the first half of the
following financial year. A 20 per cent movement in the realised iron ore price on these provisionally priced sales would increase or reduce
net earnings by US$150 million (2014: US$259 million), before the impact of taxation. This analysis assumes all other factors, including the
foreign currency exchange rates, held constant.
(ii)
Interest rate risk
The Group’s interest rate risk arises from floating rates on the senior secured credit facility and, to a lesser extent, changes in rates
applicable to the short term deposits forming part of cash and cash equivalents.
Fortescue’s policy is to reduce interest rate risk over the cash flows on its long term debt funding through the use of fixed rate instruments
whenever appropriate.
At 30 June 2015, Fortescue’s variable rate financial assets and liabilities at the end of the financial year are summarised below:
Cash and cash equivalents
Senior secured credit facility
2015
US$m
2,381
(4,797)
(2,416)
2014
US$m
2,393
(4,795)
(2,402)
Management analyses the Group’s interest rate exposure on a regular basis by simulation of various scenarios taking into consideration
refinancing, renewal of existing positions, alternative financing options and hedging.
A change of 10 basis points in interest rates in variable instruments would have an impact on the Group’s pre-tax profit and loss of
US$3 million (2014: US$3 million). This analysis assumes that all other factor remain constant, including foreign currency rates.
118 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
12 Financial risk management (continued)
(iii) Foreign exchange risk
Fortescue operates in Australia, and is exposed to the movements in the Australian dollar exchange rate, with a significant portion of
its operating costs and capital expenditure incurred and paid in Australian dollars.
Fortescue’s risk management policy is to target specific levels at which to convert United States dollars to Australian dollars by entering
into either spot or short term forward exchange contracts. The Group does not enter into transactions that qualify as hedging for hedge
accounting purposes, with the exception of a number of spot and short term forward exchange contracts in relation to the major
expansion program completed in the financial year ended 30 June 2014.
The carrying amount of the financial assets and liabilities denominated in currency other than the United States dollar, which is the
Group’s functional and reporting currency, is set out below.
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Borrowings and finance lease liabilities
Trade and other payables
Total financial liabilities
2015
AUD
US$m
2014
AUD
US$m
99
47
146
151
407
558
288
65
353
9
822
831
A change of 10 per cent in the Australian dollar would have a net impact on the above financial assets and liabilities of US$42 million
(2014: US$48 million), before the impact of taxation. This analysis assumes that all other variables, including interest rates and iron ore
price, remain constant.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to Fortescue, and is
managed on a consolidated basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks
and financial institutions and receivables from customers.
Fortescue is exposed to a concentration of risk with the majority of its iron ore customers located in China. This risk is mitigated by a
policy of only trading with creditworthy counterparties and Fortescue further mitigates its credit risk by obtaining security in the form of
letters of credit covering approximately 95 per cent of the value of iron ore shipped. Fortescue has not recognised any bad debt expense
from trading counterparties in the financial years ended 30 June 2015 and 30 June 2014.
The exposure to the credit risk from cash and short-term deposits held in banks is managed by the treasury department and monitored
by the Board of Directors. Fortescue minimises the credit risks by holding funds with a range of financial institutions with the credit
ratings approved by the Board.
At 30 June 2015, Fortescue had US$11 million (2014: US$9 million) of trade receivables which have not been settled within the normal
terms and conditions agreed with the customer. These past due receivables relate to a number of customers for whom there is no recent
history of default and are not impaired.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I CAPITAL MANAGEMENT
For the year ended 30 June 2015
12 Financial risk management (continued)
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group manages
liquidity risk by maintaining adequate cash reserves and banking facilities, by continuously monitoring actual and forecast cash flows
and by matching the maturity profiles of financial assets and liabilities.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the period to the contracted maturity
date. The amounts disclosed in the table below are the contractual undiscounted cash flows.
Less than
6 months
US$m
Between
6 - 12
months
US$m
Between
1 and 2
years
US$m
Between
2 and 5
years
US$m
30 June 2014
Non-interest bearing
Fixed rate
Variable rate
Total
30 June 2015
Non-interest bearing
Fixed rate
Variable rate
Total
1,376
187
119
1,682
760
223
118
1,101
-
177
117
294
-
221
135
356
55
355
234
644
-
445
269
714
-
2,786
737
3,523
-
2,335
5,284
7,619
Over 5
years
US$m
-
3,485
4,678
8,163
50
4,890
-
4,940
Total
contractual
cash flows
US$m
Carrying
amount
US$m
1,431
6,990
5,885
14,306
810
8,114
5,806
14,730
1,431
4,772
4,795
10,998
810
4,772
4,797
10,379
Management monitors rolling forecasts of the Group’s cash and overall liquidity position on the basis of expected cash flows.
(d) Fair values
All financial assets and financial liabilities, with the exception of derivatives, are initially recognised at the fair value of the consideration
paid or received, net of directly attributable transaction costs. Subsequently, the financial assets and financial liabilities, other than
derivatives, are measured at amortised cost. The carrying values of the financial assets and liabilities approximate their fair values, with
the exception of the senior notes and senior secured credit facility with the fair values of US$3,970 million (2014: US$4,690 million) and
US$4,347 million (2014: US$4,925 million) respectively. These fair values are based on quoted market prices at the end of the reporting
period and as such are classified as level 1 financial instruments in the fair value hierarchy.
120 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I KEY BALANCE SHEET ITEMS
For the year ended 30 June 2015
13 Property, plant and equipment
Land and
Plant and
equipment buildings
Exploration
and
Assets under
evaluation development Development
Notes
US$m
US$m
US$m
US$m
US$m
Year ended 30 June 2014
Opening net book value
Transfers of assets
Additions
Capitalised interest
Foreign exchange losses reclassified from reserves
Disposals
Depreciation
Changes in restoration and rehabilitation estimate 14
Assets written off
Other
Closing net book value
7
At 30 June 2014
Cost
Accumulated depreciation
Net book value
Year ended 30 June 2015
Opening net book value
Transfers of assets
Additions
Capitalised interest
Disposals
Depreciation
Changes in restoration and rehabilitation estimate 14
Other
Closing net book value
7
At 30 June 2015
Cost
Accumulated depreciation
Net book value
8,547
4,885
12
-
-
(139)
(847)
-
(22)
(6)
12,430
632
345
-
-
-
-
(47)
-
-
3
933
14,090
(1,660)
12,430
1,013
(80)
933
12,430
536
139
-
(1)
(995)
-
(2)
12,107
933
1
-
-
(4)
(58)
-
-
872
14,762
(2,655)
12,107
1,010
(138)
872
264
50
99
-
-
(1)
-
-
-
(4)
408
408
-
408
408
71
291
-
-
-
14
(16)
768
768
-
768
5,290
(6,972)
1,842
75
67
-
-
-
-
11
313
313
-
313
313
(603)
539
7
-
-
-
(11)
245
245
-
245
Total
US$m
17,159
(68)
1,955
75
67
(154)
(1,030)
87
(22)
(1)
18,068
2,426
1,624
2
-
-
(14)
(136)
87
-
(5)
3,984
4,397
(413)
3,984
20,221
(2,153)
18,068
3,984
24
(5)
-
-
(207)
(59)
-
3,737
18,068
29
964
7
(5)
(1,260)
(45)
(29)
17,729
4,357
(620)
3,737
21,142
(3,413)
17,729
Transfers of assets were made between the categories of property, plant and equipment, intangible assets and exploration and evaluation and
development expenditure.
Property, plant and equipment includes assets held under finance leases of US$403 million (2014: US$300 million). The details of the finance
leases under which these assets are held are disclosed in note 10(a).
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I KEY BALANCE SHEET ITEMS
For the year ended 30 June 2015
14 Provisions
Employee benefits
Restoration and rehabilitation
Total current provisions
Employee benefits
Restoration and rehabilitation
Total non-current provisions
(a) Provision for employee benefits
Movements in the provision for employee benefits during the financial year are set out below:
Carrying amount at 1 July
Changes in employee benefits provision
Amounts paid
Carrying amount at 30 June
2015
US$m
2014
US$m
168
6
174
4
424
428
2015
US$m
170
110
(108)
172
166
10
176
4
463
467
2014
US$m
127
167
(124)
170
Provision for employee benefits include the Group’s liability for long service leave and annual leave. The current portion includes all of the
accrued annual leave and the portion of long service leave where employees have completed their required period of service. The Group does
not expect all employees to take the full amount of accrued leave or require payment in the next 12 months. The amount to be taken or paid
in the next 12 months is estimated at approximately US$109 million.
(b) Provision for restoration and rehabilitation
Movements in the provision for restoration and rehabilitation during the financial year are set out below:
Carrying amount at 1 July
Changes in restoration and rehabilitation estimate1
Unwinding of discount
Payments for restoration and rehabilitation activities
Carrying amount at 30 June
2015
US$m
473
(45)
4
(2)
430
2014
US$m
388
87
4
(6)
473
1 A provision for restoration and rehabilitation has been recognised in relation to Fortescue’s iron ore operations. The provision has been
made in full for all disturbed areas at the reporting date based on current estimates of costs to rehabilitate and for the costs of infrastructure
removal, discounted to their present value based on expected timing of future cash flows.
122 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I KEY BALANCE SHEET ITEMS
For the year ended 30 June 2015
15 Deferred tax assets and liabilities
The composition and movement of deferred tax assets and (liabilities) is as follows:
Balance
1 July 2013
US$m
Charged/
(credited) to
profit or loss
US$m
Balance
30 June 2014
US$m
Charged/
(credited)
to profit
or loss
US$m
Balance
30 June 2015
US$m
Exploration expenditure
Development
Property, plant and equipment
Inventories
Foreign exchange losses (gains)
Provisions
Other financial liabilities
Other items
Exploration expenditure
Development
Property, plant and equipment
Inventories
Foreign exchange losses (gains)
Provisions
Other financial liabilities
Other items
Deferred tax assets (liabilities) expected to
be recovered (settled) within 12 months
Deferred tax assets (liabilities) expected to
be recovered (settled) beyond 12 months
(79)
(193)
(585)
(125)
(31)
157
36
15
(805)
(4)
(270)
(93)
(60)
22
35
28
(7)
(349)
Assets
2015
US$m
2014
US$m
-
-
19
-
-
195
92
33
339
-
-
35
-
1
184
137
40
397
81
316
(83)
(463)
(678)
(185)
(9)
192
64
8
(1,154)
Liabilities
2015
US$m
(92)
(511)
(945)
(162)
(3)
(4)
(23)
(29)
(1,769)
2014
US$m
(83)
(463)
(697)
(185)
(9)
(3)
(28)
(25)
(1,493)
(9)
(48)
(232)
23
7
(12)
50
3
(218)
(92)
(511)
(910)
(162)
(2)
180
114
11
(1,372)
Net assets (liabilities)
2014
US$m
2015
US$m
(92)
(511)
(910)
(162)
(2)
180
114
11
(1,372)
(83)
(463)
(678)
(185)
(9)
192
64
8
(1,154)
76
(197)
(223)
(116)
(147)
263
(1,572)
(1,270)
(1,256)
(1,007)
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I UNRECOGNISED ITEMS
For the year ended 30 June 2015
16 Commitments and contingencies
30 June 2014
Within one year
Between one and five years
Total
30 June 2015
Within one year
Between one and five years
Total
Capital1
US$m
Operating leases2
US$m
519
252
771
138
438
576
79
176
255
107
174
281
Total
US$m
598
428
1,026
245
612
857
1 At 30 June 2015 Fortescue had contractual commitments to capital expenditure not recognised as liabilities, including commitments
associated with the construction of very large iron ore carriers of US$62 million within 12 months and US$438 million between one and
five years, after the end of the financial year.
2 Fortescue leases various offices and other premises under non-cancellable operating leases expiring within one to seven years.
The leases have varying terms, escalation clauses and renewal rights. The terms of the leases are renegotiated on renewal. Fortescue
also leases mobile equipment, plant and machinery and office equipment under non-cancellable operating leases. The leases have
varying terms.
Fortescue had no material contingent liabilities or contingent assets at 30 June 2015 or at the date of this report. Fortescue occasionally
receives claims arising from its activities in the normal course of business. In the opinion of the Directors, all such matters are covered by
insurance or, if not covered, are without merit or are of such a kind or involve such amounts that would not have a material adverse impact
on the operating results or financial position if settled unfavourably.
17
Events occurring after the reporting period
On 24 August 2015, the Directors declared a final dividend of two Australian cents per ordinary share payable in October 2015.
124 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
18 Related party transactions
(a) Material subsidiaries
Interests in Fortescue’s principal subsidiaries are set out in note 23(a).
(b) Key management personnel remuneration
Short term employee benefits
Share-based payments
Post employment benefits
2015
US$’000
2014
US$’000
6,521
5,984
169
12,674
5,958
10,534
193
16,685
No termination benefits were paid to key management personnel during the financial year in addition to the above remuneration
(2014: A$277 thousand).
Detailed information about the remuneration received by each key management person is provided in the remuneration report
on pages 143 to 162.
(c) Transactions with other related parties
The following transactions occurred with joint operations partners:
Revenue
Other income
Current receivables
(d) Guarantees issued
2015
US$’000
2014
US$’000
61,388
9,504
19,318
96,102
22,026
19,376
The Minderoo Group Pty Ltd (formerly The Metal Group Pty Ltd), an entity controlled by Andrew Forrest, has entered into
arrangements to provide financial assistance by way of guarantee to certain of Fortescue’s executives to purchase the Company’s
shares. The arrangement, which constitutes a share-based payment transaction, has been measured with the reference to the fair
value of the benefit received by the executives and is recognised as an expense on a straight-line basis over a four-year vesting period,
in line with the service conditions. The fair value was determined at grant date using a Monte-Carlo simulation model. The total
share-based payment expense in relation to the arrangement for the financial year ended 30 June 2015 was US$985 thousand
(2014: US$985 thousand).
