APPENDIX 4E
For the year ended 30 June 2020
This information should be read in conjunction with Fortescue’s Annual Report, for the year ended 30 June 2020.
Name of entity
Fortescue Metals Group Ltd
ABN
57 002 594 872
Results for announcement to the market
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to members
Net profit attributable to members
Up 29% to
Up 49% to
Up 49% to
US$ million
12,820
4,735
4,735
Dividends
Financial year ended 30 June 2020:
Interim – ordinary
Final – ordinary
Total dividends
Previous corresponding period:
Interim – ordinary and special
Final – ordinary and accelerated
Total dividends
Ex-dividend date of final dividend
Record date of final dividend
Payment date of final dividend
Dividend Reinvestment Plan
The Company operates a Dividend Reinvestment Plan (the Plan) which
allows eligible shareholders to elect to invest dividends in ordinary shares
which rank equally with the ordinary shares of the Company. The allocation
of price for shares under the Plan will be calculated as the average of the
daily volume weighted average market price of all Fortescue shares traded
on the Australian Securities Exchange during the period of ten trading days
commencing on 3 September 2020.
The last date for receipt of applications to participate in or to cease or vary
participation in the Plan is by 5:00pm (WST) on 2 September 2020. The
Directors have determined that no discount shall apply to the allocation price
and the Plan will not be underwritten. Shares to be allocated under the Plan
will be acquired on market and transferred to participants on 1 October 2020.
A broker will be engaged to assist in this process.
A copy of the Plan Rules is available at www.fmgl.com.au/Investors
Amount
per security
Franked amount
per security
A$0.76
A$1.00
A$1.76
A$0.30
A$0.84
A$1.14
A$0.76
A$1.00
A$1.76
A$0.30
A$0.84
A$1.14
31 August 2020
1 September 2020
2 October 2020
Net tangible asset backing
Net tangible asset backing per
ordinary shares: US$4.30 (previous
corresponding period: US$3.44).
Previous corresponding period
The previous corresponding period is
the 12 months ended 30 June 2019.
Audit
This report is based on financial
statements which have been audited.
Commentary on results
for the period
A commentary on the results for the
period is contained within the Annual
Report, including the Financial Report
that accompany this announcement.
Annual
Report
ABN 57 002 594 872
F
Y
2
0
Global force | Thriving communities
Contents
01 Overview
02 Operating and financial review
03 Ore Reserves and Mineral Resources
04 Our approach to sustainability
05 Corporate Governance
06 Our approach to climate change
07 Financial Report
08 Remuneration Report
09 Corporate Directory
01
22
41
50
55
58
63
117
155
Our Purpose
Global force | Thriving communities
Our Culture
We are a values-based business
with a strong, differentiated culture.
We believe that by leveraging
the unique culture of our greatest
asset, our people, we will
achieve our stretch targets.
Our Values
Safety
Family
Empowerment
Frugality
Stretch targets
Integrity
Enthusiasm
Courage and
determination
Generating
ideas
Humility
2020
Year at a glance
2.4
Total Recordable Injury
Frequency Rate
178.2 mt
Shipped
US$
12.94/wmt
US$
4.7bn
C1 costs
Net Profit After Tax
US$
4. 9 bn
Cash on hand
A$
17.2 bn
Total global
economic contribution
01
01
Overview
Overview
4
Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Chairman's
message
Dr Andrew Forrest AO
High capital and high yield
growth – it is incredibly rare
for a company, let alone one
operating in the resources
sector, to occupy both spaces.
The fact that Fortescue has
successfully done so is thanks
to the values we hold as a
family globally – our character,
determination, humility,
innovation, enthusiasm,
frugality and commitment.
From Argentina to Port Hedland, the
feedback is consistent: members
of the Fortescue Family revere
the privilege of their careers and
love working with each other. It is
this rare mix that achieves what
others dismiss as unrealistic or
too hard. Our culture engenders
the high performance that is now
part of Fortescue’s DNA, as we
lead the world in our exploration,
development, project execution and
operational capability.
In the last twelve months, we have
completed our journey to develop
a vertically integrated supply chain,
all the way from exploration to the
world’s steel industries. Fortescue’s
assets and infrastructure rival the
best in the world, and, along with our
strongly innovative and collegiate
culture, ensure that we will not only
solve the new challenges the world
is throwing at us, but also become
a better and stronger company
because of them.
We are now entering a period in
which our world is changing at a
pace that is unprecedented in global
history. Against this backdrop, it is
very clear that artificial intelligence,
including autonomy, will
undoubtedly be one of the greatest
industrial revolutions in history.
Fortescue is leading by example
and our Board and leadership
understands the deep challenges
and opportunities, for Fortescue
and for humanity, that these
technologies bring.
This year, we welcomed Dr Ya-Qin
Zhang to our Board. Dr Zhang’s
knowledge and experience in the
areas of autonomy, technology and
innovation will be highly valuable as
we successfully navigate this time
of rapid technology advancement.
Ms Sharon Warburton retired,
serving through a high growth and
challenging period for Fortescue.
We thank Sharon for her service
and contribution.
Our Board brings a diversity of
thought, experience and expertise
to the table that drives our business
to set and deliver the challenging
stretch targets that define us.
Together, we oversee a company
that directly and indirectly employs
14,000 people, that is part of the
essential fabric of Western Australia
and which is a strong contributor
to the economies of our state and our
nation.
Fortescue is committed to community
and environmental responsibility
including contributing to local
prosperity, social equality, and
carbon neutrality. We believe carbon
neutrality must be achieved as soon
as possible and we are aggressively
investing in practical initiatives that
reduce or eliminate emissions, such
as solar, wind and hydrogen energy.
As we focus on the future, we will
never lose sight of where we have
come from and the friendships we
have built along the way. Fortescue
continues to have strong
relationships, with our customers in
Asia. We work tirelessly with our
partner countries to keep standards
high. From developing technologies,
to the blue economy and the
transitioning energy sector, our
connections allow us to share
ideas, perspectives and knowledge
and underpin Fortescue’s
outperformance.
Fortescue Metals Group Ltd Annual Report FY20 5
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
The success of our company is
in delivering enhanced returns to
our shareholders. We are in this
privileged position thanks to the
Fortescue Family. It’s through the
outstanding performance, hard
work and dedication of everyone at
Fortescue that Minderoo Foundation
has been funded, largely through
the dividends it has received from
Fortescue, to support a wide range of
philanthropic initiatives in Australia
and across the world for the benefit
of all Australians.
This year, Nicola and I announced
an additional personal donation
of A$520 million to Minderoo
Foundation, bringing our total
donations to the Foundation’s causes,
both here and abroad, to over A$2
billion. During FY20, we continued
to accumulate Fortescue shares
and the majority of the Foundation’s
support goes to the critical issues
that challenge our fellow Australians.
Uniquely, we take pride in targeting
the most intractable problems – the
ones that require immense teamwork
between government, business, civil
society and philanthropy.
As Minderoo responded to COVID-19
with the procurement of desperately
needed medical supplies and
established the Minderoo Foundation
Fire Fund, our belief that “we all have
to look out for each other” has never
been stronger.
We are also expanding the existing
work of Minderoo Foundation and its
efforts to:
• Fight cancer, particularly
childhood cancer, through
research collaboration;
• Maximise early childhood
development from conception to
the age of five;
• Restore ocean health by
eliminating plastic waste and
eradicating overfishing;
• Build strong communities through
arts, culture and community
programs;
• Bring meaningful accountability
and governance to frontier
technologies;
• Eliminate modern slavery and
human rights abuses, particularly
against children;
• Create parity with and for
Indigenous Australians including
early childhood programs and
pathways to training, employment
and business ownership;
• Provide PhD and postdoctoral
scholarships to the brightest
researchers from around the world
and attract them to live and work
in Australia.
Fortescue management, led by Chief
Executive Officer Elizabeth Gaines,
Deputy Chief Executive Officer Julie
Shuttleworth, Chief Operating Officer
Greg Lilleyman and Chief Financial
Officer Ian Wells, have delivered
an outstanding year, all the more
outstanding given the leadership
required to successfully adapt our
operations in response to COVID-19.
Fortescue has an extremely
hard-working culture of family,
inclusiveness, energy, commitment,
determination and trust and it is this
culture that continues to drive our
success. So therefore, I deeply thank
our team, everyone who joined the
company this year, through to those
who have been with us from the
outset. To you all, be assured we are
still, to this very day, pioneers together,
just as we were when we started this
company only 17 years ago.
The new frontiers and steep
challenges we faced then, are just as
great today. But with the strength of
the Fortescue Family with us, we share
the belief that if we can imagine a
better future, we can achieve it.
Protecting Australia from COVID-19
In an unprecedented collaboration between business and philanthropy,
Fortescue and Minderoo worked together to procure scarce personal
protective equipment (PPE) for our frontline carers, nurses and doctors,
helping to protect Australia from this awful disease.
Minderoo made available A$30m
to this cause, and Fortescue’s deep
relationships across Asia were key in
building the Australian stockpile of
critical PPE to manage the ongoing
pandemic.
In an initiative described by
Government as a ‘nation saving
event’, the team also imported PCR
testing equipment at a time when
these machines were in acutely
short supply around the world. We
were successful in sourcing critical
and scarce reagents for COVID-19
DNA/RNA testing to ensure that
when outbreaks occurred, they could
be identified and controlled in the
Australian community.
Fortescue Metals Group Ltd Annual Report FY20
6
Minderoo made available an additional
A$220m of its balance sheet to this
exercise without the protections of
normal legal documentation. Together
with Fortescue, 11 large laboratories
were installed across Australia to
quadruple Australia’s testing capability
for COVID-19 and general viral
measurement. This initiative, typically
a two year exercise, was ordered,
executed and commissioned within the
month of April.
We thank the Australian Government
and deeply appreciate their trust
in us for setting us this important
mission when Australia needed it
most, and are humbled and grateful
for the opportunity to serve our fellow
Australians.
Overview | Operating and financial review Minderoo
Fire Fund
Australia’s recent bushfire season had a devastating
effect on people and their communities, including local
businesses and wildlife.
Minderoo Foundation’s Fire Fund
committed A$70 million to rebuild
communities, revitalise local
economies and develop a long-term
and globally relevant blueprint for
wildfire and disaster resilience. Fire
Fund’s objective is to transform
Australia to be the global leader in fire
and flood resilience by 2025.
Working with more than 40 other
organisations we are leveraging
emerging science and technology.
Working with these companies
and Fortescue, we are accelerating
innovation that leads to the
development of new approaches to
mitigate bushfires, floods and other
disasters.
There is an urgent need to base
national systemic interventions that lift
disaster resilience on local knowledge.
Through Minderoo Foundation’s
Wildfire and Disaster Resilience
Program, we are engaging with
global partners to invest resources
that buffer our economies, societies,
and environments, both built and
natural, to the ever-growing impacts
of climate change-induced natural
disasters.
This includes new artificial
intelligence techniques that rapidly
detect and respond to fires and
floods, new management methods
that protect the environment, water
security and land, and programs to
lift resilience within communities,
including mental health.
While we are doing everything we
can to make sure a catastrophe of
this magnitude does not happen
again, our communities need
ongoing support to rebuild now.
Minderoo Foundation Fire Fund is
working with local organisations and
alongside relevant experts on crucial
grassroots projects that provide
practical support to those whose
lives were devastated by the bushfire
crisis. This includes delivering
temporary housing, enabling
volunteers to help with post-fire
rebuilds, enabling citizen scientists
to track ecological recovery and
partnering on a large-scale study
to improve how best to rehabilitate
wildfire-affected wildlife.
The Fortescue team also stepped
up to support those impacted by
the bushfires, donating A$90,000
to the Red Cross Disaster Relief
and Recovery Fund. Minderoo
Foundation proudly matched this
donation 2:1 to raise a total of
A$250,000.
Working together, we can rebuild
fire-ravaged communities in
Australia and make them more
resilient for the future.
Fortescue Metals Group Ltd Annual Report FY20 7
Chief Executive
Officer's message
Elizabeth Gaines
In FY20, the Fortescue team
delivered a year of records
while working together
through the unprecedented
disruption caused by the
COVID-19 pandemic.
Safety and unique culture
We are a values-based business
and our unwavering focus on safety,
family, empowerment and stretch
targets underpins everything we
do. Our Values are integral to our
success and continue to be as fresh
and relevant today as they were
when Fortescue was established.
Once again, Fortescue’s unique
culture has shone through and I
am incredibly proud of our entire
team who, in true Fortescue spirit,
have adapted to the significant
changes we have asked of them as
we proactively implemented and
expanded a range of measures to
contain the spread of COVID-19.
We began dealing with the impact
of COVID-19 long before the first
case was identified in Australia
given the impact on our China-
based colleagues. As the pandemic
hit our shores, we introduced
measures such as extended
operational rosters, working from
home, additional charter flights,
changes to our village facilities, and
temperature and health screening
to keep our people and the broader
community safe.
Critically, the team have worked
hard to maintain their focus
on the task at hand. Our Total
Recordable Injury Frequency Rate
(TRIFR)improved this financial
year to 2.4 on a rolling 12 month
basis, which is a testament to the
ongoing commitment of everyone
at Fortescue to keeping their mates
and themselves safe.
Operational excellence
Our outstanding operating
performance in FY19 was sustained
in FY20 with mining, processing, rail
and shipping combining to deliver
record shipments of 178.2 million
tonne (mt) for the year, six per cent
higher than FY19 and exceeding the
top end of guidance of 177mt.
We maintained our industry leading
cost position with full year C1 costs
of US$12.94/wet metric tonne (wmt)
(inclusive of US$0.22/wmt of direct
COVID-19 costs), one per cent lower
than FY19, reflecting our team’s
continued focus on productivity and
innovation initiatives.
In June, we celebrated the opening
of the Fortescue Hive, our expanded
integrated operations centre in
our Perth office. The purpose-built
facility is home to our planning,
operations and mine control teams,
together with port, rail, shipping and
marketing teams to deliver improved
safety, reliability, efficiency and
commercial outcomes.
Customers and market
Fortescue’s integrated supply chain
is unique in our industry and co-
locating our planning, operations,
shipping and marketing business
functions ensures we can capitalise
on market dynamics and respond to
the needs of our customers.
In 2019, we established FMG Trading
Shanghai to support our customers
through direct supply from regional
Chinese ports, providing them
with an option to purchase smaller
volumes in renminbi.
Fortescue, together with our industry
peers, was in a privileged position to
continue to operate during the peak
of COVID-19 restrictions. There was
no impact on our shipping schedule
to China, demonstrating to our
customers that we are a reliable and
secure supplier of iron ore.
Notably, the iron ore price held up
strongly through this period, with
ongoing demand for iron ore
evidenced by record production of
crude steel in China, which reached
499mt for the six months to June
2020. We anticipate continued
recovery in China's economic activity
and remain confident in the Chinese
Government’s commitment to
urbanisation, which will continue
to underpin long-term demand for
iron ore.
As home to three of the four largest
iron ore producers in the world,
Western Australia is well positioned
to support China’s ongoing growth
and development, which in turn will
support WA and Australia’s economic
recovery post-COVID-19.
8
Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Balance sheet strength
Our financial results for the year
demonstrate the continued ability of
our operations to generate strong
cash flows through the successful
execution of our integrated operations
and marketing strategy. By leveraging
the capability in our value chain,
we delivered record shipments,
sustained low cost performance
and strong operating margins,
contributing to a record net profit
after tax of US$4.7 billion.
Cash on hand at 30 June 2020 was
US$4.9 billion, while net debt was
US$0.3 billion, compared with net
debt at 30 June 2019 of US$2.1 billion.
Total capital expenditure for FY20
was US$2.0 billion.
Investing in the future
From this position of balance sheet
strength, we are investing in the future
growth of our business. The Fortescue
family is expanding as we deliver on
these important projects and we are
committed to ensuring that new team
truly members embrace our values
and all aspects of our culture.
We are focused on early stage
exploration of commodities that
support decarbonisation and the
electrification of the transport sector,
and continue to assess copper, gold
and lithium opportunities throughout
Australia, South America and Europe.
Due to COVID-19, a number of these
exploration activities were suspended
during FY20, particularly in South
America, and we continue to support
our team members impacted by
the pandemic, with the intention to
resume exploration activities once it
is safe to do so.
Our US$4.0 billion investment in
the world class Eliwana Mine and
Rail and Iron Bridge Magnetite
projects, once complete, will position
Fortescue as the only major iron ore
company with a breadth of product
offering to meet all market segments
from its Australian operations. This
is a key differentiator for Fortescue,
ensuring we continue to deliver
growth in earnings and cash flow and
enhanced returns to our shareholders
through all market cycles.
Delivering returns to
shareholders
As government looks to the business
community to drive Australia’s
economic recovery post COVID-19,
Fortescue is investing in growth
projects, supporting job creation
through investment and delivering
strong returns to our shareholders.
For FY20, we have declared A$1.76
in dividends to shareholders,
representing a payout ratio of
77 per cent of net profit after tax
consistent with our dividend policy
to pay out 50 to 80 per cent of net
profit after tax.
Everyone at Fortescue is proud
that our dividends support the
work of the Minderoo Foundation,
and Andrew and Nicola Forrest’s
philanthropy.
Global force I Thriving
communities
Fortescue was founded on the
belief that our communities should
benefit from our success. Today, we
are a global force, committed to
empowering thriving communities.
We continue to deliver training,
employment and business development
opportunities for Aboriginal people.
As of 30 June 2020, Aboriginal
people represented 10 per cent of our
Australian workforce and 14 per cent
of our Pilbara based employees.
Our strong and inclusive culture is at
the heart of our approach to diversity,
and increasing female representation
across Fortescue is a key priority. Our
female employment rate increased in
FY20 with females holding 19 per cent
of total roles and 26 per cent of senior
leadership roles.
In FY20, Fortescue made a total global
economic contribution of A$17.2 billion,
including A$4.3 billion in government
tax and royalty payments.
The Fortescue family
We are a values-based business,
committed to our strategic goals of
ensuring balance sheet strength and
flexibility, investing in the long-term
sustainability of our core business while
pursuing growth and development
options and delivering enhanced
returns to our shareholders.
On behalf of the Core Leadership
Team, I would like to thank the entire
Fortescue family for their contributions
this year. Guided by our Values, the
Fortescue team’s commitment to
meeting key safety, production and
cost targets and their willingness to
positively respond to the COVID-19
measures is at the heart of our success.
As we continue to challenge the status
quo to deliver operational excellence,
our unique and differentiated culture
will be fundamental to the achievement
of our stretch targets, as well as our
future goals.
Ambitious climate change target
In June 2020, we announced an industry leading emissions reduction
goal to achieve net zero operational emissions by 2040.
This goal is core to our Climate Change
Strategy and is underpinned by a
pathway to decarbonisation, including
the reduction of Scope 1 and 2
emissions from Existing Operations by
26 per cent from 2020 levels, by 2030.
Existing Operations include all our
current and future iron ore operations
in the Pilbara, excluding the Iron Bridge
Magnetite Project.
We have a proud history of setting
stretch targets and our 2030
emissions reduction commitment,
together with our goal to achieve net
zero operational emissions by 2040,
positions Fortescue as a leader
in addressing the global climate
change challenge.
Our success will be founded on
practical initiatives that will allow
us to deliver on our targets in an
economically sustainable manner,
including the Chichester Solar Gas
Hybrid Project, the Pilbara Energy
Connect program and our ongoing
work to decarbonise our mobile fleet
through the next phase of hydrogen
and battery electric energy solutions.
We work in one of the most
innovative industries in the world,
and by continuing to harness the
technology and capability of our
people, we are confident we can
achieve this ambitious climate
change target.
Fortescue Metals Group Ltd Annual Report FY20 9
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
10 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Our Board overview
Fortescue has a talented and diverse Board committed to
enhancing and protecting the interests of shareholders and
other stakeholders and fulfilling a strong governance role.
Dr Andrew Forrest AO
Mark Barnaba AM
Chairman
Lead Independent Director/
Deputy Chair
Elizabeth Gaines
Chief Executive Officer/
Managing Director
Lord Sebastian Coe CH, KBE
Jennifer Morris OAM
Dr Jean Baderschneider
Non-Executive Director
Non-Executive Director
Non-Executive Director
Penny Bingham-Hall
Dr Cao Zhiqiang
Non-Executive Director
Non-Executive Director
Dr Ya-Qin Zhang
Non-Executive Director
Fortescue Metals Group Ltd Annual Report FY20 11
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
The appointment and reappointment of directors is intended to maintain
and enhance the overall quality of the Board through a composition which
reflects a diversity of skills, ethnicity, experience, gender and age.
The primary driver for the Board in
seeking new directors is skills and
experience which are relevant to the
needs of the Board in discharging its
responsibilities to shareholders. All
new Board members benefit from a
comprehensive induction process
that supports their understanding of
Fortescue’s business.
Fortescue’s policy is to assess all
potential Board candidates without
regard to race, gender, age, physical
ability, sexuality, nationality, religious
beliefs, or any other factor not
relevant to their competence and
performance.
There is also a range of support
given to Board members which
enables them to stay strongly
connected to Fortescue, its culture
and Values.
These include:
• Opportunities for significant
contribution to the annual strategy
setting process conducted with
executive and senior management
• Regular briefings from executive
and senior management regarding
all major business areas, tailored
site visits and annual site tours to
operations
• Visits to meet with key
customers that strengthen their
understanding of the Company’s
key markets
• Regular formal and informal
opportunities for the directors to
meet with management and staff.
The Board has established
Committees to assist in the
execution of its duties and to ensure
that important and complex issues
are given appropriate consideration.
The primary Committees of the
Board are the Remuneration and
People Committee, the Audit and
Risk Management Committee, the
Nomination Committee and the
Finance Committee.
Each Committee has a non-executive
Chair and operates under its own
Charter which has been approved by
the Board.
Directors are expected to act
independently and ethically
and comply with all relevant
requirements of the Corporations
Act 2001, ASX Listing Rules and the
Company’s Constitution.
The Company actively promotes
ethical and responsible decision
making through its Values and Code of
Conduct and Integrity that embodies
these Values.
The Board and each of its Committees
have established a process to
evaluate their performance annually.
The process is based on a formal
questionnaire covering a range of
performance topics. The process is
managed by the Company Secretary
under the direction of the Lead
Independent Director. The most recent
review was undertaken in June 2020.
The results and recommendations
from the evaluation of the Board and
Committees are reported to the full
Board for further consideration and
action, where required.
At the date of this report, the Board has
seven non-executive directors and one
executive director, being the Chief
Executive Officer, Elizabeth Gaines.
The Board believes that an appropriate
mix of non-executive and executive
directors is beneficial to its role
and provides strong operational
and financial insights to support
the business.
12 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Global Head of the Natural Resources
Group). He has previously chaired the
State Theatre Company of Western
Australia, the West Coast Eagles (an
Australian Rules Football League
team) and several large publicly listed
(ASX) companies within the mining
and infrastructure sectors.
He is also a member of the Board (and
Chairman of the Audit Committee)
of the Reserve Bank of Australia
and was the inaugural Chairman of
the University of Western Australia
Business School Board from 2002
to 2020 and now holds the title of
(inaugural) Emeritus Board Member,
also serving as an Adjunct Professor
in Finance.
Mr Barnaba also chairs GLX (a
specialist technology company that
develops software based marketplace
solutions for commodity markets)
and the Hospital Benefit Fund (HBF)
Investment Committee, is a member of
the Senior Advisory Board of Appian
Capital (a London based pure-play
mining private-equity fund), is a
member of the Board of the Centre for
Independent Studies and is a senior
fellow at EY (Oceania).
Mr Barnaba holds a Bachelor of
Commerce (First Class Honours and
University Medal) from the University
of Western Australia, an MBA from
Harvard Business School (High
Distinction; Baker Scholar) and an
Honorary Doctor of Commerce from
the University of Western Australia.
He has lived in Australia, the United
States, Italy, the United Kingdom and
South Africa.
Committee memberships:
Audit and Risk Management
Committee (Chair), Nomination
Committee, Remuneration and
People Committee (Member),
Finance Committee (Member)
Dr Andrew Forrest AO
Chairman
Appointed Chairman in July 2003;
Assumed role of Chief Executive
Officer in 2005; Resumed non-
executive responsibilities in July 2011.
Dr Forrest is Australia’s most active
philanthropist and one of the
most effective business leaders of
his generation.
As Fortescue’s Founder and
Chairman, he has led the Company
from inception to its Top 10 status
on the Australian Stock Exchange,
during which time Fortescue invested
more than US$27 billion in the
resources sector.
In 2001, Dr Forrest co-founded the
Minderoo Foundation with his wife
Nicola, which has supported over
300 initiatives across Australia and
internationally in pursuit of a range
of causes. In April 2020, the Forrests
announced one of Australia’s largest
private philanthropic donations of
A$520 million, and have continued
giving, with their total philanthropic
donations now exceeding A$2 billion.
Dr Forrest recently completed a PhD
in Marine Ecology and is passionate
about ocean conservation. Prior to
that he was awarded an honorary
doctorate by the University of Western
Australia, is an Adjunct Professor of
the Central South University in China
and a lifetime Fellow of the Australian
Institute of Mining and Metallurgy.
In 2019, he was announced as an IUCN
Patron of Nature and is a member of
the United Nations (UN) Environment
Programme Scientific Advisory
Committee on the Assessment on
Marine Litter and Microplastics.
He is Co-Chairman of the Senior
Business Leaders’ Forum, the
leading formal dialogue for China
and Australia’s most senior
business leaders.
In 2017, Dr Forrest was appointed
an Officer of the Order of Australia
(AO) for distinguished service to the
mining sector, to the development
of employment and business
opportunities, as a supporter of
sustainable foreign investment,
and to philanthropy.
He is Global Patron of the Centre for
Humanitarian Dialogue, recipient of
the Australian Sports Medal and the
Australian Centenary Medal, and Vice-
Patron of the SAS Resources Fund.
He was a Councillor of the Global
Citizen Commission, charged by
the UN to modernise the Universal
Declaration of Human Rights
presented to the UN Secretary General
in April 2016. Dr Forrest was appointed
by the Prime Minister and Cabinet
of Australia to Chair the Review of
Indigenous Training and Employment
Programmes, to end Indigenous
disparity through employment with
its recommendations being slowly
implemented.
He was Western Australia’s 2017
Australian of the Year for his
outstanding contribution to the
community. In 2018, Dr Forrest
was inducted into the Australian
Prospectors & Miners’ Hall of Fame
and was the inaugural winner of the
EY Global Entrepreneur of the Year
Social Impact Award.
Committee memberships:
Finance Committee (Chair),
Nomination Committee
Mark Barnaba AM CitWA
Lead Independent Director/
Deputy Chair
Deputy Chair since November 2017;
Lead Independent Director since
November 2014; Non-Executive
Director since February 2010.
Mr Barnaba is a career investment
banker, having focused
predominantly in the natural
resources sector.
Mr Barnaba spent most of his career
with companies he founded, led and
then sold - GEM Consulting and
Azure Capital (both independent
corporate advisory firms which
provide financial, corporate and
strategic advice to companies,
governments and institutions in
the Asia Pacific region), McKinsey
& Company (both in Australia and
overseas) and in several senior
executive roles at Macquarie Group
(one being the Chairman and
Fortescue Metals Group Ltd Annual Report FY20 13
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Elizabeth Gaines
Lord Sebastian Coe CH, KBE
Dr Jean Baderschneider
Chief Executive
Officer/Managing Director
Chief Executive Officer since
February 2018 and Executive Director
since February 2017; Former
Non-Executive Director from
February 2013 to February 2017.
A highly experienced business leader
with extensive international experience
as a Chief Executive Officer and
group executive, Ms Gaines has a
proven track record in financial and
operational leadership across a
number of industries, including
resources, construction and
infrastructure, financial services
and travel and hospitality.
After joining Fortescue as a Non-
Executive Director in February 2013,
Ms Gaines was appointed Chief
Financial Officer and Executive Director
in February 2017. She is a former
Chief Executive Officer of Helloworld
Limited and Heytesbury Pty Limited
and has also held the position of Chief
Financial Officer at Stella Group and
Entertainment Rights plc.
Ms Gaines was ranked second on
the 2019 Fortune Magazine
Businessperson of the Year list, and
in 2020 the Chamber of Minerals and
Energy of Western Australia awarded
her the ‘Women in Resources
Champion’ at their annual Women
in Resources Awards.
She has significant exposure to the
impact of the growth in Asian
economies, particularly China, on
the Australian business environment
and economy as well as a deep
understanding of all aspects of
financial and commercial management
at a senior executive level in both
listed and private companies.
Ms Gaines holds a Bachelor of
Commerce and Masters of Applied
Finance and, in 2019, was awarded an
Honorary Doctorate of Commerce by
Curtin University. She is a member of
Chartered Accountants Australia and
New Zealand, the Australian Institute
of Company Directors and Chief
Executive Women.
Ms Gaines has previously held Non-
Executive Director roles with NEXTDC
Limited, Mantra Group Limited, Nine
Entertainment Co. Holdings Limited.
and ImpediMed Limited.
Non-Executive Director
Non-Executive Director
Non-Executive Director since
February 2018.
Non-Executive Director since
January 2015.
Lord Coe is currently a senior
advisor with Morgan Stanley & Co
International plc and a
Non-Executive Director of the Vitality
Group of health and life insurance
companies. In 2017, he became
Chancellor of Loughborough
University having previously served
as Pro Chancellor of the University.
A highly regarded leader in both
business and civil society,
Dr Baderschneider brings 35 years’
of extensive international experience
in procurement, strategic sourcing
and supply chain management along
with a deep understanding of
high-risk operations and locations
and complex partnerships.
Based in the United Kingdom, Lord
Coe is the Non-Executive Chairman
of CSM Sport and Entertainment,
within the Chime Communications
group. He was elected President of
World Athletics in 2015 where he
is driving significant governance
reforms through the organisation and
its 214 Member Federations around
the world. He is currently serving his
second term as President.
Lord Coe previously served as
Chairman of the British Olympic
Association and was Chairman
of the Organising Committee for
the London 2012 Olympic Games
and Paralympic Games. He was a
member of the British athletics team
at the 1980 and 1984 Olympic Games
where he won two gold and two
silver medals, as well as breaking
12 world records.
In 1992, Lord Coe became a Member
of Parliament and during his political
career served as a Government Whip
and then Private Secretary to William
Hague, Leader of the Opposition and
Leader of the Conservative Party. He
was appointed to the House of Lords
in 2000.
Committee memberships:
Nomination Committee (Chair)
Dr Baderschneider retired from
ExxonMobil in 2013 where she
was Vice-President of Global
Procurement. During her 30 year
career, she was responsible for
operations all over the world,
including Africa, South America, the
Middle East and Asia.
A past member of the Board of
Directors of the Institute for Supply
Management and the Executive
Board of the National Minority
Supplier Development Council,
Dr Baderschneider also served
on the boards of the Center of
Advanced Purchasing Studies and
the Procurement Council of both the
Conference Board and the Corporate
Executive Board.
In February 2011, she was the
Presidential appointee to the US
Department of Commerce’s National
Advisory Council of Minority
Business Enterprises. She holds a
Masters Degree from the University
of Michigan and a PhD from Cornell
University.
Dr Baderschneider is the recipient of
Cornell’s Jerome Alpern Award and
the Nomi Network’s Corporate Social
Responsibility Award.
Committee memberships:
Audit and Risk Management
Committee
Cameron Wilson
Company Secretary
Mr Wilson was appointed Company Secretary in February 2018, bringing over
20 years’ mining industry experience across the gold, nickel, coal and mineral
sands sectors.
Mr Wilson holds a Bachelor of Laws from the University of Western Australia
and is a Graduate of the Australian Institute of Company Directors.
14 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Dr Cao Zhiqiang
Non-Executive Director
Non-Executive Director since
January 2018 (nominated director
from Hunan Valin Iron and Steel
Group Company Ltd).
Dr Cao is currently the Chairman
of Hunan Valin Iron and Steel Group
Company Ltd and brings extensive
experience in technology and steel
mill management, along with a
deep background in international
cooperation.
Dr Cao joined Valin Xiangtan Steel
in 1997 and has worked in a variety
of roles, including Director of the
Research and Development Centre,
before being appointed Chief
Executive Officer. He holds a PhD
in Science and is a senior engineer
research fellow.
Penny Bingham-Hall
Non-Executive Director
Non-Executive Director since
November 2016.
Ms Bingham-Hall has over 30 years’
experience in senior executive and
non-executive roles in large ASX
listed companies. She is a Non-
Executive Director of Macquarie
Specialised Asset Management,
Taronga Conservation Society
Australia, Supply Nation and the
Crescent Foundation. She is also
Chair of the NSW Freight and
Logistics Council.
Ms Bingham-Hall has worked in the
construction, infrastructure, mining
and property industries across
Australia and the Asian region. She
has a particular interest in
environmental sustainability,
workplace safety and Indigenous
employment.
Prior to becoming a company
director, Ms Bingham-Hall was
Executive General Manager, Strategy
at Leighton Holdings (now CIMIC)
- Australia’s largest construction,
mining services and property group.
As part of the leadership team at
Leighton she had responsibilities
across the group’s Australian and
Asian operations.
Ms Bingham-Hall has a Bachelor of
Arts degree in Industrial Design, is a
Fellow of the Australian Institute of
Company Directors, a Senior Fellow
of the Financial Services Institute of
Australasia and a member of Chief
Executive Women and Corporate
Women Directors.
Other current directorships (ASX
listed entities):
BlueScope Steel Limited (Non-
Executive Director); Dexus Property
Group (Non-Executive Director).
Committee memberships:
Audit and Risk Management
Committee (Member), Remuneration
and People Committee (Member) and
Finance Committee (Member)
Dr Ya-Qin Zhang
Non-Executive Director
Non-Executive Director since
August 2019.
Dr Ya-Qin Zhang is a renowned
scientist, technologist and business
executive. He is the founder and
Chairman of Blue Entropy LLC, a
Seattle-based technology consulting
firm. He joined Tsinghua University as
the Chair Professor of AI Science in
2020, starting the Tsinghua Institute
for AI Industry Research (AIR). Dr
Zhang was President of Baidu Inc.
(NASDAQ: BIDU) from September
2014 to October 2019, a leading
Chinese multinational technology
company specialising in Internet-
related services, mobility, artificial
intelligence and cloud computing.
Prior to joining Baidu, he was a key
executive of Microsoft Corporation for
16 years, including Corporate Vice
President for Mobile and Embedded
Products, Managing Director of
Microsoft Research Asia and Chairman
of Microsoft China.
Dr Zhang has made significant
contributions to digital media, AI,
autonomous driving and cloud
computing industries, with over 60
granted US patents, 500
peer-reviewed publications,
and numerous contributions to
international standards. Dr Zhang was
inducted into the American Academy
of Arts and Sciences (AAAS) in
2019 and the Australian Academy of
Technology and Engineering (ATSE)
as the only foreign fellow in 2017, and
became a Fellow of the Institute of
Electrical and Electronics Engineers
(IEEE) in 1997 at the age of 31, making
him the youngest scientist winning
this honour in the 100+ year history of
the organisation.
Dr Zhang has served on the Board of
Directors of Chinasoft International Ltd
(HKEX: 354) and AsiaInfo Technologies
Ltd (HKEX: 1675). He serves on the Board
of Stewardship for the Future of Mobility
of the Davos World Economic Forum
and Chairman of the Apollo Alliance, the
largest open platform for autonomous
driving in the world. Dr Zhang received
his Bachelor’s and Master’s degree in
Electrical Engineering from the University
of Science and Technology of China,
and a PhD in Electrical Engineering from
George Washington University.