No other transactions have occurred with related parties other than subsidiaries, entities with joint control, Directors or Key
Management Personnel as disclosed above.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
19 Share-based payments
(a) Employee options and Performance Rights Plans
During the financial year Fortescue issued 1,671,456 (2014: 3,917,818) short term performance rights and 3,752,129 (2014: 8,038,536)
long term performance rights to employees and senior executives, convertible to one ordinary share per right. The short term rights
vest over one year, and the long term rights vest over three years. Vesting of both the short term and long term plans are subject to
non-market vesting conditions imposed on each individual participating in the performance rights plans.
Weighted
average
exercise price
2015
A$
1.95
-
-
-
5.00
-
-
Number of
options
and rights
2015
Number
19,226,320
5,423,585
(2,718,618)
(2,808,395)
(7,500,000)
-
11,622,892
Weighted
average
exercise price
2014
A$
3.89
-
-
-
5.69
2.50
1.95
Number of
options and
rights
2014
Number
10,603,847
11,956,354
(1,360,433)
(973,448)
(400,000)
(600,000)
19,226,320
Outstanding at 1 July
Performance rights granted
Performance rights forfeited or lapsed
Performance rights converted
Options forfeited or expired during the year
Options exercised during the year
Outstanding at 30 June
The weighted average fair value of performance rights granted during the year ended 30 June 2015 was A$2.49 per right (2014: A$5.29
per right) for the short term performance rights and A$2.37 per right (2014: A$5.09 per right) for the long term performance rights. The
estimated fair value was determined using a trinomial option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date, expected price volatility of the underlying share, the effect of additional market
conditions, the expected dividend yield, estimated share conversion factor and the risk free interest rate for the term of the right.
The weighted average inputs used to determine the fair value of performance rights granted during the year ended 30 June 2015 were:
(a) share price: A$2.55 (2014: A$5.35)
(b) exercise price: nil (2014: nil)
(c) volatility: 62 per cent (2014: 78 per cent)
(d) option life: 23 months (2014: 21 months)
(e) dividend yield: 3 per cent (2014: 2 per cent)
(f)
risk free interest rate: 2.5 per cent (2014: 2.5 per cent)
Details of options and performance rights outstanding at 30 June 2015 are presented in the following table:
Long term performance rights 2013
Long term performance rights 2014
Short term performance rights 2015
Long term performance rights 2015
Balance at
the end
of the
of the year
Number
2,497,299
4,144,145
1,439,173
3,542,275
11,622,892
Exercise price
A$
-
-
-
-
-
Vested and
exercisable
at the end
of the year
Number
Remaining
contractual life
Months
-
-
-
-
-
3
15
3
27
126 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
19 Share-based payments (continued)
(b) Other share-based payments
The arrangement between certain of Fortescue’s executives and The Minderoo Group Pty Ltd, as described in note 18,
constitutes a share-based payment. The assessed fair value of this share-based payment at grant date was US$3,941,996,
including US$985,499 expensed during the financial year (2014: US$985,499). The fair value at each grant date was determined using
a Monte-Carlo simulation model that takes into account the four-year life of the instruments, the share prices at each grant date,
the expected price volatility of the underlying share, the expected dividend yield, risk free interest rate for the life of the instruments,
the loan value per share, the loan interest rate and the terms of the margin call.
(c) Employee expenses
Total expenses arising from share-based payments transactions recognised during the period as part of employee benefit expense were
as follows.
Share-based payment expense
20 Remuneration of auditors
(a) PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements
Other assurance services
Total audit and assurance services
Other services
Consulting services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements
Total remuneration of network firms of PricewaterhouseCoopers Australia
Total auditors’ remuneration
2015
US$m
9
2014
US$m
31
2015
US$’000
2014
US$’000
830
501
1,331
774
140
914
205
1,536
705
1,619
49
49
47
47
1,585
1,666
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
21 Deed of cross guarantee
Fortescue Metals Group Limited and certain of its subsidiaries are parties to a deed of cross guarantee under which each company guarantees
the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial
report and Directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
Holding entity
• Fortescue Metals Group Limited
Group entities
• FMG Pilbara Pty Limited
• Chichester Metals Pty Limited
• FMG Resources (August 2006) Pty Limited
• FMG Resources Pty Limited
• International Bulk Ports Pty Limited
• The Pilbara Infrastructure Pty Limited
• FMG Solomon Pty Limited
(a)
Consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial
position and consolidated statement of changes in equity
The consolidated income statement, consolidated statement of comprehensive income and consolidated statement of changes in equity
for the year ended 30 June 2015 along with the consolidated statement of financial position at 30 June 2015 for the closed group and
the extended closed group represented by the above companies are materially the same as that of the consolidated group.
22 Parent entity financial information
(a) Summary financial information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income for the year
128 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
2015
US$m
198
9,395
9,593
31
77
108
9,485
1,294
33
8,158
9,485
2,002
2,002
2014
US$m
633
8,070
8,703
765
94
859
7,844
1,289
56
6,499
7,844
2,960
2,960
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
22 Parent entity financial information (continued)
(a) Summary financial information
The parent entity’s financial information has been prepared using the same basis, including the accounting policies, as the consolidated
financial information, except as outlined below:
i) Investments in subsidiaries, associates and joint venture entities have been accounted for at cost; and
ii) Profit for the year includes dividends received from subsidiaries of US$2,045 million (2014: US$3,200 million).
(b) Guarantees entered into by the parent entity
The parent entity is a party to the following guarantees:
• Deed of cross guarantee, as described in note 21; and
• Guarantees forming part of the Fortescue’s senior debt arrangements associated with the senior secured credit facility, the senior
secured notes and the senior unsecured notes, which includes providing security to the secured debt holders with respect to the
assets of the Company and certain of its subsidiaries, as described in note 10(a).
No liability was recognised by the parent entity or the Group in relation to these guarantees.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities at 30 June 2015 or 30 June 2014.
23 Interests in other entities
(a) Material subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in accordance
with the accounting policy described in note 24(a):
Controlled entities
Country of
incorporation
Australia
The Pilbara Infrastructure Pty Limited
Australia
FMG Pilbara Pty Limited
Chichester Metals Pty Limited
Australia
FMG Resources (August 2006) Pty Limited Australia
Australia
Karribi Developments Pty Limited
Australia
FMG Magnetite Pty Limited
Australia
FMG North Pilbara Pty Limited
Singapore
FMG International Pte Limited
Australia
FMG Solomon Pty Limited
Hong Kong
FMG Iron Bridge Limited
Australia
FMG Procurement Services
Australia
Pilbara Power Pty Limited
Australia
Pilbara Housing Services Pty Limited
Singapore
FMG International Shipping Pte Ltd
(b) Joint operations
Equity holding
2014
%
2015
%
Class
of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
88
88
100
100
88
100
100
100
100
100
100
100
100
100
88
88
100
100
88
100
100
100
100
Investment
2015
US$
1
1
1
1
1
1
1
209,053
1
43,557,023
1
1
1
1
2014
US$
1
1
1
1
1
1
1
209,053
1
43,557,023
1
1
1
1
Fortescue, through its wholly owned subsidiary FMG Pilbara Pty Limited, holds a 25 per cent participating interest in the Nullagine
Iron Ore Joint Venture. The principal activity of Nullagine Iron Ore Joint Venture is the production of iron ore in the Pilbara region of
Western Australia, with Fortescue entitled to receive joint operation output consistent with its participating interest.
In October 2013 Fortescue, through its 88 per cent owned subsidiary FMG Magnetite Pty Ltd and FMG North Pilbara Pty Ltd, formed
the Iron Bridge Joint Venture and Glacier Valley Joint Venture to develop and produce its magnetite assets in the Pilbara region of
Western Australia. The Group is entitled to receive joint operation output consistent with its participating interest of 69 per cent.
During the year joint operation partners, other than Fortescue, contributed US$146 million to the Iron Bridge Joint Venture, increasing
the deferred joint venture contributions liability to US$261 million (2014: $160 million).
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
(a) Principles of consolidation
(i)
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries, being the entities
controlled by the Company. Control exists when the Group is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power to direct the activities of the entity.
The financial statements of subsidiaries are prepared for the same reporting period as the Company, using consistent accounting
policies. All intercompany balances and transactions, including unrealised profits and losses arising from intra-group transactions,
have been eliminated in full. Subsidiaries are consolidated from the effective date of acquisition to the effective date of disposal.
The acquisition method of accounting is used to account for the Group’s business combinations.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement,
the consolidated statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii)
Joint arrangements
A joint arrangement is an arrangement when two or more parties have joint control. Joint control exists when the parties agree
contractually to share control over the activities that significantly affect the entity’s returns (relevant activities), and the decisions about
relevant activities require the unanimous consent of the parties sharing joint control.
Joint arrangements are classified as either joint operations or joint ventures, based on the contractual rights and obligations between
the parties to the arrangement.
To support operations and construction projects of some of the joint operations, Fortescue and other parties to the joint arrangements
are required, from time to time, to contribute funds in the form of cash calls, in proportion to their respective interests in the joint
arrangements. These funds, if contributed by the parties to the joint arrangements in different financial years, may give rise to deferred
joint venture contribution assets or liabilities.
Joint operations
If the contractual arrangement specifies a right to the assets and the obligations for the liabilities for the parties, the arrangement
is classified as joint operation. The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations
and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial
statements under the appropriate headings. Details of the joint operations are set out in note 23.
Joint ventures
If the contractual arrangement grants the parties the right to the arrangement’s net assets, it is classified as a joint venture. Interests in
joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated balance sheet.
(b) Foreign currency translation
Transactions in foreign currencies have been converted at rates of exchange ruling at the date of those transactions, with the resulting
exchange gains and losses recognised in profit and loss. Monetary assets and liabilities denominated in foreign currencies are translated
at the rates of exchange ruling at the reporting date, with the resulting gains and losses recognised in profit and loss, except as set
out below:
• For qualifying cash flow hedges, the gains and losses arising on foreign currency translations are deferred in other comprehensive
income
• Translation differences on site rehabilitation provisions are capitalised as part of the development assets.
Gains and losses on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
130 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(c) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Fortescue recognises revenue when the amount of
revenue can be reliably measured and it is probable that future economic benefits will flow to the entity and specific criteria have been
met for each of the Group’s activities as described below.
(i)
Sale of products
Revenue from the sale of products is recognised when persuasive evidence exists, usually in the form of an executed sales agreement,
indicating that there has been a transfer of risks and rewards of ownership to the customer, no further work or processing is required
by the Group, the quantity and quality of the products have been determined with reasonable accuracy, the price can be reasonably
estimated and collectability is reasonably assured.
For iron ore sales, the above conditions are generally satisfied when title passes to the customer, typically on the bill of lading date when
ore is delivered to the vessel. Accordingly, revenue from sales of iron ore is recognised on the bill of lading date at an invoiced amount.
For majority of Fortescue’s contracts the sale price included in the original invoice is referred to as provisional price and is subsequently
adjusted to reflect market prices over a quotation period stipulated in the sales contract, typically on or after the vessel arrival to the
port of discharge. Refer to note 12(a)(i) for further information on provisionally priced contracts, including accounting for marking to
market adjustments.
(ii) Services revenue
Revenue from the provision of services is recognised in the accounting period in which the services are rendered.
(iii) Interest income
Interest income is accrued using the effective interest rate method.
(d) Deferred income
Deferred income represents payments collected but not earned at the end of the reporting period. These payments are recognised
as revenue when the goods are delivered or services are provided.
(e) Income tax
The income tax expense for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate for
each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
The current income tax charge is calculated on the basis of the taxation laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which the applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the taxation authorities.
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required
in determining the provisions for income taxes. There are certain transactions and calculations undertaken during the ordinary course
of business for which the ultimate tax determination may be subject to change. Fortescue estimates its tax liabilities based on the
Group’s understanding of the tax law at the time. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such
determination is made.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts. However, the deferred income tax is not accounted for if it arises from the initial recognition of an
asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither the accounting
nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted
by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
Deferred tax assets are recognised for future deductible temporary differences and carry forward of unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amounts and tax bases of
investments in foreign operations where the Group is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not be reversed in the foreseeable future. Deferred tax assets and liabilities are offset when there is a
legal right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the Group has a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit and loss, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
Fortescue Metals Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation
as of 1 July 2002, namely the FMG tax consolidated group, and are therefore taxed as a single entity from that date. FMG Iron Bridge
(Aust) Pty Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of
28 September 2011, namely the FMG Iron Bridge tax consolidated group, and are therefore taxed as a single entity from that date.
The head entity and the controlled entities in both tax consolidated groups continue to account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity in each tax consolidated group continues to be a standalone taxpayer in its
own right. In addition to its own current and deferred tax amounts, the head entity of each group also recognises the current tax
liabilities, or assets, and the deferred tax assets it has assumed from unused tax losses and unused tax credits from controlled entities
in the each corresponding tax consolidated group.
Assets or liabilities arising within the tax consolidated entities are recognised as amounts receivable from or payable to other entities
in the tax consolidated group. Any differences between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to, or distribution from, wholly-owned tax consolidated entities.
All the entities in the FMG tax consolidated group have entered into a valid and current tax sharing agreement which, in the opinion of
the Directors, limits the joint and several liability of the wholly-owned entities in the case of an income tax obligation default by the
head entity.
(f) Cash and cash equivalents
Cash and cash equivalents include cash on hand, short term deposits and other short term highly liquid investments that are subject
to an insignificant risk of changes in value, and are readily convertible to known amounts of cash.
(g) Trade receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. An allowance for impairment of trade receivables is established when there is objective evidence
that Fortescue will not be able to collect all amounts due.
Collectibility of trade receivables is reviewed on a monthly basis. When there is objective evidence that Fortescue will not be able to
collect all amounts due according to the original terms of the receivables, an allowance for impairment of trade receivables is raised.
Total receivables which are known to be uncollectible are written off by reducing the carrying amount directly. Significant financial
difficulties of the customer, probability that the customer will enter bankruptcy or financial re-organisation and default or delinquency
in payments are considered indicators that the trade receivable may not be collected. The amount of the impairment allowance is
the difference between the trade receivable’s carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial.
132 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
The amount of the impairment allowance is recognised in profit and loss within other administration expenses. When a trade receivable
for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against other administration expenses.
(h) Inventories
Warehouse stores and materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost for
raw materials and stores is determined as the purchase price. For partly processed and saleable iron ore, cost is based on the weighted
average cost method and includes:
• labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of iron ore
• production overheads, including attributable mining and manufacturing overheads
• the depreciation of mine development assets and of property, plant and equipment used in the extraction, processing and
transportation of iron ore
• transportation expenditure in bringing such inventories to their existing location and condition, together with an appropriate
portion of fixed and variable overhead expenditure.
Iron ore stockpiles represent iron ore that has been extracted and is available for further processing or sale. Quantities are assessed
primarily through internal and third party surveys. Where there is an indication that inventories are obsolete or damaged, these
inventories are written down to net realisable value. Net realisable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the sale.
(i) Financial assets
Fortescue classifies its financial assets into loans and receivables and financial assets at fair value through profit or loss. The classification
depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at
initial recognition.
(i)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and include trade receivables. They are included in current assets, except for those with maturities greater than 12 months
after the reporting date which are classified as non-current assets. Loans and receivables are initially measured at fair value and
subsequently carried at a revised cost. At the end of each reporting period loans and receivables are assessed whether there is objective
evidence that they are impaired. The amount of loss is measured as the difference between its carrying amount and the present value
of its estimated future cash flows and is recognised in profit and loss.
(ii) Financial assets through profit or loss
This category comprises only derivative financial instruments. They are carried in the balance sheet at fair value with changes in fair
value recognised in profit or loss.
(j) Financial liabilities
Trade payables
(i)
Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost and represent liabilities for
goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group has an
obligation to make future payments in respect of the purchase of these goods and services.
(ii) Borrowings
Borrowings are initially recognised at fair value of the consideration received, less directly attributable transaction costs. After initial
recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised.
(iii) Finance lease liabilities
The Group has finance lease liabilities in relation to certain items of property, plant and equipment. Finance lease liabilities are initially
recognised at the fair value of the underlying assets or, if lower, the estimated present value of the minimum lease payments. Each lease
payment is allocated between the liability and finance cost and the finance cost is charged to profit and loss over the lease period to
reflect a constant periodic rate of interest on the remaining balance of the liability for each period.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(k) Derivatives and hedge accounting
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their
fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges
of foreign exchange risk associated with the cash flows of highly probable forecast transactions.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is immediately
recognised in profit or loss within other income or other expense.
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
When the forecast transaction that is being hedged results in the recognition of a non-financial asset, the gains and losses previously
deferred in other comprehensive income are transferred from equity and adjust the cost of the asset. When a hedging instrument
expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in equity is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.
(l) Property, plant and equipment
(i) Recognition and measurement
Each class of property, plant and equipment is stated at historical cost less, where applicable, any accumulated depreciation and
impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.
The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bringing
an asset to a working condition ready for its intended use. Assets under construction are recognised in assets under development. Upon
commissioning, which is the date when the asset is in the location and condition necessary for it to be capable of operating in the
manner intended by management, the assets are transferred into property, plant and equipment or development assets, as appropriate.
Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property,
plant and equipment. Borrowing costs related to the acquisition or construction of qualifying assets are capitalised.
When separate parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part
of the equipment.
Gains and losses arising on disposal of property, plant and equipment are recognised in profit or loss and determined by comparing
proceeds from the sale of the assets to their carrying amount.
(ii) Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with these subsequent costs will flow to Fortescue and the cost of the item can be
measured reliably. Ongoing repairs and maintenance are recognised as an expense in profit and loss during the financial period in which
they are incurred.
(iii) Depreciation
Depreciation on assets, other than land which is not depreciated, is calculated using the straight-line method or units of production
method, net of residual values, over estimated useful lives. Depreciation commences on the date when an asset is available for use, that
is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Assets
acquired under finance leases are depreciated over the shorter of the individual asset’s useful life and the lease term.
134 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
Straight-line method
Where the useful life is not linked to the quantities of iron ore produced, assets are generally depreciated on a straight-line basis over
the estimated useful lives of the assets as follows:
• Buildings
• Rolling stock
• Plant and equipment
• Furniture, fittings and equipment
• Rail and port infrastructure assets
20 – 25 years
25 – 30 years
5 – 20 years
3 – 8 years
40 – 50 years
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period with the effect of
any changes in estimate accounted for on a prospective basis.
Units of production method
Where the useful life of an asset is directly linked to the extraction of iron ore from a mine, the asset is depreciated using the units of
production method. The units of production method is an amortised charge proportional to the depletion of the estimated proven and
probable reserves at the mine.
(iv) Exploration, evaluation and development expenditure
Exploration and evaluation activities involve the search for mineral resources, the determination of technical feasibility and the
assessment of commercial viability of an identified resource. Exploration and evaluation expenditure incurred is accumulated in respect
of each identifiable area of interest.
Exploration and evaluation expenditure is capitalised and carried forward to the extent that:
• rights to tenure of the identifiable area of interest are current; and
• at least one of the following conditions is also met:
(i)
the expenditure is expected to be recouped through the successful development of the identifiable area of interest,
alternatively, by its sale; or
(ii) where activities in the identifiable area of interest have not, at the reporting date, reached a stage that permits a
reasonable assessment of the existence or otherwise of economically recoverable reserves and activities in, or in relation
to, the area of interest, are continuing.
Exploration and evaluation assets are reviewed at each reporting date for indicators of impairment and tested for impairment where
such indicators exist. If the test indicates that the carrying value might not be recoverable, the asset is written down to its recoverable
amount. These charges are recognised as impairment expense in profit and loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset in previous years.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable,
exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from
exploration and evaluation expenditure to development expenditure.
Development expenditure includes capitalised exploration and evaluation costs, pre-production development costs, development
studies and other expenditure pertaining to that area of interest. Costs related to surface plant and equipment and any associated land
and buildings are accounted for as property, plant and equipment.
Development costs are accumulated in respect of each separate area of interest. Costs associated with commissioning new assets in the
period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after
the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
When an area of interest is abandoned or the Directors decide that it is not commercially or technically feasible, any accumulated cost
in respect of that area is written off in the financial period that the decision is made. Each area of interest is reviewed at the end of each
accounting period and the accumulated costs written off to profit and loss to the extent that they will not be recoverable in the future.
Amortisation of development costs capitalised is charged on a unit of production basis over the life of estimated proven and probable
reserves at the mine.
(m) Stripping costs
(i) Development stripping costs
Overburden and other mine waste materials are often removed during the initial development of a mine in order to access the mineral
deposit. This activity is referred to as development stripping and the directly attributable costs, inclusive of an allocation of relevant
overhead expenditure, are capitalised as development costs. Capitalisation of development stripping costs ceases and amortisation
of those capitalised costs commences upon commercial extraction of ore. Amortisation of capitalised development stripping costs is
determined on a unit of production basis for each area of interest.
Development stripping costs are considered in combination with other assets of an operation for the purpose of undertaking
impairment assessments.
(ii) Production stripping costs
Overburden and other mine waste materials continue to be removed throughout the production phase of the mine. This activity is
referred to as production stripping, with the associated costs charged to the income statement, as operating cost, except when all three
criteria below are met:
• production stripping activity provides improved access to the specific component of the ore body, and it is probable that economic
benefit arising from the improved access will be realised in future periods;
• the Group can identify the component of the ore body for which access has been improved; and
• the costs relating to the production stripping activity associated with that component can be measured reliably.
If all of the above criteria are met, production stripping costs resulting in improved access to the identified component of the ore body
are capitalised as part of development asset and are amortised over the life of the component of the ore body.
The determination of components of the ore body is individual for each mine. The allocation of costs between production stripping
activity and the costs of ore produced is performed using relevant production measures, typically strip ratios. Changes to the mine
design, technical and economic parameters affecting life of the components and strip ratios, are accounted for prospectively.
(n) Leases
Leases of assets where Fortescue, as lessee, has substantially all the risks and rewards of ownership, are classified as finance leases.
Assets acquired under finance leases are capitalised at the lower of the fair value of the underlying assets or the present value of the
future minimum lease payments. The corresponding finance lease liability is classified as borrowings. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to Fortescue as lessee are classified
as operating leases. Payments made under operating leases are recognised as an expense in profit and loss on a straight-line basis over
the period of the lease.
136 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(o) Rehabilitation provision
Provisions are recognised when Fortescue has a present legal or constructive obligation as a result of past events, it is more likely than
not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
The mining, extraction and processing activities of Fortescue give rise to obligations for site rehabilitation. Rehabilitation obligations can
include facility decommissioning and dismantling, removal or treatment of waste materials, land rehabilitation and site restoration. The
extent of work required and the associated costs are estimated using current restoration standards and techniques. Provisions for the
cost of each rehabilitation program are recognised at the time that environmental disturbance occurs.
Rehabilitation provisions are initially measured at the expected value of future cash flows required to rehabilitate the relevant site,
discounted to their present value using Australian Government bond market yields that match, as closely as possible, the timing of the
estimated future cash outflows. The judgements and estimates applied for the estimation of the rehabilitation provisions are discussed
in note 25.
When provisions for closure and rehabilitation are initially recognised, the corresponding cost is capitalised into the cost of mine
development assets, representing part of the cost of acquiring the future economic benefits of the operation. The capitalised cost of
closure and rehabilitation activities is recognised within development assets and is amortised based on the units of production method
over the life of the mine. The value of the provision is progressively increased over time as the effect of discounting unwinds, creating an
expense recognised in finance costs.
At each reporting date the rehabilitation liability is re-measured to account for any new disturbance, updated cost estimates, inflation,
changes to the estimated reserves and lives of operations, new regulatory requirements, environmental policies and revised discount
rates. Changes to the rehabilitation liability are added to or deducted from the related rehabilitation asset and amortised accordingly.
(p) Impairment of non-financial assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The Group conducts an internal review of asset values bi-annually, which is used as a source of information to assess for any
indications of impairment. External factors, such as changes in expected future prices, costs and other market factors are also monitored
to assess for indications of impairment. If any such indication exists, an estimate of the asset’s recoverable amount is calculated, being
the higher of fair value less direct costs to sell and the asset’s value in use. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between
knowledgeable and willing parties. Fair value for mineral assets is generally determined using independent market assumptions to
calculate the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any
expansion prospects, and its eventual disposal. These cash flows are discounted using an appropriate discount rate to arrive at a net
present value of the asset.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset
in its present form and its eventual disposal, discounted using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Value in use
is determined by applying assumptions specific to the Group’s continued use and does not take into account future development.
In testing for indications of impairment and performing impairment calculations, assets are considered as collective groups and referred
to as cash generating units. Cash generating units are the smallest identifiable groups of assets and liabilities that generate cash inflows
that are largely independent of the cash inflows from other assets or groups of assets.
Impaired assets are reviewed for possible reversal of the impairment at each reporting date.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(q)
Intangible assets
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future
period financial benefits through revenue generation or cost reduction are capitalised as software.
Costs capitalised include external direct costs of materials and consultants services, direct payroll and payroll related costs of employees’
time spent on the project.
IT development costs include only those costs directly attributable to the development phase and are only recognised following
completion of technical feasibility and where Fortescue has an intention and ability to use the asset.
Intangible assets are amortised on a straight-line basis over periods generally ranging from 3 to 5 years.
(r) Finance costs
Finance costs comprise interest expense, excluding interest expenses incurred for the construction of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, unwinding of the discount on provisions and
impairment losses recognised on financial assets.
Interest expense and other borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are
added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Where funds used
to finance an asset form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable
to relevant general borrowings during the construction period.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
(s) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
(t) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables and accruals in respect of employee services up to the reporting date. They are measured
at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in provisions and measured as the present value of expected future payments to be made
in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels,
probability of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on Australian Corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows. The liability for long service leave for which
settlement within 12 months of the reporting date cannot be deferred is recognised in the current provision for employee benefits.
The liability for long service leave for which settlement can be deferred beyond 12 months from the reporting date is recognised in the
non-current provision for employee benefits.
138 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(u) Share-based payments
Share-based remuneration benefits are primarily provided to employees via the Fortescue Metals Group Incentive Option Scheme
(FMGIOS) and Performance Rights Plan (PRP). Information relating to these schemes is set out in note 19.
The fair value of options granted under the FMGIOS and PRP are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become
unconditionally entitled to the options or rights.
The fair value at grant date is independently determined using trinomial option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
effect of additional market conditions, the expected dividend yield and the risk free interest rate for the term of the option or right.
The fair value of the options and rights granted is measured to reflect expected market vesting conditions, but excludes the impact of
any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included
in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its
estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes
into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in profit and loss with a
corresponding adjustment to equity.
(v) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the
Company, on or before the end of the reporting period but not distributed at the end of the reporting period.
(w) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing profit for the year after income tax attributable to the ordinary shareholders
by the weighted average number of ordinary shares on issue during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share is calculated by dividing profit for the year after income tax attributable to the ordinary shareholders
by the weighted average number of ordinary shares on issue during the financial year, after adjusting for the effects of all potential
dilutive ordinary shares that were outstanding during the financial year.
(x) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of
the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount
of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities,
which is disclosed as an operating cash flow.
(y) Comparatives
Where applicable, certain comparatives have been adjusted to conform with current year presentation.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
24 Summary of significant accounting policies (continued)
(z) New accounting standards and interpretations
(i) New and amended standards adopted by the Group
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning
1 July 2014:
• AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets. AASB 2013-3 introduced
some additional impairment disclosures where impairment losses or reversals have been recognised during the period, and the
recoverable amount has been determined using ‘fair value less cost of disposal’. No impairment losses or reversals of impairment
losses were recognised for the year ended 30 June 2015 and the adoption of AASB 2013-3 had no impact on disclosures in
Fortescue’s financial statements.
• AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of Hedge Accounting.
AASB 2013-4 allows for the continuation of hedge accounting when a derivative is novated, provided specific conditions are met.
Fortescue did not enter into transactions that qualify as hedging for hedge accounting purposes during the year ended 30 June 2015,
and the adoption of the above amendments had no impact on Fortescue’s financial statements.
• Interpretation 21 Accounting for Levies. Interpretation 21 confirms what the obligating event is and when a liability is recognised.