Jennifer Morris OAM
Non-Executive Director
Non-Executive Director since
November 2016.
Ms Morris is currently the National
Director of Strategy for Cannings Purple,
one of Australia’s leading
fully integrated strategic
communications consultancies. Prior
to joining Cannings Purple, Ms Morris
was a consulting partner at Deloitte, and
more recently the CEO of Walk Free, the
Minderoo Foundation’s global initiative
against slavery. She is currently a Non-
Executive Director of the Australian
Sports Commission.
Ms Morris has key experience in
advising government entities and
corporations on strategy development,
governance controls, complex
large-scale business transformation,
the embedding of environment, social
and governance related policies and
the understanding of high-performance
environments.
A former member of the Australian
Women’s Hockey Team, Ms Morris won
Olympic gold medals at the Atlanta 1996
and Sydney 2000 Olympic Games. In
1997, she was awarded a Medal of the
Order of Australia (OAM).
Ms Morris is a member of the Australian
Institute of Company Directors, a
Fellow of Leadership WA and a member
of the Vice Chancellor’s List, Curtin
University. She holds a Bachelor of Arts
(Psychology and Journalism) received
with Distinction and has completed
Finance for Executives at INSEAD.
Committee memberships:
Remuneration and People Committee
(Chair), Audit and Risk Management
Committee (Member)
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Core
Leadership
Team
L to R: CEO Elizabeth Gaines,
Deputy CEO Julie Shuttleworth,
COO Greg Lilleyman,
CFO Ian Wells.
Elizabeth Gaines
Chief Executive Officer
Greg Lilleyman
Chief Operating Officer
Ms Gaines commenced as Chief
Executive Officer in February 2018.
A highly experienced business
leader with extensive international
experience as a Chief Executive
Officer and group executive,
Ms Gaines has a proven track
record in financial and operational
leadership across a number of
industries including resources,
construction and infrastructure,
financial services and travel
and hospitality.
After joining Fortescue as a
Non-Executive Director in February
2013, Ms Gaines was appointed
Chief Financial Officer and Executive
Director in February 2017. She is a
former Chief Executive Officer of
Helloworld Limited and Heytesbury
Pty Limited and has also held the
position of Chief Financial Officer
at Stella Group and Entertainment
Rights plc.
Ms Gaines holds a Bachelor of
Commerce and Masters of Applied
Finance and, in 2019, was awarded an
Honorary Doctorate of Commerce by
Curtin University. She is a member of
Chartered Accountants Australia and
New Zealand, the Australian Institute
of Company Directors and Chief
Executive Women.
Mr Lilleyman commenced as Chief
Operating Officer in February 2018,
after joining Fortescue as Director
Operations in January 2017.
With three decades of extensive
international experience in the mining
sector, across multiple commodities in
large scale project development and
construction, operational and business
leadership, joint venture management
and technology deployment,
Mr Lilleyman brings significant business
credentials and over 20 years' iron ore
market knowledge to Fortescue’s Core
Leadership Team.
Mr Lilleyman holds a degree in
Construction Engineering from Curtin
University and has completed the
Vincent Fairfax Fellowship in Ethical
Leadership at the University of
Melbourne, as well as the prestigious
Wharton Business School’s Advanced
Management Program.
He is a member of the Australian
Institute of Mining and Metallurgy,
the Australian Institute of Company
Directors and a Fellow of the Australian
Institute of Management. Mr Lilleyman
has recently been appointed to the
Board of the University of Western
Australia Business School.
16 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Ian Wells
Chief Financial Officer
Mr Wells commenced as Chief Financial
Officer in February 2018 having responsibility
for the Fortescue Group capital
management strategy, core finance functions
including reporting, tax and treasury,
together with Group procurement and
logistics, and technology and autonomy.
Mr Wells is a Director of a number of
Fortescue’s subsidiaries and is a member
and alternate chair of the Iron Bridge Joint
Venture Committee.
Since joining Fortescue in 2010, he has
held multiple senior executive roles in the
Group Finance Leadership team, including
Group Manager Corporate Finance,
leading Fortescue’s capital management
strategy, Group Manager planning and
analysis and he also held the position of
Company Secretary.
Mr Wells’ prior experience includes
financing Fortescue’s major iron ore
project development leading multi-billion
dollar capital raising and refinancing
transactions in domestic and international
capital markets.
With more than 25 years’ experience as a
senior executive in leading ASX listed and
private companies in the mining, energy
infrastructure and healthcare industries,
Mr Wells’ prior positions include Chief
Financial Officer of Singapore Power
subsidiary Jemena Limited and Acting
Chief Financial Officer of Alinta Limited.
Mr Wells holds a Bachelor of Business in
Accounting, is a Fellow of CPA Australia, a
Certified Finance and Treasury Professional
and a Graduate of the Australian Institute of
Company Directors. Mr Wells is Chairman of
The Salvation Army’s WA Corporate &
Philanthropic Council.
Julie Shuttleworth
Deputy Chief Executive Officer
Ms Shuttleworth commenced as Deputy
Chief Executive Officer in February 2018.
Having joined Fortescue in 2013, Ms
Shuttleworth has held General Manager
roles at both Fortescue’s Cloudbreak and
Solomon mines.
Ms Shuttleworth holds a double major
in Extractive Metallurgy and Chemistry
from Murdoch University and has 26
years’ experience in the mining industry
in Australia, China, Tanzania and South
America, including 19 years in gold/
copper working for Newcrest Mining,
Sino Mining and Barrick Gold, and
seven years’ iron ore experience with
Fortescue.
Ms Shuttleworth is a Fellow and
Chartered Professional of the Australian
Institute of Mining and Metallurgy, a
Graduate Member of the Australian
Institute of Company Directors, a
Member of Chief Executive Women, a
Member of the Institution of Engineers
Australia and on the International
Committee of the Society of Mining
Metallurgy and Exploration. She has
attended Harvard Business School
and INSEAD Business School, holds
diplomas in Financial Markets and
Management, and sponsors the Julie
Shuttleworth Prize in Mineral Processing
at Murdoch University.
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Executive team
Fortescue’s Executive team is accountable for the safety of its people,
upholding the Company’s Values, and acting with integrity and honesty.
Danny Goeman
Director Sales and Marketing
Peter Huston
Director Corporate Development,
Legal and Strategy
Don Hyma
Director Projects
Tim Langmead
Linda O’Farrell
Fernando Pereira
Director Community, Environment
and Government
Director Fortescue People
Director Pilbara Operations
Alison Terry
Rob Watson
Director Sustainability and
Corporate Affairs and Joint
Company Secretary
Director Health and Safety
18 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Danny Goeman
Director Sales and Marketing
Mr Goeman was appointed Director
Sales and Marketing in August 2018.
Mr Goeman has more than 25 years
of experience in management, sales
and marketing, strategy development
and high level commercial
negotiations, including more than
20 years with the Rio Tinto group
of companies.
Mr Goeman has a wealth of
experience in leading commercial
transactions in different geographies,
including Australia, Asia, Europe
and Africa, and has experience in
a range of commodities including
diamonds, iron ore, coal and potash.
Mr Goeman has a Master's degree in
Business Administration.
Peter Huston
Director Corporate Development,
Legal and Strategy
Mr Huston joined Fortescue in 2005
and has over 20 years’ experience in
legal and corporate advisory roles.
Prior to joining Fortescue,
Mr Huston spent 12 years as a
Partner of the law firm now known
as Norton Rose Fulbright. He then
spent over a decade in Activist
Private Equity as an Executive
Director at Troika Securities Limited.
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.
Don Hyma
Director Projects
Mr Hyma joined Fortescue in early
2019 as Project Director Iron Bridge
before moving into the role of
Director Projects in October 2019.
He has over 25 years of progressive
capital project experience in the
resources sector in Canada, Chile,
New Caledonia and Australia.
Prior to joining Fortescue, Mr Hyma
held senior management positions
with Rio Tinto, including Vice
President Projects Iron Ore in
Canada and General Manager
Pilbara Growth in Western Australia,
as well as Chief Technical Officer for
Mitsui & Co. He has extensive
experience in managing large,
complex capital projects, particularly
those implemented under joint
ventures and involving multiple
stakeholders.
Tim Langmead
Director Community, Environment
and Government
Mr Langmead joined Fortescue as
Group Manager Corporate Affairs
in January 2013 and from January
2014 served as Director External
Relations before being appointed to
his current role.
Previously, Mr Langmead held
senior corporate affairs roles in the
Australian business units of global oil
and gas companies. Mr Langmead
served in senior staff roles for
Ministers in the Howard-Anderson
and Howard-Vaile governments
and commenced his career as an
agribusiness journalist.
Linda O’Farrell
Director Fortescue People
Ms O’Farrell joined Fortescue in
October 2013 as Group Manager
Fortescue People, joining the
Executive team in December 2014.
Having held a number of executive
human resources roles in major
Australian resource companies,
Ms O’Farrell brings deep experience
in strategic people management,
diversity and Aboriginal employment.
Ms O’Farrell holds a Bachelor of
Economics (Honours in Industrial
Relations) from the University of
Western Australia. She is a Director
at the Australian Institute of
Management Western Australia,
the Australian Resources and
Energy Group (AMMA) and
Lifeline Australia.
Fernando Pereira
Director Pilbara Operations
Mr Pereira was appointed Director
Pilbara Operations in June 2019,
having started his career at
Fortescue in 2010 and has previously
led the Company’s Port and Rail
Operations and Asset Management
teams.
Mr Pereira has more than 19 years’
experience in the mining industry,
spanning various commodities and
operations in Australia and South
America. He has expertise in senior
management, mining and mineral
engineering, supply chain optimisation
and overseeing mechanical, structural
and expansion projects.
Mr Pereira holds a Bachelor in Mining
and Mineral Processing Engineering
and Specialisation in Business
Management.
Alison Terry
Director Sustainability and Corporate
Affairs and Joint Company Secretary
Ms Terry joined Fortescue in 2014 as
Group Manager Corporate Affairs and
serves as Joint Company Secretary,
having been appointed to the role in
February 2017.
With significant experience in
corporate affairs, legal, company
secretarial and general management,
Ms Terry has previously held senior
executive and Board roles across
a number of sectors including
automotive, telecommunications and
superannuation. Ms Terry holds a
Bachelor of Economics and Bachelor
of Laws (Honours) and a Graduate
Diploma of Business (Accounting).
She is a member of Chief Executive
Women, a Graduate of the Australian
Institute of Company Directors and
a Director of the Black Swan State
Theatre Company of Western Australia.
Rob Watson
Director Health and Safety
Mr Watson was appointed Director
Health and Safety in July 2020 after
joining Fortescue in 2011. Prior to this,
Mr Watson spent 15 years in a number
of senior corporate health and safety
roles in large mining companies.
Mr Watson’s career in health and
safety spans over 25 years in a number
of industries and commodities.
Mr Watson holds a Master's in
Occupational Health and Safety.
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About Fortescue
A proud West Australian company, Fortescue Metals Group Ltd
(Fortescue) 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.
In 2019, we established FMG Trading
Shanghai (FMG Trading), a wholly
owned Chinese sales entity, to
support our customers through
the direct supply of iron ore from
regional Chinese ports, providing
them with an option to purchase
smaller volumes in renminbi.
Fortescue was founded on the
belief that our communities should
benefit from our success. Today, we
are a global force, committed to
empowering thriving communities,
as we deliver training, employment
and business development
opportunities for Aboriginal people.
As a large consumer of energy, we
have committed to an industry-
leading carbon emissions target
of net zero operational emissions
by 2040. To achieve this, we are
investing in practical initiatives
such as the development of wind
and solar energy, as well as gas
and battery storage hybrid projects
to displace our current thermal
generation. We are also investigating
the next phase of hydrogen and
battery electric vehicle mobility.
Fortescue is a values-based
business, committed to our strategic
goals of ensuring balance sheet
strength and flexibility, investing in
the long-term sustainability of our
core business while pursuing growth
and development options and
delivering enhanced returns to our
shareholders.
Since Fortescue was established by
our Founder and Chairman
Dr Andrew Forrest AO in 2003, we
have discovered and developed
major iron ore deposits, constructed
some of the most globally significant
mines and have grown to be one
of the world’s largest producers of
iron ore.
Our supply chain extends to our
innovative tug fleet and the eight
purpose-built 260,000 tonne
capacity Fortescue Ore Carriers,
which have been designed to
complement the efficiency of
our port and maximise the safety
and productivity of Fortescue’s
operations.
Delivering consistent operational
excellence, our integrated mining,
rail, shipping and marketing teams
work together to export 175 to 180
million tonnes of iron ore annually
(mtpa) and our commitment to
technology and innovation ensures
we remain one of the world’s lowest
cost iron ore producers.
The Fortescue Hive, our expanded
Integrated Operations Centre,
brings together our entire supply
chain to deliver significant
safety, productivity, efficiency
and commercial benefits and
will underpin our future use of
technology, including artificial
intelligence and robotics.
Fortescue’s wholly owned and fully
integrated operations in the Pilbara
include the Chichester and Solomon
mining hubs and we are developing
the Western Hub, home to the
new Eliwana mine. The Iron Bridge
Magnetite Project, an industry-
leader in cost and energy efficiency,
will be one of the highest-grade
magnetite projects in the world.
Our mining hubs are connected to
the five berth Herb Elliott Port and
the Judith Street Harbour towage
infrastructure in Port Hedland via
620 kilometres (km) of the fastest,
heavy haul railway in the world,
with an additional 143km under
development to support Eliwana.
Through our world class exploration
capability together with our
business development and projects
focus, we are driving future
growth, targeting the early stage
exploration of commodities that
support decarbonisation and the
electrification of the transport sector.
We are undertaking exploration
activities in New South Wales
and South Australia, as well as
in Ecuador and Argentina, and
preliminary exploration activities on
tenements that are in application
in Colombia, Peru, Portugal and
Kazakhstan, prospective for copper,
gold and lithium.
Our longstanding relationships with
customers in China have grown
from our first commercial shipment
of iron ore in 2008. Today, we are a
core supplier of seaborne iron ore
to China and have expanded into
markets including Japan and South
Korea.
20 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review 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 its product suite from mine to market.
Modelling,
planning and
development
Processing
Ore processing
facility design and
wet processing
optimise output
Blending and
stockpiling
Port design
facilitates blending
and stockpiling of
product suite
Marketing
Helping customers
achieve best value
in use
China port sales
FMG Trading
Shanghai Co. Ltd
(FMG Trading)
Exploration
and discovery
Challenging geological
thinking to identify
valuable deposits
Extraction and
recovery
Innovative use of
technology suitable to
Fortescue’s deposits
Mine to port
Heavy haul rail
at 42t axle load
Ship loading
3 shiploaders and
5 berths maximise outload
capacity and utilisation
Shipping and towage
Delivery to Fortescue’s international
customers’ specifications
8 Fortescue Ore Carriers
Towage fleet provides safe
and reliable towage services
Rehabilitation
Mine closure and
decommissioning
Fortescue Metals Group Ltd Annual Report FY20 21
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178.2 mt
Shipped
US$
12.8bn
Revenue
US$
12.94
/wmt
C1 costs
US$
5.1bn
Gross debt
US$
4. 9 bn
Cash on hand
US$
0.3 bn
Net debt
02
Operating and
financial review
22 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Overview of operations
As one of the world’s largest producers of iron ore, Fortescue’s wholly
owned and integrated operations in the Pilbara include the Chichester
and Solomon mining hubs and the Western Hub, which is currently under
development. Our mining infrastructure is connected to the five berth
Herb Elliott Port and Judith Street Harbour towage facility in Port Hedland
via the fastest, heavy haul railway in the world.
Chichester Hub
Solomon Hub
Hedland Operations
Our Chichester Hub in the
Chichester Ranges, comprising
the Cloudbreak and Christmas Creek
mines, has an annual production
capacity of approximately 100mtpa
from three Ore Processing
Facilities (OPFs).
The Solomon Hub in the Hamersley
Ranges is located 60km north of
Tom Price and 120km to the west of
our Chichester Hub. It comprises the
Firetail and Kings Valley mines which
together have a production capacity
of 75mtpa.
Consistent and sustained output
delivered from the OPFs has allowed
us to optimise our product strategy
through enhanced blending and
beneficiation, increasing iron
upgrades and reducing impurities.
This has contributed to lower mining
cut-off grades, as we optimise ore
bodies with sustainably lower
strip ratios.
The Christmas Creek OPF
infrastructure is being upgraded
to include a Wet High Intensity
Magnetic Separator (WHIMS) plant
to further maximise production rates
and enhance the value of our ore.
The WHIMS construction will be
completed by the end of 2020.
Cloudbreak utilises relocatable
conveyors which can be moved,
lengthened or shortened once an
area is mined. The conveyors now
cover 10km, extended from the
initial 5km length due to the success
and efficiency of this innovative
infrastructure.
Solomon represents a valuable
source of production by blending
higher iron grade, low cost
Firetail ore with low phosphorous
Chichester ore to create Fortescue
Blend. The current operation will
expand to include the Queens Valley
mining area to maintain production
of the Kings Fines product.
Western Hub
Fortescue is developing the Western
Hub, which includes significant
amounts of high iron content
bedded iron ore and will be home
to the Eliwana mine. Located 140km
to the west of Solomon and due to
be completed in December 2020,
the Eliwana project includes 143km
of rail and a 30mpta dry OPF.
Eliwana will contribute to Fortescue’s
core iron ore business as it
underpins the ramp up of our
60.1% Fe West Pilbara Fines product.
The operation will maintain
our low cost status, providing
greater flexibility to capitalise on
market dynamics.
Fortescue wholly owns and operates
our purpose designed rail and port
facilities, constructed to deliver iron
ore from our mines to Port Hedland
for shipment to our customers.
Covering 620km of track, with the
additional 143km under construction
for Eliwana, our railway is the fastest,
heavy haul line in the world.
The efficient design and layout,
optimal berthing configuration and
ongoing innovation to increase
productivity makes Fortescue’s Herb
Elliott Port the most efficient bulk
port operation in Australia. The port
has five operating berths and our
current infrastructure is capable of
safely and efficiently exporting in
excess of 180mtpa.
The Judith Street Harbour towage
infrastructure and our fleet of tugs
provide safe and reliable towage
services that maximise the efficiency
of our operations, while offering
competitive third party towage
services within the port.
Fortescue Metals Group Ltd Annual Report FY20 23
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
Karratha
Roebourne
Port Hedland
HERB ELLIOTT PORT
Concentrate pipeline
Marble Bar
IRON BRIDGE
Eliwana
SOLOMON HUB
Firetail
Kings
and Queens
Nullagine
CHICHESTER HUB
Cloudbreak
Pilbara
Western Australia
Current operations
Christmas Creek
Under development
WESTERN HUB
Tom Price
NYIDINGHU
Newman
Shipping
Sales and marketing
Designed to complement our port
infrastructure, the fleet of eight
260,000 tonne capacity Fortescue
Ore Carriers deliver approximately
14 per cent of our shipping
requirements, while improving load
rates and efficiencies and reducing
operating costs. Our shipping fleet
completes our mine to market
supply chain.
Iron Bridge Magnetite
Project
The US$2.6 billion Iron Bridge
Magnetite Project is under
development and will deliver 22mtpa
of high grade 67% Fe magnetite
concentrate product, further
enhancing the range of products
available to our customers.
Iron Bridge, located 145km south
of Port Hedland and incorporating
the world class North Star and
Glacier Valley Magnetite ore bodies,
is an unincorporated joint venture
between Fortescue’s subsidiary FMG
Iron Bridge and Formosa Steel IB.
Baosteel also has an interest in the
Project, as a minority shareholder of
FMG Iron Bridge.
The innovative process design,
including the use of a dry crushing
and grinding circuit, will deliver
globally competitive capital intensity
and operating costs.
Fortescue has an integrated
operating and marketing strategy,
focused on meeting the needs of our
customers while maximising value. In
2019, we established FMG Trading,
a wholly owned Chinese sales entity
which supplies our products
directly to Chinese steel mills from
regional ports.
The introduction of portside sales
has allowed us to enhance our
service to small and medium-sized
customers through direct supply
in renminbi from regional Chinese
ports, complementing our existing
contractual seaborne arrangements.
World leading technology
Fortescue was the first company
in the world to deploy Caterpillar
(CAT) autonomous haulage on a
commercial scale when trucks fitted
with autonomous haulage system
(AHS) technology began operating
at the Solomon Hub in 2012. Today,
our AHS deployment represents
the largest fleet conversion to
autonomous haulage in the industry
and demonstrates our unique
capability to manage and operate a
multi-class truck size autonomous
haulage site.
When our Train Control Centre
opened in 2009, we were the first
operation in WA to control a railway
from outside the region. Now
known as the Fortescue Hive, the
expanded, purpose-built remote
operations facility was opened in
2020 and includes our planning,
operations and mine control teams,
together with port, rail, shipping
and marketing teams. The newly
refurbished space allows team
members across our complete
supply chain to work together,
24 hours a day, seven days a week,
to deliver improved safety, reliability,
efficiency and commercial outcomes.
The Fortescue Hive underpins
our future use of technology,
including artificial intelligence
and robotics, and will evolve
to include the generation and
integrated distribution network
for the Pilbara Energy
Connect, our hybrid solar-gas
power solution.
24 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Energy infrastructure
Exploration
International footprint
Fortescue began as an exploration
company and today our iron ore
tenements remain key to maintaining
mine life and sustaining product
quality in our core iron ore business.
The resources in the Western Hub
and Solomon Hub add high iron
content, dry, low cost tonnes to
our product suite, providing further
optionality for the business.
Recent Australian exploration
activity has been primarily focused
on early stage target generation for
copper-gold in the Paterson and
Rudall regions in Western Australia,
with additional exploration activity
underway in New South Wales and
South Australia.
We recognise that early stage
exploration can unlock significant
value and our world class exploration
capability is driving future growth
as we target global opportunities
and commodities that support
decarbonisation and electrification of
the transport sector.
Fortescue has a well-established
presence in Ecuador, where we
have concessions prospective for
copper in exploration phase covering
135,000 hectares and in Argentina
we currently hold 450,000 hectares
of tenements, prospective for
copper-gold.
We are also assessing exploration
and development opportunities in
Colombia, Chile and Peru, as well as
Portugal and Kazakhstan.
Since October 2019, Fortescue
and our partners have announced
investments in excess of
US$800 million in significant energy
infrastructure projects which will
increase our use of renewable
energy, a key contributor to our
pathway to achieve our emissions
reduction targets.
The Pilbara Energy Connect (PEC),
together with the Chichester Solar
Gas Hybrid Project, will deliver
25 to 30 per cent of our stationary
energy requirements from solar
power. The PEC leverages existing
assets and provides Fortescue with
a hybrid solar gas energy solution
that enables the delivery of stable,
low cost power and supports the
incorporation of additional large
scale renewable energy in the future.
The new infrastructure builds on
our previous energy initiatives,
including the construction of the
Fortescue River Gas Pipeline,
the conversion of the Solomon
Power Station from diesel to gas
generation, as well as a partnership
agreement with the Commonwealth
Scientific and Industrial Research
Organisation (CSIRO) to develop and
commercialise hydrogen technology.
Fortescue Metals Group Ltd Annual Report FY20 25
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New Shanghai office builds on strong
relationships with China
Minister Papalia said, “The
Western Australian Government
appreciates the relationship that it
and companies operating in Western
Australia have with China. Building
on its longstanding presence in
Shanghai, Fortescue having an
office in this world class city further
underpins and strengthens the
excellent and diverse connection
between China and the State of
Western Australia.”
Mr Luo Tiejun said, “Fortescue
is an important partner for the
Chinese steel industry and we are
looking forward to strengthening
our mutually beneficial cooperation
going forward.”
In January 2020, we opened our new
office in Shanghai, in the People’s
Republic of China.
Chief Executive Officer, Elizabeth
Gaines, and Chief Operating Officer,
Greg Lilleyman, celebrated the
official opening in Shanghai with:
• Hon. Paul Papalia CSC MLA,
Minister for Tourism, Government
of Western Australia, representing
Hon. Mark McGowan MLA,
Premier of Western Australia
• Mr Luo Tiejun, Vice Chairman,
China Iron and Steel Association,
representing Mr He Wenbo,
Executive Vice Chairman, China
Iron and Steel Association
• Dominic Trindade, Australia’s
Consul-General in Shanghai
• Shanghai government officials
• Customers and members of the
Fortescue team.
The opening of Fortescue’s new
office in Shanghai follows the
successful establishment in mid-
2019 of a wholly owned Chinese
sales entity, FMG Trading Shanghai
Co. Ltd (FMG Trading) which
supplies products directly to Chinese
customers in smaller volumes, in
renminbi from regional ports.
The new Shanghai office builds on
our presence in China and includes
the activities of FMG Trading, as well
as supporting our relationships with
existing and new Chinese customers,
partners and suppliers.
Opening the new office, Chief
Executive Officer Elizabeth Gaines
said, “It’s now been more than a
decade since our first commercial
shipment of iron ore in 2008. Over
that time Fortescue has become
a core supplier of seaborne iron
ore to China and we are proud to
contribute to the remarkable urban
development of China.
“The establishment of our new
Shanghai office expands our already
deep, multifaceted relationships
with China which extend beyond
our customer relationships to
partnerships, procurement,
investment, financing and social,
academic and policy linkages. We
look forward to continuing to build
on Fortescue’s strong engagement
with China for many years to come,”
Ms Gaines said.
26 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review AUTHOR: Andrew Forrest Elizabeth Gaines SECTION: GENERAL NEWS ARTICLE TYPE: NEWS ITEM
AUDIENCE : 135,996 PAGE: 65 PRINTED SIZE: 787.00cm² REGION: WA MARKET: Australia
ASR: AUD 13,797 WORDS: 695 ITEM ID: 1233317328
12 FEB, 2020
Let's show support for China
Chairman Dr Andrew Forrest AO and CEO Elizabeth Gaines contributed this opinion piece to The West Australian on 12 February, 2020
Page 1 of 2
West Australian, Perth
ANDREW FORREST &
ANDREW FORREST &
ELIZABETH GAINES
Let’s show support for China
Like so many global
to organisations on the
ground that are providing
shelter, masks, and medical
supplies.
epidemics before it —
Ebola, SARS or AIDS —
with the outbreak of
coronavirus we are at
risk of allowing fear to trump
empathy.
officer Brendan Murphy has
noted, Australia has been one
of the most proactive countries.
As Australia’s chief medical
That’s why Fortescue has
This is a global challenge
however, and we must take
these necessary precautions
with compassion and humanity.
While the worst news may still
be ahead of us, China will
recover and has demonstrated
its commitment to protect its
people and the citizens of the
world. This is despite the hard,
short-term impact these
measures will have on its
economy. We must appreciate
the country’s sacrifices and
stand ready to support China
however we can, for the benefit
of both our peoples.
We are living in a globally
connected world where our
health and the health of our
economy are closely linked to
other nations. Australia’s
relationship with China is
multi-layered and complex,
however as good friends,
neighbours and trading
partners, it is pretty simple —
the Chinese people deserve our
support.
Our country has endured
terrible bushfires and will take
years to recover as we rapidly
develop techniques to help
mitigate the reoccurrence of
fires and devastation of this
scale.
We have been fortunate to
receive an enormous outpouring
of love and support from around
the globe. China is now dealing
with its own critical emergency
and needs the support and
understanding of the
international community.
The most useful thing we can
Page 2 of 2
do is assist people who are
directly impacted or at
risk, including by donating
In these times of crisis, we
can lose sight of those who are
sick or have lost loved ones and
those who are helping others or
working to contain the harm of
the virus. Our thoughts and
prayers are with these people
suffering, and the many
millions of others confined to
their homes or banned from
travelling.
Our hearts also go out to all
the Chinese Australians
affected, especially with
increasing reports of this
community being the subject of
fear-driven racism within our
own borders. We must reach out
and support the members of our
Chinese community and show
that we stand with them. We call
for this compassion because we
have come to know the Chinese
people well over the past 30
years and have been regular
visitors to their country. There
are many more similarities
between Australians and our
Chinese neighbours than
differences, and while their
political system is different to
ours, as a people, they are
driven by compassion and
desire for a better future for
their communities.
West Australian, Perth
12 FEB, 2020
The level of alarm about
Let's show support for China
another sudden, potentially
deadly virus is to be expected.
As a global community, we must
contain it and prevent as many
people as possible from
becoming sick. We care about
The Chinese people will
our health, safety, and those of
rebound with the resilience they
the people we love.
have demonstrated time and again.
AUTHOR: Andrew Forrest Elizabeth Gaines SECTION: GENERAL NEWS ARTICLE TYPE: NEWS ITEM
AUDIENCE : 135,996 PAGE: 65 PRINTED SIZE: 787.00cm² REGION: WA MARKET: Australia
ASR: AUD 13,797 WORDS: 695 ITEM ID: 1233317328
Licensed by Copyright Agency. You may only copy or communicate this work with a licence.
donated thousands of face
masks to support health
workers in the immediate
response and will now provide
$1 million to Wuhan-based
customer Wuhan Iron and Steel
Corporation (WISCO) to support
the conversion of the WISCO
Sports Stadium into a 300-bed
shelter hospital to treat patients
who have been infected.
We will look for other ways to
provide meaningful help, but the
little things we can do to
support each other are just as
important.
Like going to your local
Chinese restaurant or reaching
out with a hand and a smile to
any Chinese person. It all sends
the critical signal that we stand
together.
We are confident the Chinese
people will rebound with the
resilience they have
demonstrated time and again
over thousands of years and
Fortescue will continue to
support China throughout this
hardship and beyond.
Now is the time to really show
we do stand together. That we
remember we are common and
unique, the one people on our
little planet. We are all
vulnerable and we all need each
other.
Andrew Forrest is chairman and
Elizabeth Gaines chief executive
of Fortescue Metals Group
The Chinese
people will
rebound with
the resilience
they have
demonstrated
time and again.
Illustration: Don Lindsay
Fortescue Metals Group Ltd Annual Report FY20 27
Licensed by Copyright Agency. You may only copy or communicate this work with a licence.
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
Key Performance
Indicators
Safety
2.4
Total Recordable
Injury Frequency
Rate
Production
C1 costs
178.2 mt
Shipped
US$12.94/wmt
28 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Key Performance Indicators
Safety
The health, safety and wellbeing of the Fortescue family is our number
one priority and our focus remains on ensuring everyone goes home
safely after every shift.
Each day, everyone at Fortescue is
encouraged and empowered to take
control and look out for their mates
and themselves. We are committed
to providing a safe workplace for all
our employees and contractors as
we strive to become a global leader
in safety.
Fortescue’s rolling 12 month Total
Recordable Injury Frequency Rate
(TRIFR) decreased by 14 per cent
from 2.8 at 30 June 2019 to 2.4 at
30 June 2020.
Response to COVID-19
On 30 January 2020, the World
Health Organisation (WHO)
announced that the coronavirus
(COVID-19) outbreak was a global
health emergency and later declared
it a global pandemic. Since the
outbreak began we have carefully
monitored its impact and swiftly
introduced and expanded measures
to protect the health and safety of
our team, and contribute to efforts
to mitigate the impacts of COVID-19
across our operations and the wider
community. The measures included:
• Temporary changes were made to
site operational rosters, extending
from a two week on/one week off
roster to a four week on/two week
off roster, which reduced people
movement by approximately
40 per cent.
• Additional charter flights and
bus services scheduled within
our operations to ensure physical
distances were maintained
between team members.
• Temperature checks and health
screening put in place at the Perth
Domestic Airport, site aerodromes
and Perth offices.
• Polymerase Chain Reaction (PCR)
testing implemented, at least
once, for all Fly-in Fly-out (FIFO)
team members under the West
12-month rolling TRIFR, per million hours worked
4.3
3.7
2.9
2.8
2.4
FY16
FY17
FY18
FY19
FY20
Safety culture
During FY20, there were no fatalities
and we focused on reducing the
risk of fatalities and serious injuries
through exposure reduction activities
by 15 per cent. In FY20 a 17.8 per cent
risk reduction was achieved.
We are committed to continuing
to improve our safety performance
across the following areas:
• Strengthening safety leadership
through specific action plans to
improve the results of the company
wide annual Safety Excellence and
Culture Survey
• Engaging our workforce in
improving safety through initiatives
such as the 'Take Control' program
and sustained risk reduction
activities and projects
• Engaging with our contracting
partners to ensure compliance
with our safety standards and a
safe workplace
• Continuing to reduce workplace
exposures through safety
improvement opportunities.
Australian DETECT FIFO program
and the State Government’s
broader DETECT program.
• Initiatives at our village facilities
were introduced, including
changes to food service, the
closure of wet mess (licensed)
areas, gyms and swimming
pool facilities and additional
cleaning services.
• Office-based team members and
non-critical site-based employees
worked from home where possible.
Our Incident Management Team
(IMT) meet regularly to review our
operations and the latest advice
from the Commonwealth and State
governments. As the physical
distancing guidelines changed,
we responded to each additional
measure quickly, and regularly
communicated with our teams on all
matters related to the mining sector,
as well as the importance of
physical distancing and stringent
hygiene practices.
Our focus on the health and safety
of our workforce extends to their
mental health and wellbeing. All
team members have access to the
Fortescue Chaplains and Employee
Assistance Program 24 hours a day,
seven days a week.
Fortescue Metals Group Ltd Annual Report FY20 29
Ore Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate DirectoryOverview | Operating and financial review
Key Performance Indicators
Production
Optimised product mix and record shipments in FY20.
Production and shipments on a wet metric tonne (wmt) basis for the year are outlined below.
12 months to 30 June
Overburden removed
Ore mined
Ore processed
Shipments
Ore sold1
2020
million wmt
318.9
204.3
176.3
178.2
177.2
2019
million wmt
303.7
206.7
176.9
167.7
167.5
Movement
%
5
-1
-1
6
6
Volume references are based on wet metric tonnes. Product is shipped with about eight to nine per cent moisture.
1Our wholly owned trading entity, FMG Trading, maintains some inventory at Chinese ports and ore sold versus shipments reflects the timing differences that
may occur between shipments and sales to external customers.
Mining, million wmt
Processing, million wmt
Shipments, million wmt
181
198
185
207
204
168
172
166
177
176
169
170
170
168
178
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
FY20 Product mix
FY19 Product mix
7%
10%
9%
41%
West Pilbara Fines
Kings Fines
Fortescue Blend
Fortescue Lump
Super Special Fines
1%
5%
5%
9%
33%
37%
43%
West Pilbara Fines
Kings Fines
Fortescue Blend
Fortescue Lump
Super Special Fines
Other
30 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Key Performance Indicators
Fortescue, together with our
industry peers, was in a privileged
position to continue to operate
throughout the COVID-19 pandemic,
as the Commonwealth and State
governments acknowledged
the mining sector’s significant
contribution as a provider of
essential services. Impact on our
production and shipping schedule
to China was largely mitigated,
demonstrating to our customers that
we are a reliable and secure supplier
of iron ore.
Our focus in FY20 was to leverage
the capability and flexibility in our
value chain to achieve improved
sales volumes, while increasing the
proportion of higher value products,
to maximise margins and capitalise
on market demand.
Combined with optimised
inventory levels, this resulted in the
outperformance of FY20 targets
across all metrics and supported
the delivery of record shipments of
178.2mt. This represents a six per
cent increase on 2019 shipments of
167.7mt and is five per cent above
the annual shipment rate of
around 170mt achieved in prior
financial years.
Production of our 60.1% Fe West
Pilbara Fines product, which
commenced in December 2018,
doubled in FY20 with 17.9mt shipped
(FY19: 9.0mt). West Pilbara Fines
continued to be sourced from a
blend of ore from the western pits of
Cloudbreak and the Firetail mine at
the Solomon Hub, with production
targeting up to 40mt per annum once
Eliwana is fully operational. Strip
ratio remained consistent in FY20 at
1.6x (FY19: 1.5x) given our optimised
inventory levels and mine planning.