The adoption of Interpretation 21 had no impact on the amounts recognised in Fortescue’s financial statements.
• AASB 2014-1 Amendments to Australian Accounting Standards. AASB 2014-1 introduced annual improvements that resulted in
changes to various standards. The adoption of AASB 2014-1 had no impact on the amounts recognised and disclosures in Fortescue’s
financial statements.
(ii) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods.
These standards and interpretations have not been early adopted.
• AASB 9 Financial Instruments (effective for annual reporting periods beginning on or after 1 January 2018). AASB 9 addresses the
classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge
accounting. Fortescue has determined that AASB 9 will have no material impact on the way the Group accounts for its financial
instruments.
• AASB 15 Revenue from Contracts with Customers (effective for annual reporting periods beginning on or after 1 January 2017).
AASB 15 introduces new framework for accounting for revenue and will replace AASB 118 Revenue and AASB 111 Construction
Contracts. The new standard is based on the principle that revenue is recognised when control over goods and services transfers
to a customer, therefore the notion of control replaces the existing notion of risks and rewards. Management is continuing to assess
the impact of the new standard on Fortescue’s financial statements.
140 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
25 Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make judgements and estimates and form assumptions
that affect how certain assets, liabilities, revenue, expenses and equity are reported. At each reporting period, management evaluates its
judgements and estimates based on historical experience and on other factors it believes to be reasonable under the circumstances, the
results of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions and conditions.
Fortescue has identified the following critical accounting policies where significant judgements and estimates are made by management in
the preparation of these financial statements.
(a) Iron ore reserve estimates
Iron ore reserves are estimates of the amount of product that can be economically and legally extracted from Fortescue’s current
mining tenements. In order to calculate ore reserves, estimates and assumptions are required about a range of geological, technical
and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity
demand, commodity prices and exchange rates. Estimating the quantity and grade of ore reserves requires the size, shape and depth of
ore bodies or fields to be determined by analysing geological data such as drilling samples. This requires complex and difficult geological
judgements and calculations to interpret the data.
As economic assumptions used to estimate reserves change and as additional geological data is generated during the course of
operations, estimates of reserves may vary from period to period. Changes in reported reserves may affect Fortescue’s financial results
and financial position in a number of ways, including the following:
• asset carrying values may be affected due to changes in estimated future cash flows
• depreciation and amortisation charges in profit and loss may change where such charges are determined by
the units of production basis, or where the useful economic lives of assets change
• the carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of tax benefits.
(b) Exploration and evaluation expenditure
Fortescue’s accounting policy for exploration and evaluation expenditure results in expenditure being capitalised for an area of interest
where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which
permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates as to future
events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates
and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy,
a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to profit and loss.
(c) Development expenditure
Development activities commence after commercial viability and technical feasibility of the project is established. Judgement is
applied by management in determining when a project is commercially viable and technically feasible. In exercising this judgement,
management is required to make certain estimates and assumptions as to the future events. If, after having commenced the
development activity, a judgement is made that a development asset is impaired, the relevant capitalised amount will be written off to
profit and loss.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I OTHER INFORMATION
For the year ended 30 June 2015
25 Critical accounting estimates and judgements (continued)
(d) Property, plant and equipment – recoverable amount
The determination of fair value and value in use requires management to make estimates about expected production and sales volumes,
commodity prices, reserves (see ‘iron ore reserve estimates’ above), operating costs, rehabilitation costs and future capital expenditure.
Changes in circumstances may alter these projections, which may impact the recoverable amount of the assets. In such circumstances,
some or all of the carrying value of the assets may be impaired and the impairment would be charged to profit and loss.
(e) Rehabilitation estimates
Fortescue’s accounting policy for the recognition of rehabilitation provisions requires significant estimates including the magnitude of
possible works required for the removal of infrastructure and of rehabilitation works, future cost of performing the work, the inflation
and discount rates and the timing of cash flows. These uncertainties may result in future actual expenditure differing from the amounts
currently provided.
142 I FORTESCUE METALS GROUP LIMITED FINANCIAL REPORT
REMUNERATION REPORT
Overview I Operating and Financial Review I Reserves and Resources I Corporate Social Responsibility I Corporate Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 143
6
7
8
9
9.1
HOW FORTESCUE PERFORMED OVER
THE PAST FIVE YEARS
SECURITIES TRADING POLICY
EXECUTIVE CONTRACT TERMS
DETAILED REMUNERATION
FOR EXECUTIVES
Share-based remuneration
10 NON-EXECUTIVE DIRECTOR
REMUNERATION
11 EQUITY INSTRUMENT DISCLOSURES
RELATING TO KEY MANAGEMENT
PERSONNEL
11.1 Options and Performance Rights
11.2 Share holdings (Ordinary Shares)
155
155
155
156
158
159
159
161
162
1
1.1
1.2
1.3
2.
2.1
2.2
3
3.1
4
4.1
5
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
FY15 OVERVIEW AND YEAR AHEAD
FY15 Remuneration outcomes – linking
performance and pay
Executive total earnings FY15
Details of performance grants to executive directors
GOVERNANCE OF OUR REMUNERATION
Use of remuneration consultant
Clawback Policy
146
146
146
147
147
148
148
EXECUTIVE REMUNERATION STRATEGY 148
148
Remuneration Policy
EXECUTIVE REMUNERATION STRUCTURE
Remuneration Mix
149
149
KEY COMPONENTS OF EXECUTIVE
REMUNERATION
Total Fixed Remuneration (TFR)
Executive and Senior Staff Incentive Plan (ESSIP)
ESSIP performance objectives
How objectives and weightings are determined
How the ESSIP works
ESSIP performance in FY15
Long Term Incentive Plan (LTIP)
FY13 LTIP Performance
Salary Sacrifice Share Plan
150
150
150
150
151
152
152
153
154
154
144 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
Who this report covers
This report outlines the remuneration arrangements for
Fortescue’s KMP. KMP are defined as ‘those persons having authority
and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity’.
The KMP of the Company for FY15 were:
Non-Executive Directors
Chairman
Vice Chairman
Lead Independent Director
A Forrest
O Hegarty
M Barnaba
J Baderschneider Non-Executive Director (appointed 19 January 2015)
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott
G Rowley
H Scruggs
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Deputy Chairman (retired 13 November 2014)
Non-Executive Director (retired 13 November 2014)
Non-Executive Director (retired 13 November 2014)
Executive Directors (KMP)
N Power
P Meurs
Chief Executive Officer
Director Development
Executives (KMP)
N Cernotta
S Pearce
Director Operations
Chief Financial Officer
Within this Remuneration Report reference to “KMP” includes
Executive Directors and Executives as defined above.
There were no changes to KMP after the reporting date.
REMUNERATION REPORT
On behalf of the Directors of Fortescue Metals Group Limited I am
pleased to present the Remuneration Report for the year ended
30 June 2015.
Our Remuneration Report is designed to provide you, our Shareholders,
with information on key remuneration activities undertaken and
details of remuneration paid to Directors and Key Management
Personnel (KMP) in FY15 as well as demonstrate how reward outcomes
link to Company strategy and performance.
It is also an opportunity to provide you with information on changes
planned for the coming year.
In the current year the Committee and the Board have reviewed
the executive long term incentive plan. This review involved
considering the plan performance against its objectives, general
market conditions, together with the performance hurdles utilised by
leading resource companies both regionally and globally.
Arising from that review, the Board will propose to shareholders an
amendment to the long term incentive plan. These proposed changes
will be an extension of the existing plan, incorporating an additional
two performance hurdles. In this context, it is the Board’s intention
to retain absolute return on equity as a key measure and improve the
current program with the introduction of a relative total shareholder
return measure and a strategic measure. The strategic measure will
specifically relate to key milestones and strategic objectives that
are fundamental to the organisation’s sustainability, continuing
development and delivery of shareholder returns.
It is the Committee and the Board’s view that the broader focus under
the amended long term incentive plan is consistent with market
practice and will continue to focus management on a broader array
of critical long term performance goals. The Board’s key focus will be
rewarding the leadership team of the Company for outperforming the
market while driving the key levers relevant to the Company’s success.
The information provided in the Remuneration Report has been
prepared in accordance with requirements under the Corporations Act
2001, ASX Corporate Governance Principles and Recommendations
(3rd edition) and Accounting Standards. Further details in regard to
Company Directors can be found in the Governance section
of this report.
Whilst the functional and reporting currency of Fortescue is
US dollars, it is the Directors’ view that presentation of the
information in Australian dollars provides a more accurate and fair
reflection of the remuneration practices of Fortescue, as all directors,
executives and employees are remunerated in Australian dollars.
This report forms part of the Directors’ Report and has been audited
in accordance with section 308(3c) of the Corporations Act 2001.
Sharon Warburton
Remuneration and Nomination Committee Chair
Non-Executive Director
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 145
1 FY15 OVERVIEW AND YEAR AHEAD
Fortescue’s remuneration strategy seeks to build a performance orientated culture by attracting and retaining the best possible people to
align with driving increased shareholder value.
Fortescue’s Board and the Remuneration and Nomination Committee (RNC) are committed to continued review and refinement of the
remuneration strategy to ensure it meets the changing needs of the organisation, maintains market competitiveness and aligns to
shareholder interests.
1.1
FY15 Remuneration outcomes - linking performance and pay
The Board takes into consideration both quantitative and qualitative assessments when deliberating on executive remuneration to ensure
that reward outcomes reflect both company and individual performance. The following explains how fixed and variable remuneration
outcomes were driven by performance in FY15.
Elements of remuneration
Outcome
Total Fixed Remuneration (TFR)
As reported in the FY14 Remuneration Report, fixed remuneration for the CEO increased
by 11 per cent with KMP fixed remuneration increasing (on average) by 3.3 per cent effective
from 1 July 2014. Prior to that review, TFR levels had not increased since July 2011.
A market review was conducted for the CEO and KMP in May 2015. In consideration of
fixed remuneration levels and current business climate, no changes were made.
Executive and Senior Staff Incentive Plan
Awards made in relation to the FY15 ESSIP reflect the achievement of:
(ESSIP)
• All three company performance objectives delivering a reduction in Total Recordable
Injury Frequency Rate (TRIFR), a significant reduction in C1 costs and above target
production outcomes.
• Company growth objectives
• Individual performance objectives for executives other than the CEO.
Refer to section 5 for further detail.
The FY15 outcome represents an average payment of 81 per cent of maximum opportunity
compared with an average payment of 76 per cent of maximum opportunity in FY14.
Long Term Incentive Plan (LTIP)
92.35 per cent vesting of the FY13 (performance period 1 July 2012 to 30 June 2015 reflecting
Absolute Return on Equity performance of 28.47 per cent against a stretch target of 30 per cent.
1.2 Executive total earnings in FY15
Details of remuneration received by the CEO and KMP prepared in accordance with statutory requirements and accounting standards are
detailed in section 9. The table below sets out the total earnings for the CEO and KMP realised in FY15 sometimes referred to as ‘actual’ pay.
The table includes fixed remuneration, the cash component of the ESSIP earnings for FY15 performance and the value of the share component
of the FY15 ESSIP and FY13 LTIP was awarded.
Fixed remuneration1
A$
FY15 ESSIP
cash paid
A$
FY15 ESSIP2
shares awarded
A$
FY13 LTIP3
shares awarded
A$
Total actual
remuneration
earned in FY15
A$
N Power
P Meurs
S Pearce
N Cernotta5
2,000,000
956,250
379,198
907,470
4,242,918
794,783
180,8794
71,7274
352,906
1,400,295
1,102,500
210,853
195,098
352,906
1,861,357
950,000
301,031
119,373
-
1,370,404
1 Fixed remuneration includes cash salary, paid leave and superannuation.
2 The actual share value to the individual is not realised until the shares are awarded. For the purpose of this report the nominal ESSIP share
value for FY15 is the value of the participant’s elected weighting in shares (minimum 50 per cent of the total award) divided by the VWAP of
Fortescue Shares for the first five trading days of the plan year (A$4.5397) multiplied by the five day VWAP of Fortescue shares for the first
five trading days of FY16 (A$1.8002).
3 The nominal value of the FY13 LTIP is the value of the participant’s award divided by the VWAP of Fortescue Shares for the first five trading
days of the plan year (A$4.9464) multiplied by the five day VWAP of Fortescue shares for the first five trading days of FY16 (A$1.8002).
4 FY15 ESSIP awarded on a pro-rata basis.
5 Mr Cernotta was appointed on 24 March 2014 and accordingly, did not participate in the FY13 LTIP.
146 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
1
FY15 overview and year ahead (continued)
1.3 Details of Performance Grants to Executive Directors
At the 2013 AGM, shareholders approved a maximum grant of 5.5 million performance rights to executive directors over a three year period
from 13 November 2013. To date, Mr Power has been granted 2,810,790 performance rights and Mr Meurs has been granted 1,073,652
performance rights with a total of 3,884,442 performance rights granted to executive directors during the approved three year period.
The issue of performance rights to participants will not have a diluting effect on the percentage interest of Shareholders holdings if the
performance rights vest into shares acquired on market.
2 GOVERNANCE OF REMUNERATION
Fortescue believes that robust governance is critical to underpinning the effectiveness of its remuneration strategy.
The RNC operates under a Board-approved charter. This includes responsibility for reviewing and reporting to the Board on remuneration
policy and practices such as remuneration levels and incentive plans.
It also includes recruitment, retention, performance management, succession planning and termination policies and managing Board
nomination, including determining candidate criteria and addressing skills and experience requirements for Board position vacancies.
A copy of the charter is available under the Governance section of the Fortescue website.
The RNC in FY15 consisted solely of non-executive directors. CEO and others may be invited to attend meetings by the Committee
Chair as required, but have no vote on matters before the Committee.
The process and accountabilities in determining remuneration are shown below:
REMUNERATION
CONSULTANTS
May be engaged directly
by the Board or Remuneration
and Nomination Committee
to provide advice or
information relating to
KMP that is free from
influence of management
REMUNERATION
CONSULTANTS
Will be engaged directly
by management other than in
respect of KMP’s to provide
advice and market data to
ensure Fortescue’s
remuneration position
remains competitive
BOARD OF DIRECTORS
• Approving the remuneration of Non-Executive Directors and CEO
• Ensuring remuneration practices are competitive and align with the attraction
and retention policies of the company
BOARD REMUNERATION AND NOMINATION COMMITTEE
Advise the Board on:
• Remuneration policies and practices • Non-Executive Director remuneration
• Executive remuneration
HUMAN RESOURCES MANAGEMENT
• Implementation of remuneration policies and practices
• Advising the Remuneration and Nomination Committee of changing statutory and market conditions
• Provides relevant information to the Remuneration and Nomination Committee to assist with decisions
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2 Governance of remuneration (continued)
2.1 Use of remuneration consultants
The Committee has the resources and authority appropriate to perform its duties and responsibilities, including the authority to engage
external professionals on terms it deems appropriate.
During the year ended 30 June 2015, while the Committee retained Egan Associates, their engagement was in the review of policies
and practices and the provision of information on market trends, it did not incorporate providing the Committee with any remuneration
recommendations as defined by the Corporations Act 2001.
2.2 Clawback Policy
Fortescue operates a Clawback Policy. Clawback will be initiated where in the opinion of the Board:
1)
an Award, which would not have otherwise vested, vests or may vest as a result directly or indirectly of:
a) the fraud, dishonesty or breach of obligations (including, without limitation, a material misstatement of financial information)
of any person.
b) any other action or omission (whether intentional or inadvertent) of any person, the Board may make a determination to ensure that
no unfair benefit is obtained by any Participant.
2)
an Award, which may otherwise have vested, has not vested as a result directly or indirectly of any circumstance referred to in
paragraphs 1) a) or b) above, the Board may reconsider the level of satisfaction of the applicable Conditions and reinstate and vest any
Award that may have lapsed to the extent that the Board determines appropriate in the circumstances.
3 EXECUTIVE REMUNERATION STRATEGY
Fortescue’s reward strategy and associated remuneration policies seek to build a performance orientated culture that supports the
achievement of our strategic vision and to attract, retain and motivate its employees by providing market competitive fixed remuneration
and incentives.
The reward strategy also supports Fortescue’s growth and progression as one of the world’s leading producers of iron
ore through:
• being well positioned to deliver fair and market competitive rewards
• supporting a clear performance focus
• alignment to the long term goals of the Company.
3.1 Remuneration Policy
Fortescue is committed to providing competitive remuneration packages to our executives and senior employees. Fortescue benchmarks
remuneration components against major indices such as ASX 100 Resources Index and also seeks input from independent remuneration
consultants regarding executive remuneration as and when required as detailed in section 2.
The overall intent is to ensure that executive remuneration is appropriately positioned to motivate, attract and retain key executives
and senior employees to deliver on the current and long term strategic activities of the Company.
148 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
3 Executive remuneration strategy (continued)
How remuneration policy and practices align with reward strategy
Remuneration strategy principle
Policy
Practice
High levels of share ownership
Drive alignment of employee and
shareholder interests
Market competitive remuneration
Attract and retain key talent and be
competitive against relevant companies
A minimum 50 per cent of the ESSIP
paid in shares with executives able
to elect up to 100 per cent in shares.
LTIP awarded as shares
Remuneration is benchmarked against
the ASX 100 Resources Index and other
relevant indices
Performance focus
Fit for purpose
Provide fair reward in line with
individual and company achievements
Executive remuneration mix targets a
minimum of 64 per cent of the total
opportunity ‘at risk’
Include flexibility to reflect clear linkage
to business strategy
Business strategy is prioritised; market
practice is only one input in determining
the relevant framework
Strategic alignment
Support delivery of long term business
strategy and growth aspirations
Shareholder and Executive alignment
LTI rewarding sustained performance
over a three year period
Incentives are measured on
financial and non-financial performance
to support sustainable growth
A significant portion of executive
remuneration granted as performance
rights vesting subject to short and long
term performance hurdles
4 EXECUTIVE REMUNERATION STRUCTURE
Executive remuneration has a fixed component and a variable ‘at risk’ component, the payment of which is dependent on the achievement of Company
performance and growth targets and individual objectives. The key components of the executive remuneration structure for FY15 comprised:
• Total Fixed Remuneration (TFR)
• Executive and Senior Staff Incentive Plan (ESSIP)
• Long Term Incentive Plan (LTIP).
Remuneration may also include participation in the Salary Sacrifice Share Plan (SSSP). Total remuneration comprising each of these
components is benchmarked against the market taking into account the Company’s position as the world’s fourth largest iron ore producer
and its ranking on the Australian Securities Exchange. Remuneration is benchmarked against companies in the ASX 100 Resources Index, with
total remuneration targeted at the third quartile. Total reward opportunities are intended to provide executives the opportunity to earn 75th
percentile rewards for outstanding performance against stretch targets.
4.1 Remuneration mix
The table below shows the remuneration mix for performance at stretch for the CEO and direct reports in FY15:
CEO
28
31
Direct reports
0%
36
20%
28
TFR
40%
ESSIP (at risk)
60%
LTIP (at risk)
41
36
80%
100%
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4
Executive remuneration structure (continued)
* Note the table above represents the remuneration mix for stretch levels of performance for the CEO direct reports in FY15 and does not take
into consideration options granted to Mr Peter Meurs at the start of his employment or any value that may be attributed to the guarantee
provided by the Minderoo Group which supported certain senior executives in purchasing Fortescue shares on-market.
The above table clearly illustrates the significant proportion of ‘at-risk’ components of executive remuneration and reinforces the pay for
performance policy alignment adopted by the Board. It will be noted later in this report, arising from the Company’s share price performance in
the current financial year, that management’s reward has not delivered significant benefits under the performance aligned ‘at-risk’ elements.
5 KEY COMPONENTS OF EXECUTIVE REMUNERATION
5.1 Total Fixed Remuneration (TFR)
TFR comprises base salary, cash allowances (such as site-based or location allowances), employee benefits and superannuation. The level of
TFR is based on the executive’s responsibilities, experience and qualifications. Company and individual performance are considered during the
annual remuneration review process.
5.2 Executive and Senior Staff Incentive Plan (ESSIP)
The purpose of the ESSIP is to incentivise and reward key Fortescue executives (including KMP) for achieving Company and individual
performance objectives that drive shareholder value.
The CEO’s ESSIP potential award is linked solely to Company objectives with executive’s ESSIP potential award linked 50 per cent to
Company objectives, and 50 per cent to individual performance, aligning CEO and executive remuneration with Company performance
during the Plan Year.
The maximum ESSIP opportunity is established at the beginning of the financial year for each executive. The ESSIP is delivered as a minimum
of 50 per cent in ordinary shares, and a maximum of 50 per cent in cash. The plan allows participants to elect to receive up to 100 per cent of
the ESSIP in shares. Share rights are granted based on the election made by the participant and represent the maximum number of shares
that may be awarded subject to performance.
ESSIP share rights are calculated based on the Volume Weighted Average Price (VWAP) of Fortescue shares traded over the first five trading days
of the Plan Year (e.g. 1 July 2014 to 7 July 2014).
The maximum incentive opportunity for KMPs in FY15 is shown below:
Chief Executive Officer
KMP
112.5 per cent of TFR*
75 per cent of TFR*
1 participant
3 participants
* Note that the actual award outcomes under the ESSIP will be determined by the number of objectives achieved and the value of the
Fortescue shares at time of vesting.
Individuals who leave during the year (i.e. before 30 June) are not eligible to receive an ESSIP award, unless by specific RNC approval. On receipt
of such approval, the ESSIP is pro-rated based on service during the period, and made at the usual payment date, which is around September of
each year, post release of audited and approved full year results.
Individuals who commence during the year similarly will have awards under the ESSIP pro-rated based on service during the performance period.
5.3 ESSIP performance objectives
ESSIP awards are made based on an assessment of Company and individual performance. Company performance comprises company annual
and growth measures designed to drive both a short and long term perspective on performance, and protect the long term interests of the
shareholder by seeking to ensure efficient processing of reserves mined and that financial objectives are met.
The financial performance measures were chosen as they represent the key drivers for the short term success of the Company and provide a
framework for delivering long term value. The non-financial component of the ESSIP is measured with reference to an assessment against a
range of measures. A majority of the non-financial measures are quantitative-based.
A key element of our culture is to set challenging stretch targets and strive to outperform those targets. When deliberating on performance
outcomes, the Board considers the level of achievement against stretch targets and in circumstances where above target performance is
achieved, the Board may approve an above target award to reflect the degree of outperformance by the business.
150 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
5 Key components of executive remuneration (continued)
The performance objectives in FY15 are shown below:
FY15 Results CEO Direct reports
Weighting Outcome
Weighting Outcome
Company Annual Performance
Safety2
Target percentage reduction (15 per cent) in
Total Recordable Injury Frequency Rate (TRIFR)
Production2 Target tonnes shipped
Cost1
Target cost per tonne shipped
Company Growth Performance
Growth2
Achieve ultra stretch production and cost targets
Financial1 Achieve target annual Absolute Return on Equity (AROE) of >20%
Physical2
Target percentage of reserves mined is converted
(after processing losses) to product, inclusive of quality
measurement (e.g. grade expectations and real mined tonnage)
Achieve agreed workforce culture and engagement targets
Culture2
Met
Met
Met
Met
Not met
Partially met
Met
20
20
20
10
10
10
10
20
20
20
10
0
10
10
10
7
7
10
10
10
7
0
5
6
10 Included in personal
KPI’s
3
Individual Performance
Four objectives based on the business plan weighted
according to business impact
Partially met
n/a
n/a
50
44
1 Financial targets.
2 Non-financial targets.
In FY15, the CEO was measured solely against Company performance outcomes thereby ensuring the alignment between Company
performance, shareholder returns and CEO reward for the performance year. Payment of ESSIP awards are made in September after the
release of the Company’s audited results and with final approval from the Board.
5.4 How objectives and weightings are determined
ESSIP targets and measures are set on an annual basis and are linked to the annual stretch budget and Fortescue’s strategic plan.
Personal objectives are set at stretch levels of performance with measures and weightings aligned to the individual’s ability to
influence outcomes and ensure focus on critical outcomes. The following table shows the relationship between the primary
ESSIP performance measures for the CEO and other KMP.
CEO
CFO
Director Development
Director Operations
FY16
FY15
FY16
FY15
FY16
FY15
FY16
FY15
25
20
22.5
22.5
20
30
15
12.5
42.5
10
10
10
10
42
25
15
12.5
12.5
10
10
17
50
50
5050
20
20
20
10
10
10
13
10
13
25
25
24.5
23
22.5
10
17
13
18
22
0%
20%
40%
60%
Safety
Production
Financial
Growth
80%
Other
100%
* Other includes measures associated with culture, engagement and functional objectives
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5 Key components of Executive remuneration (continued)
5.5 How the ESSIP works: an example
ESSIP participant rewards are designed to reflect company performance and provide alignment with shareholder outcomes by linking
a minimum of half the ESSIP to share price movement over the financial year.
Example:
The example below assumes that Executive A has an incentive opportunity of A$100,000 and has elected to take 70 per cent of the
incentive in shares.
Details of offer
Nominal value of full award
VWAP at start of FY15 (1 to 7 July 2014)
Participant share weighting
Potential award
Cash (30 per cent of opportunity)
Nominal value of share rights (70 per cent)
Share rights (70 per cent of opportunity) (ie A$70,000 ÷ A$4.5397)
Example outcome
Percentage of incentive opportunity achieved (company and personal performance)
Cash paid (80 per cent of cash component)
Shares Awarded (80 per cent of share rights convert to ordinary shares)
A$100,000
A$4.5397
70%
A$30,000
A$70,000
15,419
80%
A$24,000
12,335
The actual value of shares awarded is subject to share price movement thereby ensuring alignment with shareholder interests.
5.6 ESSIP performance in FY15
Performance rights granted under the ESSIP at the beginning of FY15 are shown below. All the performance rights issued convert to
ordinary shares if all ESSIP objectives are met. The deferred ESSIP performance shares, which reflect the value at the commencement of the
performance year when shares are nominally allocated, incorporate at the time of award positive and negative movement in the Company’s
share price and in this way, the outcome of any management incentive is fully aligned with ordinary shareholder returns. That is, the nominal
number of rights available are priced at the beginning of the period. The last column details the actual number of share rights converted to
ordinary shares based on actual performance:
Executive
N Power
P Meurs 1
S Pearce
N Cernotta
ESSIP
performance
rights granted
ESSIP
performance
rights lapsed
ESSIP
performance
rights forfeited
Performance rights to
convert to shares for
FY15 ESSIP performance
247,814
91,072
127,501
78,475
37,172
51,228
19,125
12,164
-
-
-
-
210,642
39,844
108,376
66,311
Unvested share rights lapse once the outcome of the ESSIP is determined.
1 Mr Meurs FY15 ESSIP awarded on a pro-rata basis.
152 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
5 Key components of Executive remuneration (continued)
The table below details the maximum ESSIP cash and share awards against the actual outcomes for FY15. The share components are based
on the share weighting election of each executive:
Maximum
ESSIP
opportunity Weighting
in shares
(per cent)
(per cent
of TFR)
Maximum
cash
ESSIP
opportunity
A$
Maximum
ESSIP shares
opportunity
- value
at grant1
A$
ESSIP
outcome
(per cent)
ESSIP cash
awarded
A$
ESSIP shares
awarded
value at
award2
A$
FY15
TFR
A$
Executive Directors
N Power
P Meurs
2,000,000
1,102,500
112.5
75
KMP
S Pearce
N Cernotta
1,102,500
950,000
75
75
50
50
70
50
1,125,000
413,438
1,125,000
413,438
85
88
956,250
180,8793
379,198
71,7273
248,063
356,250
578,813
356,250
85
85
210,853
301,031
195,098
119,373
1 The value at grant is the participant’s elected weighting in shares (minimum 50 per cent of the total award) divided by the strike price used
to determine the number of share rights granted being the VWAP of Fortescue shares traded over the first five trading days of the Plan Year
(A$4.5397).