Continued investment in sustaining
capital expenditure on the OPFs
resulted in a decrease in our reliance
on ancillary crushing, with a
45 per cent reduction in the tonnes
processed through ancillary crushing
equipment from 13.9mt in FY19 to
7.6mt in the current year. Year on year
total ore processed decreased by
one per cent.
We commenced our port towage
services in the first half of FY20
utilising a fleet of nine purpose-built
tugs, providing safe and reliable
towage services within the port of
Port Hedland for all shipments and
further maximising the efficiency of
our operations. A total of 678 vessel
movements were completed during
FY20 for both third party vessels and
our own Fortescue Ore Carriers.
Total shipments in FY20 included
7.5mt of product shipped onshore
to China for subsequent sale by our
wholly owned Chinese sales entity,
FMG Trading. This entity allows
us to improve our product offering
through the direct supply of products
to Chinese customers in smaller
volumes, sold in renminbi directly
from regional ports. Total sales for
FY20 included 6.5mt sold by
FMG Trading, with the difference
between ore shipped and sold due
to the fact that FMG Trading
maintains some inventory at Chinese
ports and timing differences may
occur between shipments and sales
to external customers.
Fortescue Metals Group Ltd Annual Report FY20 31
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Key Performance Indicators
Costs
Focus on innovation and technology.
During the year, we continued to
deliver on our integrated operations
and marketing strategy while
leveraging the capability of our
value chain to achieve record sales
volumes. Importantly, we have
remained a low cost producer of
seaborne iron ore.
Strategic initiatives delivered in
FY20 include:
• Autonomous haul fleet conversion
was completed at Christmas Creek
and continued at Cloudbreak
during FY20 with a total of
170 trucks operating autonomously
across all operations at 30 June
2020. Our AHS deployment
represents the largest fleet
conversion to autonomous haulage
in the industry and has increased
productivity, while reducing overall
mining operating costs and diesel
consumption.
• Phase two of the Cloudbreak
relocatable conveyors project
commenced construction during
the year and was completed in
early July 2020. The conveyors
now cover 10km, extended
from the initial 5km length. By
connecting the western pits to
the OPF, we have realised the
benefits of reduced haul truck
requirements, operating costs and
diesel consumption increasing
overall productivity and mitigating
cost increases due to natural mine
expansion aligned with the life of
mine plan.
• Sales of West Pilbara Fines,
produced from a blend of
Cloudbreak and Firetail ore
doubled from 9mt in FY19 to 17.9mt
in FY20.
• Our expanded integrated
operations centre, the Fortescue
Hive, was officially launched in
June 2020. The purpose-built
remote operations facility will
deliver improved safety, reliability,
efficiency and commercial
outcomes.
• Ongoing business improvement
processes focused on industry
benchmarking and engaging
our people to drive productivity
improvements across the supply
chain through data driven informed
decision making.
Our response to COVID-19 also
included extending support to our
suppliers through the provision
of 14 day payment terms to all
small businesses and by working
collaboratively with all suppliers to
address any cashflow challenges.
The impact of these internal initiatives
has been further enhanced by a more
favourable AUD/USD exchange rate
and the reclassification of operating
lease costs from C1 to depreciation
and interest expense on adoption of
AASB 16 Leases.
As we were able to continue to
operate in Australia during the peak
of COVID-19 restrictions, we did not
seek any financial support or
assistance from government, lenders,
landlords or others. COVID-19 related
costs included labour,
accommodation and other measures,
such as increased hygiene protocols,
and totalled US$0.22/wmt for FY20.
FY20 demonstrated our ability to
consistently deliver sustainable cost
improvements through a continued
focus on innovation, investment in
technology and realising the benefits
from capital expenditure reinvested
into our operations. C1 costs for the
year reduced to US$12.94/wmt, a
one per cent decrease over FY19,
maintaining our industry leading
position as a low cost supplier of
seaborne iron ore into China.
In addition to the key strategic
initiatives mentioned above,
during FY20 we continued to assess
and develop low cost growth
options through exploration
activities in Australia and overseas.
Exploration drilling activities were
suspended in March 2020 in Ecuador
and Argentina due to COVID-19.
C1 cost, US$/wmt
15.43
12.82
12.36
13.11
12.94
FY16
FY17
FY18
FY19
FY20
The chart above illustrates the success of our cost reduction and
efficiency initiatives over the past five years, reflecting sustainable,
long-term management of operating costs.
32 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Financial performance
Highlights
Our financial results for the year demonstrate the continued ability of our
operations to generate strong cash flows through the successful execution
of our integrated operations and marketing strategy. Leveraging the
capability in our value chain resulted in record shipments, sustained low
cost performance and strong operating margins.
During the year ended 30 June 2020, we delivered a record net profit of US$4,735 million and earnings per share of
153.9 US cents, based on strong customer demand, record shipments and an optimised product mix to deliver
higher margins.
Key metrics
Revenue, US$ millions
Underlying EBITDA1, US$ millions
Net profit after tax, US$ millions
Earnings per share, US cents
Earnings per share, AUD cents
Average realised price, US$/dmt
C1 costs, US$/wmt
Underlying EBITDA margin, US$/dmt
Key ratios
Underlying EBITDA margin, %
Return on equity, %
2020
12,820
8,375
4,735
153.9
229.2
79
12.94
52
65
40
2019
9,965
6,047
3,187
103.1
144.1
65
13.11
39
61
31
1 Refer to page 80 for the reconciliation of Underlying EBITDA to the financial metrics reported in the financial statements under Australian Accounting
Standards.
Fortescue Metals Group Ltd Annual Report FY20 33
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Financial Performance
Revenue
Total iron ore revenue, US$ millions
Total shipping revenue, US$ millions
Other revenue, US$ millions
Operating sales revenue, US$ millions
Shipments, million wmt
Ore sold, wmt2
Average 62% Fe CFR Platts index, US$/dmt
Average realised price, US$/dmt
Note1
3
3
3
2020
US$m
11,581
1,196
43
12,820
178
177
93
79
2019
US$m
8,786
1,177
2
9,965
168
168
80
65
1 Notes to the accompanying financial statements.
2 Our wholly owned trading entity, FMG Trading, maintains some inventory at Chinese ports and ore sold versus shipments reflects the timing differences
that may occur between shipments and sales to external customers.
The Platts 62% CFR index averaged US$93/dmt in FY20 which reflects an increase of 16 per cent over the prior year
(FY19: US$80/dmt) with Fortescue’s realised price increasing by 21 per cent over the same period (from US$65/dmt
in FY19 to US$79/dmt in FY20). The factors which have influenced our realised price improvement include:
• Successful integrated operations and marketing strategy increasing the volume of higher margin products shipped,
including West Pilbara Fines (10 per cent of volume FY20 compared to five per cent of volume FY19)
• Continued strength in Chinese steel production, growing by 1.4 per cent in the first half of calendar year 2020
compared to the prior year
• Increasing demand for Fortescue’s products from customers in China
• Sustained strength in the benchmark iron ore price following supply disruptions in Brazil and Australia leading to
significant drawdowns in iron ore inventories at Chinese ports.
Production costs
The reconciliation of C1 costs and total delivered costs to customers to the financial metrics reported in the financial
statements under Australian Accounting Standards is set out below.
Mining and processing costs, US$ millions
Rail costs, US$ millions
Port costs, US$ millions
C1 costs, US$ millions
Ore sold, million wmt
C1 costs, US$/wmt
Shipping costs, US$ millions
Government royalty2, US$ millions
Administration expenses, US$ millions
Shipping, royalty and administration, US$ millions
Ore sold, million wmt
Shipping, royalty and administration, US$/wmt
Total delivered cost, US$/wmt
Total delivered cost, US$/dmt
Note1
5
5
5
5
5
6
2020
1,938
186
169
2,293
177
12.94
1,190
845
114
2,149
177
12
25
27
2019
1,829
190
176
2,195
168
13.11
1,082
651
95
1,828
168
11
24
26
1 Notes to the accompanying financial statements.
2 Fortescue pays 7.5 per cent Western Australian State Government royalty for the majority of its iron ore products, with a concession rate of five per cent
applicable to beneficiated fines.
Key factors contributing to our FY20 operating cost performance are discussed on page 32.
34 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review
Financial Performance
Underlying EBITDA
Underlying EBITDA, defined as earnings before interest, tax, depreciation and amortisation, exploration, development
and other expenses, is used as a key measure of our financial performance. During the year, our operations generated
Underlying EBITDA of US$8,375 million (FY19: US$6,047 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
Net foreign exchange gain
Administration expenses
Other income/(expenses)
Underlying EBITDA
Finance income
Finance expenses
Depreciation and amortisation
Exploration, development and other expenses
Net profit before tax
Income tax expense
Net profit after tax
Cost of early debt repayment after tax
Underlying net profit after tax
1 Refer to notes to the accompanying financial statements.
Key factors contributing to
the 39 per cent increase in
Underlying EBITDA from
the prior period were both
market and volume driven,
with higher prices realised
for Fortescue products
averaging US$79/dmt in
FY20 (FY19: US$65/dmt).
392
6,047
Note1
3
5
4
6
4, 6
7
7
5, 6
6
14
2020
US$m
12,820
(4,359)
52
(114)
(24)
8,375
50
(272)
(1,400)
(63)
6,690
(1,955)
4,735
11
4,746
2019
US$m
9,965
(3,931)
110
(95)
(2)
6,047
26
(279)
(1,196)
(29)
4,569
(1,382)
3,187
-
3,187
Underlying EBITDA (US$m)
2,233
(11)
(194)
(90)
(2)
8,375
FY19
Volume
Price and
product
mix
Costs
Royalty
Foreign
exchange
Other
FY20
Fortescue Metals Group Ltd Annual Report FY20 35
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Financial Performance
Underlying EBITDA continued
The Underlying EBITDA of US$8,375m for FY20 represents an Underlying EBITDA margin of US$52/dmt or
65 per cent. As illustrated in the chart below, Fortescue has been maintaining EBITDA margins through market
cycles, demonstrating our ongoing focus on productivity, efficiency and innovation.
US$/dmt
100
80
60
40
20
21
FY16
30
FY17
20
FY18
39
FY19
52
FY20
Underlying EBITDA, US$/dmt
Average Underlying EBITDA, US$/dmt
Average Fortescue realised price, US$/dmt
62% Platts CFR Index, US$/dmt
Fortescue realised price, US$/dmt
Non-operating events
Key non-operating matters forming part of the financial result include:
• Finance expenses of US$272 million include interest on borrowings and lease liabilities of US$209 million which
decreased by four per cent compared to the prior period, as a result of early debt repayments and refinancing
completed in the first half of FY20, lowering Fortescue’s cost of capital. This has been partially offset by additional
interest on lease liabilities due to the transition to AASB 16 Leases.
• Depreciation and amortisation expense of US$1,400 million (FY19: US$1,196 million) increased by 17 per cent
compared to the prior period due to the combined impact of higher tonnes processed through the OPFs and railed,
as well as the implementation of AASB 16 Leases which replaced operating lease expenses in the profit and loss
with depreciation expense on ‘right of use’ assets and interest expense on lease liabilities.
• Income tax expense for the year was US$1,955 million at an effective income tax rate of 29.2 per cent
(FY19: US$1,382 million, at an effective rate of 30.3 per cent).
36 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Financial position
Highlights
Disciplined capital management strategy enhances strong liquidity position.
Fortescue’s debt increased to US$5,113 million as at 30 June 2020 with a gearing ratio of 28 per cent
(FY19: US$3,952 million, gearing ratio of 27 per cent), inclusive of leases of US$879 million (FY19: US$573 million)
reflecting the draw down of the Revolving Credit Facility (RCF) of US$1,025 million and the impact of transition to the
new lease accounting standard, AASB 16 Leases.
Key metrics
Borrowings
Finance lease liabilities
Total debt
Cash and cash equivalents
Net debt
Equity
Key ratios
Gearing, %
Net gearing, %
Debt to EBITDA (x)
Net debt to EBITDA (x)
1 Notes to the accompanying financial statements.
Note1
9(a)
9(a)
9(b)
2020
US$m
4,234
879
5,113
4,855
258
13,244
28
2
0.61x
0.03x
2019
US$m
3,379
573
3,952
1,874
2,078
10,601
27
16
0.65x
0.34x
Fortescue Metals Group Ltd Annual Report FY20 37
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Financial Position
Debt and liquidity
Fortescue’s balance sheet is structured on low cost, investment grade terms with optimal gearing and
liquidity levels to support ongoing operations. The debt capital structure allows optionality and flexibility to
fund future growth.
During September 2019, we successfully completed a US$600 million offering of Senior Unsecured Notes, the
proceeds of which were applied to the partial repayment of US$600 million of the outstanding US$1,386 million
2022 Syndicated Term Loan Facility (Term Loan). A further US$186 million of the Term Loan was repaid from
available cash, and negotiations were successfully concluded with existing Term Loan lenders to extend the
repayment date of the balance of the Term Loan of US$600 million to 2025 based on the same terms
and conditions.
Consistent with our disciplined approach to capital management and to enhance our strong liquidity position at a
time of global uncertainty, we proactively drew down on our US$1,025 million RCF in April 2020. Before the end of
the financial year, we also successfully concluded negotiations to extend the maturity date of the RCF to July 2023.
Our debt maturity profile at 30 June 2020, after the repayment and refinancing of the Term Loan and draw down
and extension of the RCF, is set out below. No financial maintenance covenants are contained within Fortescue’s
debt instruments.
Debt maturity profile (excluding leases), US$m
750
500 1,025 750
600
600
CY2020
CY2021
CY2022
CY2023
CY2024
CY2025
CY2026
CY2027
CY2028
Senior unsecured notes
Term loan
RCF
At 30 June 2020, Fortescue had US$4,855 million of liquidity being cash on hand. Total debt of US$5,113 million,
inclusive of US$879 million of leases, represents a gearing ratio of 28 per cent. Due to market strength and
confidence in the outlook, Fortescue elected to repay the full amount drawn on the RCF of US$1,025 million plus
accrued interest on 29 July 2020. The undrawn facility remains an available source of liquidity.
Cash generated from operations
Fortescue continued to generate strong underlying cash flows from operations during the year with cash on hand at
30 June 2020 of US$4,855 million. Cash generated from operations was 66 per cent higher compared to prior year,
primarily as a result of a 38 per cent increase in Underlying EBITDA.
Key metrics
Cash generated from operations
Cash flows from operating activities
Capital expenditure (including joint operations)
Free cash flow
2020
US$m
8,287
6,415
(1,966)
4,449
2019
US$m
4,979
4,373
(1,045)
3,328
Net cash flows from operating activities include net interest payments of US$235 million (FY19: US$254 million) and
income tax paid of US$1,685 million (FY19: US$376 million).
Capital expenditure for the year was US$1,966 million (FY19: US$1,045 million) and includes expenditure incurred on
our Eliwana Mine and Rail and Iron Bridge Magnetite growth projects, which were a significant focus of FY20.
38 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review Financial Position
Dividends and shareholder returns
In October 2019, we paid a fully franked final dividend of 24 AUD cents per share for the financial year ended
30 June 2019.
In FY20, we generated earnings of 153.9 US cents per share (FY19: 103.1 US cents per share), with return on equity
of 40 per cent (FY19: 31 per cent).
Underlying net profit after tax1, US$ millions
Basic earnings per share, US cents per share
Basic earnings per share, AUD cents per share2
Return on equity, %
Interim and special dividend, AUD cents per share
Final and accelerated final dividend, AUD cents per share
Total dividend, AUD cents per share
Dividend payout ratio, %
2020
4,746
153.9
229.2
40
76
100
176
77
2019
3,187
103.1
144.1
31
30
84
114
78
1 Underlying net profit after tax is calculated as statutory net profit after tax adjusted for the cost of early debt repayment.
2 Australian dollar earnings per share is calculated by translating the US dollar earnings per share at the average exchange rate for the period of 0.6715
AUD/USD (FY19: 0.7152 AUD/USD).
Our full year dividend payout ratio of 77 per cent of net profit after tax was in accordance with our policy of a payout
ratio of between 50 and 80 per cent. Special dividends declared and paid in FY19 were 'special' in terms of timing,
noting that our total FY19 dividends declared of A$1.14 per share represented a dividend payout ratio of 78 per cent of
full year net profit after tax.
The success of our integrated operations and marketing strategy, enhanced product mix and record shipped volumes
as well as the strength of demand for iron ore, have all combined to generate strong cash flows from operations.
Fortescue’s track record of delivering returns to shareholders reflects our disciplined approach to capital allocation.
Dividends declared and payout ratios
A$ /share
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
21%
17%
16%
0.07
0.08
0.10
21%
0.20
52%
0.45
38%
36%
0.15
0.05
Payout ratio
62%
78%
77%
1.14
65%
1.00
0.23
0.76
80%
60%
40%
20%
0%
FY12
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Dividend, A$/share - paid
Divedend, A$/share - declared
Payout ratio - statutory NPAT
Fortescue Metals Group Ltd Annual Report FY20 39
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Capital expenditure
Total capital expenditure payments incurred in FY20 of US$2.0 billion with
investment in growth projects achieving key milestones.
Fortescue’s payments for capital expenditure in FY20 of US$1,966 million (FY19: US$1,045 million) included:
• Sustaining capital of US$690 million (FY19: US$612 million)
• Development capital, including Queens Hub, WHIMS plants, autonomous haulage and relocatable conveyors of
US$389 million (FY19: US$221 million which included Fortescue ore carriers and towage)
• Eliwana Mine and Rail, Iron Bridge Magnetite and Pilbara Energy Connect growth projects US$771 million
(FY19: US$107 million)
• Exploration and studies expenditure of US$116 million (FY19: US$105 million).
Fortescue’s investment in its major growth projects intensified in FY20 as key milestones were achieved, including:
• Tracklaying on the first stage of the 143km railway and installation of over half of the OPF structural steel for
the Eliwana Mine and Rail Project. At year end, the construction workforce was at peak levels with earthworks,
structural steel erection and process equipment installation advancing rapidly, and pre-strip mining planned to
commence in Q1 FY21.
• Bulk earthworks on the Iron Bridge Magnetite project were over 50 per cent complete at year end and concrete
works commenced during July 2020 as the project progressed to the construction phase. First earthworks on the
OPF, completion of the mine access road and commencement of the permanent village installation took place in
FY20. The project is progressing on schedule and budget with first concentrate production planned in the first half
of calendar year 2022.
• The Pilbara Energy Connect (PEC) project totalling US$700 million commenced engineering, procurement and site
establishment works for the transmission line and thermal generation. Design and procurement of the solar and
battery energy storage components will continue in FY21.
Actual and forecast capital expenditure on an incurred basis for each of Fortescue’s major growth projects is shown
in the charts below:
Eliwana Mine and
Rail Project, US$m
Iron Bridge
Magnetite Project, US$m
Pilbara Energy
Connect, US$m
1,050-1,250
600-650
619
500-700
300-400
124
243
50-100
17
250-350
50-100
FY19
FY20
FY21
FY20
FY21
FY22
FY23
FY20
FY21
FY22
FY23
40 Fortescue Metals Group Ltd Annual Report FY20
Overview | Operating and financial review 03
Ore Reserves
and Mineral
Resources
Fortescue Metals Group Ltd Annual Report FY20 41
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Ore Reserves and Mineral Resources
Reporting is grouped by operating and development properties and
includes both hematite and magnetite deposits.
Hematite Ore Reserves total 2.25 billion
dry tonnes (bt) at an average iron (Fe)
grade of 57.5% on a post-processed
product basis. Combined Hematite
Mineral Resources total 13.89bt at an
average Fe grade of 56.7%
Magnetite Ore Reserves total 716
million dry tonnes (mt) at an average
mass recovery of 29.4% for a 67%
Fe grade product. Magnetite Mineral
Resources total 5.5bt at an average
mass recovery of 22.7%.
Operating property Ore Reserves
and Mineral Resources have all
been reported and classified in
accordance with the guidelines of
the 2012 edition of the Australasian
Code for Reporting of Exploration
Results, Mineral Resources and Ore
Reserves (the 2012 JORC Code).
Accordingly, the information in
these sections should be read in
conjunction with the respective
explanatory Mineral Resource and
Ore Reserve information (Fortescue
ASX release dated 21 August 2020).
Development property Mineral
Resources have been reported
and classified in accordance
with the 2012 JORC Code. The
development property Mineral
Resources are detailed in Fortescue
ASX releases dated 21 August 2020,
23 August 2019, 17 August 2018,
18 August 2017, 8 January 2015
and 20 May 2014, which include
supporting technical data.
Magnetite Mineral Resources have
been reported in accordance with
the 2012 JORC Code. The Mineral
Resources quoted in this report
should be read in conjunction with
the supporting technical information
contained in the corresponding ASX
release dated 2 April 2019.
The Ore Reserve 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 part of
Fortescue’s risk management
process.
In addition to routine internal audits
and peer review, auditing of the
Mineral Resource and Ore Reserve
estimates is addressed as a
subset of the annual internal audit
plan approved by the Board Audit
and Risk Management Committee
(ARMC). Specific auditing of the Ore
Reserve process was performed
in 2011, 2013, 2015, 2016, 2017 and
2019. These audits were managed
by Fortescue’s internal audit service
provider with external technical
subject experts. The 2015, 2016, 2017
and 2019 Ore Reserves audits were
carried out by independent external
technical consultants.
The ARMC also monitors the Ore
Reserve and Mineral Resource
status and recommends it to the
Board for approval. The annual
Ore Reserve and Mineral Resource
updates are 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.
Tonnage and quality information
contained in the following tables
have been rounded and as a result
the figures may not add up to the
totals quoted.
Ore Reserves Operating
Properties – Hematite
The combined Chichester, Solomon
and Eliwana Hematite Ore Reserves
for 2020 are estimated to total
2,247mt at an average Fe grade
of 57.5%.
The Ore Reserve is quoted as at
30 June 2020 and is inclusive of ore
and product stockpiles at mines.
Product stockpiles at port have been
excluded from contributing to Ore
42 Fortescue Metals Group Ltd Annual Report FY20
Reserves. The proportion of higher
confidence Proved Ore Reserve has
increased to 826mt (from 816mt in
2019) as a result of ongoing infill
drilling at the Solomon, Chichester
and Eliwana deposits.
The Chichester Hub (Cloudbreak
and Christmas Creek deposits)
contains 1,404mt at an average Fe
grade of 57.1%, a net increase of
86mt due to the re-optimisation
of pit designs and additional
infill drilling (+ve), offset by more
conservative metallurgical and
reconciliation factors (-ve). Proved
Ore Reserve constitutes 41 per cent
of the Chichester Ore Reserve, a
slight decrease from 2019. 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 634mt at an average
Fe grade of 57.6%, a decrease of
133mt mainly due to pit design
adjustments for the Queens deposit
(-ve), reconciliation factors (-ve)
and updated metallurgical test work
(-ve), offset slightly by additional
infill drilling (+ve). Proved Ore
Reserves comprise 16 per cent
of the tonnage in the total
Solomon Reserve.
The Ore Reserve for the Eliwana
deposit is estimated to be 209mt
at an average Fe grade of 60.1%.
The estimate is 7mt higher than
previous reporting due to pit-design
modifications (+ve) and an updated
geological model (+ve). Proved Ore
Reserves comprise 69 per cent of
the tonnage in the total Eliwana Ore
Reserve, an increase of two per cent
compared to previous reporting.
Ore Reserves and Mineral Resources Proved Ore Reserve
has increased to
826mt at the Solomon,
Chichester and
Eliwana deposits.
The 2020 Hematite Ore Reserve
estimates were subject to a
comprehensive review and update
addressing:
• Ore depletion as a result of sales
(decrease)
• Revisions of ore loss and dilution
factors based on 12 months of
operational history at all mines
(reduced dilution/tonnage
decrease at Firetail and Queens)
• Revisions to the processing
response through all OPFs based
on updated metallurgical test work
and operational history (minor)
• Revisions to the Christmas
Creek metallurgical factors to
incorporate plant reconfiguration
(increase)
• Revisions to the Queens and
Firetail pit geometries and
input Mineral Resource models
(decrease)
• Updated metallurgical test work
• Revisions to the Eliwana input
to the Kings and Queens deposits
(decrease)
Mineral Resource models and pit
geometries (increase)
• Re-optimisation of mine
geometries to maximise the
benefit of new additions to the
Mineral Resource base
• Revisions to the Cloudbreak input
Mineral Resource models and pit
geometries (increase)
• Revisions to the Christmas Creek
input Mineral Resource models
and pit geometries (increase)
• A revised life of mine plan that
addresses the listed items and
incorporates the latest information
on long-term product strategy,
including the West Pilbara Fines
60.1% Fe product.
Fortescue Metals Group Ltd Annual Report FY20 43
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Hematite Ore Reserves – as at 30 June 2020
30 June 2020
30 June 2019
Product
tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
Product
tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
Cloudbreak
Proved
Probable
Total
266
294
560
Christmas Creek
Proved
Probable
Total
315
528
843
57.2
57.2
57.2
56.9
57.0
57.0
Sub-total Chichester Hub
Proved
Probable
581
822
Total
1,404
Firetail
Proved
Probable
Total
2
82
84
Kings and Queens
Proved
Probable
Total
99
451
550
57.1
57.1
57.1
59.3
59.9
59.9
57.3
57.3
57.3
Sub-total Solomon Hub
Proved
Probable
Total
Eliwana
Proved
Probable
Total
101
533
634
143
66
209
57.3
57.7
57.6
60.6
58.9
60.1
Total Hematite Ore Reserves
Proved
826
Probable
1,421
Total
2,247
57.7
57.4
57.5
Notes in reference to table
5.12
5.47
5.30
6.01
5.78
5.87
5.60
5.67
5.64
5.77
5.22
5.23
6.22
6.20
6.20
6.21
6.04
6.07
4.55
5.00
4.69
5.49
5.78
5.67
2.70
2.65
2.67
2.63
3.12
2.93
2.66
2.95
2.83
2.96
2.25
2.27
2.88
2.38
2.47
2.88
2.36
2.44
2.47
2.61
2.52
2.66
2.71
2.69
0.055
0.059
0.057
0.045
0.050
0.048
0.050
0.053
0.052
0.116
0.110
0.111
0.075
0.070
0.071
8.56
7.93
8.23
7.81
7.70
7.74
8.15
7.78
7.94
5.81
6.56
6.54
9.04
9.53
9.44
0.076
0.076
8.97
9.07
0.076
9.05
0.137
0.102
0.126
0.068
0.064
0.066
5.52
7.09
6.02
7.80
8.23
8.07
231
255
486
340
492
832
570
748
1,318
8
118
126
102
539
641
110
657
768
136
66
202
816
1,471
2,288
57.6
57.4
57.5
56.9
57.5
57.3
57.2
57.5
57.4
59.5
59.1
59.1
56.0
56.9
56.8
56.3
57.3
57.2
60.8
58.7
60.1
57.7
57.5
57.5
5.29
5.82
5.57
6.07
5.18
5.54
5.75
5.40
5.55
5.69
6.02
6.00
6.29
6.68
6.62
6.24
6.56
6.52
4.39
5.28
4.68
5.59
5.91
5.80
2.69
2.67
0.055
0.063
2.68
0.059
2.75
2.96
0.048
0.054
2.88
0.052
2.73
2.86
0.051
0.057
2.80
0.055
8.27
7.67
7.96
7.59
7.61
7.60
7.86
7.63
7.73
6.07
6.61
6.57
2.58
2.24
2.26
2.72
2.69
2.70
2.71
2.61
0.115
0.112
0.113
0.078
10.54
0.070
0.071
8.79
9.07
0.080
10.22
0.077
8.40
8.66
2.63
0.078
2.41
2.64
2.49
2.67
2.74
2.72
0.137
0.096
5.41
7.10
0.124
5.96
0.069
0.068
0.068
7.77
7.95
7.89
• All Ore Reserve estimates are quoted on a dry product, post-processed basis.
• The diluted mining models used to report the 2020 Ore Reserves are based on regional Mineral Resource models completed in 2016 for Christmas
Creek, 2016 for Cloudbreak, 2018 for Firetail, 2019 for Queens, 2017 for Kings, 2019 for Kutayi and 2019 for Eliwana. The regional models for the operating
sites are updated for local pit areas as infill drilling is completed, with updates included through to 2019.
• Diluted mining models are validated by reconciliation against historical production.
• Proved Ore Reserves are inclusive of ore and product stockpiles at the mines which total approximately 33.6mt of dry, post-processed product.
• The Chichester Ore Reserve is inclusive of the Cloudbreak, Christmas Creek and Kutayi BID deposits. Selected Christmas Creek Ore Reserves will be
directed to the Cloudbreak OPF to optimise upgrade performance and increase Cloudbreak and Christmas Creek OPF utilisation.
• Tonnage figures have been rounded and may not add up to the totals quoted.
44 Fortescue Metals Group Ltd Annual Report FY20
Ore Reserves and Mineral Resources
Ore Reserves – Magnetite
The 2020 Ore Reserves for
Magnetite are from the Iron Bridge
Magnetite Project. Ore Reserves for
the project total 716mt at an average
mass recovery of 29.4% for a 67.0%
Fe grade product. The Ore Reserves
are quoted as at 30 June 2020, on
a dry in-situ tonnes basis prior to
processing.
The Mineral Resource model for Iron
Bridge was developed by Snowden
Mining Industry Consultants in
conjunction with Fortescue’s internal
technical team during February and
March 2019.
The Ore Reserves estimate was
developed in March 2019 by the
Iron Bridge technical team on the
basis of the 2019 Mineral Resource
model using detailed information
on mining, geotechnical and
metallurgical processing parameters
and cost assumptions, as used in the
2019 Iron Bridge Feasibility study.
The Ore Reserves have been
estimated from Measured and
Indicated Mineral Resources from
within the North Star, Eastern
Limb and Glacier Valley mining
areas. All Magnetite Ore Reserves
are classified as Probable Ore
Reserves due to the lack of full
scale production history as no sales
or production have occurred for
magnetite as at 30 June 2020.
Magnetite Ore Reserves – as at 30 June 2020
30 June 2020
30 June 2019
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 and Eastern Limb
Proved
Probable
Total
-
595
595
Glacier Valley
Proved
Probable
Total
West Star
Proved
Probable
Total
-
122
122
-
-
-
-
29.7
29.7
-
26.2
26.2
-
-
-
-
67.0
67.0
-
67.0
67.0
-
-
-
-
5.62
5.62
-
5.62
5.62
-
-
-
-
0.29
0.29
-
0.29
0.29
-
-
-
-
595
595
-
122
122
-
-
-
-
29.7
29.7
-
28.2
28.2
-
-
-
-
67.0
67.0
-
67.0
67.0
-
-
-
-
5.62
5.62
-
5.62
5.62
-
-
-
-
0.29
0.29
-
0.29
0.29
-
-
-
Total Magnetite Ore Reserves
Proved
Probable
Total
-
716
716
-
29.4
29.4
-
67.0
67.0
-
5.62
5.62
-
0.29
0.29
-
716
716
-
29.4
29.4
-
67.0
67.0
-
5.62
5.62
-
0.29
0.29
Notes in reference to table
• As per the Iron Bridge Project agreements, Fortescue owns 60.72% of the reported Total Magnetite Ore Reserve estimate.
• Magnetite Ore Reserves are derived from Measured and Indicated Mineral Resources reported within a defined pit design.
• Magnetite Ore Reserves are based on Mass Recovery expressed as a 17 per cent Davis Tube Recovery (DTR) cut-off.
• Magnetite Ore Reserves are reported on an in-situ dry-tonnage basis.
• Tonnage information has been rounded and as a result the figures may not add up to the totals quoted.
Mineral Resources Operating Properties – Hematite
Mineral Resources for the Operating
Properties, including the Chichester
and Solomon Hubs along with
Eliwana, are stated on a dry
in-situ tonnage basis. The Mineral
Resources, including stockpiles, are
quoted inclusive of Ore Reserves.
decrease of 343mt compared to the
prior year. This was accompanied
by an increase in the proportion of
higher confidence Measured and
Indicated Mineral Resources from
69 per cent to 70 per cent.
As at 30 June 2020, the total Mineral
Resource for the Chichester and
Solomon Hubs and Eliwana is
estimated to be 5,832mt at an
average Fe grade of 56.2%, a
The total Chichester Hub Mineral
Resource is estimated to be 2,785mt
at an average Fe grade of 56.2%,
with 80 per cent of the tonnage in
the Measured and Indicated Mineral
Resource categories.
The total Solomon Hub Mineral
Resource is estimated to be 2,121mt
at an average Fe grade of 55.2%,
with 70 per cent of the tonnage in
the Measured and Indicated Mineral
Resource categories.
The total Eliwana Mineral Resource is
estimated to be 926mt at an average
Fe grade of 58.6%, with 38 per cent
of the tonnage in the Measured
and Indicated Mineral Resource
categories.
Fortescue Metals Group Ltd Annual Report FY20 45
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Hematite Mineral Resources (Operating Properties) – as at 30 June 2020
30 June 2020
30 June 2019
In-situ
tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
In-situ
tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
Cloudbreak
Measured
Indicated
Inferred
Total
419
401
117
936
Christmas Creek
Measured
Indicated
Inferred
480
922
447
Total
1,849
56.6
56.2
56.4
56.4
56.7
56.1
55.6
56.1
Sub-total Chichester Hub
Measured
898
Indicated
1,323
Inferred
564
56.7
56.1
55.8
Total
2,785
56.2
Firetail
Measured
Indicated
Inferred
Total
3
166
102
271
Kings and Queens
Measured
Indicated
Inferred
204
1,111
535
Total
1,851
57.1
57.9
56.1
57.2
55.3
55.0
54.6
54.9
Sub-total Solomon Hub
Measured
208
Indicated
1,277
Inferred
Total
Eliwana
Measured
Indicated
Inferred
Total
636
2,121
229
122
575
926
55.3
55.3
54.9
55.2
60.0
58.4
58.1
58.6
5.75
6.63
6.29
6.20
6.37
6.59
6.91
6.61
6.08
6.61
6.78
6.47
7.25
6.94
8.00
7.34
7.72
8.18
8.88
8.33
7.71
8.02
8.74
8.21
4.89
5.44
5.69
5.46
Total Hematite Operating Mineral Resources
Measured
1,335
Indicated
2,722
Inferred
1,776
57.0
55.9
56.2
6.13
7.22
7.13
Total
5,832
56.2
6.94
3.21
3.38
3.66
3.43
Notes in reference to table
3.45
3.41
3.62
0.058
0.060
0.054
3.45
0.058
3.15
3.70
3.79
3.58
3.29
3.61
3.75
0.049
0.051
0.054
0.051
0.053
0.054
0.054
3.54
0.054
3.76
2.74
3.77
3.14
3.52
3.27
3.75
0.111
0.119
0.107
0.115
0.085
0.078
0.076
3.44
0.078
3.53
3.20
3.75
0.085
0.083
0.081
3.40
0.083
2.61
2.77
3.45
3.16
0.141
0.096
0.102
0.111
0.073
0.069
0.079
0.073
8.7
8.0
7.6
8.2
7.9
7.9
7.9
7.9
8.2
7.9
7.9
8.0
6.6
6.9
7.4
7.1
9.1
9.0
8.5
8.9
9.1
8.7
8.3
8.6
5.8
7.2
6.9
6.7
8.0
8.2
7.7
8.0
460
414
123
997
556
935
463
1,954
1,016
1,349
586
2,951
14
195
110
319
183
1,137
585
1,905
197
1,331
694
56.6
56.2
56.4
56.4
56.9
56.1
55.6
56.2
56.8
56.1
55.8
56.3
57.9
58.1
56.1
57.4
54.8
55.1
54.6
54.9
55.1
55.5
54.9
2,223
55.3
229
122
650
1,001
1,442
2,802
1,930
6,175
60.0
58.4
58.1
58.6
57.0
55.9
56.2
56.3
5.69
6.66
6.31
6.17
6.28
6.59
6.90
6.57
6.01
6.61
6.77
3.44
3.43
3.60
0.058
0.060
0.054
3.45
0.058
3.13
3.70
3.80
3.56
3.27
3.62
3.75
0.047
0.051
0.055
0.051
0.052
0.054
0.055
6.44
3.53
0.053
6.28
6.86
8.02
7.23
7.48
8.25
8.71
8.32
7.39
8.05
8.60
8.16
4.89
5.44
5.76
5.52
6.02
7.24
7.09
6.91
3.34
2.67
3.74
3.07
3.31
3.34
3.72
0.121
0.119
0.106
0.115
0.079
0.079
3.44
0.080
3.15
3.25
3.72
0.089
0.085
0.083
3.39
0.085
2.61
2.77
3.40
3.14
3.15
3.40
3.62
3.41
0.141
0.096
0.102
0.110
0.071
0.071
0.081
0.074
8.6
8.0
7.7
8.3
7.9
7.9
7.9
7.9
8.2
7.9
7.8
8.0
6.9
6.8
7.4
7.0
9.0
8.7
9.0
10.1
8.7
8.5
8.7
5.8
7.2
7.0
6.7
8.1
8.2
7.8
8.1
0.086
10.4
• Chichester Hub Mineral Resources are quoted above a cut-off grade of 53.5% Fe. Solomon Hub and Eliwana Mineral Resources are quoted above a cut-off grade of 51.5% Fe.
• The Measured Mineral Resource estimate includes mine stockpiles totalling approximately 32mt.
• Mineral Resources are reported inclusive of Ore Reserves.
• Tonnage information has been rounded and as a result the figures may not add up to the totals quoted.
46 Fortescue Metals Group Ltd Annual Report FY20
Ore Reserves and Mineral Resources
Mineral Resources Development Properties – Hematite
This update to the development
We have announced a 153mt
properties is reported in accordance
addition to the Development
with the 2012 JORC Code as
Properties Mineral Resource as a
identified in the Fortescue
result of exploration drilling. This
ASX release of 21 August 2020
includes updates to our existing
that includes the supporting
Sheila Valley and Raven deposits at
technical data.
Greater Solomon, Flying Fish, Cobra,
Lora, and Wyloo North deposits
at Greater Western Hub and the
Nyidinghu deposit.
As at 30 June 2020, the total
Mineral Resource for Development
Properties, which excludes and
is additional to the operating
properties, is estimated to be
8,060mt at an average Fe grade of
57.1%. This comprises 433mt for
the Greater Chichester deposits,
2,682mt at the Greater Solomon
deposits, 2,086mt at the Greater
Western deposits, 2,475mt at the
Nyidinghu deposit and 384mt at the
Pilbara Other deposits.
Hematite Mineral Resources (Development Properties) – as at 30 June 2020
30 June 2020
30 June 2019
In-Situ
Tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
In-Situ
Tonnes
(mt)
Iron
Fe
%
Silica
SiO2
%
Alumina
Al2O3
%
Phos
P
%
Loss On
Ignition
LOI
%
Greater Chichester Hub
Measured
Indicated
Inferred
Total
-
-
433
433
Greater Solomon Hub
Measured
Indicated
Inferred
Total
-
254
2,427
2,682
Greater Western Hub
Measured
Indicated
-
99
Inferred
1,987
-
-
56.4
56.4
-
56.6
56.9
56.9
-
59.1
57.1
Total
2,086
57.2
Nyidinghu
Measured
Indicated
Inferred
Total
Pilbara Other
Measured
Indicated
Inferred
Total
22
575
1,878
2,475
-
-
384
384
59.7
58.0
57.1
57.3
-
-
57.1
57.1
-
-
7.10
7.10
-
6.70
6.87
6.85
-
5.32
5.86
5.83
3.56
4.60
5.17
5.02
-
-
6.10
6.10
-
-
-
-
3.77
3.77
0.058
0.058
-
3.45
3.79
3.76
-
2.45
2.90
-
0.083
0.083
0.083
-
0.162
0.080
2.88
0.084
2.08
2.97
3.41
0.140
0.148
0.148
3.30
0.148
-
-
-
-
2.57
2.57
0.069
0.069
Total Hematite Development Mineral Resources
Measured
Indicated
Inferred
Total
22
929
7,109
8,060
59.7
57.7
57.0
57.1
3.56
5.25
6.11
6.00
2.08
3.05
3.37
3.33
0.140
0.132
0.097
0.101
Notes in reference to table
-
-
7.0
7.0
-
8.3
7.2
7.3
-
7.1
8.8
8.7
8.1
8.5
8.8
8.7
-
-
9.1
9.1
8.1
8.3
8.1
8.2
-
-
433
433
-
254
2,325
-
-
56.4
56.4
-
56.6
56.8
2,580
56.8
-
-
2,047
2,047
23
580
1,860
2,463
-
-
384
384
23
834
7,049
7,907
-
-
57.2
57.2
59.6
58.1
57.2
57.4
-
-
57.1
57.1
59.6
57.6
57.0
57.1
-
-
7.10
7.10
-
6.70
6.96
6.93
-
-
5.79
5.79
3.56
4.52
5.00
4.88
-
-
6.10
6.10
3.56
5.18
6.06
5.97
-
-
-
-
3.77
3.77
0.058
0.058
-
3.45
3.74
3.71
-
-
-
0.083
0.081
0.082
-
-
2.86
2.86
0.083
0.083
2.21
2.95
3.36
3.25
-
-
0.139
0.148
0.147
0.147
-
-
2.57
2.57
0.069
0.069
2.21
3.11
3.32
3.30
0.139
0.128
0.097
0.100
-
-
7.0
7.0
-
8.3
7.1
7.2
-
-
8.7
8.7
8.0
8.6
8.8
8.8
-
-
9.1
9.1
8.0
8.5
8.1
8.2
• The Greater Chichester Mineral Resources includes the Investigator, White Knight and Mount Lewin deposits.
• The Greater Solomon Mineral Resources includes the Serenity, Sheila Valley, Mount MacLeod, Cerberus, Stingray and Raven deposits.
• The Greater Western Mineral Resources includes the Flying Fish, Vivash, Cobra, Lora, Zorb, Farquhar, Elevation, Boolgeeda CID and Wyloo North deposits.
• The Pilbara Other Mineral Resources includes the Fig Tree and Wonmunna deposits.
• 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
each Mineral Resource was first announced.
• Mineral Resources are reported inclusive of Ore Reserves.
• Tonnage information has been rounded and as a result the figures
may not add up to the totals quoted.
Fortescue Metals Group Ltd Annual Report FY20 47
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Mineral Resources Development Properties – Magnetite
The Mineral Resource for the North
Star, Eastern Limb, West Star and
Glacier Valley deposits (part of
the Iron Bridge Project, 60.72 per
cent Fortescue) was completed
by Snowden Mining Industry
Consultants in 2019. The remodelling
of the Mineral Resource resulted
in a downgrade of the Indicated
and Inferred Mineral Resources,
compared with the previous model.
These changes resulted from the
following:
• Changes to the Mineral Resource
classification which shifted the
Indicated and Inferred Mineral
Resource boundaries upwards
so that the revised classification
better constrains the Mineral
Resources to the current drilling
and is consistent with geological
and geostatistical confidence.
The Iron Bridge Mineral Resource
as at 30 June 2020 remains
unchanged from the 2019 Mineral
Resource estimate. Ongoing drilling
will be incorporated into a revised
Mineral Resource estimate for
the Iron Bridge deposit, which is
planned to be completed in the first
half of FY21.
• A new geological interpretation
derived from mapping, geophysics
and assay data
• Improved geological understanding
leading to improvements in
estimation methodology
Following external review and
the remodelling of the Iron Bridge
Mineral Resources in 2019, 2 to 3bt
of material (at 28 to 32% Fe, 39 to
43% SiO2 and 2 to 3% Al2O3, with
an average mass recovery of 20
to 24%) was reclassified in 2019
as an Exploration Target. The Iron
Bridge Exploration Target remains
unchanged as of 30 June 2020 and
is considered a long-term target. The
potential quantity and grade of the
Exploration Target is conceptual in
nature and there has been insufficient
exploration to estimate a Mineral
Resource. It is uncertain if further
exploration will result in the estimation
of a Mineral Resource in this area.
Magnetite Mineral Resources (Development Properties) – as at 30 June 2020
30 June 2020
30 June 2019
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
%
North Star and Eastern Limb
Measured
Indicated
Inferred
Total
109
825
2,127
3,150
Glacier Valley
Measured
Indicated
Inferred
Total
West Star
Measured
Indicated
Inferred
Total
-
191
1,480
1,671
-
-
627
627
25.0
24.5
24.2
24.3
-
23.7
20.3
20.6
-
-
20.6
20.6
33.2
30.3
29.8
30.1
-
33.4
31.9
32.0
-
-
28.1
28.1
Total Magnetite Mineral Resources
Measured
109
Indicated
1,016
Inferred
Total
4,324
5,448
Notes in reference to table
25.0
24.3
22.3
22.7
33.2
30.9
30.3
30.4
40.2
41.3
41.5
41.4
-
39.4
39.6
39.6
-
-
43.8
43.8
40.2
41.0
41.2
41.1
2.06
2.74
2.84
2.79
-
1.73
1.94
1.92
-
-
3.36
3.36
2.06
2.55
2.61
109
825
2,217
3,150
-
191
1,480
1,671
-
-
627
627
109
1,016
4,324
2.59
5,448
25.0
24.5
24.2
24.3
-
23.7
20.3
20.6
-
-
20.6
20.6
25.0
24.3
22.3
22.7
33.2
30.3
29.8
30.1
-
33.4
31.9
32.0
-
-
28.1
28.1
33.2
30.9
30.3
30.4
40.2
41.3
41.5
41.4
-
39.4
39.6
39.6
2.06
2.74
2.84
2.79
-
1.73
1.94
1.92
-
-
-
-
43.8
43.8
3.36
3.36
40.2
41.0
41.2
41.1
2.06
2.55
2.61
2.59
• As per the Iron Bridge Project agreements, Fortescue owns 60.72% of the reported Total Magnetite Ore Reserve estimate.
• All magnetite Mineral Resources are reported above a nine per cent Mass Recovery cut-off, based on DTR test work.
• All Mineral Resources are reported on a dry-tonnage basis.
• Small discrepancies may occur due to rounding.
• Mineral Resources are reported inclusive of Ore Reserves.
• Tonnage information has been rounded and as a result the figures may not add up to the totals quoted.
48 Fortescue Metals Group Ltd Annual Report FY20
Ore Reserves and Mineral Resources
Competent Persons Statement
The detail in this report that
relates to Hematite Mineral
Resources is based on information
compiled by Mr Stuart Robinson,
Mr Nicholas Nitschke, Ms Erin Retz
and Mr David Frost-Barnes, full
time employees and shareholders
of Fortescue. Each provided
technical input for Mineral Resource
estimations.
The detail in this report that relates
to the Iron Bridge Magnetite Mineral
Resources and Exploration Target is
based on information compiled by
Mr John Graindorge, a full-time
employee and shareholder of
Fortescue. Mr Graindorge provided
technical input for Mineral Resource
estimations.
Estimated Ore Reserves for the
Chichester and Solomon Hubs and
Eliwana deposit for fiscal year 2020
were compiled by Mr Oliver Wang
and Mr Martin Slavik; full-time
employees and shareholders of
Fortescue.
Estimated Magnetite Ore Reserves
for the Iron Bridge project for fiscal
year 2020 were compiled by Mr
Martin Slavik, a full-time employee
and shareholder of Fortescue.
Mr Robinson is a Fellow of, and Mr
Nitschke, Ms Retz,
Mr Frost-Barnes, Mr Slavik, Mr Wang
and Mr Graindorge are Members of
the Australasian Institute of Mining
and Metallurgy. Mr Graindorge
is also a Chartered Professional
(Geology).
Mr Robinson, Mr Nitschke, Ms Retz,
Mr Frost-Barnes, Mr Slavik, Mr Wang
and Mr Graindorge have sufficient
experience relevant to the style of
mineralisation and type of deposit
under consideration and to the
activity which they are undertaking
to qualify as a Competent Person
as defined in the 2012 Edition of the
‘Australasian Code for Reporting
of Exploration Results, Mineral
Resources and Ore Reserves'.
Mr Robinson, Mr Nitschke, Ms Retz,
Mr Frost-Barnes, Mr Slavik, Mr Wang
and Mr Graindorge consent to the
inclusion in this report of the matters
based on this information in the form
and context in which it appears.
Fortescue Metals Group Ltd Annual Report FY20 49
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Our Values form
the foundation of
our approach to
sustainability
04
Our approach
to sustainability
50 Fortescue Metals Group Ltd Annual Report FY20
Our approach to Sustainability FY20
Year at a glance
2.4
Total Recordable Injury
Frequency Rate
A$
17.2 bn
Total global economic
contribution
14
%
Aboriginal employment
rate across
Pilbara operations
A$
2.7bn
Contracts to
Aboriginal businesses
and joint ventures
26
%
Female representation
in senior leadership
roles
6.6A$
m
Social investment in
our communities
Fortescue Metals Group Ltd Annual Report FY20 51
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Our approach to sustainability
Sustainability is integrated into
all aspects of our business.
At the heart of our approach to
sustainability is a commitment to
create value for our stakeholders,
protect the health and safety of our
Fortescue family and support the
communities and environments in
which we operate.
Our Values form the foundation
of our approach to sustainability
and integrity is key to building
trust with our stakeholders, setting
the ethical and moral compass
by which we operate. Integrity
inspires our people to do what we
say we are going to do and to be
accountable for the impact of
our activities on the community
and environment.
The Value of empowerment
encourages our employees to do
their best and to find innovative
solutions to business and societal
challenges. By empowering our
communities through training,
development, employment and
business opportunities, we can
assist them to thrive and prosper.
Our Board approved Code of
Conduct and Integrity establishes
the essential standards of personal
and corporate conduct of our
employees, suppliers, contractors
and all those with whom we do
business. This strong base supports
our commitments and principles,
which leads to the development
and implementation of policies,
opportunities and objectives. These
inform specific targets, processes and
plans set by our business units.
Compliance with all relevant
legislation and obligations, including
those that govern health, safety and
environment, is the absolute minimum
standard at which we operate.
Our Board is responsible for the
oversight of all sustainability issues,
receiving regular updates through
the Audit and Risk Management
Committee (ARMC). At the operational
level, sustainability is managed by
our Chief Executive Officer with
support from the Core Leadership
Team and Director Sustainability and
Corporate Affairs.
The FY20 Sustainability Report,
FY20 Climate Change Report and
FY20 Modern Slavery Statement
are available on our website at
www.fmgl.com.au
Targets
Opportunities
and objectives
Fortescue’s
policies
Voluntary
commitments
and principles
Code of Conduct
and Integrity
Vision and Values
52 Fortescue Metals Group Ltd Annual Report FY20
Our approach to Sustainability United Nations Sustainable Development Goals
The United Nations Sustainable
Development Goals (SDGs), adopted
in 2015, set the 2030 global agenda for
sustainable development and are a
call for global action by national
governments to end poverty, protect
the planet and to ensure all people are
able to enjoy peace and prosperity.
We have aligned Fortescue’s approach
to sustainability with the SDGs and
will continue to work with our host
governments as they strive to meet
these goals. Eight of the SDGs are
prioritised by Fortescue.
Our priority SDGs
Fortescue Metals Group Ltd Annual Report FY20 53
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Material issues
Fortescue’s Sustainability Report
outlines the issues that may impact
our ability to meet our sustainability
commitments and targets.
Material issues are those that may
have a significant bearing on our
ability to achieve our commitments
and targets. These issues are
identified through an annual
assessment process that considers
risks and opportunities, as well as
internal and external stakeholder
views. The assessment involves
a cycle of research, identification,
prioritisation, validation and review.
5
5
Review
Review
1
1
Research
Research
4
4
Validation
Validation
2
2
Identification
Identification
3
3
Prioritisation
Prioritisation
During FY20, our materiality
assessment considered the
following:
• Our sustainability initiatives and
targets
• Corporate risk assessments
• Company policies, standards and
guidelines
• Results of internal and external
engagement with stakeholders
• Media and investor interest and
feedback
• Material issues identified by
peers, sustainability leaders and
materiality analysis
• Benchmarking and environmental,
social and governance
assessments.
Priorities were informed by internal
and external engagement, which
included workshops with our
employees and a broad range of
external stakeholders. Materiality
was validated by subject leaders and
the Executive team, with 11 issues
determined to be material.
Material issues are incorporated under our three core sustainability pillars.
Setting high
standards
Safeguarding
the environment
Creating positive
social change
• Employee health and safety
• Economic contribution
• Workforce diversity
• Protecting Aboriginal heritage
• Ethical business conduct
• Climate change action and
disclosure
• Protecting biodiversity and water
• Creating employment and
business opportunities for
Aboriginal people
resources
• Tailings management
• Building sustainable communities
• Human rights
54 Fortescue Metals Group Ltd Annual Report FY20
Our approach to Sustainability 03 | Approach to Coporate Social Responsibility
05
Corporate
Governance
55 Fortescue Metals Group Limited Sustainability Report FY20
Fortescue Metals Group Ltd Annual Report FY20 55
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Overview of Corporate Governance
Good corporate governance is critical to the long-term, sustainable
success of Fortescue. Good governance is the collective responsibility
of the Board of Directors (the Board) and all levels of management.
Fortescue
seeks to adopt
leading practice,
contemporary
governance
standards and
apply these in a
manner consistent
with our culture
and Values.
Fortescue supports the intent of
the 4th Edition of the Australian
Securities Exchange (ASX)
Corporate Governance Council’s
Corporate Governance Principles
and Recommendations (Principles
and Recommendations). Unless
otherwise disclosed, Fortescue
has reported against the revised
requirements of the Principles
and Recommendations.
Our cornerstone principles of
corporate governance are:
Empowerment
Ensuring everyone at Fortescue is
empowered to make decisions that
support our objectives and are in
the best interests of stakeholders.
Management and employees are
encouraged to be innovative and
strategic in making decisions that
align with our risk appetite and
are undertaken in a manner
consistent with corporate
expectations and standards.
Transparency
Being clear and unambiguous
about our structure, operations and
performance, both externally and
internally, and maintaining a genuine
dialogue with, and providing
insight to, stakeholders and the
market generally.
Corporate
accountability
Ensuring that there is clarity of
decision making, with processes
in place to authorise the right
people to make effective and
efficient decisions and appropriate
consequences delivered when these
processes are not followed.
Integrity
Developing and maintaining a
corporate culture committed to
ethical behaviour and compliance
with the law.
Stewardship
Developing and maintaining a
company wide recognition that
Fortescue is managed for the
benefit of its shareholders, taking
into account the interests of
other stakeholders.
56 Fortescue Metals Group Ltd Annual Report FY20
Corporate Governance STAKEHOLDERS
GOVERNMENT
AND
REGULATORS
BUSINESS
PARTNERS AND
INVESTORS
SHAREHOLDERS
EMPLOYEES
COMMUNITY
BOARD
MANAGEMENT RESPONSIBILITY
Audit and Risk
Management
Committee
Remuneration and
People Committee
Finance
Committee
Nomination
Committee
D
N
A
S
E
I
C
I
L
O
P
S
E
R
U
D
E
C
O
R
P
BUSINESS PROCESS
DELEGATION OF AUTHORITY
CHIEF EXECUTIVE OFFICER
CORE LEADERSHIP TEAM
EXECUTIVE AND LINE MANAGEMENT
INTEGRATED RISK MANAGEMENT
CORPORATE CULTURE AND VALUES
A
S
S
U
R
A
N
C
E
A
C
T
I
V
I
T
Y
I
N
D
E
P
E
N
D
E
N
T
Fortescue Metals Group Ltd Annual Report FY20 57
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06
Our approach
to climate
change
58 Fortescue Metals Group Ltd Annual Report FY20
Our approach to climate change FY20
highlights
LONG-TERM GOAL
Net zero
operational emissions
by 2040
MEDIUM-TERM TARGET
Reduce Scope 1 and 2
emissions by 26%
from Existing Operations by 2030
Scenario
analysis
expanded
CO2
Carbon price
application
expanded
Fortescue Metals Group Ltd Annual Report FY20 59
OverviewOverview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Approach to climate change
Fortescue is committed to taking a leadership position on climate
change which we believe will drive shareholder value.
uilding re sili e
B
n c e
Reducin
g
e
m
i
s
s
i
Wholly
owned, fully
integrated
supply chain
s
n
o
Four key
elements of
our strategy
E
n
g
c
a
o
g
l
l
a
e
m
b
e
o
r
nt and
ation
xi m ising
o rtunities
p
M a
o
p
Climate Change Strategy
Our Climate Change Strategy
focuses on implementing innovative
and practical emissions reduction
initiatives to maximise opportunities
and proactively mitigate and
manage climate-related risks in a
transitioning economy.
Metric and targets
This year, we revised our long-term
emissions reduction goal to achieve
net zero operational emissions by
2040. This goal is core to our Climate
Change Strategy and is underpinned
by a pathway to decarbonisation,
including the reduction of Scope 1
and 2 emissions from Existing
Operations by 26 per cent from
2020 levels, by 2030.
Risk management
Fortescue is committed to taking
a leadership position on climate
change which we believe will drive
shareholder value.
We accept the scientific
consensus as assessed by the
Intergovernmental Panel on Climate
Change (IPCC) and support the Paris
Agreement goal of limiting global
temperature rise to well below 2°C
above pre-industrial levels.
Climate change is a complex
and challenging issue impacting
governments, businesses and
communities all over the world.
Successful mitigation and adaptation
to climate change impacts requires
a collaborative approach to ensure
we succeed as a global community
in protecting our environment for
future generations, while maintaining
economic stability and sustainable
growth.
The transition to a low carbon
economy presents both opportunities
and risks and we are implementing
measures to mitigate and manage
these risks and optimise opportunities.
The evaluation of climate change
risks and opportunities is integrated
into our company wide risk
management process. Fortescue’s
Risk Management Framework
ensures a consistent approach
to the recognition, measurement
and evaluation of all risks and
opportunities, including those related
to climate change.
We undertook a climate change
focused risk assessment in May 2020.
As a values-based business, we
acknowledge our responsibility to
engage and accelerate the transition
towards a net zero emissions global
economy. We are committed to
taking a leadership position on
climate change and believe this
will drive shareholder value over
the longer term, while meeting the
expectations of our internal and
external stakeholders.
Our Board has overall responsibility
for the oversight of climate-related
matters and our dedicated Climate
Change Committee (CCC) provides
advice to the Audit and Risk
Management Committee and
the Board.
60 Fortescue Metals Group Ltd Annual Report FY20
Our approach to climate change
LONG-TERM
GOAL
Net zero
operational
emissions
by 2040
Material climate-related
risks and opportunities
Transitional risks
• Reduced product demand
• Technical innovation is not
delivered at commercial scale
to support required emissions
reductions
• Reputational damage
Physical risks – acute
• Cyclone frequency and intensity
• Bushfire frequency and intensity
Physical risks – chronic
• Change in precipitation patterns
• Rising sea levels and storm
surge inundation
FY20 Performance
Our FY20 Scope 1 emissions were
1.93 million tonnes of CO2-e and
Scope 2 emissions were
0.16 million tonnes of CO2-e. Since
FY15, the emissions intensity in
electricity generation (Scope 1) has
reduced by 16 per cent.
Our FY20 Scope 3 emissions from
crude steel manufacturing and
shipping are estimated to be
244.5 million tonnes of CO2-e.
Fortescue’s FY20 Climate Change
Report is part of our annual
reporting suite, which also includes
the FY20 Annual Report, FY20
Sustainability Report and FY20
Corporate Governance Statement, all
of which are available on our website
at www.fmgl.com.au
The report is aligned with the
recommendations of the
Task Force on Climate-related
Financial Disclosures (TCFD).
Governance
Governance of
Strategy
Impacts of
climate-related risks
climate-related risks
Industry
and opportunities
leading
cost
position
Core elements
of the TCFD
recommendations
and opportunities on
Wholly
business, strategy
owned, fully
and financial
integrated
planning
supply chain
Metrics and targets
Metrics and targets used
to assess and manage
relevant climate-
related risks and
opportunities
Risk management
Processes used to
identify, assess and
manage climate-
related risks
Fortescue Metals Group Ltd Annual Report FY20 61
OverviewOverview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
In its short history, Fortescue has
accomplished what was judged as
impossible: to build a company from
a start up to a global leader in the
mining industry.
2004
Cloudbreak
identified
2005
S&P/ASX
200 index
2003
THE
DREAM
BEGINS
2006
Port Hedland
ground-
breaking
2007
First iron ore sales
agreement with Boasteel
Mining commenced at
Cloudbreak
2008
First ore on ship
2009
Hunan Valin
becomes major
shareholder
2010
Christmas Creek
expanded
2011
Solomon
construction
begins
2012
Autonomous
haulage begins
at Solomon
2013
Firetail opened
at Solomon
2014
Kings Valley project
opened at Solomon
2015
Anderson Point
Berth 5 completion
Fortescue River Gas
Pipeline completion
2016
FMG Nicola into
Port Hedland
2017
Expansion
of autonomous
haulage to
Chichester Hub
2018
Fortescue’s
milestone year
1 billion tonnes of
ore shipped
2019
Official opening of
Judith Street Harbour
in Port Hedland
First sod turn for
Eliwana project
2020
Opening of new FMG office in Shanghai
Opening of Fortescue Hive, expanded
integrated operations centre
62 Fortescue Metals Group Ltd Annual Report FY20
THE JOURNEY
CONTINUES
Our approach to climate change 07
Financial
Report
Directors’ Report
Directors
The Directors of the Company in office during the 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 15.
The relevant interests of each Director in the shares
and share 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 detailed in the table below.
The Directors’ meetings, including meetings of the
Company’s Board of Directors and of each Board
Committee held during the year ended 30 June 2020,
and the number of meetings attended by each
Director are shown in section 2.3 of the Corporate
Governance Statement¹.
The remuneration of Directors and Key Management
Personnel is detailed in the Remuneration Report on
pages 117 to 154.
Director
Dr A Forrest AO
M Barnaba AM
E Gaines
Dr J Baderschneider
Dr Z Cao
P Bingham-Hall
J Morris OAM
Dr Y Zhang
Lord S Coe CH, KBE
Ordinary shares
Share rights
1,116,165,000
40,300
595,669
138,000
-
45,415
12,780
-
-
-
-
1,418,735
-
-
-
-
-
-
¹Corporate Governance Statement is available on Fortescue’s website at www.fmgl.com.au
64 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Directors’ Report
For the year ended 30 June 2020
Operating and financial review
Fortescue’s principal activities during the 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 FY20.
These measures have enabled Fortescue to maintain
planned production and shipping schedules. Accordingly,
the COVID-19 outbreak has not had a material impact
on the financial results of the Group as at and for the 12
months ended 30 June 2020, or on its ability to continue
as a going concern.
On 30 January 2020, the WHO announced that COVID-19
was a global health emergency and declared it a global
pandemic on 11 March 2020. The Group’s principal
activities are carried out in Western Australia, where the
COVID-19 outbreak has been well contained through a
series of lockdown measures by both the Australian and
Western Australian governments. The Group proactively
implemented and expanded a range of measures
to protect the health and safety of its people and
contributed to efforts to contain the spread of COVID-19
across its operations and the wider community.
The overview of Fortescue’s operations, including a
discussion of strategic priorities and outlook, key aspects
of operating and financial performance and key business
risks are contained in the following sections of the
Annual Report: Overview on pages 4 to 21, Operating
and Financial Review on pages 22 to 40 and Corporate
Governance Statement¹ section 4 Risk Management.
Dividends
Profit
Net profit after tax
Declared and paid during the year:
Final ordinary dividend for the year ended 30 June 2019 – paid in October 2019
Interim ordinary dividend for the year ended 30 June 2020 – paid in April 2020
Total – declared and paid during the year
Declared since the end of the financial year:
Final ordinary dividend for the year ended 30 June 2020 – to be paid in October 2020
2020
US$m
4,735
A$ cents
24
76
100
100
Environmental regulation and compliance
Shares under option
Fortescue is committed to minimising the environmental
impacts of its operations, with an appropriate focus
placed on continuous monitoring of environmental
matters and compliance with environmental regulations.
As at the date of this report, there were no unissued
ordinary shares under options, nor were there any
ordinary shares issued during the year ended 30 June
2020 as a result of the exercise of options.
The details of Fortescue’s environmental performance,
including compliance with the relevant environmental
legislation, are presented in Fortescue’s Sustainability
Report².
Greenhouse gas emissions and energy
Fortescue complies with the Australian Government’s
National Greenhouse and Energy Reporting Act 2007
(Cth) and recognises its responsibility to actively
improve energy use and minimise greenhouse gas
emissions to reduce its contribution to climate change
and impact on the environment.
The details of greenhouse gas emissions and energy
strategy, compliance and reporting are presented in
Fortescue’s Sustainability Report².
Company Secretary
Cameron Wilson and Alison Terry are Company
Secretaries of Fortescue. Details of their qualifications
and experience are set out on pages 14 and 19 of this
report.
¹ Corporate Governance Statement is available on Fortescue’s website at
www.fmgl.com.au
² Sustainability Report is available on Fortescue’s website at
www.fmgl.com.au
Fortescue Metals Group Ltd Annual Report FY20 65
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Directors’ Report
For the year ended 30 June 2020
Directors' and Officers' indemnities
and insurance
Since the end of the previous 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.
Non-audit services
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.
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 19 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 2001, is set
out on page 67 and forms part of this report.
66 Fortescue Metals Group Ltd Annual Report FY20
Future developments
The Overview section set out on pages 4 to 21 and the
Operating and Financial Review section set out on pages
22 to 40 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.
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 Fortescue, or to intervene in
any proceedings to which Fortescue is a party, for the
purposes of taking responsibility on behalf of Fortescue
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.
Rounding of amounts
The Company is of a kind referred to in ASIC
Corporations Instrument 2016/191, 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 instrument to the
nearest million dollars, unless otherwise stated.
Events occurring after the reporting period
On 24 August 2020, the Directors declared a final
dividend of A$1.00 per ordinary share payable in
October 2020.
This report has been made in accordance with a
resolution of the Directors.
Dr Andrew Forrest AO
Chairman
Dated in Perth this 24th day of August 2020.
Financial Report Auditor’s independence declaration
As lead auditor for the audit of Fortescue Metals Group Ltd for the year ended 30 June 2020, I declare that
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to
the audit, and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Fortescue Metals Group Ltd and the entities it controlled during the period.
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
24 August 2020
Fortescue Metals Group Ltd Annual Report FY20 67
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Independent
auditor’s report
To the members of Fortescue Metals Group Ltd
Report on the audit of the
financial report
Our opinion
In our opinion:
The accompanying financial report of Fortescue Metals Group Ltd (the Company) and its controlled entities (together
the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for
the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
• the consolidated statement of financial position as at 30 June 2020
• the consolidated statement of comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• the consolidated income statement for the year then ended
• the notes to the consolidated financial statements, which include a summary of significant accounting policies
• the directors’ declaration.
68 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Independent auditor’s Report
For the year ended 30 June 2020
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial report as a whole, taking into account the geographic and management structure of the Group, its
accounting processes and controls and the industry in which it operates.
Materiality
Key audit
matters
Audit scope
Materiality
• For the purpose of our audit we used overall Group materiality of US$209 million, which represents approximately
5% of the three year average profit before tax of the Group for the current and two previous years.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report
as a whole.
• We chose Group profit before tax because, in our view, it is the benchmark against which the performance of the
Group is most commonly measured. We applied a three year average to address potential volatility in the calculation
of materiality that arises from iron ore price fluctuations between years.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
• The primary activity of the Group is the operation of integrated iron ore mining operations and infrastructure
comprising various iron ore mines in the Chichester and Hamersley ranges, a rail network and port facilities in Port
Hedland. Our audit procedures were supported by a visit to the port and rail facilities at Port Hedland.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report for the current period. The key audit matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated
the key audit matters to the Audit and Risk Management Committee.
Fortescue Metals Group Ltd Annual Report FY20 69
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Independent auditor’s Report
For the year ended 30 June 2020
Key audit matter
How our audit addressed the key audit matter
Revenue from provisional pricing adjustments – sale of iron ore and shipping revenue
(Refer to note 3 and 24(f))
Fortescue’s sales contracts, which also include
shipping services, may provide for provisional pricing
of sales at the time the product is delivered to the
vessel with final pricing determined using the relevant
price indices on or after the vessel’s arrival to the port
of discharge.
For the year ended 30 June 2020 the Group
recognised a net reduction to revenue of US$140
million from provisional pricing adjustments to iron ore
revenue and a US$4 million net increase to revenue
from provisional pricing adjustments to shipping
revenue. Provisional pricing adjustments represent any
difference between the revenue recognised at the bill
of lading and the final settlement price.
This was a key audit matter as these provisional
pricing adjustments may represent a significant
component of revenue within the consolidated income
statement. Also, for sales where final settlement price
is yet to be determined, the value of this revenue
is adjusted by considering tonnes subject to price
finalisation at the end of the period and applying the
closing spot rate.
We performed the following audit procedures, amongst
others, over the provisional pricing adjustments to the
sale of iron ore and shipping revenue:
• For a sample of sales contracts open at balance date,
we inspected the sales contracts and assessed key
terms of the sale including the volume of sales and
duration of any provisional sales period.
• For a sample of sales contracts with provisional
pricing adjustments recorded in the current year,
we recalculated the recorded provisional pricing
adjustments to revenue and final value of revenue
recognised. We found them to be consistent with
relevant external price indices and cash settlements.
• We performed tests of key controls over the
calculation of provisional pricing adjustments to
revenue.
Restoration and rehabilitation obligations (Refer to note 13 and 24(e))
The Group recognised provisions for restoration and
rehabilitation obligations of US$753 million as at
30 June 2020.
To assess the Group’s restoration and rehabilitation
obligations, we performed the following audit procedures,
amongst others:
This was a key audit matter as the calculation of
these provisions requires judgement by the Group in
estimating the magnitude of possible works required
for the removal of infrastructure and rehabilitation
works, the future cost of performing the work,
when rehabilitation activities will take place and the
economic assumptions such as inflation and discount
rates relevant to such liabilities.
The judgement required by the Group to estimate such
costs is further compounded by the fact that there
has been limited restoration and rehabilitation activity
by the Group or historical precedent against which to
benchmark estimates of future costs.
• We evaluated the Group’s rehabilitation and restoration
cost forecasts including the process by which they were
developed. We checked the mathematical accuracy of
the underlying calculations.
• We considered the competence and objectivity of the
Group’s experts who reviewed the closure plans and
associated cost estimates.
• We assessed the reasonableness of the Group’s
significant judgemental assumptions and key data used
in the closure plans and associated cost estimates.
• We evaluated the expected timing of restoration and
rehabilitation activities and found them to be consistent
with the life of mine plan for each mining operation.
• We benchmarked key market related assumptions
including inflation rates and discount rates against
external market data and found them to be consistent.
• We assessed provision movements in the year relating
to restoration and rehabilitation obligations and found
them to be consistent with our understanding of the
Group’s operations and associated rehabilitation plans.