2 The actual share value to the individual is not realised until the shares are awarded. For the purpose of this report the nominal ESSIP share
value for FY15 is the number of shares awarded multiplied by the five day VWAP of Fortescue shares traded over the first five trading days of
FY16 (A$1.8002).
3 Mr Meurs FY15 ESSIP awarded on a pro-rata basis.
5.7 Long Term Incentive Plan (LTIP)
LTIP awards to executives are made under the performance share plan rules and are delivered in the form of Performance Rights (Rights).
Each Right entitles the holder (subject to achievement of the specified performance conditions) to one fully paid ordinary share in the
Company for nil consideration.
The Company uses Absolute Return On Equity (AROE) as the performance measure for assessments of LTIP awards.
AROE was selected as the LTI performance measure for the following reasons:
• AROE is one of the most important value metrics reflecting profit earned relative to shareholders equity (the amount of capital invested
by shareholders)
• AROE performance in excess of the Company’s cost of equity capital will deliver shareholder value.
As with the ESSIP above, the LTIP is designed to provide alignment with shareholder outcomes by linking the value of the LTIP to share price
movement over the performance period. A minimum 20 per cent annual AROE hurdle rate was selected for the following reasons:
• 20 per cent exceeds the Company’s cost of equity
• The average AROE for the ASX 100 Resources Index from 2010 to 2014 is 9.2 per cent
• The 80th percentile AROE for the ASX 100 Resources Index from 2010 to 2014 is 15.6 per cent.
The vesting schedule is as follows:
Performance
Below threshold
Threshold
Target
FY13
%
<15
15
>30
Average AROE
FY14
%
<20
20
>30
FY15
%
<20
20
>30
Vesting
Nil
25 per cent of share rights vest
100 per cent of share rights vest
Vesting between threshold and target is calculated linearly.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 153
5 Key components of Executive remuneration (continued)
The performance period for the FY15 LTIP is from 1 July 2014 to 30 June 2017. Share Rights will convert to shares at the end of the three year
performance period subject to performance against the AROE performance measure. The average AROE over three years will be measured as the
sum of AROE for years 1, 2 and 3 divided by three. Average AROE less than Threshold Performance will result in no award.
In the event of a change of control of the Company, the performance period end date will generally be brought forward to the date of the
change of control and awards will vest over this shortened period, subject to ultimate Board discretion.
The Clawback Policy also applies to this plan.
5.8 FY13 LTIP performance
At the end of FY15, the FY13 LTIP grant completed its performance period (1 July 2012 to 30 June 2015).
Performance rights granted under the LTIP at the beginning of FY13 are shown below. All the performance rights issued convert to ordinary
shares if the LTIP measure is met in full.
The last column details the actual number of share rights converted to ordinary shares based on actual performance.
Unvested share rights lapse once the outcome of the LTIP is determined.
FY13 LTIP
N Power
P Meurs
S Pearce
N Cernotta1
LTIP performance
rights issued
LTIP performance
rights lapsed
LTIP performance
rights forfeited
Performance rights
to convert to shares for
FY13 LTIP performance
545,852 41,758
212,276 16,239
212,276 16,239
-
-
-
-
-
-
504,094
196,037
196,037
-
1 Mr Cernotta was appointed on 24 March 2014 and accordingly, did not participate in the FY13 LTIP.
The table below details the maximum LTIP share awards against the actual outcomes for FY15.
FY13 LTIP
Executive Directors
N Power
P Meurs
Executives
S Pearce
N Cernotta3
TFR
at grant
A$
1,800,000
1,050,000
1,050,000
-
Maximum LTIP
opportunity (per
cent of TFR)
Maximum LTIP
shares opportunity
- value at grant1
A$
LTIP shares
awarded
LTIP shares
awarded value
at award2
A$
150
100
100
-
2,700,000
1,050,000
504,094
196,037
907,470
352,906
1,050,000
-
196,037
-
352,906
-
1 The value at grant is the participant’s TFR at grant multiplied by the maximum LTIP opportunity.
2 The actual share value to the individual is not realised until the shares are awarded. For the purpose of this report the nominal LTIP share
value for FY15 is the number of shares awarded multiplied by the five day VWAP of Fortescue shares traded over the first five trading days of
FY16 (A$1.8002).
3 Mr Cernotta was appointed on 24 March 2014 and accordingly, did not participate in the FY13 LTIP.
5.9 Salary Sacrifice Share Plan
Executives may nominate an amount (up to A$5,000 per annum) of pre-tax salary to acquire ordinary shares under the Salary Sacrifice
Share Plan (SSSP). Provided ordinary shares are kept in the SSSP, income tax on the acquisition of these ordinary shares can be deferred
by the executive for up to seven years.
Disposal restrictions apply while the shares remain in the SSSP. Shares acquired under this plan are not subject to performance
conditions because they are issued in lieu of salary which would otherwise be payable and are subject to a monetary limit of
A$5,000 per annum.
154 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
6
HOW FORTESCUE PERFORMED OVER THE PAST FIVE YEARS
Fortescue continues to build on its performance over the past five years, showing strong growth in revenue and net profit to deliver
shareholder wealth.
In considering Fortescue’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the
current financial year and the previous four financial years.
In FY15, Fortescue’s share price decreased from the FY14 closing price of A$4.35 to A$1.91 at the end of FY15.
This represents a 56 per cent decrease compared with the ASX 100 Resources Index which decreased 19.9 per cent over the corresponding period.
Revenue from iron ore operations - US$millon
Net profit/(loss) - US$million
A$ dividends paid
A$ change in share price
Per cent change in share price
FY15
8,390
316
0.13
(2.44)
(56)
FY14
11,611
2,740
0.20
1.31
43
FY13
8,057
1,746
0.04
(1.81)
(37)
FY12
6,681
1,559
0.08
(1.45)
(23)
FY11
5,442
1,022
0.03
2.23
54
An explanation of how fixed and variable remuneration outcomes were driven by company performance in FY15 is included in section 1.
7 SECURITIES TRADING POLICY
Fortescue’s Securities Trading Policy provides clear guidance on how company securities may be dealt with.
The Securities Trading Policy details acceptable and unacceptable periods for trading in Company Securities including detailing potential civil
and criminal penalties for misuse of confidential information.
Fortescue’s Security Trading Policy provides guidance on acceptable transactions in dealing in the Company’s various securities, including
shares, debt notes and options.
The policy also sets out a specific governance approach for how the Chairman and Directors can deal in Company Securities.
The Company’s Security Trading Policy was updated in August 2015 and can be accessed from the Governance section of the Fortescue
website.
8
EXECUTIVE CONTRACT TERMS
Remuneration and other terms of employment for executives are formalized in a service agreement.
The CEO and KMP are employed on a rolling basis with no specified fixed term. The CEO and KMP are remunerated on a total fixed
remuneration (TFR) basis inclusive of superannuation and allowances.
The major terms of the agreements relating to remuneration are set out in the table below:
Position
Executive
Chief Executive Officer
N Power
TFR1 (A$)
2,000,000
Maximum ESSIP
opportunity
(% of TFR)
Maximum LTIP
opportunity
(% of TFR)
112.5
150
Termination clause
Three months written notice
(or three months TFR in lieu)
Director Development
P Meurs
1,102,500
Chief Financial Officer
S Pearce
1,102,500
Director Operations
N Cernotta
950,000
75
75
75
1 Total Fixed Remuneration as at 30 June 2015. Reviewed annually by the RNC.
100
Three months written notice
(or three months TFR in lieu)
100
100
Three months written notice
(or three months TFR in lieu)
Three months written notice
(or three months TFR in lieu)
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 155
8
Executive contract terms (continued)
All executives are required to provide written notice of three months to terminate their service agreement. Should executives not provide
sufficient notice they will forfeit the monetary equivalent (calculated based on TFR) of any shortfall in the notice period.
If an executive resigns and leaves the Company prior to 30 June in any year, the executive will forfeit all entitlement to any award under the
ESSIP. If an executive retires, is made redundant or leaves the Company as a result of a negotiated termination, the RNC at its sole discretion
may elect to make a pro-rata ESSIP payment based on service up to the termination date.
If the executive resigns and leaves the Company prior to 30 June in the year of vesting under the LTIP, the executive will forfeit all entitlement
to any award under the LTIP.
If an executive retires, is made redundant or leaves the Company as a result of a negotiated termination prior to 30 June in the year of vesting
under the LTIP, the RNC at its sole discretion may elect to make a pro-rata LTIP award based on service up to the termination date.
Termination benefits for KMP comply with the limits set by the Corporations Act 2001 that do not require shareholder approval.
9 DETAILED REMUNERATION FOR EXECUTIVES
The table below details the remuneration received by the CEO and KMP prepared in accordance with statutory requirements and accounting
standards. For details on ‘actual pay’ for the CEO and KMP realised in FY15 refer to section 1.
Executive remuneration for year ending 30 June 2015
Post
employ-
ment End of
Short-term employee benefits benefits service
Share-based payments
Cash
salary
and fees
A$
FY15
Executive Directors
N Power 1,972,500
P Meurs 767,283
KMP
S Pearce 1,076,100
N Cernotta5 906,931
ESSIP cash
Non-
value for
2015 Plan monetary Superan-
benefits
A$
Year1
A$
A$
Termin-
ation
nuation benefits
956,250
180,879
4,205
3,168
27,500
27,500
210,853
301,031
4,205
-
26,400
27,500
ESSIP
share
value2
A$
LTIP
share
value2
A$
Other
share based
payments3
A$
Options
A$
Total
A$
524,499
99,2124
2,507,263
963,897
269,856
165,114
963,897
165,169
-
-
-
-
- 5,992,217
2,895,211
853,272
-
-
2,351,311
1,565,745
A$
-
-
-
-
1 ESSIP cash value payable in respect to FY15 to be paid in September 2015.
2 The value of ESSIP and LTIP performance rights was assessed using trinomial pricing model that takes into account the price of Fortescue
shares at the grant date, expected price volatility of the underlying share, the term of the right, the expected divided yield and the risk-free
interest rate for the term of the right and represents the accounting value expensed in FY15.
3 Other share based payments relate to financial assistance by way of guarantee to Mr Meurs by The Minderoo Group Pty Ltd to purchase
Fortescue shares under an approved arrangement. The fair value at grant date was determined using a Monte Carlo simulation model,
which takes into account the following inputs: the life of the instruments, the price of the underlying share, the expected volatility of the
underlying share price, the dividends expected on the underlying share, the risk free interest rate for the life of the instruments, the loan
value per share, the interest, fees and charges on the loan and the terms of the margin call.
4 Mr Meurs FY15 ESSIP was awarded on a pro-rata basis.
5 Mr Cernotta was appointed on 24 March 2014 and accordingly, did not participate in the FY13 LTIP.
156 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
9 Detailed remuneration for Executives (continued)
The graph below represents the actual remuneration mix for KMP in FY15:
100%
80%
60%
40%
20%
0%
21
32
47
19
22
59
25
18
57
30
70
N Power
S Pearce
P Meurs
N Cernotta
Mr Cernotta was appointed on 24 March 2014 and accordingly did not participate in the FY13 LTIP.
TFR
ESSIP (at risk)
LTIP (at risk)
Executive remuneration for year ending 30 June 2014
Post
employ-
ment End of
Short-term employee benefits benefits service
Share-based payments
Cash
salary
and fees
A$
FY14
Executive Directors
1,775,000
N Power
1,025,000
P Meurs
KMP
S Pearce
1,025,000
N Cernotta5 251,524
D Woodall6
393,350
ESSIP cash
value for
Non-
2014 plan monetary Superan-
benefits
A$
Year1
A$
A$
nuation benefits
Termin-
ation
A$
ESSIP
share
value2
A$
LTIP
share
value2
A$
Other
share-based
payments4
A$
Total
A$
Options3
A$
-
-
4,633
4,633
25,000
25,000
- 2,415,361
- 1,016,511
2,147,767
835,244
-
2,157,1797
-
853,272
6,367,761
5,916,839
- 45,155
57,721
-
25,000
- 10,417
37,884
- 1,115,217
96,468
-
-
16,667 277,914
835,244
-
-
-
-
-
-
-
-
3,045,616
416,130
725,815
1 ESSIP cash value payable in respect to FY14 to be paid in September 2014.
2 The value of ESSIP and LTIP performance rights was assessed using trinomial pricing model that takes into account the price of Fortescue
shares at the grant date, expected price volatility of the underlying share, the term of the right, the expected divided yield and the risk-free
interest rate for the term of the right and represents the accounting value expensed in FY14.
3 The estimated fair value was determined using a trinomial option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date, expected price volatility of the underlying share, the effect of additional market
conditions, the expected dividend yield, estimated share conversion factor and the risk free interest rate for the term of the right.
4 Other share based payments relate to financial assistance by way of guarantee to Mr Meurs by The Minderoo Group Pty Ltd to purchase
Fortescue shares under an approved arrangement. The fair value at grant date was determined using a Monte Carlo simulation model,
which takes into account the following inputs: the life of the instruments, the price of the underlying share, the expected volatility of the
underlying share price, the dividends expected on the underlying share, the risk free interest rate for the life of the instruments, the loan
value per share, the interest, fees and charges on the loan and the terms of the margin call.
5 Mr Cernotta was appointed on 24 March 2014.
6 Mr Woodall resigned on 12 December 2013.
7 Once vested, the options are subject to a further share price performance condition. Half of the options require a share price of A$7.00 with
the second half requiring a minimum share price of A$8.00 before they can be exercised. The exercise price of each option is A$5.00 and the
expiry date is May 2015.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 157
9 Detailed remuneration for Executives (continued)
9.1 Share-based remuneration
Options over equity instruments granted as remuneration
During the year ending 30 June 2012, the Board of Fortescue Metals Group Limited consented to The Minderoo Group Pty Ltd (formerly
the Metal Group Pty Ltd), an entity controlled by the Chairman, to offer an arrangement to provide financial assistance to allow certain
senior executives of Fortescue to purchase the Company’s shares on market. The arrangement was effected through a number of separate
transactions and appropriate disclosures made via lodgement of an Appendix 3Y as required by the ASX Listing Rules.