70 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Independent auditor’s Report
For the year ended 30 June 2020
Other information
The directors are responsible for the other information. The other information comprises the information included
in the annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained
in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the
Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report.
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Independent auditor’s Report
For the year ended 30 June 2020
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 117 to 154 of the directors’ report for the year ended
30 June 2020.
In our opinion, the remuneration report of Fortescue Metals Group Ltd for the year ended 30 June 2020 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
Justin Carroll
Partner
Perth
24 August 2020
72 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Directors’
declaration
Dr Andrew Forrest AO
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 74 to 116 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 2020 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 20 will be able to meet any obligations or liabilities to which
they are, or may become, subject to by virtue of the deed of cross guarantee described in note 20.
Note 1(a) confirms that the financial statements comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The Directors have been given the declaration 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.
Dr Andrew Forrest AO
Chairman
Dated in Perth this 24th day of August 2020.
Fortescue Metals Group Ltd Annual Report FY20 73
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Consolidated income statement
For the year ended 30 June 2020
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
Note
3
5
4
6
7
7
14
2020
US$m
12,820
(5,742)
7,078
58
(224)
6,912
50
(272)
6,690
(1,955)
4,735
4,735
-
4,735
2019
US$m
9,965
(5,115)
4,850
110
(138)
4,822
26
(279)
4,569
(1,382)
3,187
3,187
-
3,187
Earnings per share attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
8
8
153.9
153.2
103.1
102.9
Note
Cents
Cents
Consolidated statement of comprehensive income
For the year ended 30 June 2020
Profit for the year after income tax
Other comprehensive income:
Gain on investments taken to equity
Exchange differences on translation of foreign operations
Total comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to:
Equity holders of the Company
Total comprehensive income for the period, net of tax
2020
US$m
4,735
1
5
4,741
4,741
4,741
2019
US$m
3,187
-
1
3,188
3,188
3,188
The above consolidated income statement and consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
74 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Consolidated statement of financial position
As at 30 June 2020
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Deferred income
Borrowings and lease liabilities
Provisions
Deferred joint venture contributions
Current tax payable
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings and lease liabilities
Provisions
Deferred joint venture contributions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Note
9(b)
10(a)
10(c)
12
10(b)
9(a)
13
17(c)
14(c)
10(b)
9(a)
13
17(c)
14(d)
9(d)
2020
US$m
4,855
543
828
71
6,297
2
17,073
7
19
17,101
23,398
1,057
-
186
277
251
1,024
2,795
50
4,927
738
-
1,644
7,359
10,154
13,244
1,167
62
12,002
13,231
13
13,244
2019
US$m
1,874
923
772
43
3,612
2
16,071
6
3
16,082
19,694
986
486
86
208
118
762
2,646
50
3,866
688
155
1,688
6,447
9,093
10,601
1,181
42
9,365
10,588
13
10,601
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Fortescue Metals Group Ltd Annual Report FY20 75
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Consolidated statement of cash flows
For the year ended 30 June 2020
Note
Cash flows from operating activities
Cash receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash inflow from operating activities
9(c)(i)
Cash flows from investing activities
Payments for property, plant and equipment - Fortescue
Payments for property, plant and equipment - joint operations
(Payments)/receipts of deferred joint venture contributions
Proceeds from disposal of plant and equipment
Sale of financial asset
Purchase of financial asset
2020
US$m
12,704
(4,417)
8,287
48
(235)
(1,685)
6,415
(1,768)
(177)
(21)
7
-
(9)
2019
US$m
8,853
(3,874)
4,979
24
(254)
(376)
4,373
(1,040)
(8)
3
5
57
-
Net cash outflow from investing activities
(1,968)
(983)
Cash flows from financing activities
Proceeds from borrowings
Proceeds from leases
Repayment of borrowings
Repayment of leases
Finance costs paid
Dividends paid
Purchase of shares under share buy-back program
Purchase of shares by employee share trust
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
9(b)
1,625
-
(792)
(113)
(32)
(1,925)
-
(44)
(1,281)
3,166
1,874
(185)
4,855
-
56
(14)
(71)
(14)
(2,220)
(101)
(28)
(2,392)
998
863
13
1,874
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
76 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Consolidated statement of changes in equity
For the year ended 30 June 2020
Attributable to equity holders of the Company
Contributed
equity
US$m
Reserves
US$m
Retained
earnings
US$m
Balance at 1 July 2018
Adjustment on adoption of AASB 15
Restated total equity at 1 July 2018
Net profit after tax
Other comprehensive income
Total comprehensive income for the period, net
of tax
Transactions with owners:
Purchase of shares under employee share plans
Employee share awards vested
Equity settled share-based payment transactions
Purchase of shares under share buy-back
program
Dividends declared
Other
Balance at 30 June 2019
Balance at 1 July 2019
Adjustment on adoption of AASB 16¹
Restated total equity at 1 July 2019
Net profit after tax
Other comprehensive income
Total comprehensive income for the period,
net of tax
Transactions with owners:
Purchase of shares under employee share plans
Employee share awards vested
Equity settled share-based payment transactions
Dividends declared
Other
1,287
-
1,287
-
-
-
(28)
23
-
(101)
-
-
1,181
1,181
-
1,181
-
-
-
(42)
28
-
-
-
46
-
46
-
1
1
-
(24)
21
-
-
(2)
42
42
-
42
-
6
6
-
(28)
42
-
-
Total
US$m
9,719
(2)
9,717
3,187
1
8,386
(2)
8,384
3,187
-
3,187
3,188
-
-
-
-
(28)
(1)
21
(101)
(2,205)
(2,205)
(1)
(3)
Non-
controlling
interest
US$m
Total
equity
US$m
13
-
13
-
-
-
-
-
-
-
-
-
9,732
(2)
9,730
3,187
1
3,188
(28)
(1)
21
(101)
(2,205)
(3)
9,365
10,588
13
10,601
9,365
10,588
(7)
(7)
9,358
10,581
4,735
4,735
-
6
4,735
4,741
-
-
-
(42)
-
42
(2,093)
(2,093)
2
2
13
-
13
-
-
-
-
-
-
-
-
10,601
(7)
10,594
4,735
6
4,741
(42)
-
42
(2,093)
2
Balance at 30 June 2020
1,167
62
12,002
13,231
13
13,244
1 See note 23(x) for details regarding the restatement as a result of the adoption of AASB 16 Leases.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Fortescue Metals Group Ltd Annual Report FY20 77
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Notes to the consolidated
financial statements
For the year ended 30 June 2020
Basis of preparation
01 Basis of preparation
Financial performance
02 Segment information
03 Operating sales revenue
04 Other income
05 Cost of sales
06 Other expenses
07 Finance income and finance expenses
08 Earnings per share
Capital management
09 Capital management
9(a) Borrowings and lease liabilities
9(b) Cash and cash equivalents
9(c) Cash flow information
9(d) Contributed equity
9(e) Dividends
10 Working capital
10(a) Trade and other receivables
10(b) Trade and other payables
10(c) Inventories
11 Financial risk management
11(a) Market risk
11(b) Credit risk
11(c) Liquidity risk
11(d) Fair values
79
80
81
81
81
82
82
82
83
83
86
86
87
88
89
89
89
89
90
90
91
92
93
78 Fortescue Metals Group Ltd Annual Report FY20
Key balance sheet items
12 Property, plant and equipment
13 Provisions
Taxation
14 Taxation
14(a) Income tax expense
14(b) Prima facie income tax expense
reconciliation
14(c) Reconciliation of income tax expense
to current tax payable/(receivable)
14(d) Deferred tax assets and liabilities
14(e) Unrecognised tax losses
Unrecognised items
15 Commitments and contingencies
16 Events occurring after the reporting period
Other
17 Related party transactions
18 Share-based payments
19 Remuneration of auditors
20 Deed of cross guarantee
21 Parent entity financial information
22 Interests in other entities
94
95
96
96
96
97
97
98
99
99
100
100
102
103
104
105
23 Summary of significant accounting policies 106
24 Critical accounting estimates and judgements 116
Financial Report
Basis of preparation
01 Basis of preparation
The financial statements cover the consolidated group
comprising Fortescue Metals Group Ltd (the Company)
and its subsidiaries, together referred to as Fortescue or
the Group. The Company is a for-profit company limited
by shares and incorporated in Australia, whose shares
are publicly traded on the Australian Stock Exchange.
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.
(d) Critical accounting estimates
The preparation of financial statements requires
management to use estimates, judgements and
assumptions. Application of different assumptions
and estimates may have a significant impact on
Fortescue’s net assets and financial results. Estimates
and assumptions are reviewed on an ongoing basis
and are based on the latest available information at
each reporting date. Actual results may differ from the
estimates.
The areas involving a higher degree of judgement and
complexity, or areas where assumptions are significant
to the financial statements are:
• Iron ore reserve estimates
• Exploration and evaluation expenditure
• Development expenditure
• Property, plant and equipment - recoverable amount
• Rehabilitation estimates
• Revenue.
The accounting estimates and judgements applied to
these areas are disclosed in note 24.
(c) Functional and presentation currency
(e) Rounding of amounts
The financial statements are presented in United States
dollars, which is the Group’s reporting currency and the
functional currency of the Company and the majority of
its subsidiaries.
All amounts in the financial statements have been
rounded to the nearest million dollars, except as
indicated, in accordance with the ASIC Corporations
Instrument 2016/191.
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Financial performance
02 Segment information
Fortescue’s chief operating decision maker is identified as the Core Leadership Team (CLT) which comprises the
Chief Executive Officer, Deputy Chief Executive Officer, Chief Financial Officer and Chief Operating Officer. The CLT
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 income
Finance expenses
Depreciation and amortisation
Exploration, development and other
Profit before tax
Income tax expense
Net profit after tax
(a) Geographical information
Note
7
7
5, 6
6
14
2020
US$m
8,375
50
(272)
(1,400)
(63)
6,690
(1,955)
4,735
2019
US$m
6,047
26
(279)
(1,196)
(29)
4,569
(1,382)
3,187
Fortescue operates predominantly in the geographical location of Australia, and this is the location of the vast
majority of the Group’s assets. In presenting information on the basis of geographical segments, segment revenue is
based on the geographical location of customers.
Revenues from external customers
China
Other
(b) Major customer information
2020
US$m
12,126
694
12,820
2019
US$m
9,260
705
9,965
Revenue from two customers amounted to US$1,754 million and US$1,395 million respectively (2019: US$1,753 million
and US$1,451 million), arising from the sale of iron ore and the related shipment of product.
80 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Financial performance
03 Operating sales revenue
Iron ore revenue
Provisional pricing adjustments - iron ore
Total iron ore revenue1
Shipping revenue
Provisional pricing adjustments - shipping revenue
Total shipping revenue1
Other revenue²
Operating sales revenue
2020
US$m
11,721
(140)
11,581
1,192
4
1,196
43
12,820
2019
US$m
7,699
1,087
8,786
1,140
37
1,177
2
9,965
¹Certain sales contracts are provisionally priced at the initial revenue recognition (bill of lading) date, with the final settlement price based on a pre-
determined quotation period. Operating sales revenue from these contracts each comprise two parts:
(i) Iron ore revenue and shipping revenue recognised at the bill of lading date at current prices; and
(ii) Provisional pricing adjustments which represent any difference between the revenue recognised at the bill of lading date and the final settlement price.
Shipping revenue and the provisional pricing adjustments to shipping revenue are recognised over the period during which the shipping service has
been provided.
²Other revenue includes towage services provided by Fortescue (commenced in September 2019) which is recognised as performed.
04 Other income
Net foreign exchange gain
Other
05 Cost of sales
Mining and processing costs
Rail costs
Port costs
Shipping costs
Government royalty
Depreciation and amortisation
Other operating expenses
2020
US$m
52
6
58
2020
US$m
1,938
186
169
1,190
845
1,383
31
5,742
2019
US$m
110
-
110
2019
US$m
1,829
190
176
1,082
651
1,184
3
5,115
Total employee benefits expense included in cost of sales and administration expenses is US$869 million (2019:
US$673 million).
Fortescue Metals Group Ltd Annual Report FY20 81
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Financial performance
06 Other expenses
Administration expenses
Exploration, development and other
Depreciation and amortisation
Fair value change in derivatives
Other
07 Finance income and finance expenses
Finance income
Interest income
Finance expenses
Interest expense on borrowings and lease liabilities
Loss on early debt redemption
Interest on prepayment
Other
08 Earnings per share
(a) Earnings per share
Basic
Diluted
2020
US$m
114
63
17
30
-
224
2020
US$m
50
50
209
16
13
34
272
2020
cents
153.9
153.2
(b) Reconciliation of earnings used in calculating earnings per share
US$m
Profit attributable to the ordinary equity holders of the Company used in
calculating basic and diluted earnings per share
4,735
2019
US$m
95
29
12
-
2
138
2019
US$m
26
26
218
-
32
29
279
2019
cents
103.1
102.9
US$m
3,187
(c) Weighted average number of shares used as denominator
Number
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
3,077,324,924
3,090,462,322
Adjustments for calculation of diluted earnings per share:
Potential ordinary shares
12,713,541
8,142,063
Weighted average number of ordinary and potential ordinary shares used
as the denominator in calculating diluted earnings per share
3,090,038,465
3,098,604,385
(d) Information on the classification of securities
Share rights granted to employees under the Fortescue incentive plan are considered to be potential ordinary shares
and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
Details relating to the share rights are set out in note 18.
82 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management
Fortescue’s capital management policy supports its strategic objectives and provides a framework to maintain
a strong capital structure to deliver consistent returns to its shareholders and sustain future developments and
expansion of the business.
Fortescue’s capital includes shareholders’ equity, reserves and net debt. Net debt is defined as a combination of
cash and cash equivalents, borrowings and lease liabilities.
Borrowings
Lease liabilities
Cash and cash equivalents
Net debt
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Capital management involves a continuous process of:
Note
9(a)
9(a)
9(b)
2020
US$m
4,234
879
(4,855)
258
13,231
13
13,244
2019
US$m
3,379
573
(1,874)
2,078
10,588
13
10,601
• Evaluating capital requirements against the risks arising from Fortescue’s activities and its operating environment
• Raising, refinancing and repaying debt
• Development, maintenance and implementation of the dividend policy, including the dividend reinvestment plan.
To achieve its primary capital management objective of maintaining a strong capital structure, Fortescue has
developed target ranges for a number of financial indicators. These indicators include gearing, net gearing, debt to
Underlying EBITDA and interest coverage ratio, and are monitored together with a number of other financial and
non-financial indicators. Target ranges for the financial ratios vary upon the investment and commodity cycles.
During periods of intensive investment, for example expansion programs, or a commodity downturn, the capital
management policy contemplates interim ratio levels returning to a targeted longer term level. Interim levels
acknowledge and consider the requirements, in certain circumstances, for remedial actions to be taken.
(a) Borrowings and lease liabilities
Senior unsecured notes
Syndicated term loan
Revolving credit facility
Lease liabilities
Total current borrowings and lease liabilities
Senior unsecured notes
Syndicated term loan
Revolving credit facility
Lease liabilities
Total non-current borrowings and lease liabilities
Total borrowings and lease liabilities
2020
US$m
24
8
9
145
186
2,583
585
1,025
734
4,927
5,113
2019
US$m
16
22
-
48
86
1,985
1,356
-
525
3,866
3,952
Fortescue Metals Group Ltd Annual Report FY20 83
OverviewCorporate GovernanceOverview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management (continued)
(a) Borrowings and lease liabilities
(i) Senior unsecured notes
On 6 September 2019, Fortescue completed a US$600 million offering of senior unsecured notes (Notes) at an
interest rate of 4.5 per cent, maturing 15 September 2027. Proceeds from the Notes were applied to the partial
repayment of US$600 million of the outstanding US$1.4 billion 2022 syndicated term loan. The Notes rank pari passu
with all existing and future senior unsecured indebtedness.
As at 30 June 2020 the Company had the following senior unsecured notes on issue:
Date of issue
Date of maturity
Non-call
period
Face value
US$m
Carrying value
US$m
Coupon rate
%
Currency
May 2017
May 2017
May 2022
May 2024
March 2018
March 2023
5 years
7 years
5 years
September 2019
September 2027
8 years
750
750
500
600
751
749
505
602
4.750
5.125
5.125
4.500
USD
USD
USD
USD
2,600
2,607
Fortescue’s listed debt instruments are classified as level 1 financial instruments in the fair value hierarchy with their
fair values based on quoted market prices at the end of the reporting period. Refer to note 11(d).
(ii) Syndicated term loan
On 26 September 2019, Fortescue completed a partial repayment and extension of maturity of the syndicated term
loan. The partial repayment comprised US$600 million of proceeds from the September 2019 senior unsecured notes
(disclosed above) and a further US$186 million from operating cash flows. The syndicated term loan is now due to
mature in June 2025, and as at 30 June 2020 had a carrying value of US$593 million (30 June 2019: US$1,378 million)
with a coupon rate linked to LIBOR plus a fixed margin. The facility has principal repayment of one per cent per
annum with early repayment of the facility at Fortescue’s option.
(iii) Revolving credit facility
The revolving credit facility was drawn in full on 2 April 2020 for proceeds of US$1,025 million, and on 8 June 2020
the Company completed an extension of the facility’s maturity date to 28 July 2023. Interest accrues based on a
variable rate linked to LIBOR plus a fixed margin and is payable at the end of the interest period selected (either one,
two, three or six months), with the principal due at maturity. Fortescue elected to repay the full amount drawn on the
revolving credit facility of US$1,025 million plus accrued interest on 29 July 2020. The facility remains available for
redraw until maturity.
(iv) Lease liabilities
The Group enters into contractual arrangements for the leases of mining equipment, vehicles, buildings and other
assets. Typically, the duration of these contracts is for periods of between two and five years, some of which include
extension options and are recognised within lease liabilities. Refer to note 23(x) for details of the impact on adoption
of AASB 16 Leases.
Expense relating to short-term leases
Expense relating to leases of low-value assets that are not shown above as
short-term leases
Expense relating to variable lease payments not included in the
measurement of lease liabilities
Future cashflows for leases not yet commenced
84 Fortescue Metals Group Ltd Annual Report FY20
2020
US$m
2019
US$m
96
1
40
45
-
-
-
-
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management (continued)
a) Borrowings and lease liabilities (continued)
(v) Summary of movements in borrowings and lease liabilities
Senior
unsecured notes
US$m
Syndicated
term loan
US$m
Revolving
credit facility
US$m
Lease
liabilities
US$m
Balance at 1 July 2018
Additions
Interest expense
Interest and lease repayments
Foreign exchange gain
Repayment
Balance at 30 June 2019
Initial recognition¹
Additions²
Interest expense
Payments
Transaction costs
Foreign exchange gain
Balance at 30 June 2020
1,997
-
105
(101)
-
-
2,001
-
600
127
(113)
(8)
-
2,607
1,383
-
72
(63)
-
(14)
1,378
-
-
33
(830)
12
-
593
-
-
-
-
-
-
-
-
1,025
9
-
-
-
1,034
Total
US$m
3,975
51
227
(280)
(7)
(14)
3,952
237
1,816
231
595
51
50
(116)
(7)
-
573
237
191
62
(177)
(1,120)
-
(7)
879
4
(7)
5,113
1 Refer to note 12 for movements in right of use assets and note 23(x) for details on the transition to AASB 16.
²Additions to lease liabilities and right-of-use assets (refer note 12) represent non-cash financing and investing activities of the Group.
Information about Fortescue’s exposure to interest rate risk and foreign exchange rate risk is disclosed in note 11.
Fortescue Metals Group Ltd Annual Report FY20 85
OverviewCorporate GovernanceOverview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportRemuneration ReportCorporate Directory
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management (continued)
(b) Cash and cash equivalents
Cash at bank
Short term deposits
2020
US$m
3,074
1,781
4,855
Cash and cash equivalents do not have any restrictions by contractual or legal arrangements.
(c) Cash flow information
(i) Reconciliation of profit after income tax to net cash inflow from operating activities
2020
US$m
4,735
1,400
63
41
19
16
(2)
18
(81)
71
380
(56)
(42)
(486)
72
311
(44)
6,415
Net profit after tax
Depreciation and amortisation
Exploration, development and other
Share-based payment expense
Net unrealised foreign exchange loss/(gain)
Cost of early debt repayment
Rehabilitation expenditure
Depreciation in inventory
Other non-cash items
Working capital adjustments:
Increase in payables
Decrease/(increase) in receivables
Increase in inventories
Increase in other assets
Decrease in deferred income
Increase in provisions
Increase in provision for income taxes payable
(Decrease)/increase in deferred tax liabilities
Net cash inflow from operating activities
86 Fortescue Metals Group Ltd Annual Report FY20
2019
US$m
1,655
219
1,874
2019
US$m
3,187
1,196
29
21
(7)
-
(38)
90
(60)
308
(802)
(276)
(9)
(309)
38
923
82
4,373
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management (continued)
(d) Contributed equity
(i) Share capital
Issued
shares
Treasury
shares
Contributed
equity
Issued
shares
Treasury
shares
Contributed
equity
Number
Number
Number
US$m
US$m
At 1 July 2018
3,113,798,151
(1,227,861)
3,112,570,290
1,296
Purchase of shares under
employee share plans
Employee share awards
vested
Purchase of shares under
share buy-back program
-
-
(9,864,138)
(9,864,138)
9,581,318
9,581,318
-
-
(34,833,233)
-
(34,833,233)
(101)
At 30 June 2019
3,078,964,918
(1,510,681)
3,077,454,237
1,195
Purchase of shares under
employee share plans
Employee share awards
vested
-
-
(8,017,231)
(8,017,231)
8,277,348
8,277,348
-
-
At 30 June 2020
3,078,964,918
(1,250,564)
3,077,714,354
1,195
(9)
(28)
23
-
(14)
(42)
28
(28)
US$m
1,287
(28)
23
(101)
1,181
(42)
28
1,167
(ii) Issued shares
Issued shares are fully paid and entitle the holders to one vote per share and the rights to participate in dividends.
Ordinary shares participate in the proceeds on winding up of the Company in proportion to the number of shares held.
(iii) Treasury shares
Movements in treasury shares represent acquisition of the Company’s shares on market and allocation of shares
to the Company’s employees from the vesting of awards and exercise of rights under the employee share-based
payment plans.
(iv) Share buy-back program
During the period, the Company acquired none of its own shares on market under the share buy-back program which
was extended for a further 12 months on 11 October 2019 (2019: 34,833,233 shares). All shares purchased under the
share buy-back program were cancelled at 31 December 2019.
Fortescue Metals Group Ltd Annual Report FY20 87
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
09 Capital management (continued)
(e) Dividends
(i) Dividends paid during the year
Final fully franked dividend for the year ended 30 June 2019: A$0.24 per
share (30 June 2018: A$0.12 per share)
Interim fully franked dividend for the half-year ended 31 December 2019:
A$0.76 per share (31 December 2018: A$0.19 per share)
Special interim fully franked dividend for the half-year ended 31 December
2019: nil per share (31 December 2018: A$0.11)
Accelerated final fully franked dividend for the year ended 30 June 2020 of
nil per share (30 June 2019: A$0.60)
(ii) Dividends declared and not recognised as a liability
Final fully franked dividend: A$1.00 per share (2019: A$0.24 per share)
(iii) Franking credits
Franking credit account balance at the end of the financial year at 30%
(2019: 30%)
Franking credits/(debits) that will arise from the payment/(receipt) of
current tax payable/(receivable) as at the end of the year
Franking debits that will arise from the payment of the final dividend for
the year
2020
US$m
519
1,574
-
-
2,093
2020
US$m
2,233
2020
A$m
2,111
1,459
(1,320)
2,250
2019
US$m
271
416
241
1,277
2,205
2019
US$m
519
2019
A$m
930
1,077
(317)
1,690
88 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
10 Working capital
(a) Trade and other receivables
Trade debtors
GST receivables
Other receivables
Total current receivables
2020
US$m
475
30
38
543
2019
US$m
882
14
27
923
Trade receivables are recognised initially at fair value and subsequently at amortised cost using the effective
interest method, less an allowance for impairment, except for a significant portion of trade receivables with
embedded derivatives for provisional pricing which are subsequently measured at fair value through profit and loss
under AASB 9 Financial Instruments.
The Group applies the expected credit loss model prescribed by AASB 9 to trade and other receivables. A provision
for doubtful receivables is established based on the expected credit loss model and reviewed on an ongoing basis.
Expected credit losses on trade and other receivables held at amortised cost are insignificant and no provision has
been recognised at 30 June 2020 (2019: Nil).
The carrying value of the receivables approximates their fair value. Information about Fortescue’s exposure to foreign
currency risk, interest rate risk and price risk pertaining to the trade and other receivables balances is disclosed in
note 11.
Disclosures relating to receivables from related parties are set out in note 17.
(b) Trade and other payables
Trade payables
Other payables and accruals
Total current payables
Customer deposits
Total non-current payables
(c) Inventories
Iron ore stockpiles
Warehouse stores and materials
Total current inventories
2020
US$m
281
776
1,057
50
50
2020
US$m
512
316
828
2019
US$m
315
671
986
50
50
2019
US$m
466
306
772
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 2020 amounted to US$3,676 million (2019: US$3,379 million).
During the year, inventory write-offs of US$31 million (2019: US$9 million) were recognised in relation to specific
items of warehouse stores and materials that were identified as obsolete.
Fortescue Metals Group Ltd Annual Report FY20 89
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
11 Financial risk management
Fortescue is exposed to a range of financial risks, including market risk, credit risk and liquidity risk. Fortescue has
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 CLT. Periodically, the CLT 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 or diesel price (commodity price risk), interest rates (interest rate risk) or foreign
exchange rates (foreign currency exchange risk).
(i) Commodity price risk
Fortescue is exposed to commodity price risk, as its iron ore sales are predominantly subject to prevailing market
prices. Fortescue has limited ability to directly influence market prices of iron ore and manages the commodity price
risk through a focus on improving its cash margins and strengthening its 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’s arrival to the port at 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 provisional pricing
adjustments to revenue. At 30 June 2020, Fortescue had 5.7 million tonnes of iron ore sales (2019: 10.4 million tonnes)
that remained subject to provisional pricing, with the final price to be determined in the following financial year.
A 10 per cent movement in the realised iron ore price on these provisionally priced sales and derivatives would have an
impact on the Group’s profit of US$27 million (2019: 17 per cent movement would have an impact on the Group’s profit
of US$155 million), before the impact of taxation. This analysis assumes all other factors, including the foreign currency
exchange rates, are held constant.
During the year and in accordance with its risk management framework, Fortescue entered into commodity swap
contracts that fixed the price of a portion of its iron ore sales and diesel purchases to manage exposure to market risk.
No such derivative financial instruments were entered into in the prior year.
(ii) Interest rate risk
The Group’s interest rate risk arises from variable rates on the lease liabilities relating to the ore carriers and, to a
lesser extent, changes in rates applicable to the short term deposits forming part of cash and cash equivalents.
Fortescue’s policy is to reduce interest rate risk over the cash flows on its long term debt funding through the use of
fixed rate instruments whenever appropriate.
Fortescue’s variable rate financial assets and liabilities at the end of the financial year are summarised below:
Cash and cash equivalents
Syndicated term loan
Revolving credit facility
Lease liabilities
90 Fortescue Metals Group Ltd Annual Report FY20
Note
9(b)
9(a)
9(a)
2020
US$m
3,074
(593)
(1,034)
(367)
1,080
2019
US$m
1,655
(1,378)
-
(387)
(110)
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
11 Financial risk management (continued)
(a) Market risk (continued)
Management analyses the Group’s interest rate exposure on a regular basis by simulating various scenarios which take
into consideration refinancing, renewal of existing positions, alternative financing options and hedging.
A change of 100 basis points in interest rates in variable instruments would have an impact on the Group’s profit of
US$11 million (2019: a change of 100 basis points would impact profit by US$1 million), before the impact of taxation.
This analysis assumes that all other factors remain constant, including foreign currency rates.
(iii) Foreign currency exchange risk
Fortescue operates in Australia with a significant portion of its operating costs and capital expenditure incurred and paid
in Australian dollars, and as such, is exposed to the movements in the Australian dollar exchange rate.
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 or structured foreign currency option
arrangements (i.e. collars) to fix a portion of the Group’s Australian dollar exposure to within a Board approved range.
The Group has not applied hedge accounting to any of these contracts during the year. At 30 June 2020, the Group had
option collars in place for a total notional amount of US$180 million (2019: US$200 million) and a strike range between
0.63 and 0.67 USD:AUD exchange rate (2019: 0.67 and 0.70 USD:AUD). All contracts are set for maturity within two months
(2019: three months) of year end.
The carrying amounts of the financial assets and liabilities denominated in Australian dollars (AUD) and Chinese yuan
(CNY) (expressed in US dollars), are set out below:
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total financial assets
Financial liabilities
Borrowings and lease liabilities
Trade and other payables
Current tax payable
Total financial liabilities
AUD denominated
CNY denominated
2020
US$m
2019
US$m
2020
US$m
2019
US$m
871
39
4
914
442
804
1,024
2,270
697
28
4
729
129
814
762
1,705
141
-
-
141
1
24
-
25
1
-
-
1
-
-
-
-
A change of two per cent in the Australian dollar exchange rate would have a net impact on the Group’s profit of
US$27 million (2019: a change of two per cent would have an impact of US$4 million), before the impact of taxation.
A change of two per cent in the Chinese yuan exchange rate would have a net impact on the Group’s profit of
US$2 million (2019: a change of two per cent would have an impact of US$0.02 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, deposits with banks
and financial institutions and receivables from customers.
Contracts for sales allow for pricing mechanisms in which the price can be finalised over multiple periods. On this basis
the Group does not consider in the first instance that the ageing of receivables is an indicator of risk of default, rather an
indication of the contractual terms and conditions agreed within the sales contract.
Fortescue Metals Group Ltd Annual Report FY20 91
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
11 Financial risk management (continued)
(b) Credit risk (continued)
At 30 June 2020, Fortescue had US$7 million (2019: US$6 million) of trade receivables which have not been settled
within the normal terms and conditions agreed with the customer. The Group applies a forward-looking expected
credit loss model. To measure the expected credit losses, trade receivables have been grouped based on shared credit
risk characteristics. Fortescue allocates each group of trade receivables to a credit risk grade based on data that is
determined to be predictive of the risk of loss including but not limited to external ratings and available press information
about customers. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk
of default and are aligned to external credit rating definitions from agencies. The Group assesses expected credit losses
by considering the risk of default modified for credit enhancements such as letters of credit obtained. On this basis, the
resulting expected credit loss on trade receivables is not material.
The Group has assessed the impact of COVID-19 and its potential to affect customers’ repayment ability. Major customers
have not been adversely impacted by COVID-19 with no extension of credit terms requested and therefore no material
risk of loss exists due to COVID-19 in Fortescue’s trade receivables exposure.
Fortescue has not recognised any bad debt expense from trading counterparties in the years ended 30 June 2020 and
30 June 2019.
The exposure to the credit risk from cash and short-term deposits held in banks is managed by the Group’s treasury
department and monitored by the CFO. Fortescue minimises the credit risks by holding funds with a range of financial
institutions with credit ratings approved by the Board.
(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.
Fortescue 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 its assets and liabilities.
The table below analyses Fortescue’s financial liabilities into relevant maturity groupings based on the period to the
contracted maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than
6 months
US$m
6 to 12
months
US$m
1 to 2
years
US$m
2 to 5
years
US$m
Over
5 years
US$m
Total
contractual
cash flows
US$m
Carrying
amount
US$m
30 June 2019
Trade and other payables
1,749
Borrowings
Lease liabilities
Lease expenditure
commitments
Effect of discounting
83
26
50
(24)
1,858
30 June 2020
Trade and other payables
2,081
Borrowings
Lease liabilities
Lease expenditure
commitments
95
90
119
-
97
22
46
(24)
119
-
89
55
81
Effect of discounting
(29)
(26)
-
180
60
105
(45)
240
50
936
110
158
(48)
50
3,615
87
207
(120)
3,752
-
3,131
207
324
(117)
-
-
378
593
(215)
378
-
670
417
649
(232)
1,798
3,379
573
1,799
3,975
1,001
1,001
-
6,775
5,750
2,131
4,234
879
2,131
4,921
1,331
1,331
-
Management monitors rolling forecasts of the Group’s cash and overall liquidity position on the basis of expected cash flows.
2,266
144
1,096
3,338
1,087
8,383
7,244
92 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Capital management
11 Financial risk management (continued)
(d) Fair values
The carrying amounts and estimated fair values of all the Group’s financial instruments recognised in the financial
statements are materially the same, with the exception of Fortescue’s listed debt instruments. The senior unsecured
notes are classified as level 1 financial instruments in the fair value hierarchy, with their fair values based on quoted
market prices at the end of the financial year, as outlined below.
Senior unsecured notes
2020
2019
Carrying value
Fair value
Carrying value
Fair value
US$m
2,607
US$m
2,662
US$m
2,001
US$m
2,071
The Group enters into derivative financial instruments (foreign currency options and commodity swap contracts) with
various counterparties, principally financial institutions with investment-grade credit ratings. It also recognises trade
receivables in relation to its provisionally priced sales contracts at fair value. All derivatives and provisionally priced
trade receivables are valued using valuation techniques which employ the use of market observable inputs, such as
foreign exchange spot and forward rates, yield curves of the respective currencies, interest rate curves and forward rate
curves of the underlying commodity. Accordingly, these instruments are classified as Level 2. Refer to note 10(a) for the
fair value of provisionally priced trade receivables as at 30 June 2020.
For all fair value measurements and disclosures, the Group uses the following levels to categorise the method used:
Level 1: the fair value is calculated using quoted prices in active markets for identical assets and liabilities.
Level 2: the fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data. The Group does not have any
financial assets or liabilities in this category.
For financial instruments that are carried at fair value on a recurring basis, the Group determines whether transfers
have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers
between levels during the year.
Fortescue Metals Group Ltd Annual Report FY20 93
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Key balance sheet items
12 Property, plant and equipment
Plant and
equipment
US$m
Land and
buildings
US$m
Exploration
and
evaluation
US$m
Assets
under
development
US$m
Right of use assets
Development
US$m
Plant and
equipment
US$m
Land and
buildings
US$m
Total
US$m
Net carrying value
At 1 July 2018
Transfers of assets
Additions
Disposals
Depreciation
Changes in restoration
and rehabilitation
estimate2
Other
At 30 June 2019
Cost
Accumulated
depreciation
Net carrying value
10,995
678
12
(8)
744
20
-
-
(980)
(114)
-
(7)
-
-
10,690
650
17,154
1,062
(6,464)
(412)
At 1 July 2019
10,690
650
Initial recognition1
Transfers of assets
Additions
Disposals
(729)
383
-
(15)
-
14
-
-
Depreciation
(1,031)
(68)
Changes in restoration
and rehabilitation
estimate2
Other
At 30 June 2020
Cost
Accumulated
depreciation
-
-
-
-
9,298
596
16,775
1,075
857
(391)
89
-
-
1
(17)
539
539
-
539
-
(6)
107
(14)
-
-
-
626
626
301
(366)
954
-
-
-
-
889
889
3,292
53
-
-
(189)
146
1
3,303
4,751
-
(1,448)
3,303
-
31
-
-
889
-
(427)
1,890
(2)
-
-
(8)
2,342
2,342
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
871
-
184
(22)
84
-
25
-
16,189
(6)
1,055
(8)
(1,283)
147
(23)
16,071
24,395
(8,324)
16,071
226
(5)
2,206
(53)
(185)
(122)
(10)
(1,416)
52
-
3,201
4,833
-
-
911
1,157
-
-
99
108
52
(8)
17,073
26,916
(7,477)
(479)
-
-
(1,632)
(246)
(9)
(9,843)
¹ Reclassification of finance lease assets (US$729 million) to right of use assets. Refer to note 9 for movements in lease liabilities and note 23(x) for details on the
transition to AASB 16.
² Refer to note 13(a) for movements in the restoration and rehabilitation provision.
Transfers of assets were made between the categories of property, plant and equipment, intangible assets, exploration and
evaluation, development expenditure and right of use assets.
94 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Key balance sheet items
13 Provisions
Employee benefits
Restoration and rehabilitation
Total current provisions
Employee benefits
Restoration and rehabilitation
Total non-current provisions
2020
US$m
260
17
277
2
736
738
(a) Provision for restoration and rehabilitation
Movements in the provision for restoration and rehabilitation during the financial year are set out below:
At 1 July
Changes in restoration and rehabilitation estimate
Unwinding of discount
Payments for restoration and rehabilitation activities
At 30 June
2020
US$m
706
52
(3)
(2)
753
2019
US$m
189
19
208
1
687
688
2019
US$m
591
147
6
(38)
706
The provision for restoration and rehabilitation has been made in full for all disturbed areas at the reporting date
based on current cost estimates for rehabilitation and infrastructure removal, discounted to their present value based
on expected timing of future cash flows.
Payments for restoration and rehabilitation activities exclude ongoing rehabilitation performed as part of normal operations.
Fortescue Metals Group Ltd Annual Report FY20 95
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Taxation
14 Taxation
For the year ended 30 June 2020, Fortescue continues to be a signatory to the Board of Taxation’s voluntary Tax
Transparency Code (TTC). The TTC recommends a number of additional tax disclosures to be publicly available, in two
separate parts. The Part A disclosure requirements are addressed in this note.
(a) Income tax expense
Current tax
Deferred tax
Income tax expense in the consolidated income statement
(b) Prima facie income tax expense reconciliation
Consolidated group
2020
US$m
1,996
(41)
1,955
2019
US$m
1,299
83
1,382
Fortescue operates in a number of jurisdictions and pays income taxes accordingly. The Company’s effective corporate
income tax rate is reflective of the statutory corporate income tax rates in each jurisdiction. The majority of the
Group’s taxes are paid in Australia consistent with the location of its mining operations. The Australian Group includes
Fortescue’s wholly owned Australian entities.
For the year ended 30 June 2020, the Group’s global effective tax rate was 29.2 per cent. This is in line with the Australian
corporate tax rate of 30 per cent.
Consolidated
group 2020
US$m
Australian
group 2020
US$m
Consolidated
group 2019
US$m
Australian
group 2019
US$m
Profit before income tax expense
Tax at the Australian tax rate of 30 per
cent (2019: 30 per cent)
Research and development
Adjustments in respect of income tax
expense of prior periods
Foreign exchange variations and other
transactions adjustments
Tax impact of overseas jurisdiction
Share based payments
Other
Income tax expense
Effective tax rate
6,690
2,007
(2)
(17)
(31)
6
(8)
-
1,955
29.2%
6,624
1,987
(2)
(20)
(31)
13
(8)
4
1,943
29.3%
4,569
1,371
(2)
33
(22)
-
(2)
4
1,382
30.3%
4,508
1,353
(2)
34
(22)
7
(2)
2
1,370
30.4%
96 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Taxation
14 Taxation (continued)
(c) Reconciliation of income tax expense to current tax payable/(receivable)
Consolidated group
Income tax expense in the consolidated income statement
Deferred tax expense
Current tax payable/(receivable) at 1 July
Tax payments made to tax authorities¹
Impact of foreign exchange on income tax payable²
Current tax payable/(receivable) at 30 June
2020
US$m
1,955
44
1,999
762
(1,687)
(50)
1,024
2019
US$m
1,382
(83)
1,299
(79)
(376)
(82)
762
1 In Australia, Fortescue pays pay as you go (PAYG) instalments based on a set rate, as advised by the Australian Taxation Office.
2 Fortescue’s income tax payments are made in the local currency of the country where taxes are due, being predominantly Australian Dollars.
(d) Deferred tax assets and liabilities
Deferred tax assets and liabilities represent the difference between the carrying value of assets and liabilities
compared to their income tax base. Deferred tax assets and liabilities are measured at the relevant tax rates enacted
for the reporting period. Fortescue’s main operations are in Australia and therefore the main taxable income arises
in Australia. The Company’s major deferred tax assets and liabilities also arise in Australia, predominantly relating to
capital investments in the Pilbara region.
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
Consolidated group
2020
US$m
712
(2,356)
(1,644)
2019
US$m
516
(2,204)
(1,688)
Fortescue Metals Group Ltd Annual Report FY20 97
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Taxation
14 Taxation (continued)
(d) Deferred tax assets and liabilities
Composition of and movements in deferred tax assets and liabilities during the year are set out below:
Temporary differences arising from
Exploration expenditure
Development
Property, plant and equipment¹
Inventories
Foreign exchange losses/(gains)
Provisions
Other financial liabilities
Other items
Deferred tax assets
Deferred tax liabilities
Charged / (credited) to
the income statement
Consolidated group
Consolidated group
Consolidated group
2020
US$m
2019
US$m
2020
US$m
2019
US$m
2020
US$m
2019
US$m
-
-
-
-
29
344
288
51
712
-
-
-
-
4
286
191
35
516
(169)
(597)
(148)
(588)
(1,400)
(1,309)
(147)
-
(39)
-
(4)
(139)
-
(16)
-
(4)
(2,356)
(2,204)
21
9
94
8
(25)
(35)
(97)
(16)
(41)
14
42
64
34
(4)
(48)
(9)
(10)
83
¹ The movement in deferred tax liabilities related to property, plant and equipment includes US$3 million credited to equity on adoption of AASB 16 Leases.
Refer to note 23(x).
(e) Unrecognised tax losses
At 30 June 2020, the Group had income tax losses with a tax benefit of US$36 million (2019: US$34 million) which are
not recognised as deferred tax assets. The Group recognises the benefit of tax losses only to the extent of anticipated
future taxable income or gains in relevant jurisdictions. These losses do not expire.
98 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Unrecognised items
15 Commitments and contingencies
(i) Capital commitments
Within one year
Between one and five years
Later than five years
Total commitments
(ii) Operating lease commitments
2020
US$m
1,018
147
-
1,165
2019
US$m
393
7
-
400
Operating lease commitments as at June 2019 amounted to US$176 million (Within one year: US$36 million, between
one and five years: US$128 million and more than five years: US$12 million). Refer to note 23(x) for details on the
transition to AASB 16 Leases.
(iii) Contingent assets and liabilities
Since 2012 Fortescue has been a respondent party to the native title claim to exclusive possession made by the
Yindjibarndi People over land which included Fortescue’s Solomon Hub (Warrie (formerly TJ) (on behalf of the
Yindjibarndi People) v State of Western Australia). The Full Federal Court handed down its decision on this matter on
18 October 2019, and upheld the original court ruling in favour of the Yindjibarndi People given in 2017. The original
ruling recognised the Yindjibarndi People's exclusive possession native title over parts of Fortescue’s Solomon Hub
mining tenure. On 15 November 2019, Fortescue lodged an application for special leave to the High Court of Australia
appealing the decision of the Full Federal Court. On 29 May 2020, the High Court refused Fortescue’s application for
special leave to appeal.
The decision of the Full Federal Court has no impact on Fortescue’s current or future operations or mining tenure at
the Solomon Hub, and the Company does not anticipate any material financial impact to the business as a result of
the decision of the Full Federal Court.
Fortescue remains open to negotiating a Native Title agreement to the benefit of all Yindjibarndi people on similar
terms to the agreements it has in place with other native title groups in the region. At the date of this report, no such
negotiations have commenced or claims for compensation been made.
Fortescue had no material contingent assets or contingent liabilities at 30 June 2020 or at the date of this report.
Fortescue occasionally receives claims arising from its activities in the normal course of business. It is expected
that any liabilities arising from such claims would not have a material effect on the Group’s operating results or
financial position.
16 Events occurring after the reporting period
On 24 August 2020, the Directors declared a final dividend of A$1.00 per ordinary share payable in October 2020.
Fortescue Metals Group Ltd Annual Report FY20 99
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
17 Related party transactions
(a) Subsidiaries and joint operations
Interests in significant subsidiaries and joint operations are set out in note 22.
(b) Key management personnel remuneration
Short term employee benefits
Share-based payments
Post employment benefits
2020
US$'000
5,874
5,783
122
11,779
2019
US$'000
5,465
4,984
129
10,578
Detailed information about the remuneration received by each key management person is provided in the
remuneration report on pages 117 to 154.
(c) Transactions and balances with other related parties
Transactions with joint operations partners
Other revenue
Balances at 30 June
Deferred joint venture contributions - current
Deferred joint venture contributions - non-current
Other receivables - current
2020
US$'000
9,281
2019
US$'000
4,436
251,388
-
4,122
117,545
154,972
2,314
The deferred joint venture contributions liability reflects the timing of cash call contributions to the Iron Bridge Joint
Venture by Fortescue and other joint operation partners.
18 Share-based payments
(a) Employee share rights plans
During the year ended 30 June 2020, Fortescue issued 1,261,819 (2019: 1,827,145) short term share rights and 3,180,213
(2019: 4,262,313) long term share 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.
Outstanding at 1 July
Share rights granted
Share rights forfeited or lapsed
Share rights converted or exercised
Outstanding at 30 June
100 Fortescue Metals Group Ltd Annual Report FY20
2020
Number
13,062,093
4,862,706
(447,602)
(3,024,035)
14,453,162
2019
Number
14,370,793
6,089,458
(3,127,678)
(4,270,480)
13,062,093
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
18 Share-based payments (continued)
(a) Employee share rights plans (continued)
The weighted average fair value of share rights granted during the year ended 30 June 2020 was A$8.80 per right
(2019: A$4.10) for the short term share rights and A$7.59 per right (2019: A$4.10) for the long term share rights. The
estimated fair value of the short term share rights was determined using a binomial option pricing model and the
estimated fair value of the long term share rights was determined using a combination of analytical approaches,
binomial tree and Monte Carlo simulation. The fair value estimation takes into account the exercise price, the effective
life of the right, 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 share rights granted during the year ended
30 June 2020 were:
• Share price: A$9.26 (2019: A$4.61)
• Exercise price: nil (2019: nil)
• Volatility: 112 per cent (2019: 43 per cent)
• Effective life: 2.3 years (2019: 1.9 years)
• Dividend yield: 6.5 per cent (2019: 6.6 per cent)
• Risk free interest rate: 0.7 per cent (2019: 1.9 per cent).
Details of share rights outstanding at 30 June 2020 are presented in the following table:
Exercise
price
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Remaining
contractual
life
Vesting conditions
A$
Number
Number
Years
Market
Non-market
Short term share rights 2016
Short term share rights 2017
Short term share rights 2018
Short term share rights 2019
Short term share rights 2020
Long term share rights 2016
Long term share rights 2017
Long term share rights 2018
Long term share rights 2019
Long term share rights 2020
-
-
-
-
-
-
-
-
-
-
217,238
217,238
444,435
444,435
454,126
454,126
1,024,646
1,024,646
1,244,189
-
864,835
864,835
852,573
852,573
2,342,317
3,875,603
3,133,200
-
-
-
14,453,162
3,857,853
10.5
11.5
12.3
13.5
14.5
10.5
11.5
12.3
13.3
14.5
-
-
-
-
-
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Fortescue Metals Group Ltd Annual Report FY20 101
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
18 Share-based payments (continued)
(b) 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
19 Remuneration of auditors
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
Network firms of PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements
Total auditor's remuneration
2020
US$m
41
2019
US$m
21
2020
US$'000
2019
US$'000
825
265
1,090
166
1,256
218
218
1,474
771
60
831
156
987
85
85
1,072
102 Fortescue Metals Group Ltd Annual Report FY20
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
20 Deed of cross guarantee
Fortescue Metals Group Ltd 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 ASIC Corporations (Wholly-
owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission.
Holding entity
• Fortescue Metals Group Ltd
Group entities
• FMG Pilbara Pty Limited
• Chichester Metals Pty Limited
• Pilbara Power Pty Limited
• FMG JV Company Pty Limited
• FMG Resources (August 2006) Pty Limited
• FMG Ashburton Pty Limited
• International Bulk Ports Pty Limited
• Pilbara Mining Alliance Pty Limited
• The Pilbara Infrastructure Pty Limited
• Fortescue Services Pty Limited
• FMG Solomon Pty Limited
• FMG Nyidinghu Pty Limited
• FMG Personnel Pty Limited
• FMG Personnel Services Pty Limited
• FMG Procurement Services Pty Limited
• CSRP Pty Limited
• Pilbara Gas Pipeline Pty Limited
• FMG Training Pty Limited
• Pilbara Marine Pty Limited
(a) Consolidated income statement, consolidated statement of other comprehensive income,
consolidated statement of financial position and consolidated statement of changes in equity
The consolidated income statement, consolidated statement of other comprehensive income and consolidated
statement of changes in equity for the year ended 30 June 2020 along with the consolidated statement of financial
position at 30 June 2020 for the closed group represented by the above companies are materially the same as that
of the Group.
Fortescue Metals Group Ltd Annual Report FY20 103
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
21 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
2020
US$m
290
9,722
10,012
1,136
65
1,201
8,811
1,167
12
7,632
8,811
2,101
2,101
2019
US$m
215
9,599
9,814
847
136
983
8,831
1,181
26
7,625
8,831
1,039
1,039
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:
• Investments in subsidiaries, associates and joint operations have been accounted for at cost.
• Profit for the year includes dividends received from subsidiaries of US$2,147 million (2019: US$956 million).
(b) Guarantees entered into by the parent entity
The parent entity is a party to the following guarantee:
• Deed of cross guarantee, as described in note 20.
No liability was recognised by the parent entity or the Group in relation to this guarantee.
(c) Contingent liabilities of the parent entity
The parent entity is a party to the legal proceedings disclosed in note 15(iii) but otherwise did not have any
contingent liabilities at 30 June 2020 or 30 June 2019.
104 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
22 Interests in other entities
(a) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following significant
subsidiaries, in accordance with the accounting policy described in note 23(a)(i):
Equity holding
Investment
Country of
incorporation
Class
of shares
2020
%
2019
%
2020
US$
2019
US$
Controlled entities
Chichester Metals Pty Limited
Australia
Ordinary
FMG International Pte Limited
Singapore
Ordinary
FMG International Shipping Pte Ltd
Singapore
Ordinary
FMG Iron Bridge Limited
Hong Kong
Ordinary
FMG Magnetite Pty Limited
Australia
Ordinary
FMG North Pilbara Pty Limited
Australia
Ordinary
FMG Pilbara Pty Limited
Australia
Ordinary
FMG Procurement Services
Australia
Ordinary
100
100
100
88
88
88
100
100
100
100
100
88
88
88
100
100
FMG Resources (August 2006) Pty
Limited
Australia
Ordinary
100
100
FMG Solomon Pty Limited
Australia
Ordinary
Karribi Developments Pty Limited
Australia
Ordinary
Pilbara Housing Services Pty Limited
Australia
Ordinary
Pilbara Power Pty Limited
Australia
Ordinary
The Pilbara Infrastructure Pty Limited
Australia
Ordinary
FMG Hong Kong Shipping Ltd
Hong Kong
Ordinary
FMG Personnel Services Pty Ltd
Australia
Ordinary
100
100
100
100
100
100
100
FMG Trading Shanghai Co., Ltd
China
Ordinary
100
100
100
100
100
100
100
100
100
1
1
209,053
209,053
1
1
43,557,023
43,557,023
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
129,665,444
129,665,444
1
1
5,860,000
5,860,000
Entities not included in the list of significant subsidiaries are deemed immaterial in relation to the Group.
(b) Joint operations
The consolidated financial statements incorporate Fortescue’s share in the assets, liabilities and results of the
following principal joint operations, in accordance with the accounting policy described in note 23(a)(ii).
Joint operations
Country of
incorporation
Holding entity
Principal activities
2020
2019
Participating interest %
Iron Bridge
Joint Venture
Glacier Valley
Joint Venture
Australia
FMG Magnetite Pty Ltd
Development of magnetite
assets and production of
magnetite concentrate
Australia
FMG North Pilbara Pty Ltd
Iron ore exploration
69
69
69
69
Fortescue Metals Group Ltd Annual Report FY20 105
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies
The principal accounting policies adopted in the
preparation of these consolidated financial statements
are set out below.
These have been incorporated in the financial statements
under the appropriate headings. Details of the joint
operations are set out in note 22(b).
(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 right 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, consolidated statement of
changes in equity and consolidated statement of
financial position 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.
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,
revenue and expenses.
106 Fortescue Metals Group Ltd Annual Report FY20
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 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) Employee share trust
The Group has formed a trust to administer its
employee share schemes. The trust is consolidated
as the substance of the relationship is that the trust is
controlled by the Group. Shares held by the share trust
are disclosed as treasury shares and deducted from
contributed equity.
(c) Foreign currency translation
Transactions in foreign currencies have been converted
at rates of exchange at the date of those transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated at the rates of exchange of
the reporting date, with the resulting gains and losses
recognised in the income statement, 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.
(d) Revenue recognition
The Group is principally engaged in the business of
producing iron ore and providing related freight/shipping
services. Revenue is measured at the amount the Group
expects to be entitled to in exchange for those goods or
services and is recognised at the point at which control
of the goods or services is transferred to the customer.
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(d) Revenue recognition (continued)
(i) Sale of products
Revenue from the sale of products is recognised when
control has passed 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.
The above conditions are generally satisfied when title
passes to the customer, typically on the bill of lading date
when iron ore is delivered to the vessel, or alternatively
on collection for port sales.
Revenue is recorded at the invoiced amounts however
the shipping service represents a separate performance
obligation, and is recognised separately from the sale of iron
ore over the period during which the shipping service has
been provided, along with any associated shipping costs.
Fortescue’s sales contracts, which also include shipping
services, may provide for provisional pricing of sales at
the time the product is delivered to the vessel with final
pricing determined using the relevant price indices on or
after the vessel’s arrival at the port of discharge. Under
AASB 9 the receivable asset is measured at fair value
through profit and loss.
(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.
(e) 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
performance obligations are satisfied.
Where deferred income is considered to contain a
financing component and if the period of time between
the receipt of the upfront cash and the satisfaction of the
future performance obligations is greater than 1 year, an
interest charge of the upfront amount will be recognised.
(f) 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. Income tax on the profit
or loss for the period comprises current and deferred tax.
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. Current income tax represents the expected
tax payable on the taxable income for the year and any
adjustments to tax payable in respect to previous years.
Where the amount of tax payable or recoverable is uncertain,
a provision is established based on the Group’s
understanding of applicable tax law at the time. Settlement of
these matters may result in changes to current and deferred
income tax if the settlement differs from the provision.
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.
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 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.
Fortescue and its wholly owned Australian controlled
entities have implemented the tax consolidation legislation
at 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 at 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 each corresponding tax
consolidated group.
Fortescue Metals Group Ltd Annual Report FY20 107
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(g) 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.
(h) Trade and other receivables
Trade and other receivables are recognised initially at
fair value and subsequently at amortised cost using
the effective interest method, less an allowance for
impairment, except for a significant portion of trade
receivables with embedded derivatives for provisional
pricing which are subsequently measured at fair value
through profit and loss under AASB 9.
Uncollectable amounts are determined using the
expected credit loss model. Collectability of trade and
other receivables is reviewed on a monthly basis. Total
receivables which are known to be uncollectable are
written off by reducing the carrying amount directly.
Significant financial difficulties of the customer,
probability that the customer will enter bankruptcy or
financial reorganisation and default or delinquency
in payments are considered indicators that the
receivable may not be collected. The amount of the
impairment allowance is the difference between the
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.
The amount of the impairment allowance is recognised in
the income statement within administration expenses.
When a receivable for which an impairment allowance
had been recognised becomes uncollectable 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.
(i) 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:
• Materials and production costs, directly attributable to
the extraction, processing and transportation of iron
ore to the existing location
• Production and transportation overheads
• Depreciation of property, plant and equipment used in
the extraction, processing and transportation of iron ore.
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.
(j) Financial assets
Fortescue classifies its financial assets into the following
categories: those to be measured subsequently at fair
value, being through either other comprehensive income
or through profit and loss and those that are to be held at
amortised cost.
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) Financial assets held at amortised cost
The Group classifies its financial assets as held at
amortised cost only if the asset is held within a business
model with the objective to collect the contractual cash
flows, and the contractual terms give rise to cash flows
that are solely payments of principal and interest. The
classification of financial assets held at amortised cost
applies to Fortescue’s loans and receivables. These
debt instruments are initially measured at fair value
and subsequently carried at amortised cost. 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. At the
end of each reporting period, loans and receivables are
reviewed for impairment.
(ii) Financial assets held at fair value through other
comprehensive income (FVOCI)
The Group’s classification of financial assets held
at fair value through other comprehensive income
applies to equity investments where the Group has
made the irrevocable election to present the fair value
gains or losses on revaluation of the asset in other
comprehensive income. This election can be made for
each investment; however, it is not applicable to equity
investments which are held for trading. These assets
are included in non-current assets unless management
intends to dispose of the investment within 12 months
of the reporting date. These instruments are recognised
at fair value, with changes in fair value being recognised
directly in other comprehensive income.
108 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(iii) Financial assets held at fair value through profit or
loss (FVPL)
This category comprises trade receivables including
the quotation period for the sale of iron ore, derivatives
(unless designated as effective hedging instruments)
and equity investments which are held for trading or
where the FVOCI election has not been applied. They are
carried on the balance sheet at fair value with changes
in fair value or dividend income recognised in profit or
loss with any associated changes in fair value recognised
in the income statement. The receivables relating to
quotation period for the sale of iron ore are recorded as
trade receivables.
(k) Financial liabilities
(i) Trade payables
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.
(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.
Borrowings are derecognised when the contractual
obligations are discharged, cancelled or expire, or when
the terms of an existing borrowing are substantially
modified. Any difference between the carrying amount of
a derecognised liability and the carrying amount of the
new liability is recognised in the income statement.
(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. Costs
required for dismantling and rehabilitation are included
in rehabilitation estimates. Further information on
rehabilitation is in note 23(o).
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 the income statement
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 the income statement
during the financial period in which they are incurred.
(iii) Depreciation
Depreciation of 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 leases are
depreciated over the shorter of the individual asset’s
useful life and the lease term.
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. The estimated useful lives for the
principal categories of property, plant and equipment
depreciated on a straight-line basis are as follows:
• Buildings 20 to 40 years
• Rolling stock 25 to 30 years
• Plant and equipment 2 to 20 years
• Rail and port infrastructure assets 40 to 50 years.
Fortescue Metals Group Ltd Annual Report FY20 109
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(l) Property, plant and equipment (continued)
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.
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.
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 mines.
(iv) Exploration and evaluation 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 and capitalised in
respect of each identifiable area of interest, and carried
forward to the extent that:
• Rights to tenure of the identifiable area of interest are
current.
• 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 within
exploration, development and other expenses in the
income statement.
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.
110 Fortescue Metals Group Ltd Annual Report FY20
(v) 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.
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 the
income statement 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 mines.
(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.
Financial Report
Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(m) Stripping costs (continued)
(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.
• 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 - accounting policy applied
until 30 June 2019
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 income
statement 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
the income statement on a straight-line basis over the
lease term.
Leases – accounting policy applied
from 1 July 2019
The Group enters into contractual arrangements for the
leases of mining equipment, vehicles, buildings and
other assets.
The nature of these arrangements can be lease contracts
or service contracts with embedded assets. Typically, the
duration of these contracts is for periods of between two
and five years, some of which include extension options.
Leases are recognised on the balance sheet as a right
of use asset, representing the lessee’s entitlement
to the benefits of the identified asset over the lease
term, and a lease liability representing the lessee’s
obligation to make the lease payments. Each lease
payment is allocated between its liability and finance
cost component. The finance cost is charged to the
income statement over the lease period so as to produce
a constant periodic rate of interest on the remaining
balance of the liability for each period. The right of use
asset is amortised on a straight-line basis over the
shorter of the useful life of the asset and lease term.
When the right of use asset is used in the extraction,
processing and transportation of ore, depreciation is
included in inventory.
Liabilities arising from contractual arrangements which
contain leases are initially measured at the present value
of the future lease payments. These payments include
the present value of fixed payments prescribed in the
contract; variable lease payments based on an index or
prescribed rate; amounts expected to be payable by the
lessor under residual value guarantees; and exercise
price of a purchase option if it is reasonably certain that
the option will be exercised.
Right of use assets are initially measured at the amount
of the initial lease liability plus any lease payments at or
before commencement date less incentives received,
plus any initial direct costs, and any costs required for
dismantling and rehabilitation. Right of use assets are
subsequently measured at cost less any accumulated
depreciation and accumulated impairment losses; and
any adjustment for remeasurement of the lease liability.
Lease liabilities are subsequently measured at present
value, adjusted for any variations to the underlying
contract terms.
Lease payments are discounted using the interest rate
implicit in the lease. If this rate cannot be determined, the
Group’s incremental borrowing rate is used, which is the
rate which the Group would have to pay to borrow the
funds necessary to obtain an asset of a similar value in
a similar economic environment over a similar term and
security.
Fortescue Metals Group Ltd Annual Report FY20 111
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(n) Leases – accounting policy applied
(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.
from 1 July 2019 (continued)
Payments for short term leases and low value assets are
recognised on a straight-line basis as an expense in the
income statement. Short term leases are for a period
of 12 months or less and contracts involving low value
assets typically comprise small items of IT hardware and
minor sundry assets.
(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 include decommissioning of
facilities, 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 24.
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
remeasured 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.
112 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(q) Finance costs
(s) Share-based payments
Finance costs principally represent interest expense
and are recognised as incurred except when
associated with major projects involving substantial
development and construction periods. In addition,
finance costs include losses arising on derecognition
of finance liabilities at above their carrying value,
unwinding of the discount on provisions and bank
charges.
Interest expense and other borrowing costs directly
attributable to major projects are added to the cost
of the project assets until such time as the assets
are substantially ready for their intended use or
sale. Where funds are 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.
(r) 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
Government 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. 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.
Share-based remuneration benefits are provided to
employees under Fortescue’s share rights plan, as set
out in note 18.
The fair value of rights is measured at grant date
and is recognised as an employee benefits expense
over the period during which the employees
become unconditionally entitled to the rights, with a
corresponding increase in equity.
The fair value at grant date is determined using an
option pricing model that takes into account the exercise
price, the term of the right, 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 right.
The fair value of the rights granted is measured to
reflect expected market vesting conditions, but excludes
the impact of any non-market vesting conditions (for
example, profitability). Non-market vesting conditions are
included in assumptions about the number of rights that
are expected to become exercisable. At each reporting
date, the entity revises its estimate of the number of
rights 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 the
income statement with a corresponding adjustment to
equity.
(t) 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.
(u) 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.
Fortescue Metals Group Ltd Annual Report FY20 113
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(v) Goods and Services Tax (GST)
Adoption of AASB 16
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.
(w) Comparatives
Where applicable, certain comparatives have been
adjusted to conform with current year presentation.
(x) New accounting standards and interpretations
(i) New accounting standards and interpretations
AASB 16 replaces existing leases guidance, including AASB
117 Leases and Interpretation 4 Determining whether an
Arrangement contains a Lease.
The new standard contains a comprehensive model for the
identification of lease arrangements and their treatment
in the financial statements of lessees. It applies a control
model for the identification of leases, distinguishing
between leases and service contracts on the basis of
whether there is an identified asset controlled by the
lessee.
AASB 16 removes the distinction between operating and
finance leases for lessees. Instead, all leases other than
short term and low value asset leases are recognised on
the balance sheet as a right of use asset, representing the
lessee’s entitlement to the benefits of the identified asset
over the lease term, and a lease liability representing the
lessee’s obligation to make the lease payments. For leases
recognised as operating leases under AASB 117, the lease
expense will be replaced by the amortisation of the right of
use asset and interest expense on the lease liability.
not yet adopted
Transition to AASB 16
Certain new accounting standards and interpretations
have been published that are not mandatory for the
30 June 2020 reporting period. Fortescue has reviewed
the standards and interpretations and concluded
that none of the new or amended standards have a
material effect on the Group’s accounting policies,
financial position or performance. These standards and
interpretations have not been early adopted.
(ii) 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 2019:
• AASB 16 Leases
The Group has amended its accounting policies
following the adoption of AASB 16, the details of which
have been disclosed below.
The Group initially adopted AASB 16 on 1 July 2019, using
the modified retrospective approach. The cumulative effect
of adopting AASB 16 was recognised as an adjustment to
the opening balance of retained earnings at 1 July 2019,
with no restatement of comparative information. The
impact of the current lease arrangements for the lease of
buildings, mining equipment and other assets has been
evaluated and the impact on the balance sheet on this date
was an increase in lease liabilities of US$149 million and
right of use assets of US$139 million, with the balance of
US$10 million being adjusted to retained earnings, net of
an adjustment of US$3 million for deferred tax.
The weighted average borrowing rate applied to the
Group’s lease liabilities recognised on the balance sheet as
at 1 July 2019 was 4.9 per cent.
114 Fortescue Metals Group Ltd Annual Report FY20
Financial Report Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
23 Summary of significant accounting policies (continued)
(x) New accounting standards and interpretations (continued)
Transition to AASB 16 (continued)
A reconciliation of operating lease commitments disclosed at 30 June 2019 to additional lease liabilities recognised as
at 1 July 2019 is provided in the table below.
Note
US$m
Operating Lease commitments disclosed as at 30 June 2019
Less: short-term leases not recognised as a liability
Leases to be discounted and accounted for under AASB 16
Discounted using the incremental borrowing rate at date of initial application
Add: Service contracts subsequently reassessed as leases
Lease liabilities identified as per AASB 16 at 1 July 2019
Add: Existing finance lease liabilities recognised as at 30 June 2019
9(a)(v)
Lease liability recognised as at 1 July 2019
Impact on current reporting period from adoption of AASB 16
176
(7)
169
149
88
237
573
810
Note
US$m
Lease liabilities recognised as per AASB 16 at 1 July 2019
Additional leases entered into during the period
Finance costs on leases identified under AASB 16
Payments for leases identified under AASB 16
Lease liabilities recognised as at 30 June 2020
Existing finance lease liabilities balance at 30 June 2020 recognised under AASB 117
and transitioned to AASB 16 at 1 July 2019
Total lease liabilities recognised as at 30 June 2020
9(a)(v)
237
184
16
(82)
355
524
879
Right of use assets recognised as at 1 July 2019
Additional right of use assets identified on subsequent assessment of
service contracts
Additional right of use assets recognised
Accumulated depreciation on right of use assets
Right of use assets recognised as at 30 June 2020
Existing right of use asset balance at 1 July 2019 recognised under AASB 1171
Depreciation on assets recognised under AASB 117 and transitioned to AASB 16
Note
US$m
139
87
187
(79)
334
729
(53)
Total right of use assets recognised as at 30 June 2020
12
1,010
¹ Original acquisition value of US$857 million and accumulated depreciation of US$128 million at time of adoption.
Fortescue Metals Group Ltd Annual Report FY20 115
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Notes to the consolidated financial statements
For the year ended 30 June 2020
Other
24 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 the income
statement may change where such charges are
determined by the units of production method, 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
116 Fortescue Metals Group Ltd Annual Report FY20
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 the income statement.
(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 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.
(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 the income statement.
(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.
(f) Revenue
The transaction price at the date control passes for sales
made subject to the provisional pricing mechanism
is estimated with reference to quoted index prices.
For sales where the final settlement price is yet to be
determined, the value of this revenue is adjusted by
considering tonnes subject to price finalisation at the end
of the period and applying the closing spot rate.
Financial Report 08
Remuneration
Report
From the Chair of the Remuneration
and People Committee Jennifer Morris OAM
On behalf of the Directors of Fortescue Metals Group Ltd, I am pleased to
present the Remuneration Report for the year ended 30 June 2020.
Safety
C1 Costs
2.4Total Recordable Injury
Frequency Rate
14% IMPROVEMENT
COMPARED TO FY19
US$
12.94
wmt
Production
Culture
178.2
mt shipped
6% HIGHER THAN FY19
96%
Participation in Safety
Excellence and Culture survey
Underlying
EBITDA
US$
8.38bn
38% HIGHER THAN FY19
Dividends
A$
1.76
Per share
+ 36 NET
PROMOTER SCORE
DIVIDENDS DECLARED
54% HIGHER THAN FY19
Dear Shareholders,
Fortescue’s Remuneration Strategy is
underpinned by our core Values and
performance culture which includes
setting challenging stretch targets,
striving to achieve them and rewarding
that achievement.
Our safety performance, production
levels, relative price realisation
improvements and continued focus on
costs in the current and prior years,
together with our successful
management of the COVID-19 pandemic
through temporary roster changes and
health protection measures saw the
Company deliver a strong performance
which resulted in executives being
rewarded through the vesting of both
short and long term incentives.
FY20 performance
The COVID-19 pandemic has had an
unprecedented impact on the
Australian economy and community. In
mt shipped
determining remuneration
outcomes for FY20, the Board
has recognised the exceptional
performance of the Fortescue
team during this extremely
challenging period.
From the outset, the Fortescue
leadership team prioritised the
health of our people, families and
communities in response to the
COVID-19 pandemic. A range of
measures was proactively
implemented and expanded
including working from home
arrangements, temporary changes
to our operational roster and
proactive health measures across
offices, villages and sites. We are
extremely proud of all our people
who have worked tirelessly in this
environment to sustain our
contribution to the Western
Australian and national economies
through the reliable and secure
supply of iron ore.
Safety is paramount to our culture as
we work towards achieving zero harm
and this year our rolling twelve-month
Total Recordable Injury Frequency
Rate (TRIFR) reduced by 14 per cent
to a record low of 2.4. Engagement
across the business remains strong,
demonstrated by a 96 per cent
participation rate in our annual Safety
Excellence and Culture survey. Against
this backdrop, Fortescue achieved a
record FY20 with net profit after tax of
US$4.7 billion.
We achieved our mining and
processing targets and upgraded our
shipment and cost targets to deliver
operating and financial performance
exceeding our top end of shipping
guidance for FY20. Customer demand
has remained strong with Fortescue’s
revenue per tonne increasing by
21 per cent compared to FY19, which
is higher than the 16 per cent increase
in the average Platts 62% CFR Index
over the same period.
118 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report This reflects the successful
execution of Fortescue’s integrated
operations and marketing strategy
and improved product mix.
Fortescue declared a final dividend
of A$1.00, bringing total dividends for
FY20 to A$1.76.
Our balance sheet is robust,
structured on low cost, investment
grade terms while maintaining
flexibility and capacity for future
growth, as we continue to deliver
enhanced shareholder returns.
Response to shareholder
feedback
In response to shareholder feedback,
the Board has focused on improving
transparency in remuneration
reporting. In this respect, it is
important to note:
• Upon the appointment of Elizabeth
Gaines as CEO, her total fixed
remuneration (TFR) was based
well below her predecessor. Last
year, reflecting her experience in
the role and proven performance,
increases were made to bring her
TFR closer to market competitive
levels. In an attempt to continue to
bring the CEO and Core
Leadership Team’s (CLT)
remuneration in line with market,
and taking into account their
performance and the delivery of
returns to our shareholders, an
increase to TFR levels is also
planned for FY21. The Board
believes this increase is
commensurate with Fortescue’s
strong Company performance and
reflects the need to attract and
retain a leadership team capable
of maximising long-term
shareholder returns.