The arrangement constitutes a share-based payment transaction and has been measured with reference to the fair value of the benefit
received by the executives and is recognised as an expense on a straight-line basis over a four-year vesting period, in line with the service
conditions. The fair value was determined at grant date using Monte-Carlo simulation model. Total share-based payment expense in relation
to the arrangement for the financial year ended 30 June 2015 was A$925,453 (2014: A$925,453).
The purpose was to provide an opportunity for a limited number of senior individuals critical to Fortescue’s performance to be incentivised
and remunerated through increased direct share ownership (reinforcing alignment with shareholder interests), and further enhance
Fortescue’s ability to retain these individuals over the long term. The offer is provided at no cost to Fortescue and the executive is required to
arrange their own finance through a third party and is responsible for all repayments and associated costs.
Mr Meurs is a participant in the above financial arrangement. Under this arrangement The Minderoo Group Pty Limited provided Mr Meurs
with financial assistance by way of a guarantee for the acquisition of 16,632,614 ordinary shares in the Company. The fair value attributed to
Mr Meurs in relation to this arrangement for the financial year ended 30 June 2015 was A$853,272 (2014: A$853,272).
There are no current plans to offer this arrangement to any additional employees.
Details of share based payments relating to LTIP
The following table provides details of the number of share rights granted under the LTIP during the financial years ended 30 June 2015 and
30 June 2014. The value of the rights has been determined using the amount of the grant date fair value.
Grant
date
Performance
period
LTIP
No. share share right granted at
granted1
grant date
A$
A$
rights
granted
Performance
achieved
%
For-
feited
lapsed
Vested
Value per Value of rights
P Meurs
N Power
FY15
FY14
FY13
FY15
FY14
FY13
FY15
FY14
FY13
N Cernotta2 FY15
S Pearce
9/12/2014
1/7/14 to 30/6/17
16/12/2013 1/7/13 to 30/6/16
10/12/2012 1/7/12 to 30/6/15
9/12/2014
1/7/14 to 30/6/17
16/12/2013 1/7/13 to 30/6/16
10/12/2012 1/7/12 to 30/6/15
9/12/2014
1/7/14 to 30/6/17
16/12/2013 1/7/13 to 30/6/16
10/12/2012 1/7/12 to 30/6/15
1/7/14 to 30/6/17
9/12/2014
660,837
853,000
545,852
242,858
331,723
212,276
242,858
331,723
212,276
209,265
2.37
5.09
3.85
2.37
5.09
3.85
2.37
5.09
3.85
2.37
1,566,184
4,341,770
2,101,530
575,573
1,688,470
817,263
575,573
1,688,470
817,263
495,958
Determined in 2017
Determined in 2016
92.5
Determined in 2017
Determined in 2016
92.5
Determined in 2017
Determined in 2016
92.5
Determined in 2017
n/a
-
-
n/a
504,094 41,758
-
n/a
-
n/a
196,037 16,239
-
n/a
-
n/a
196,037 16,239
-
n/a
1 The estimated fair value was determined using a trinomial option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date, expected price volatility of the underlying share, the effect of additional market
conditions, the expected dividend yield, estimated share conversion factor and the risk free interest rate for the term of the right.
2 Mr Cernotta was appointed on 24 March 2014 and accordingly, did not participate in the FY13 or FY14 LTIP.
Legacy Incentive Option Scheme (IOS)
Details of options over ordinary shares in the Company that were granted under the legacy Incentive Option Scheme (IOS) as remuneration
to KMP are set out below. The plan has now been discontinued and there are no current plans to offer any further grants under this plan. All
remaining grants expired in FY15.
All options refer to options over ordinary shares of the Company, which were exercisable on a one for one basis under the IOS. Options
granted under the plan carried no dividend or voting rights. When exercisable, each option was convertible into one ordinary share.
158 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
9 Detailed remuneration for executives (continued)
The IOS provided eligible employees with options subject to share price performance and time conditions determined by the
Board. These awards were typically targeted at KMP at the time of appointment, or to retain selected individuals critical to the Company’s
development. The options typically vested in three tranches over a 36 month period.
The options were provided at no cost to the recipients. Once performance hurdles (share price performance and time conditions) were met, the
options were exercisable evenly on an annual basis over the four years from grant date. All unexercised options expired on the earlier of their
expiry date or termination of the individual’s employment. When exercisable, each option was convertible into one ordinary share of Fortescue
Metals Group Limited.
Directors of Fortescue Metals Group Limited
KMP
P Meurs1
Number of options vested
FY15
FY14
-
937,500
1 Once vested, options granted to Mr Meurs were subject to a further share price performance hurdle before they could be exercised. Half of
the options required a share price of A$7.00 with the second half requiring a share price of A$8.00 before they can be exercised. Options
granted to Mr Meurs did not meet the share price performance hurdle and accordingly, expired in May 2015.
The assessed fair value of options at grant date has been included in the remuneration tables in section 9.
Exercise of options granted as remuneration
No options were exercised by KMP in FY15.
10 NON-EXECUTIVE DIRECTOR REMUNERATION
Fortescue’s policy on non-executive director remuneration requires that non-executive director fees are:
• Not ‘at-risk’, to reflect the nature of their responsibilities and safeguard their independence
• Market competitive with fees set at levels comparable with non-executive director remuneration of comparable companies
Non-Executive Directors receive fees for both Board and Committee membership. The payment of additional fees for serving on a Committee
recognises the additional time commitment required by non-executive directors who serve on a Committee. The Board Chairman attends all
Committee meetings but does not receive any additional fees in addition to Board fees.
The maximum aggregate remuneration payable to Non-Executive Directors is A$2.0 million, which was approved by shareholders at the
annual general meeting on 19 November 2010. There have been no changes to the aggregate fee pool since November 2010. The Board will
not seek any increase to this fee pool at the 2015 AGM.
The current fees (inclusive of superannuation) are outlined in the table below:
Position
Board Chairman*
Board Deputy Chairman**
Vice Chairman
Lead Independent Director
Non-Executive Director
Audit & Risk Management Committee Chairman
Audit & Risk Management Committee Member
Remuneration & Nomination Committee Chairman
Remuneration & Nomination Committee Member
China Advisory Group Board of Representatives
Finance Sub-Committee Member
Fee (A$)
120,000
210,000
170,000
170,000
140,000
40,000
15,000
15,000
7,500
60,000
6,000
* The Board Chairman has elected to receive an annual fee significantly below market and other Fortescue director norms.
** Mr Elliott held the role of Deputy Chairman and Lead Independent Director. Upon Mr Elliott’s retirement, Mr Hegarty was appointed
Vice Chairman and Mr Barnaba was appointed Lead Independent Director.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 159
10 Non-executive director remuneration (continued)
Non-executive directors do not receive retirement benefits, nor do they participate in any incentive programs of the Company.
The remuneration of non-executive directors for the year ended 30 June 2015 and 30 June 2014 is detailed on the following page.
FY15
A Forrest
O Hegarty
M Barnaba
J Baderschneider1
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott2
G Rowley2
H Scruggs2
Base fees
A$
Committee fees
A$
Other benefits
A$
Superannuation
A$
108,687
144,071
144,071
63,320
126,801
140,000
140,000
126,801
69,754
46,502
51,269
10,247
6,793
48,456
-
19,021
-
60,000
22,221
2,491
9,965
7,690
16,075
-
-
-
-
-
-
-
-
30,456
17,499
12,488
15,841
20,215
-
15,311
-
-
15,647
7,586
5,929
-
1 J Baderschneider was appointed on 19 January 2015.
2 H Elliott, G Rowley and H Scruggs retired on 13 November 2014.
FY14
A Forrest
O Hegarty
M Barnaba
E Gaines
C Huiquan
G Raby
S Warburton1
H Elliott
G Rowley
H Scruggs
G Brayshaw2
Base fees
A$
Committee fees
A$
Other benefits
A$
Superannuation
A$
108,884
127,032
127,032
126,332
140,000
140,000
80,336
195,159
127,032
133,098
52,958
6,806
6,806
47,253
15,873
-
60,000
8,608
6,806
22,228
17,750
11,732
8,250
-
-
-
-
-
-
-
2,323
-
-
11,858
13,718
17,864
14,648
-
-
9,117
21,118
15,299
-
4,136
1 S Warburton was appointed on 13 November 2013.
2 G Brayshaw retired on13 November 2013.
Total
A$
147,497
166,705
212,742
63,320
161,133
140,000
200,000
164,669
79,831
92,852
76,458
Total
A$
135,798
147,556
192,149
156,853
140,000
200,000
98,061
223,083
166,882
150,848
68,826
160 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
11 EQUITY INSTRUMENT DISCLOSURES RELATING TO KMP
11.1 Options and performance rights
The movement during the reporting period in the number of options and performance rights over ordinary shares in the Company held
directly, indirectly or beneficially, by each of the KMP, including their related parties is as follows:
Granted1
Exercised/
converted
Forfeited/
lapsed
Balance at
the end of
the year
Vested
Unvested
Vested and
not
exercisable
-
-
-
908,651
333,930
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(456,590)
(183,160)
(192,157) (7,556,635)2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,307,503
877,929
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,307,503
877,929
-
-
-
-
-
-
-
-
914,358
287,740
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
792,791
30,527
370,359
287,740
(210,816)
(18,236)
(37,976)
(12,291)
914,358
287,740
1 Performance Rights were granted in accordance with the short term and long term performance rights plans, as disclosed in note 19 of the
financial statements.
2 Includes 7,500,000 options which expired in May 2015.
3 J Baderschneider was appointed on19 January 2015.
4 H Elliott, G Rowley and H Scruggs retired on13 November 2014.
Granted1
Exercised/
converted
Forfeited/
lapsed
Balance at
the end of
the year
Vested and
not
Vested
Unvested exercisable
-
-
-
1,902,138
739,722
-
-
-
-
-
-
-
-
-
-
-
(143,291)
(82,472)
-
-
-
-
-
-
-
-
-
-
-
(61,403)
(28,973)
-
-
-
-
-
-
-
-
132,673
-
52,032
739,721
30,527
453,395
(55,923)
-
(20,566)
(23,680)
-
(484,861)
-
-
-
2,038,602
8,292,791
-
-
-
-
-
-
-
-
792,791
30,527
-
-
-
-
-
7,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,038,602
792,791
-
-
-
-
-
-
-
-
792,791
30,527
-
-
-
-
-
7,500,000
-
-
-
-
-
-
-
-
-
-
-
Balance
at the
start of
the year
-
-
-
2,038,602
8,292,791
-
-
-
-
-
-
-
-
FY15
Directors
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
J Baderschneider3
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott4
G Rowley4
H Scruggs4
KMP
S Pearce
N Cernotta
Balance
at the
start of
the year
-
-
-
341,158
7,664,514
-
-
-
-
-
-
-
-
FY14
Directors
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott
G Rowley
H Scruggs
G Brayshaw2
KMP
S Pearce
N Cernotta
D Woodall2
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1 Performance Rights were granted in accordance with the short term and long term performance rights plans, as disclosed in note 19 of the
financial statements.
2 Mr Brayshaw retired and Mr Woodall resigned during FY14.
FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 161
11
Equity Instrument disclosures relating to KMP (continued)
11.2 Share holdings (ordinary shares)
The numbers of shares in the Company held during the financial year by each KMP, including their related parties, are set out below:
Held at
1 July 2014
Received on
conversion of
rights
Issued
Purchases
Sales
Transfers
Other1
Held at
30 June 2015
FY15
Directors
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
E Gaines
C Huiquan
G Raby
S Warburton
J Baderschneider2
H Elliott3
G Rowley3
H Scruggs3
KMP
S Pearce
N Cernotta
1,033,479,247
40,000
-
1,254,981
26,006,995
50,000
-
8,000
-
-
2,167,938
17,644,951
-
-
-
-
456,590
192,157
-
-
-
-
-
-
-
-
284,972
-
210,816
18,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,000,000
-
20,000
100,000
-
-
-
50,750
138,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,860
-
(390,071)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 1,037,479,247
40,000
-
20,000
-
1,811,571
-
26,199,152
-
50,000
-
-
-
-
8,000
50,750
-
138,000
-
-
(2,167,938)
-
(17,644,951)
-
-
-
-
107,577
18,236
1 Negative amounts reflect the result of retiring during the year.
2 J Baderschneider was appointed on 19 January 2015.
3 H Elliott, G Rowley and H Scruggs retired on 13 November 2014.
Held at
1 July 2013
Received on
conversion of
rights
Issued
Purchases
Sales
Transfers
Other1
Held at
30 June 2014
1,020,690,915
40,000
-
1,111,690
25,924,523
-
-
8,000
-
2,167,938
17,644,951
-
52,149
382,304
-
-
-
-
-
143,291
82,472
-
-
-
-
-
-
-
-
55,923
-
20,566
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,788,332
-
-
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,745
-
-
(175,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 1,033,479,247
40,000
-
-
-
1,254,981
-
26,006,995
-
50,000
-
-
-
8,000
-
-
-
2,167,938
-
17,644,951
-
-
-
-
(52,149)
-
-
(20,566)
284,972
-
-
FY14
Directors
A Forrest
O Hegarty
M Barnaba
N Power
P Meurs
E Gaines
C Huiquan
G Raby
S Warburton
H Elliott
G Rowley
H Scruggs
G Brayshaw2
KMP
S Pearce
N Cernotta
D Woodall2
1 Negative amounts reflect the result of retiring during the year.
2 Mr Brayshaw retired and Mr Woodall resigned during FY14.
162 I FORTESCUE METALS GROUP LIMITED REMUNERATION REPORT
CORPORATE INFORMATION
Overview I Operatingand Financial Review I Reserves and Resources I Corporate Social Responsibility I Governance I Financial Report I Remuneration Report I Corporate Information
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 163
SHAREHOLDER INFORMATION
as at 31 July 2015
Top 20 holders of ordinary shares
Rank
Name
Minderoo Group Pty Ltd
J P Morgan Nominees Australia Limited
Valin Investments (Singapore) Pte Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
Valin Resources Investments (Singapore) Pte Ltd
National Nominees Limited
Citicorp Nominees Pty Limited
Emichrome Pty Ltd
AMNL Financing Pty Ltd
Valin Mining Investments (Singapore) Pte Ltd
AMNL Financing Pty Ltd
UOB Kay Hian Private Limited
BNP Paribas Noms Pty Ltd
The Minderoo Foundation Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 3
WWB Investments Pty Ltd
Bainpro Nominees Pty Limited
Mr William Graeme Rowley
Ms Judith Mary Street
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
Substantial shareholders
Name
Minderoo Group Pty Ltd and John Andrew Forrest
Hunan Valin Iron and Steel
Capital Research Global Investors
Range of shares
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Units
917,485,795
307,260,776
228,007,497
215,880,054
155,799,857
154,267,590
146,792,017
106,465,685
94,685,358
71,365,581
70,546,904
30,365,261
20,711,054
15,770,940
11,310,500
10,283,717
9,534,597
8,000,000
7,144,951
6,826,348
2,588,504,482
Total shares
1,037,479,247
458,405,492
220,488,581
% of issued capital
29.46
9.87
7.32
6.93
5.00
4.95
4.71
3.42
3.04
2.29
2.27
0.98
0.67
0.51
0.36
0.33
0.31
0.26
0.23
0.22
83.13
% of issued capital
33.32
14.72
7.08
Total holders
Units % of issued capital
24,449
25,572
7,308
6,401
464
64,194
12,021,549
66,378,036
56,245,211
165,686,484
2,813,466,871
3,113,798,151
0.39
2.13
1.81
5.32
90.35
100.00
Unmarketable parcels
There were 8,188 members holding less than a marketable parcel of shares in the company.