• In response to feedback from
shareholders regarding last year’s
Long Term Incentive Plan (LTIP)
grants, we have amended our
remuneration review timelines to
seek annual shareholder approval
of the CEO’s LTIP grant.
FY20 remuneration
outcomes
The Board set aggressive stretch
targets for the FY20 Executive and
Senior Staff Incentive Plan (ESSIP),
to drive business operations,
financial performance and maximise
shareholder value. The FY20 ESSIP
performance conditions included
operational, people and culture and
individual strategic measures, with
the people and culture metric
recognising the importance of
supporting Fortescue’s unique and
differentiated culture. All stretch
targets were achieved in FY20, with
targets exceeded for safety,
production, cost and cashflow. For our
CLT, reflective of these results and
their strong performance against
individual objectives, the ESSIP was
awarded at 100% of stretch target
opportunity levels for FY20.
Vesting of the FY18 LTIP is assessed
over a three year performance period
of 1 July 2017 to 30 June 2020 against
Absolute Return on Equity (AROE),
Total Shareholder Return (TSR)
relative to the ASX100 Resources
comparator group and strategic
measures aligned with the Company’s
long-term objectives. The
performance conditions for the
FY18 LTIP were tested and vested at
100 per cent based on:
• The average AROE for the
performance period at 27.6 per cent
being well above threshold vesting
set at 15 per cent.
• TSR meeting the stretch target and
ranking at the 100th percentile with
a result of 245 per cent due to
outstanding share price growth
over the performance period. We
are proud to have achieved the
number one ranking in the
S&P/ASX 100 Index for total
shareholder returns over the three
years to 30 June 2020 of
266 per cent.
• Strategic measures are crucial to
driving innovation and growth
outcomes which support
Fortescue’s longevity and long-term
business success. Our strategic
metric was achieved at target with
100 per cent of share rights vesting
based on Iron Ore Growth and
Other Growth for the FY20 period.
No changes were made to executive
remuneration and there was no
increase to Non-Executive Director
fees during the financial year, with the
exception of the Board’s decision to
increase Mark Barnaba’s annual fees
to reflect his expanded responsibilities
and time commitment as Deputy Chair.
Further details of Mr Barnaba’s fee
increase is available in section 8 of
this Report.
During FY20, we reviewed the style and
content of our Remuneration Report.
The Board is confident that our new
streamlined approach to reporting and
disclosure will improve readability and
display stronger links between
Fortescue’s culture, success,
performance and reward outcomes. In
response to feedback from shareholders,
the Board also made the decision to
separate the Remuneration and
Nomination Committees in August 2019.
I invite you to read our Remuneration
Report and trust you will find that it
outlines the links between our strategy,
culture, performance and executive
remuneration outcomes. The
exceptional results delivered by the
Fortescue team are reflected in the
FY20 ESSIP and the FY18 LTIP, which
aligns with the Group’s financial
performance and shareholder returns.
My thanks to Sharon Warburton for her
unwavering commitment as Chair of
the Remuneration and People
Committee from 2016 until 2020.
On behalf of the Directors, we look
forward to welcoming you and
receiving your feedback at our
2020 AGM.
Yours sincerely,
Jennifer Morris OAM
CHAIR - REMUNERATION &
PEOPLE COMMITTEE
Fortescue Metals Group Ltd Annual Report FY20 119
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Contents
1.
Introduction and FY20 Key Management Personnel
2. Remuneration snapshot
3. Response to criticism raised over the FY19 report
4. Business performance
5. Remuneration outcomes
6. Incentive plan operation
7. Executive contract terms
8. Non-Executive Director remuneration
9. Remuneration governance
10. Statutory disclosures
120 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Introduction FY20 Key
Management Personnel
This report outlines the remuneration arrangements
for Fortescue’s Key Management Personnel (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’. Within this Remuneration
Report reference to Executives and
Core Leadership Team (CLT) includes
Executive Directors and Other Key
Management Personnel.
The information provided in this
Remuneration Report has been
prepared in accordance with
requirements under the Corporations
Act 2001 and Australian Accounting
Standards. This report forms part of
the Directors’ Report and unless
otherwise indicated the following
sections have been audited in
accordance with section 308 (3c) of
the Corporations Act 2001.
All Executives are paid in AUD. This
year and going forward we will report
the value of remuneration in USD in
line with the rest of the Annual Report,
unless otherwise stated. From year
to year, this may result in reporting
of remuneration that is affected by
foreign currency movements. In order
to assess the remuneration levels of our
Executives, each year, we will report:
• The contractual terms and currency
in which our Executives are paid (see
section 7)
• Whether any changes have been
made to Executive remuneration.
For this year only, we will provide
disclosures in USD and AUD to assist
with the transition to USD reporting
going forward.
The KMP of the Group
for FY20 were:
Non-executive Directors
Dr Andrew Forrest AO
Chairman
Mark Barnaba AM
Deputy Chair and Lead
Independent Director
Sharon Warburton
Deputy Chair
Until 31 March 2020
Dr Jean Baderschneider
Non-Executive Director
Penny Bingham-Hall
Non-Executive Director
Lord Sebastian Coe CH, KBE
Non-Executive Director
Jennifer Morris OAM
Non-Executive Director
Dr Cao Zhiqiang
Non-Executive Director
Dr Ya-Qin Zhang
Non-Executive Director
From 1 September 2019
Executive Directors
Elizabeth Gaines
Chief Executive Officer and
Executive Director
Other Key Management
Personnel (Executives)
Greg Lilleyman
Chief Operating Officer
Julie Shuttleworth
Deputy Chief Executive Officer
Ian Wells
Chief Financial Officer
There have been no changes to
KMP after the reporting date.
Fortescue Metals Group Ltd Annual Report FY20 121
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Remuneration
snapshot
Remuneration Strategy principles
2
Our Values drive our reward strategy, which seeks to:
• Build a high performance oriented culture that supports the achievement
of the Company’s strategic vision
• Attract, retain and motivate employees by providing market competitive
fixed remuneration and incentives.
Drive the right culture
and encourage high levels
of share ownership
Ensure the alignment of employee
and shareholder interests
Market competitive
remuneration
Attract and retain key talent with
remuneration competitive against
relevant comparable companies
Performance and
outperformance focus
Provide fair reward in line
with individual and company
achievements
Fit for purpose
Include flexibility to reflect clear
linkage to business strategy and the
cyclical nature of industry without
constraint by market practice
Strategic alignment
Support delivery of long-term
business strategy and growth
aspirations
Shareholder and
executive alignment
Rewarding sustained performance
and delivering awards aligned
with shareholder returns
Fortescue’s Values
Safety
Family
Empowerment
Frugality
Stretch targets
Integrity
Enthusiasm
Courage and
determination
Generating
ideas
Humility
122 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Remuneration framework components
Our remuneration framework is designed to support Fortescue’s Values
and bring to life our Remuneration Strategy.
Purpose
How that
component
drives our
Values and
Remuneration
Strategy
FY20
approach
Fixed component
Variable / At – risk component
Total Fixed Remuneration
(TFR)
Executive and Senior Staff
Incentive Plan (ESSIP)
Long Term Incentive Plan (LTIP)
Comprising base salary,
superannuation and
optional salary sacrifice
benefits.
• TFR is set to support the
execution of business
strategy based on
role, qualifications,
experience,
accountability and
responsibility.
Annual incentive opportunity that
awards against annual stretch
budget and objectives.
• Granted in share rights with
an elected amount (no more
than 50%) in cash to create
immediate shareholder
alignment.
• Performance assessed against
balanced scorecard.
Three year incentive opportunity
focused on growth strategy,
long-term priorities and alignment with
shareholder value creation.
• Share rights are granted at the start
of the performance period with value
realised at time of vesting.
• Vesting is subject to achievement of
stretch performance targets under
multiple measures.
• Share rights are exposed to
• Targets set at stretch levels to
promote outperformance with
cliff vesting.
movement in share price over
the three years ensuring strong
correlation with shareholder returns.
Performance measure breakdown
Performance measure breakdown
Operations (60%) – Safety, cost,
production, cashflow and revenue
People and culture (20%)
Strategic Individual KPIs (20%)
Project delivery, strategy
and business development
Total Shareholder Return (33%)
Average Return on Equity (33%)
Key Strategic Measures (34%)*
* Key Strategic Measures from FY20 will be assessed over a
three year performance period
Benchmarked against
median comparator group
or above for outstanding
performance.
Comparators: ASX 30,
ASX 50 and resources
companies in the ASX 100.
MINIMUM SHAREHOLDING REQUIREMENT
CEO: 200% of TFR, Other CLT: 200% of TFR, NEDs: 100% of base annual fee
The framework visualised
The following diagram sets out the remuneration structure and delivery timing for the CEO and other CLT.
TFR
ESSIP
LTIP
Base salary,
superannuation
and benefits
Balanced scorecard of
measures assessed over the
annual performance period
Share rights granted at the start of the performance period; vesting is based on
performance against TSR, AROE and key strategic measures assessed over the three
year performance period
Year 1
Year 2
Year 3
Share rights granted
following election of
equity portion by the
participant
Share rights (and cash, if elected)
vest to the extent stretch targets are
met (if the stretch targets are not
met, awards will lapse)
All awards, both vested and unvested,
are subject to malus/clawback
(as relevant), Board discretion and the
minimum shareholder policy
Fortescue Metals Group Ltd Annual Report FY20 123
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Remuneration mix
The graph below shows the remuneration mix for superior performance when stretch targets have been met for both
the CEO and other CLT.
CEO
28%
31%
41%
Other
CLT
0%
36%
27%
50%
37%
TFR
ESSIP (at risk)
LTIP (at risk)
Total at risk
72%
64%
100%
FY20 ESSIP Outcomes
Operations
People and
culture
Strategic
KPIs
E
C
N
A
M
R
O
F
R
E
P
E
M
O
C
T
U
O
STRETCH
TARGET
Awards made in relation to the
FY20 ESSIP reflect achievement of:
• Strong safety performance
• Above target financial and operational performance
• Improvements in the already high levels of safety culture
and employee engagement
• Substantial diversification and growth strategy progress
FY18 LTIP vesting outcomes
Share price over the last 3 years, A$/share
Measure Weighting % Outcome % Vesting %
33
33
34
TSR
AROE
Strategic
KPIs
Total
Capped
at
150
87.8
100
49.5
29.0
34.0
112.5
100
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$
Ju n-17
S ep-17
D ec-17
M ar-18
Ju n-18
S ep-18
D ec-18
M ar-19
Ju n-19
S ep-19
D ec-19
M ar-20
Ju n-20
124 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report
Response to feedback
on FY19 report
3
The Board has engaged with shareholders, proxy advisors and other stakeholders to further understand their
feedback at our FY19 Annual General Meeting (AGM). This section outlines the key issues and the steps taken to
address those issues or otherwise explain our rationale in response.
Remuneration
element
Issue raised
Response
TFR
ESSIP
Increases
to fixed
remuneration
for the CEO
and CLT
• Fortescue’s approach is to set fixed remuneration initially at a level reflecting
the individual’s experience that also allows for progressive increases as the
executive becomes more experienced in their role, subject to performance.
• In FY19, the Board believed it was appropriate to increase the CEO’s and other
CLT’s TFR to bring remuneration towards market median (noting the CEO’s
remuneration is still considerably below median and that of her predecessor)
in line with our strategy outlined in Section 2.
• No increase to CLT TFR was made in FY20.
Cliff vesting and
disclosure
• Incorporating cliff-vesting, which simply reflects the importance of stretch
targets, is a deliberate strategy at Fortescue to align and promote our core
value of setting stretch targets and our culture of outperformance.
• We will continue to provide disclosure of measures and targets where
commercial sensitivities do not preclude us from doing so.
Non-financial
measures used
in the ESSIP
• Fortescue’s Board recognises the importance of supporting the Company’s
strong, differentiated culture underpinned by its core Values, which is
fundamental to corporate success.
• Our operations, people and culture and strategic measures have financial and
quantifiable effects on the Company.
• While the financial performance metrics and targets are focused on
incentivising executives to deliver strong financial performance, the non-
financial measures provide a framework around how this performance should
be delivered. It would be against Fortescue’s culture to deliver strong financial
performance while having a poor safety record, occurrence of misconduct,
negligence, or inability to respond to unforeseen events.
• The Board believes that the strength of our values-based culture continues
to be a core contributor to our success and, accordingly, to remuneration
outcomes. As such, achievement of all measures, including non-financial,
ultimately have tangible financial benefits for Fortescue and its shareholders.
Fortescue Metals Group Ltd Annual Report FY20 125
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Remuneration
element
Issue raised
Response
LTIP
Adjustment to
the CEO’s LTI
performance
rights grant
Change
to annual
shareholder
approval for the
CEO’s LTIP
Use of measures
such as safety,
performance,
resource
management
and growth in the
LTIP
Disclosure
of strategic
measures in the
LTIP
• We have reviewed our remuneration review timelines and made adjustments
to ensure increases in TFR flow into the following performance year and are
not applied retrospectively to grants already approved by shareholders.
• At the 2018 AGM, Fortescue sought approval for the equity components of the
FY19, FY20 and FY21 ESSIP and LTIP grants to the CEO. We understand that
this is not in line with typical market practice.
• Having noted that feedback and in line with good governance and improved
transparency, the Board has determined that that the grants approved at the
2018 AGM are forgone. Instead, from 2019, the Board determined that it would
seek shareholder approval of the CEO’s equity grants on an annual basis.
• It is the Board’s view that having management focused on these measures is
integral to the long term success of Fortescue.
• Under the FY18 LTIP grant (which vested in FY20), performance targets
under the strategic measures component were set annually and performance
banked over the three year period of operation of the grant. Only one year of
the three year period was assessed against these measures. The FY19 and
FY20 performance years were directly linked to iron ore growth, diversification
and our growth strategy.
• The FY20 LTIP grant and onwards will be assessed against strategy execution
measures in line with milestones for delivery of strategic projects (explained
later in this Report) over a three year performance period.
• We have reviewed our approach and have provided greater transparency this
year.
• We are not always able to provide extensive disclosure regarding matters
which are commercially sensitive.
The Board will continue to take a pro-active approach to engagement with shareholders in FY21 and will continue
to address queries in a transparent manner.
126 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Business performance
a. FY20 performance and link to remuneration
4
The Fortescue team achieved excellent results in FY20 with significant
progress made on the delivery of our business strategy.
The results were underpinned
by improved safety outcomes,
operational excellence and the
successful execution of our
integrated operations and
marketing strategy.
In a year that has been impacted
by the unprecedented COVID-19
global health and economic crisis
Fortescue sustained our strong
contribution to the Western
Australian and national economies
through the reliable and secure
supply of iron ore to our customers.
In determining remuneration
outcomes, the Board considers all
measures including financial and
non-financial performance.
People and culture
Fortescue’s rolling twelve-month
TRIFR improved by 14 per cent from
2.8 at 30 June 2019 to a record low of
2.4 at 30 June 2020.
Safety is deeply ingrained in
our culture and our outstanding
engagement and commitment to
achieving global leadership in safety
was demonstrated by an excellent
participation rate of 96 per cent in
our annual Safety Excellence and
Culture survey. Our overall safety
culture remains strong and we are
confident in our ability to further
improve our safety culture as we
work towards achieving zero harm.
Operational performance
Fortescue’s outstanding operating
performance was sustained in
FY20 with mining, processing, rail
and shipping combining to deliver
record shipments of 178.2mt in FY20,
six per cent higher than FY19 and
exceeding the top end of our FY20
guidance of 177mt.
We leveraged the capability and
flexibility in our value chain to
achieve improved sales volumes,
while increasing the proportion of
higher margin products including
doubling the volume of our 60.1% Fe
West Pilbara Fines product during
FY20 to 17.9mt shipped.
Our full year C1 costs of
US$12.94/wmt reflected
our continued focus on cost
management and innovation to
maintain our industry leading
cost position.
In June 2020, we celebrated
the opening of our expanded
integrated operations centre, the
Fortescue Hive. The purpose-
built remote operations facility in
Perth brings together our entire
supply chain to deliver significant
safety, productivity, efficiency and
commercial benefits.
Financial performance
Fortescue’s outstanding financial
performance for FY20 was
underpinned by consistent and
predictable operating performance,
strong customer demand, record
shipments and an optimised product
mix to deliver higher margins. We
delivered a record net profit of
US$4,735 million, an increase of
49 per cent.
Fortescue’s balance sheet is
structured on low cost, investment
grade terms while maintaining
flexibility and capacity for future
growth. Our total debt at
30 June 2020 of US$5,113 million
is inclusive of US$879 million of
leases and represents gearing of
28 per cent.
Fortescue Metals Group Ltd Annual Report FY20 127
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Investing in growth
The strength of our operations
and balance sheet means we can
continue to reinvest in the business
and, importantly, invest in growth.
marketing as well as growth and
balance sheet management are
driving our excellent results and
delivering significant benefits for
our shareholders.
We are developing the Western Hub,
which includes deposits of high iron
content bedded iron ore and will be
home to the Eliwana mine. Eliwana
will contribute to Fortescue’s core
iron ore business as it underpins
the ramp up of our 60.1% Fe, West
Pilbara Fines product. The Eliwana
mine will contribute to maintaining
our low cost status, providing greater
flexibility to capitalise on market
dynamics.
The US$2.6 billion Iron Bridge
Magnetite Project is under
development and will deliver 22mtpa
of high grade 67% Fe magnetite
concentrate product, further
enhancing the range of products
available to our customers.
Since October 2019, Fortescue
and our partners have announced
investments in excess of
US$800 million in significant energy
infrastructure projects which will
increase our use of renewable
energy and will be a key contributor
to our pathway to achieve our
emissions reduction targets.
Shareholder value
Fortescue’s strong financial
performance and our clear strategic
focus on production, operations,
Our unwavering determination to
deliver shareholder returns through
dividends and investment in growth
was evident in FY20 with record fully
franked dividends of A$1.76 declared,
representing a 77 per cent pay-out
ratio of FY20 NPAT.
Over the three year period to 30 June
2020 we have achieved an Average
Return on Equity of 27.6 per cent
and Total Shareholder Return of
245 per cent, resulting in a percentile
ranking of 100 per cent against
comparator companies in the
ASX 100 Resources Index.
Sustainability
Fortescue is well positioned to
continue to deliver benefits to
all stakeholders, including our
customers, employees and the
communities in which we operate.
During the year, we made a total
global economic contribution of
A$17.2 billion and an additional
A$6.6 million in social investment.
We believe in supporting Aboriginal
communities through the provision
of training, employment and
business development opportunities,
through our Billion Opportunities
program, further details of which
are contained in the FY20
Sustainability Report.
As at 30 June 2020, 14 per cent of
employees at our Pilbara operations
are Aboriginal.
At Fortescue, our values of Family
and Safety serve as a constant
reminder to look out for our mates,
and this extends to supporting our
fellow Australians in their time of
need. Fortescue donated A$1 million
to the Minderoo Foundation Fire
Fund to provide immediate relief to
communities impacted by bushfires
and assist with long-term recovery
efforts. The Fortescue Family
raised a further A$250,000 for the
Australian Red Cross’ Disaster Relief
and Recovery Fund.
During the COVID-19 pandemic, in
addition to supporting our people
and their families, we focused on
practical solutions to support our
communities, especially small
businesses, during this global health
and economic crisis. We made
donations to the Royal Flying Doctor
Service, Foodbank and Lifeline and
distributed over 1,300 care packages
to Aboriginal communities in the
Pilbara. Fortescue also actively
supported the Minderoo Foundation
initiative to procure and distribute
A$160 million of critical medical
supplies to the West Australian
healthcare sector and the expertise
of our procurement team, including
those based in China, was critical to
the success of this initiative.
128 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Safety
2.4
Total Recordable Injury
Frequency Rate
Production
178.2
mt shipped
Cost
US$
12.94
/wmt
Sustaining Capex
US$
690
m
Revenue
US$
12.82
bn
Culture
96%
Participation in Safety
Excellence and Culture Survey
The following graphs show our Group performance against key financial measures in FY20:
Cost
C1
US$/wmt
15.43
12.82
12.36
13.11
12.94
Production
wmt
169.4
170.4
169.8
167.7
178.2
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
Free cashflow
US$m
4,449
Revenue
US$m
12,820
3,328
9,965
6,887
704
FY18
FY19
FY20
FY18
FY19
FY20
Fortescue Metals Group Ltd Annual Report FY20 129
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
The graphs below shows Fortescue’s Underlying EBITDA vs ESSIP outcomes and TSR vs LTIP outcomes
over the last three years.
Underlying EBITDA vs ESSIP outcomes
)
m
$
S
U
(
A
D
T
I
B
E
g
n
i
y
l
r
e
d
n
U
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
140%
120%
100%
80%
60%
40%
20%
0%
m
u
m
i
x
a
m
f
o
%
a
s
a
d
r
a
w
a
P
S
S
E
e
g
a
r
e
v
A
I
T
L
C
r
o
f
y
t
i
n
u
t
r
o
p
p
o
2018
2019
2020
Underlying EBITDA (US$m)
Average ESSIP award as a % of maximum opportunity for CLT
TSR vs LTIP outcomes
)
%
(
R
S
T
250%
200%
150%
100%
50%
0%
100%
80%
60%
40%
20%
0%
)
%
(
s
e
m
o
c
t
u
o
g
n
i
t
s
e
v
I
T
L
3 years to
30/06/18
3 years to
30/06/19
3 years to
30/06/20
Vesting dates
Fortescue Metals Group
LTI vesting
130 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report
b. 5 year Group performance
Fortescue continues to deliver operational and financial improvements
across the business. Our performance against key financial measures for
FY20 and the five years FY16 - FY20 (inclusive) are set out below.
Underlying
EBITDA
Net profit
after tax
US$
8.38
bn
US$
4.74
bn
Return on
equity
40%
Dividends
1.76A$
Per share
Total tonnes shipped (wmt)
2020
178.2
Revenue from iron ore operations (US$m)
12,820
Underlying EBITDA (US$m)
Net profit/(loss) (US$m)
Underlying Return on Equity %
Gearing (book value of debt/debt + equity)
Dividends declared (A$ per share)
Share price at 30 June 2020 A$
Change in share price (A$)
Change in share price (%)
8,375
4,735
40
28
1.76
13.85
4.83
54
2019
167.7
9,965
6,047
3,187
31
27
1.14
9.02
4.63
105
2018
169.8
6,887
3,182
878
11
29
0.23
4.39
(0.83)
(16)
2017
170.4
8,335
4,744
2,093
23
31
0.45
5.22
1.72
49
2016
169.4
6,947
3,195
985
12
45
0.15
3.50
1.59
83
Fortescue Metals Group Ltd Annual Report FY20 131
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Remuneration outcomes
5
As reported in section 4, Fortescue has again delivered strong, consistent results against the majority of key targets for
FY20, underpinned by our values-based culture and the commitment of the entire Fortescue team.
Reflecting our strong Company performance, our CLT has achieved all stretch targets in the ESSIP and our LTIP has
vested at 100 per cent.
a. FY20 fixed remuneration changes
No changes were made to TFR in FY20 for the CLT. A market review of CLT fixed remuneration was undertaken in May
2020 as part of Fortescue’s broader annual salary review process. As a result of that review, and in order to remain
competitive against market peers, the Board has approved an increase to CLT fixed remuneration effective from 1 July
2020. Details of CLT fixed remuneration for FY21 will be reported in the FY21 Remuneration Report.
b. FY20 ESSIP performance outcomes
The ESSIP performance objectives and achievement outcomes in FY20 are shown in the table below:
Measure
Weighting
Details
Operations – 60%
Stretch
target
Stretch
target
met
Commentary
Safety*
12
Fortescue TRIFR
2.6
Yes
Production
C1 Cost
Cashflow
12
12
12
12
Revenue
Total iron ore tonnes
shipped
Achieve C1 cost
175mt
US$13.49/
wmt
Yes
Yes
Fortescue’s rolling twelve-month
TRIFR decreased by 14 per cent
from 2.8 at 30 June 2019 to a record
low of 2.4 at 30 June 2020
Record shipments of 178.2mt
delivered in FY20
Full year C1 costs of US$12.94/
wmt, inclusive of US$0.22/wmt
of COVID-19 related costs,
maintaining our industry leading
cost position
Sustaining capital
expenditure
62%
Achieve:
• EBITDA margin
• Increase in West Pilbara
Fines
• Increase shipments of
Fortescue high value
products
• Sell a portion of product
direct to Chinese
customers through
Fortescue’s wholly
owned Chinese trading
subsidiary
A number of the revenue targets
are market sensitive and therefore
specific targets have not been
disclosed.
Overall, the revenue measure has
been exceeded.
• Full year EBITDA margin of 65%
• Production of 60.1% Fe West
Pilbara Fines doubled during FY20
to 17.9mt shipped
• 118.3mt of Fortescue high value
products shipped
• 6.5mt of product sold directly to
customers in China.
People and Culture – 20%
People and
Culture
20
Measured through the
Safety and Culture Survey
Excellence as well as
Board assessment:
• Participation Rate
• Net Promoter Score
>90%
Positive
*In the event of a fatality no award is made for the Safety KPI
The non-IFRS financial information included in the table above has not been subject to audit.
132 Fortescue Metals Group Ltd Annual Report FY20
Yes
The Safety Excellence and Culture
Survey participation rate of 96%
and net promotor score of +36
both exceeded stretch targets.
Remuneration Report Measure
Weighting
Details
Strategic KPIs – 20%
Stretch
target
met
Commentary
CLT KPIs
20
• Eliwana and Iron Bridge (IB) committed
Yes
• Both projects remain on
capital and scheduling remains on
target
• Achieve IB Board approved project
funding solution, incorporating project
debt facilities
• Finalise the strategy for the Pilbara
Energy Connect (PEC) project for Board
consideration
• Develop a strategy and business case
for industrial autonomy for Board
consideration
• Identify and progress international iron
ore opportunities, including West Africa
schedule with funding solutions
identified for Iron Bridge
• PEC approved and announced to
the market in October 2019
• Industrial autonomy strategy and
business case developed with
key initiatives ongoing
• A number of opportunities,
including Simandou, identified
and actioned.
FY20
US$
R
F
T
)
R
F
T
f
o
%
(
y
t
i
n
u
t
r
o
p
p
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I
P
S
S
E
m
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i
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a
M
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a
h
s
n
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n
i
t
h
g
e
W
i
1
)
%
(
h
s
a
c
P
S
S
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I
m
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a
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t
i
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r
o
p
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m
u
m
i
x
a
M
y
t
i
n
u
t
r
o
p
p
o
Nominal Value
of ESSIP Vested
Rights
Nominal total
ESSIP value
e
m
o
c
t
u
o
P
S
S
E
I
%
d
e
d
r
a
w
a
h
s
a
c
I
P
S
S
E
l
a
t
o
T
t
a
e
c
i
r
p
e
r
a
h
S
2
9
8
1
.
9
$
A
t
n
a
r
g
t
a
e
c
i
r
p
e
r
a
h
S
2
6
4
1
.
4
1
$
A
g
n
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t
s
e
v
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p
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r
a
h
S
2
9
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1
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9
$
A
t
n
a
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a
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S
2
6
4
1
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4
1
$
A
g
n
i
t
s
e
v
E Gaines
1,242,719
112.5
G Lilleyman
1,007,610
J Shuttleworth
671,740
I Wells
671,740
75
75
75
50
100
100
100
699,029
113,245
100
699,029 699,033
1,076,118 1,398,063 1,775,148
-
-
-
122,427
81,618
81,618
100
100
100
-
-
-
755,712
1,163,371
755,712 1,163,371
503,808
775,581
503,808
775,581
503,808
775,581
503,808
775,581
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.67174.
FY20
A$
R
F
T
)
R
F
T
%
(
y
t
i
n
u
t
r
o
p
p
o
I
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m
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a
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W
i
1
)
%
(
h
s
a
c
P
S
S
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I
m
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a
M
y
t
i
n
u
t
r
o
p
p
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I
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r
a
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s
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m
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x
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i
n
u
t
r
o
p
p
o
e
m
o
c
t
u
o
P
S
S
E
I
%
Nominal Value of
ESSIP Vested Rights2
Nominal total
ESSIP value
d
e
d
r
a
w
a
h
s
a
c
I
P
S
S
E
l
a
t
o
T
t
a
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r
p
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r
a
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S
2
9
8
1
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9
$
A
t
n
a
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r
a
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S
2
6
4
1
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4
1
$
A
g
n
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2
9
8
1
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9
$
A
t
n
a
r
g
t
a
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i
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p
e
r
a
h
S
2
6
4
1
.
4
1
$
A
g
n
i
t
s
e
v
E Gaines
1,850,000
112.5
50
1,040,625 113,245
100
1,040,625 1,040,631 1,601,986 2,081,256 2,642,611
G Lilleyman
1,500,000
J Shuttleworth 1,000,000
I Wells
1,000,000
75
75
75
100
100
100
-
-
-
122,427
100
81,618
81,618
100
100
-
-
-
1,125,006 1,731,877
1,125,006
1,731,877
750,004 1,154,585
750,004
1,154,585
750,004 1,154,585
750,004
1,154,585
1 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 days of the plan year (A$9.1892).
2 Nominal value of ESSIP vested rights is non-IFRS financial information and has not been subject to audit.
Fortescue Metals Group Ltd Annual Report FY20 133
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
c. FY18 LTIP performance outcomes
The FY18 LTIP was tested over the period from 1 July 2017 to 30 June 2020. Executives have achieved all performance
measures as shown in the table below resulting in 100 per cent of share rights vesting.
Measure
TSR
AROE
Key strategic measures
Weighting
%
Threshold
Result
Achieved %
33
33
34
60th percentile
100th percentile
15%
27.6 %
5 out of 15
10 out of 15
150
87.8
100
FY18 LTIP vesting outcome
100
Overall outcome capped at 100%
Weighted
Average %
49.5
29.0
34.0
112.5
100%
Each LTIP performance measure has a minimum performance target for vesting with increasing levels applicable to
each individual measure. There is an ability to earn up to 150 per cent of any individual measure by achieving stretch
performance. The overall cap for the LTIP is 100 per cent of the maximum number of share rights granted.
Performance against the agreed performance measures for the FY18 LTIP grant is shown in the table below.
The strategic measures under the FY18 LTIP were assessed against three annual tranches: being the FY18, FY19
and FY20 strategic measures. This approach provided the Company flexibility to respond to economic and industry
challenges as they occurred to ensure strategic measures remained relevant to driving shareholder value.
The FY18 and FY19 measures have already been assessed and banked as set out in the FY19 Remuneration Report
and summarised further below. For the FY20 tranche, the Board agreed to set the same measures as those set in
FY19 as they were still relevant to Fortescue’s strategic priorities. These were assessed over the FY20 period.
134 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Performance measure and objective
Result
Proportion
of
award
vested %
Comment
TSR (33%)
In line with Fortescue’s approach to setting
stretch targets, the Board determined that
a vesting schedule more aggressive than
standard local and global market practice
was required to align executive reward for
this performance measure with superior
shareholder returns.
The vesting criteria:
• Threshold at the 60th percentile,
resulting in 25% of rights vesting
• Target at the 80th percentile, resulting in
100% of rights vesting
• Stretch at the 100th percentile, resulting
in 150% of rights vesting.
Details of the FY18 LTIP
comparator group and
TSR ranking are show in the table:
AROE (33%)
The vesting criteria:
• Threshold was set at 15%, resulting in
25% of rights vesting
• Target was set at 30%, resulting in 100%
of rights vesting
• 150% of rights will vest for greater
than 30%.
100th
percentile
150
In the period from 1 July 2017 to 30 June
2020, Fortescue achieved a TSR of
245% and a percentile ranking of 100%,
achieving the stretch target for this
measure.
ASX 100 Resource Index Constituent
TSR
Percentile Rank
Fortescue Metals Group Limited
Northern Star Resources Limited
Evolution Mining Limited
245%
186%
135%
90%
89%
83%
52%
46%
17%
11%
1%3
(2%)
(4%)
(11%)
(12%)
(43%)
100%
93%
87%
80%
73%
67%
60%
53%
47%
40%
3%
27%
20%
13%
7%
0%
Rio Tinto Group
Santos Limited
BHP Group
OZ Minerals Limited
Newcrest Mining Limited
Alumina Limited
Iluka Resources Limited
BlueScope Steel Limited
Ampol Limited
South32 Limited
Origin Energy Limited
Woodside Petroleum Ltd
Oil Search Limited
27.6%
87.8
Fortescue’s AROE performance over
the three years ending 30 June 2020
exceeded the AROE minimum threshold
performance target of
15% achieving an average AROE over the
three year period of 27.6%.
Fortescue Metals Group Ltd Annual Report FY20 135
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Objective*
Result
Strategic Measures* (Annual FY20 assessment) (34%)
Iron ore growth
• Progress on iron ore strategy
• Increase long-term product flexibility
with no net decrease in mine life
• Progress agreed long-term sales strategy
10 out
of 15
Proportion
of
award
vested
The three
year
cumulative
outcome for
this measure
is 100%
Other growth
• Develop and execute strategies for
exploration and drilling programs in new
geographical locations
• Develop and execute strategic options for
non-iron ore growth
Comment
Iron ore growth
Significant progress on the iron ore
strategy has been made, including:
• Global high grade opportunities
evaluated
• Early site works for Iron Bridge
commenced and progressing to plan
• Eliwana engineering completed and
OPF and rail construction in full
progress
• 20 year mine life maintained
• Strong results produced from drilling at
the Western and Solomon Hubs
• Long-term sales strategy is on target.
Considerable progress has been made
on Fortescue’s diversification strategy,
including:
Other growth
Exploration and drilling
• Significant exploration and drilling
carried out in South America, with
operations suspended in March 2020
due to COVID-19
• Copper and lithium projects continue to
be identified and analysed
• Continued identification of both
advanced and greenfield projects in
South America and Kazakhstan
Autonomy
• Fortescue Hive, Fortescue’s expanded
integrated operations centre, opened in
2020
• Supervisory Control System (SCS)
developed and integrated to
autonomous light vehicles and being
tested at Christmas Creek
• Significant progress made on mobile
and fixed plant autonomy
• Advancing projects aimed at
decarbonising operations.
* FY20 strategic measures are assessed on an overall basis at the discretion of the Board and subject to a score from 0 to 15.
136 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report FY18 LTIP - previously assessed and banked strategic measures
Banked performance against the FY18 and FY19 performance measures is set out below.
Further detail on performance against these measures is contained in the FY19 Remuneration Report.
Objective
Measures
FY18
Safety
• Improve Fortescue’s relative position against the global safety culture
benchmark
• Improve Fortescue’s relative position on the global cost curve with a target
to have a C1 cost which is the lowest in the world
Performance
• Reduce all-in cash costs
• Maximise production capacity without significantly increasing capital
Resource
management
Growth
expenditure budget
• Increase long-term resources quantity and value
• No net decrease in mine life
• Quantity, quality and diversity of tenements
• Diversify customer base
• Strategic options for growth in iron ore and other commodities
• Reduce gearing (Debt/Debt + Equity) to target levels
Balance sheet
management
• Overall cost of financing
• Maintain cash on hand at Board approved levels
• Balance sheet flexibility
Overall annual result
FY19
Iron ore
growth
• Progress identified iron ore strategy
• Increase long-term product flexibility with no net decrease in mine life
• Progress agreed long-term sales strategy
• Develop and execute strategies for exploration and drilling programs in new
Other growth
geographical locations
• Develop and execute strategic options for non-iron ore growth
Overall annual result
Result
Achieved
Achieved
Achieved
Achieved
Achieved
100%
Achieved
Achieved
100%
Fortescue Metals Group Ltd Annual Report FY20 137
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d. Actual remuneration paid (non-IFRS)
The following tables show the nominal remuneration value realised by the individual and includes fixed remuneration,
cash incentives and the nominal value of equity at the time the share rights vest or shares are awarded. As noted in
section 1, this information is shown in both USD and AUD in this transitional year. Statutory remuneration is detailed
in section 10.