164 I FORTESCUE METALS GROUP LIMITED CORPORATE INFORMATION
BUSINESS DIRECTORY
Australian Business Number
ABN 57 002 594 872
Registered Office Australia
Level 2, 87 Adelaide Terrace
East Perth, WA 6004
T: +61 8 6218 8888
F: +61 8 6218 8880
W: www.fmgl.com.au
E: fmgl@fmgl.com.au
Auditor
PricewaterhouseCoopers
Level 15, 125 St Georges Terrace
Perth, WA 6000
Stock Exchange Listings
Fortescue Metals Group Limited shares are listed
on the Australian Securities Exchange (ASX)
ASX Code: FMG
Fortescue Share Registry
Link Market Services Limited
Level 4, Central Park
152 St Georges Terrace
Perth, WA 6000
Locked Bag A14
Sydney South, NSW 1235
T: 1300 733 136
T: +61 2 8280 7603 (International)
F: +61 2 9287 0309
W: www.linkmarketservices.com.au
Prefer email?
If you would prefer to receive information such as annual reports,
notices of meetings and announcements via email, you can change
your communication preferences on the Registry website:
www.linkmarketservices.com.au
EVENT CALENDAR 2015
Key dates for Fortescue shareholders in 2015.
Please note dates are subject to review.
Full Year Results Announcement
24 August 2015
September Quarter Production Report
15 October 2015
Annual General Meeting
11 November 2015
FY15 KEY ANNOUNCEMENTS
April 2015
• Fortescue Issues US$2,300 million of Senior Secured Notes
• Launch of High Yield Bond Offering
March 2015
• Fortescue Refinancing Update
• Fortescue announces multi-billion dollar refinancing
February 2015
• Appointment of Company Secretary – Ian Wells
• Consolidation of mining services contract
January 2015
• Chichester Range Mineral Resource Update
• Appointment of Non-Executive Director – Dr. Jean Baderschneider
November 2014
• Maintaining Outstanding Operational Performance
and Further Reducing Capital
• Appointment of Vice Chairman – Owen Hegarty
• Appointment of Lead Independent Director – Mark Barnaba
• Retirement of three Directors – Herb Elliott, Graeme Rowley,
Herbert Scruggs
August 2014
• Fortescue continues debt reduction program with repayment
of US$0.5 billion of Senior Unsecured Notes
FY15 AWARDS
2015 Supply Nation Supplier Diversity Awards
• Corporate Member of the Year
2015 Supply Nation Supplier Diversity Awards
• Supplier Diversity Advocate of the Year, Heath Nelson
2015 CME Safety and Health Innovation Awards
• Systems category
2015 CME Women in Resources Awards
• Women in Resources Champion, Linda O’Farrell
2015 Australasian Reporting Awards (ARA)
• Silver award
Women’s Leadership Forum
Scholarship to Harvard Business School
• Julie Shuttleworth
FY15 FINALIST AWARDS
2015 CME Women in Resources Awards
• Women in Resources Champion Finalist, Sharon Warburton
2014 Telstra Women in Business Awards
• Finalist, Sharon Warburton
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 165
GLOSSARY
Aboriginal owned businesses
Contractors, joint ventures, sub-contractors or other legal entities
owned by Aboriginal people.
Australian Accounting Standards
Australian accounting standards are developed, issued and
maintained by the Australian Accounting Standards Board, an
Australian Government agency under the Australian Securities and
Investments Commission Act 2001.
Corporations Act
Corporations Act 2001 of the Commonwealth of Australia.
DID
Detrital Iron Deposit.
Direct employees
Total number of employees including permanent, fixed term and
part-time. Does not include contractors.
ASX
The Australian Securities Exchange.
ASX Corporate Governance Principles and Recommendations
(Third Edition)
Principles and recommendations developed and released by the
ASX Corporate Governance Council on the corporate governance
practices to be adopted by ASX listed entities and which are designed
to promote investor confidence and to assist listed entities to meet
shareholder expectations.
Beneficiation
Beneficiation is a process whereby ore is pulverised into fine particles
and the higher grade material is separated, often magnetically, from
the gangue (waste).
BID
Bedded Iron Deposit.
bt
Billion tonnes.
C1 Cost
Operating costs of mining, processing rail and port. The reconciliation
of C1 to the amounts disclosed in the financial statements prepared
under the Australian Accounting Standards.
CFR
A delivery term that indicates that the shipment price includes
the cost of goods, freight costs and marine costs associated with a
particular delivery.
Chichester Hub
Fortescue’s mining hub with two operating iron ore mines,
Cloudbreak and Christmas Creek, located in the Pilbara,
approximately 250 kilometres south east of Fortescue’s Herb Elliott
Port in Port Hedland.
CID
Channel Iron Deposit.
CO2e
Carbon dioxide equivalent which is the internationally recognised
measure of greenhouse gas emissions.
Contractors
Non-Fortescue employees, working with the company to support
specific business activities.
dmt
Dry metric tonnes.
dmtu
Dry metric tonne unit.
Fe
The chemical symbol for iron.
FIFO
Fly-in Fly-out is defined as circumstances of work where the place
of work is sufficiently isolated from the worker’s place of residence to
make daily commute impractical.
Fortescue
Fortescue Metals Group Limited (ACN 002 594 872) and its
subsidiaries.
Fortescue River Gas Pipeline
A 270 kilometre gas pipeline which delivers natural gas from the
Dampier to Bunbury Pipeline to the main power station in the
Solomon Hub.
FY
Refers to a Financial Year.
GJ
Gigajoules.
GRI
The Global Reporting Initiative (GRI) is an international independent
organisation which has developed a standard for sustainability
reporting and disclosure.
Ha
Hectares.
Hematite
An iron ore compound with an average iron ore content of between
57% and 63% Fe.
Hematite deposits are typically large, close to the surface and mined
via open pits.
166 I FORTESCUE METALS GROUP LIMITED CORPORATE INFORMATION
GLOSSARY
HSES
Health, safety, environment and security.
ICMM
The International Council on Mining and Metals was established in
2001 to act as a catalyst for performance improvement in the mining
and metals industry.
Indicated Resource
As defined in the JORC Code, that part of a mineral resource for which
tonnage, densities, shape, physical characteristics, grade and mineral
content can be estimated with a reasonable level of confidence.
It is based on exploration, sampling and testing information
gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes. The locations are
too widely or inappropriately spaced to confirm geological and/or
grade continuity but are spaced closely enough for continuity to be
assumed.
Inferred Resource
As defined in the JORC Code, that part of a mineral resource for
which tonnage, grade and mineral content can be estimated with a
low level of confidence. It is inferred from geological evidence and
assumed but not verified geological and/or grade continuity. It is
based on information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes
which may be limited or of uncertain quality and reliability.
International Financial Reporting Standards
International Financial Reporting Standards (IFRS) is a single set of
accounting standards, developed and maintained by the IASB with
the intention of those standards being capable of being applied on a
globally consistent basis.
Iron Bridge Joint Venture
Unincorporated joint venture between FMG Iron Bridge Limited
(69%) and a subsidiary of Formosa Plastics Group (31%) to develop
the Iron Bridge magnetite project. FMG Iron Bridge Limited is jointly
owned by Fortescue (88%) and a subsidiary of Baosteel (12%).
IUCN
International Union for Conservation of Nature.
JORC Code
The Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves 2004 or 2012 Edition, as the case may
be, each prepared by the Joint Ore Reserves Committee of the
Australian Institute of Mining and Metallurgy, Australian Institute
of Geoscientists and Mineral Council of Australia, as amended or
supplemented from time to time.
Key Management Personnel
Key Management Personnel (KMP) are those persons having
authority and responsibility for planning, directing and controlling
the activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity.
Kings CID Fines
Fortescue’s stand-alone product produced from Channel Iron Deposit
Ore from its Kings mine in the Solomon Hub, with an iron grade of
57.3% Fe.
kL
Kilolitre.
Local supplier
Suppliers based in the Pilbara region.
LOM
Life of Mine, being the number of years over which available reserves
will be extracted.
m3
Cubic metres.
Magnetite
An iron ore compound that is typically a lower grade ore than
hematite iron ore because of a lower iron content.
Magnetite ore requires significant beneficiation to form a saleable
concentrate. After beneficiation, magnetite ore can be pelletised for
direct use as a high-grade raw material for steel production.
Measured Resource
As defined in the JORC Code, that part of a mineral resource for
which tonnage densities, shape, physical characteristics, grade and
mineral content can be estimated with a high level of confidence. It
is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes. The
locations are spaced closely enough to confirm geological and grade
continuity.
mt
Million tonnes.
mtpa
Million tonnes per annum.
NGER
The National Greenhouse and Energy Reporting (NGER) Scheme was
introduced in 2007 to provide data and accounting in relation to
greenhouse gas emissions and energy consumption and production.
The NGER Scheme operates under the National Greenhouse and
Energy Reporting Act 2007 (NGER Act).
OPF
Ore processing facility.
Pilbara
The Pilbara region in the North West of Western Australia.
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FORTESCUE METALS GROUP LIMITED 2015 ANNUAL REPORT I 167
Solomon Hub
A mining hub with two operating iron ore mines, Firetail and Kings.
The Hub is located approximately 60 kilometers north of the township
of Tom Price and 120 kilometers west of the railway that links the
Chichester Hub to Port Hedland.
Super Special Fines
Fortescue’s flagship iron ore product from the Chichester Hub, with an
iron grade of 56.4% Fe.
TRIFR
Total Recordable Injury Frequently Rate per million man hours
worked, comprising lost time injuries, restricted work and medical
treatments.
Underlying EBITDA
Underlying EBITDA is defined as earnings before interest, tax,
depreciation and amortisation, exploration, development and other
expenses. The reconciliation of Underlying EBITDA to the financial
metrics reported in the financial statements under Australian
Accounting Standards is presented on page 28.
UNGC
United Nations Global Compact provides a leadership platform
for business that are committed to aligning their strategies and
operations with ten universally accepted principles in human rights,
labour, environment and anti-corruption.
Voluntary employee turnover
Permanent and fixed term employees who left Fortescue voluntarily
for reasons not initiated by the company.
VTEC
Vocational Training and Employment Centre.
wmt
Wet metric tonnes.
WMYAC
Wirlu-murra Yindjibarndi Aboriginal Corporation.
GLOSSARY
Probable Reserve
As defined in the JORC Code, the economically mineable part of an
indicated mineral resource, and in some circumstances, a measured
mineral resource. It includes diluting materials and allowances for
losses which may occur when the material is mined. Appropriate
assessments and studies have been carried out, and include
consideration of and modification by realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and
governmental factors. These assessments demonstrate at the time of
reporting that extraction could reasonably be justified.
Proved Reserve
As defined in the JORC Code, the economically mineable part of
a measured mineral resource. It includes diluting materials and
allowances for losses which may occur when the material is mined.
Appropriate assessments and studies have been carried out, and
include consideration of and modification by realistically assumed
mining, metallurgical, economic, marketing, legal, environmental,
social and governmental factors. These assessments demonstrate at
the time of reporting that extraction could reasonably be justified.
Reserves or Ore Reserves
As defined in the JORC Code, the economically mineable part of a
measured mineral resource and/or an indicated mineral resource.
It includes diluting materials and allowances for losses, which
may occur when the material is mined. Appropriate assessments
and studies have been carried out, and include consideration of
and modification by realistically assumed mining, metallurgical,
economic, marketing, legal, environmental, social and governmental
factors. These assessments demonstrate at the time of reporting
that extraction could reasonably be justified. Mineral reserves are
sub-divided in order of increasing confidence into probable mineral
reserves and proven mineral reserves. Where capitalised, this term
refers to Fortescue’s estimated reserves.
Resources or Mineral Resources
As defined in the JORC Code, a concentration or occurrence of
material of intrinsic economic interest in or on the Earth’s crust in
such form, quantity and quality that there are reasonable prospects
for eventual economic extraction. The location, quantity, grade,
geological characteristics and continuity of a mineral resource are
known, estimated or interpreted from specific geological evidence
and knowledge. Mineral resources are sub-divided, in order of
increasing geological confidence, into inferred, indicated and
measured categories. Where capitalised, this term refers to Fortescue’s
estimated resources.
Rocket Fines
A product containing approximately 59% Fe upon shipment and
produced by Fortescue from the Chichester Hub.
Senior Executive
Leadership position title of Director, Group Manager or General
Manager.
168 I FORTESCUE METALS GROUP LIMITED CORPORATE INFORMATION
Vision is to be the safest, lowest cost,
most profitable iron ore producer
www.fmgl.com.au
@FortescueNews
Working together. Delivering results.
www.fmgl.com.au
@FortescueNews