US$
Name
E Gaines
G Lilleyman
J Shuttleworth
I Wells
1
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
F
I
P
S
S
E
0
2
Y
F
i
d
a
p
h
s
a
c
1,242,719
699,029
1,007,610
671,740
671,740
-
-
-
f
o
e
u
a
v
l
l
i
a
n
m
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N
3
,
2
s
t
h
g
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d
e
t
s
e
v
I
P
S
S
E
0
2
Y
F
1,076,118
1,163,371
775,581
775,581
f
o
e
u
a
v
l
l
i
a
n
m
o
N
,
5
4
s
t
h
g
i
r
d
e
t
s
e
v
P
I
T
L
8
1
Y
F
n
i
n
o
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t
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r
e
n
u
m
e
r
6
)
t
n
a
r
g
t
a
(
0
2
Y
F
l
a
t
o
t
l
i
a
n
m
o
N
7
0
2
Y
F
n
i
d
e
n
r
a
e
l
a
t
o
t
l
i
a
n
m
o
N
n
o
i
t
a
r
e
n
u
m
e
r
3,929,639
4,002,318
6,680,194
2,251,128
2,543,290
4,268,977
1,253,342
1,609,804
2,615,405
1,449,210
1,677,669
2,797,950
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.67174 with the exception of the
FY18 LTIP which has been translated at 0.72077.
A$
Name
E Gaines
G Lilleyman
J Shuttleworth
I Wells
1
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
F
I
P
S
S
E
0
2
Y
F
i
d
a
p
h
s
a
c
f
o
e
u
a
v
l
l
i
a
n
m
o
N
3
,
2
s
t
h
g
i
r
d
e
t
s
e
v
I
P
S
S
E
0
2
Y
F
f
o
e
u
a
v
l
l
i
a
n
m
o
N
,
5
4
s
t
h
g
i
r
d
e
t
s
e
v
P
I
T
L
8
1
Y
F
n
i
n
o
i
t
a
r
e
n
u
m
e
r
6
)
t
n
a
r
g
t
a
(
0
2
Y
F
l
a
t
o
t
l
i
a
n
m
o
N
7
)
d
r
a
w
a
t
a
(
0
2
Y
F
n
i
n
o
i
t
a
r
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n
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m
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r
l
a
t
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t
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m
o
N
1,850,000
1,040,625
1,601,986
5,452,002
5,958,135
9,944,613
1,500,000
1,000,000
1,000,000
-
-
-
1,731,877
1,154,585
1,154,585
3,123,226
3,786,122
6,355,103
1,738,893
2,396,469
3,893,478
2,010,642
2,497,497
4,165,227
1 Fixed remuneration includes cash salary, paid leave and superannuation.
2 FY20 ESSIP share rights granted at the beginning of the performance period at a Volume Weighted Average Price of Shares (VWAP) of A$9.1892.
3 FY20 ESSIP vested rights awarded have a nominal value based on A$14.1462 being the five day VWAP at the beginning of FY21. The increase in share
price over the respective performance period has resulted in an unrealised increase in equity value to the CLT in respect to this plan.
4 FY18 LTIP share rights granted at the beginning of the performance period at a VWAP of A$5.2591.
5 FY18 LTIP vested rights awarded have a nominal value based on A$14.1462 being the five day VWAP at the beginning of FY21. The increase in share price
over the respective performance periods has resulted in an unrealised increase in equity value to the CLT in respect to these plans.
6 Value based on FY20 ESSIP and FY18 LTIP share price at grant.
7 Value based on the five day VWAP at award and incorporates share price growth over the relevant performance periods.
138 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report
Incentive plan operation
6
a. ESSIP
The purpose of the ESSIP is to incentivise and reward key Fortescue Executives (including CLT) for achieving annual
company and individual stretch performance objectives that drive shareholder value.
Below we have set out the key terms of the ESSIP for FY20:
Element
Description
Delivery
Prior to the start of the performance period, participants elect the portion of awards they
wish to receive in rights with the remaining awards to be delivered as cash. The plan
allows Executives to elect to receive up to 100% of awards in equity (a minimum of 50%
must be elected to be received by way of share rights).
Each share right, if vested, entitles the participant to an ordinary share in Fortescue for
nil consideration.
Performance period
1 year (i.e. 1 July to 30 June).
The number of ESSIP share rights is calculated based on the Volume Weighted Average
Price of Shares (VWAP) of Fortescue shares traded over the first five trading days of the
performance period. As such:
• If the share price at the time of award is higher, Executives will receive higher value
Valuing awards
per share right.
Performance measures
• If the share price at the time of award is lower, the value to Executives is decreased.
The value of share rights is therefore aligned with shareholder interests from the
beginning of the performance period as Executives receive value consistent with share
price movements.
The Board continues to recognise the importance of focusing on operational and
strategic targets, with people and culture also being a key driver of success.
In FY20, the Board set a number of challenging targets in respect to operations,
including product mix, direct customer sales, cost reduction and revenue across all
operating and support functions:
• The operational measures were chosen as they represent the key drivers of financial
performance (underlying EBITDA and NPAT) of the Company and provide a
framework for delivering long-term shareholder value, irrespective of the iron ore
price.
• The inclusion of a people and culture metric recognises the importance of supporting
the Company’s differentiated culture underpinned by its core Values, which is
fundamental to Fortescue’s success.
• Strategic KPIs focus on critical objectives and are set at stretch levels of performance
with measures and weightings aligned to the individual’s ability to influence outcomes
such as the delivery of a project and business expansion.
The Board determined the relative weighting and mix of performance objectives for the
CLT and Executives in order to deliver long-term sustainable shareholder value.
The measures for the FY20 ESSIP are outlined in section 5.
A key element of Fortescue’s culture is to set challenging stretch targets and strive to
outperform those targets, in line with our Values.
Target setting
As such, all targets are set at stretch levels of performance with a ‘cliff vesting’ outcome
to promote a focus on outperformance. Board discretion applies as set out below.
ESSIP targets are linked to the annual stretch budget and Fortescue’s strategic plan
focusing on core drivers of shareholder value.
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Element
Description
Board discretion
Awards under the ESSIP are subject to the Board’s discretion. When deliberating on
performance outcomes, the Board follows a rigorous assessment process including:
• The degree of stretch in the measures and targets and the context in which the targets
were set
• The level of achievement against the stretch targets
• The operating environment over the performance period and management’s ability to
respond to unforeseen events (i.e. cyclones, floods, fire, pandemic)
• Financial performance and shareholder value generated
• Global competitiveness and level of improvement compared to global peers during the
period
• The level of improvement across key business drivers on the prior year
• Any other relevant under or over performance or other criteria not stated above.
In circumstances where performance against stretch targets is not accurately reflected
in the level of achievement against stretch targets, whether under or over, the Board
may exercise its discretion to increase or decrease the vesting level of the incentive and
therefore the value awarded. This exercise of discretion and the reasons for it will be
clearly communicated in our Remuneration Report.
b. LTIP
The LTIP operates under the Performance Rights Plan Rules as approved by Shareholders at Fortescue’s AGM on 15
November 2018.
The key terms of the LTIP for FY20 are set out below:
Element
Description
Change from FY19
From FY20, key strategic measures will be set in year one with overall performance
tested against the measure at the end of year three in line with delivery of Fortescue’s
strategic priorities.
Previously, annual performance outcomes were assessed and approved by the Board at
the end of each financial year with approved outcomes banked each year for inclusion in
the overall LTIP assessment at the end of the three year performance period.
This means that the disclosure of the outcomes under the FY19 LTI grant next year will be
the last year that we disclose the outcomes against this annualised format of targets.
Delivery in share rights
Each share right entitles Executives, subject to achievement of the performance
conditions, to one fully paid ordinary share in Fortescue for nil consideration.
Performance period
3 years
Summary of
performance
objectives/measures
The LTIP is measured against three independent performance measures being;
•
TSR performance relative to companies in the ASX 100 Resources Index
• AROE averaged over the three year performance period
• Key strategic measures fundamental to business sustainability, continuing
development and growth and delivering shareholder value.
140 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report The relative weighting between financial and strategic measures provides the ability
to assess performance across a cyclical market. The inclusion of strategic measures is
deliberate to ensure alignment between short and long-term value creation by ensuring
long-term value is not compromised.
TSR performance measure: 33% weighting
TSR is a measure of the performance of the Company’s shares over a three year
period against the ASX 100 Resources Index. It combines share price appreciation and
dividends paid to show the total return to the shareholder expressed as a percentage.
Relative TSR targets are valuable because Fortescue needs to outperform a peer
group of participants to receive any reward and is therefore aligned to relative market
performance.
The comparator group for the FY20 grant comprises the companies in the ASX100
Resources Index. The ASX 100 Resources Index has been chosen as the comparator
group as a transparent market indicator which includes Fortescue’s ASX Listed
commodity market peers and represents the peer group that Fortescue competes with
for investment.
Performance measures
AROE performance measure: 33% weighting
AROE has been used as a measure in Fortescue’s LTIP for some time now and measures
how effectively management is using Fortescue’s assets to create profits.
Key strategic measures: 34% weighting
Key strategic measures are aimed at directing performance toward the achievement
of Fortescue’s long-term strategic objectives over and above annual short-term goals.
The strategic objectives devised by the Board specifically relate to key milestones and
objectives that are fundamental to Fortescue’s sustainability, continuing development
and growth and delivery of shareholder value.
Each LTIP performance measure has a minimum performance target for vesting with
increasing levels applicable to each individual measure. There is an ability to earn up
to 150% of any individual measure by achieving stretch performance. Each individual
measure contributes to the overall result with vested rights awarded based on the
aggregate of the three measures.
While each individual performance measure includes stretch targets, with a relative
contribution on any individual measure of up to 150%, the overall cap for the LTIP is
100% of the maximum number of share rights granted.
TSR performance measure
When formulating the vesting schedule for the TSR performance measure, the Board
considered both local and international market practice. In line with Fortescue’s
approach to setting stretch targets, the Board determined that a vesting schedule more
aggressive than standard market practice was required in order to align executive
reward for this performance measure with superior shareholder returns. The vesting
criteria for both threshold and target have been set at the 60th percentile and 80th
percentile respectively, higher than standard market practice. The plan also provides for
a premium grant of awards (subject to the overall cap noted above) where Fortescue
delivers market leading total shareholder return over the performance period.
Vesting conditions
LTIP TSR target and vesting schedule
The TSR vesting schedule is as follows:
Performance
Average TSR
Portion of tranche that vests
Below threshold
Below the 60th percentile Nil
Threshold
At the 60th percentile
25% of share rights vest
Target
Stretch
At the 80th percentile
100% of share rights vest
At the 100th percentile
150% of share rights vest
Vesting between performance levels is calculated on a linear basis with the stretch
element considered together with the achievement of all performance measures and
subject to the overall cap.
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Element
Description
The Board acknowledges that a relative TSR target can result in unintended outcomes.
The intent is to ensure no windfall gains or undue penalty. In the event that TSR is negative
but the relative TSR target is achieved, the Board will consider overall performance and
circumstances and may, at its absolute discretion, reduce the level of vesting or determine
that no award will be made in respect to the TSR measure.
AROE performance measure
The AROE vesting schedule is as follows:
LTIP AROE target and vesting schedule
Performance
Average ROE %
Portion of tranche that vests
Below Threshold
Threshold
Target
Stretch
<15
15
30
>30
Nil
25% of share rights vest
100% of share rights vest
150% of share rights vest
Vesting between threshold and target performance levels is calculated on a linear
basis with the stretch element considered together with the achievement of all
performance measures and subject to the overall cap.
Vesting conditions
Key strategic measures
In line with Fortescue’s key strategic priorities and associated key performance indicators,
the strategic measures for the FY20 grant are set out below.
Measure
Objective
Iron Bridge
Eliwana
Energy
Iron Bridge Magnetite Project completed on time and on
budget with an identified pathway to ramp up to 22mtpa
Eliwana Mine and Rail Project completed on time and on
budget with an identified pathway to ramp up to 40mtpa
Compelling progress on the energy strategy and business case
incorporating Fortescue’s approach to emissions reduction
including:
- Renewables
- Alternate energy sources
Diversification
Compelling progress on creating and delivering a pipeline of
commodity diversification projects and exploration targets
Industrial autonomy
Compelling progress on delivering the Industrial Autonomy
strategy
Whether a strategic objective has been achieved is measured at the end of the three year
performance period on an outcome basis and subject to Board discretion with vesting as follows:
LTIP strategic measure target and vesting schedule
Performance
Score
Portion of tranche that vests
Did not meet
Threshold
Target
Exceeded
<5
5
10
15
Nil
25% of share rights vest
100% of share rights vest
150% of share rights vest
Vesting between performance levels is calculated on a linear basis with the stretch
element considered together with the achievement of all performance measures and
subject to the overall cap.
Board discretion
The LTIP is subject to the Board’s discretion.
142 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report c. General terms applying to equity awards
The occurrence of particular events may affect the grant and vesting of the ESSIP and LTIP equity awards. The table
below outlines how these awards may be addressed, noting that the Board at all times maintains an overriding and
absolute discretion with respect to the incentive plans.
Element
ESSIP
LTIP
What happens
on cessation of
employment?
Unless the Board exercises its discretion
under the ESSIP rules, for individuals who
leave during the year (i.e. before 30 June) the
ESSIP is pro-rated based on service during the
period, and made at the usual payment date,
around September, post release of audited and
approved full year results.
Individuals who commenced during the year
similarly will have awards under the ESSIP
pro-rated based on service during the
performance period.
Unless the Board exercises its
discretion under the plan rules, on
cessation participants may be entitled
to retain a pro-rata portion of unvested
performance rights, which may vest,
subject to satisfaction of the applicable
vesting conditions, in accordance with
the original terms of their grant at the
end of the vesting period.
Fortescue operates a Clawback Policy, which applies to both the ESSIP and LTIP.
Clawback may be initiated at the discretion of the Board, including where, in the opinion
of the Board:
a) a Participant has engaged in fraud, dishonesty or gross misconduct, breached
his or her obligations to the Group or there is a material misstatement of financial
information;
Clawback Policy
b) an Award, which would not have otherwise vested, vests or may vest as a result of
the fraud, dishonesty or breach of obligations of any other person; or
c)circumstances have occurred that result in an unfair benefit being obtained by
any Participant.
The Board’s discretion, with respect to the operation of the Clawback Policy, is
considered standard market practice and an appropriate mechanism to ensure the
Board has sufficient flexibility to respond to changing or unexpected circumstances
(should they arise).
Change of control
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.
Fortescue Metals Group Ltd Annual Report FY20 143
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Executive contract terms
7
The CLT are employed on a rolling basis with no specified fixed term. The CLT are required to provide written
notice of six months, as specified in their individual service agreement, to terminate their employment.
Contractual termination benefits for the CLT comply with the limits set by the Corporations Act 2001.
The CLT are remunerated on a TFR basis inclusive of superannuation and allowances. The table below details the
remuneration details for the CLT for FY20 in AUD:
Position
Executive
TFR1 (A$)
Maximum ESSIP
opportunity
Maximum LTIP
opportunity
% of
TFR
A$
% of TFR
A$
Nominal
value of total
remuneration
package at
maximum
opportunity A$
CEO
COO
E Gaines
1,850,000
112.5
2,081,250
150
2,775,000
6,706,250
G Lilleyman
1,500,000
Deputy CEO
J Shuttleworth
1,000,000
CFO
I Wells
1,000,000
75
75
75
1,125,000
100
1,500,000
4,125,000
750,000
100
1,000,000
2,750,000
750,000
100
1,000,000
2,750,000
1Includes superannuation and allowances. TFR is reviewed annually by the RPC
144 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Non-Executive Director remuneration 8
a. Non-Executive Director Remuneration Policy and fees
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.
The maximum aggregate remuneration payable to Non-Executive Directors is A$3 million, which was approved by
shareholders at the AGM on 29 October 2019. There have been no further changes to the aggregate fee pool since
October 2019.
Most Non-Executive Directors receive fees for both Board and Committee membership with the exception being
the Chairman, who has elected to forgo all Board fees. The payment of additional fees for serving on a Committee
recognises the additional time commitment required by Non-Executive Directors who serve on a Committee.
Non-Executive Director fees for FY20 were as follows:
Position
Board Chairman1
Deputy Chair and Lead Independent Director
Deputy Chair
Non-Executive Director
Audit and Risk Management Committee (ARMC) Chair
ARMC Member
Remuneration and People Committee (RPC) Chair
RPC Member
Finance Committee Member
Nomination Committee Member
Fee A$ effective
1 January 2019
-
688,3502
341,770
200,200
57,200
21,450
57,200
21,450
8,580
-
1 The Chairman of the Board has elected to forego Directors fees and receives no form of remuneration.
2 This fee has since been increased to reflect Mark Barnaba’s role at Fortescue effective 18 December 2019 as outlined in section 8b.
Non-Executive Directors do not receive retirement benefits, nor do they participate in any incentive programs of the Company.
Fortescue Metals Group Ltd Annual Report FY20 145
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
b. Non-Executive Director fee increase in FY20
Non-Executive Director fees remain below the market median of the ASX 100 Resources Index total.
The last 12 months has witnessed an exponential growth in the philanthropic activities of the Minderoo Foundation
across its eight global initiatives as well as its unprecedented responses to the 2019 bushfires and the global
COVID-19 pandemic. While Dr Forrest’s commitment to Fortescue is undiminished, his increased workload in leading
the Minderoo Foundation together with this critical phase in Fortescue’s development and growth has required the
Deputy Chair and Lead Independent Director, Mark Barnaba, to significantly increase his workload and commitment
to Fortescue.
Drawing on his significant experience and expertise, Mr Barnaba’s additional time commitment is focused on
working with the CLT on areas critical to Fortescue's growth strategy, including project development and finance,
business development, autonomy and energy. As the sole Deputy Chair with effect from 1 April 2020, Mr Barnaba
has also spent an increasing amount of time representing Fortescue’s interests with institutional shareholders,
customers, banks, industry bodies and government. In order to ensure he has the capacity to take on these additional
responsibilities, Mr Barnaba has stepped back from a number of other external roles and commitments.
In light of this, the Board agreed to increase the fee for Mr Barnaba by A$333,333, bringing his total fee to A$1.1 million
inclusive of Committee membership fees, as Chair of the ARMC and member of the RPC and the Finance Committee.
Despite the increase to the Deputy Chair’s fee, total Non-Executive Director fees remain within the shareholder
approved fee cap of A$3 million. In that regard, it should also be noted that Dr Forrest does not receive a fee for his
role as Chairman.
c. Non-Executive Director Salary Sacrifice Rights Plan
Non-Executive Directors may choose to sacrifice a portion or all of their base fees, excluding Committee fees
and Company superannuation contributions to be used to acquire vested rights to Fortescue shares under the
Non-Executive Director Salary Sacrifice Share Rights Plan.
Shares, to the gross value of the amount salary sacrificed, are purchased on market twice a year following the
announcement of Fortescue’s half and full year results in February and August.
The VWAP purchased is used to determine the number of vested rights to be allocated to Non-Executive Directors.
Vested rights may be exercised at any time, up to 15 years from date of grant.
Shares will be held by the Pacific Custodians (as Trustee) until the vested rights are exercised into shares. Vested
rights and shares acquired under this Plan are not subject to performance conditions because they are issued in lieu
of salary which would otherwise be payable to the relevant Non-Executive Directors.
146 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Remuneration governance
9
Fortescue believes that robust governance is critical to underpinning the effectiveness of the Remuneration Strategy.
a. The Remuneration and People Committee (RPC)
The RPC operates under a Board-approved Charter. The purpose of the RPC is to provide assistance and
recommendations to the Board to ensure that it is able to fulfil its responsibilities.
The RPC in FY20 consisted solely of Non-Executive Directors. The Chief Executive Officer and others may be invited
to attend all or part of meetings by the RPC Chair as required, but have no vote on matters before the RPC.
A copy of the RPC Charter is available under the Corporate Governance section on our website at www.fmgl.com.au
Remuneration
Consultants
Board of
Directors
• Approving the remuneration of Non-Executive Directors
and CEO
• Ensuring remuneration practices are competitive and
strategic and align with the attraction and retention
policies of the Company
May be engaged directly by
the Board or RPC to provide
advice or information relating
to KMP that is free from
influence of management.
During the year ended
30 June 2020, the Committee
sought advice from
remuneration consultants
from time to time for
remuneration advisory
services. This did not
involve providing the RPC
with any remuneration
recommendations as defined
by the Corporations Act 2001.
Will be engaged directly by
management other than in
respect of KMP to provide
data to ensure Fortescue’s
remuneration position
remains competitive.
Advise the Board on:
• Remuneration strategy, policies and practices
• NED, CLT and Senior Executive remuneration
• Committee member appointments
• CLT recruitment and the Company’s recruitment,
ESSIP, LTIP, retention termination policies and annual
performance reviews
• Succession planning and talent management
• Diversity strategy and gender pay equity
• Information on risk, including non-financial risk
shared among Committee members
Board
Remuneration
and People
Committee
• Implementation of remuneration policies and practices
• Advising the RPC of changing statutory and
market conditions
• Providing relevant information to the RPC to
assist with decisions
Human
Resources
Management
Fortescue Metals Group Ltd Annual Report FY20 147
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
b. Minimum shareholding conditions
All Directors and employees are encouraged to own Fortescue shares and the Company enables employee
participation as a shareholder through short and long-term incentives, salary sacrifice and dividend
reinvestment programs.
In August 2020, the board approved an increase to the minimum shareholding policy for the CEO and CLT, increasing
their minimum shareholding requirement to 200 per cent of TFR. The policy applies to Directors and Executives to
support a long-term focus and further strengthen alignment with shareholders. The minimum shareholding required
is as follows:
• Non-executive directors: 100 per cent of base annual fees
• CEO: 200 per cent of total fixed remuneration
• Other CLT: 200 per cent of total fixed remuneration
Participants are required to meet their respective minimum shareholding within a reasonable timeframe, generally
within five years from the effective date of the policy, or the date of their appointment, if later.
The Directors’ and Executives’ Minimum Shareholding Policy can be accessed from the Corporate Governance
section on our website at www.fmgl.com.au
c. Board discretion
The Committee and the Board consider it critical that they are able to exercise full and appropriate discretion in order
to ensure that remuneration outcomes for executives appropriately reflect the performance of individuals, the Group
and meet the expectations of shareholders.
d. Securities Trading Policy
Fortescue’s Securities Trading Policy provides 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 Securities 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 Securities Trading Policy can be accessed from the Corporate Governance section on our
website at www.fmgl.com.au.
148 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report Statutory disclosures
10
a. KMP statutory remuneration
Statutory remuneration disclosures are prepared in accordance with Australian Accounting Standards and include
share based payments expensed during the financial year, calculated in accordance with AASB 2 Share based
payments.
The estimated fair value of ESSIP and LTIP performance rights was determined using an option pricing model as
disclosed in note 18 of the Financial Report.
b. Executive remuneration
Statutory remuneration differs significantly from actual remuneration paid to executives due to the accounting
treatment of share based payments. For details of remuneration actually paid to the Chief Executive Officer and
executives in FY20 refer to section 5.
The tables below include statutory remuneration disclosures for FY20 and FY19.
For this year only, we have provided disclosures in USD and AUD.
US$
Short-term employee
benefits
Post employment
benefits
Share-based
payments
Total
statutory
remuneration
l
r
a
e
y
n
a
p
0
2
Y
F
r
o
f
y
r
a
t
e
n
o
m
-
n
o
N
s
t
i
f
e
n
e
b
l
e
u
a
v
h
s
a
c
P
S
S
E
I
l
y
r
a
a
s
h
s
a
C
s
e
e
f
d
n
a
Executive Director
E Gaines
Other CLT
G Lilleyman
J Shuttleworth
FY20 1,225,926
699,029
3,029
FY19 1,179,948 641,436
3,055
FY20
990,817
FY19
947,534
FY20
657,625
-
-
-
FY19
593,169
86,801
-
-
-
-
I Wells
FY20
657,625
FY19
637,864
-
-
3,029
3,055
n
o
i
t
a
u
n
n
a
r
e
p
u
S
16,794
17,878
16,794
17,878
14,115
14,683
14,115
14,683
t
n
e
m
y
a
p
r
e
h
t
O
-
-
-
-
-
-
-
-
l
e
u
a
v
e
r
a
h
s
I
P
S
S
E
l
e
u
a
v
e
r
a
h
s
P
I
T
L
l
a
t
o
T
660,994
1,500,927
4,106,699
681,697
1,054,366
3,578,380
714,594
845,953
2,568,158
737,105
606,804
2,309,321
476,392
551,847
1,699,979
393,799
502,356
1,590,808
476,392
556,230
1,707,391
491,191
516,780
1,663,573
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.71512 for FY19 and 0.67174 for FY20.
Fortescue Metals Group Ltd Annual Report FY20 149
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
A$
Short-term employee
benefits
Post employment
benefits
Share-based
payments
Total
statutory
remuneration
l
r
a
e
y
n
a
p
0
2
Y
F
r
o
f
y
r
a
t
e
n
o
m
-
n
o
N
s
t
i
f
e
n
e
b
l
e
u
a
v
h
s
a
c
P
S
S
E
I
l
y
r
a
a
s
h
s
a
C
s
e
e
f
d
n
a
Executive Director
E Gaines
Other CLT
G Lilleyman
J Shuttleworth
FY20 1,825,000 1,040,625
4,509
FY19 1,650,000
896,963 4,272
FY20 1,475,000
FY19 1,325,000
FY20
978,988
-
-
-
FY19
829,468
121,380
-
-
-
-
I Wells
FY20
978,988
FY19
891,968
-
-
4,509
4,272
n
o
i
t
a
u
n
n
a
r
e
p
u
S
25,000
25,000
25,000
25,000
21,012
20,532
21,012
20,532
t
n
e
m
y
a
p
r
e
h
t
O
-
-
-
-
-
-
-
-
l
e
u
a
v
e
r
a
h
s
I
P
S
S
E
e
u
a
v
l
e
r
a
h
s
P
I
T
L
l
a
t
o
T
984,003
2,234,387
6,113,524
953,262
1,474,391
5,003,888
1,063,795
1,259,346
3,823,141
1,030,743
848,535
3,229,278
709,191
821,519
2,530,710
550,676
702,478
2,224,534
709,191
828,044
2,541,744
686,865
722,648
2,326,285
c. Non-Executive Director remuneration
The remuneration of NEDs for the year ended 30 June 2020 and 30 June 2019 is detailed below.
US$
Dr A Forrest AO
M Barnaba AM
S Warburton1
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
Base
fees
Committee
fees
Other
benefits
Superannuation
Total
-
-
598,777
421,143
161,651
203,571
134,482
126,648
121,703
114,614
134,482
126,648
134,482
126,648
-
-
21,721
46,189
33,371
49,939
5,341
-
23,090
17,192
-
-
-
-
122,038
34,136
114,614
24,560
112,068
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,794
17,878
12,595
17,878
-
-
15,203
13,840
-
-
-
-
15,942
14,613
-
-
-
-
637,292
485,210
207,617
271,388
139,823
126,648
159,996
145,646
134,482
126,648
134,482
126,648
172,116
153,787
112,068
-
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.71512 for FY19 and 0.67174 for FY20.
150 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report
A$
Short-term employee
Post employment
benefits
benefits
Share-based
payments
Total
statutory
remuneration
r
a
e
y
n
a
l
p
0
2
Y
F
r
o
f
e
u
l
a
v
h
s
a
c
P
I
S
S
E
y
r
a
t
e
n
o
m
-
n
o
N
s
t
i
f
e
n
e
b
y
r
a
l
a
s
h
s
a
C
s
e
e
f
d
n
a
Executive Director
E Gaines
Other CLT
G Lilleyman
FY20 1,475,000
FY19 1,325,000
FY20
978,988
J Shuttleworth
FY19
829,468
121,380
I Wells
FY20
978,988
FY19
891,968
-
-
-
-
-
-
-
-
-
4,509
4,272
n
o
i
t
a
u
n
n
a
r
e
p
u
S
25,000
25,000
25,000
25,000
21,012
20,532
21,012
20,532
e
u
l
a
v
e
r
a
h
s
P
I
S
S
E
e
u
l
a
v
e
r
a
h
s
P
I
T
L
l
a
t
o
T
1,063,795
1,259,346
3,823,141
1,030,743
848,535
3,229,278
709,191
821,519
2,530,710
550,676
702,478
2,224,534
709,191
828,044
2,541,744
686,865
722,648
2,326,285
FY20 1,825,000 1,040,625
4,509
FY19 1,650,000
896,963 4,272
984,003
2,234,387
6,113,524
953,262
1,474,391
5,003,888
c. Non-Executive Director remuneration
The remuneration of NEDs for the year ended 30 June 2020 and 30 June 2019 is detailed below.
Base
fees
Committee
fees
Other
benefits
Superannuation
Total
US$
Dr A Forrest AO
M Barnaba AM
S Warburton1
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
-
-
598,777
421,143
161,651
203,571
134,482
126,648
121,703
114,614
134,482
126,648
134,482
126,648
112,068
-
21,721
46,189
33,371
49,939
5,341
23,090
17,192
-
-
-
-
-
-
-
-
-
122,038
34,136
114,614
24,560
16,794
17,878
12,595
17,878
15,203
13,840
15,942
14,613
-
-
-
-
-
-
-
-
-
-
-
-
637,292
485,210
207,617
271,388
139,823
126,648
159,996
145,646
134,482
126,648
134,482
126,648
172,116
153,787
112,068
-
t
n
e
m
y
a
p
r
e
h
t
O
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
c. Non-Executive Director remuneration continued
A$
Dr A Forrest AO
M Barnaba AM
S Warburton 1
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
1Sharon Warburton resigned 31 March 2020.
Base
fees
Committee
fees
Other
benefits
Superannuation
Total
-
-
891,382
588,912
240,645
284,667
200,200
177,100
181,176
160,272
200,200
177,100
200,200
177,100
181,675
160,272
166,833
-
-
-
32,336
64,589
49,679
69,833
7,951
-
34,373
24,041
-
-
-
-
50,817
34,344
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
18,750
25,000
-
-
22,632
19,353
-
-
-
23,733
20,435
-
-
-
-
948,718
678,501
309,074
379,500
208,151
177,100
238,181
203,666
200,200
177,100
200,200
177,100
256,225
215,051
166,833
-
d. Details of performance grants to Executive Directors
Details of performance rights granted in FY20 in accordance with the Performance Rights Plan are shown in the table
below.
E Gaines
ESSIP Share Rights
LTIP Share Rights
Total
Share rights granted in FY20
113,245
301,985
415,230
The issue of share rights to participants will not have a diluting effect on the percentage interest of shareholders
holdings if the share rights vest into shares acquired on market.
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.71512 for FY19 and 0.67174 for FY20.
Fortescue Metals Group Ltd Annual Report FY20 151
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
e. 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 2018 to 30 June 2020. The value of the rights has been determined using the amount of the grant date
fair value.
Name
P
I
T
L
e
t
a
d
t
n
a
r
G
FY18
08/11/2017
FY18
27/12/2017
E Gaines
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY18 06/09/2017
FY18
27/12/2017
G Lilleyman
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY18 06/09/2017
FY18
27/12/2017
J Shuttleworth
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY18 06/09/2017
FY18
27/12/2017
I Wells
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
e
c
n
a
m
r
o
f
r
e
P
d
o
i
r
e
p
1/7/17 to
30/6/20
1/7/17 to
30/6/20
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/17 to
30/6/20
1/7/17 to
30/6/20
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/17 to
30/6/20
1/7/17 to
30/6/20
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/17 to
30/6/20
1/7/17 to
30/6/20
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
d
e
t
n
a
r
g
s
t
h
g
i
r
e
r
a
h
s
.
o
N
e
r
a
h
s
r
e
p
e
u
a
V
l
1
d
e
t
n
a
r
g
s
t
h
g
i
r
s
t
h
g
i
r
f
o
e
u
a
V
l
t
a
d
e
t
n
a
r
g
e
t
a
d
t
n
a
r
g
e
c
n
a
m
r
o
f
r
e
P
%
d
e
v
e
h
c
a
i
/
d
e
t
i
e
f
r
o
F
d
e
s
p
a
l
d
e
t
s
e
V
US$ A$
US$
A$
209,637
3.17 4.15 664,549
869,994 100
209,637
175,767
3.22
4.17 565,970
732,948 100
175,767
-
-
517,480
2.61 3.57 1,350,623 1,847,404
100,621
5.54
7.91
557,440
795,912
301,985
5.13 7.55 1,549,183 2,279,987
Determined in
2021
Determined in
2021
Determined in
2022
190,147
3.98 4.98 756,785
946,932 100
190,147
30,635
3.22
4.17
98,645
127,748 100
30,635
-
-
275,989
2.61 3.57
720,331
985,281
57,498
5.54
7.91
318,539
454,809
163,236
5.13 7.55
837,401 1,232,432
Determined in
2021
Determined in
2021
Determined in
2022
72,019
3.98 4.98 286,636
358,655 100
72,019
50,904
3.22
4.17
163,911
212,270 100
50,904
-
-
160,994
2.61 3.57
420,194
574,749
57,498
5.54
7.91
318,539
454,809
108,824
5.13 7.55 558,267
821,621
Determined in
2021
Determined in
2021
Determined in
2022
81,068
3.98 4.98
322,651
403,719 100
81,068
61,065
3.22
4.17
196,629
254,641
100
61,065
-
-
189,743
2.61 3.57 495,229
677,383
33,540
5.54
7.91
185,812
265,301
108,824
5.13 7.55 558,267
821,621
Determined in
2021
Determined in
2021
Determined in
2022
LTIP awards are determined at the first Board meeting following the end of the relevant performance period.
1 The estimated fair value of LTIP performance rights was determined using an option pricing model as disclosed in note 18 of the Financial Report.
152 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report
f. KMP Share Rights
Share rights granted under the ESSIP at the beginning of FY20, granted at the face value share price at the
commencement of the performance year, and under the LTIP at the beginning of FY18 which vested in FY20 are
shown below. The ultimate value of these share rights to the executives will reflect either an improvement or
decline in the Company’s share price over the performance period. The adoption of this approach is specifically to
ensure that awards made to executives have a value which reflects sustainable value of shareholder’s investment
in the Company. The last column details the actual number of share rights that vested on actual performance.
Executive
E Gaines
FY20 ESSIP
FY18 LTIP
G Lilleyman
FY20 ESSIP
FY18 LTIP
J Shuttleworth
FY20 ESSIP
FY18 LTIP
I Wells
FY20 ESSIP
FY18 LTIP
1 Unvested share rights lapse
Share
rights granted
Share
rights lapsed1
Share
rights forfeited
Share
rights vested
113,245
385,404
122,427
220,782
81,618
122,923
81,618
142,133
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
113,245
385,404
122,247
220,782
81,618
122,923
81,618
142,133
Non-Executive Directors do not participate in Fortescue’s incentive plans and do not hold unvested share rights.
The movement during the reporting period in the number of options and share rights over ordinary shares in the
Company held directly, indirectly or beneficially, by each of the CLT, including their related parties is as follows:
Balance
at the
start of
the year
FY20
Granted1
Exercised /
converted2
Forfeited
/ lapsed2
Balance
at the
end of
the year
Vested Unvested
Not
exercisable
Executive Directors of Fortescue
E Gaines
1,220,200
415,230
(206,294)
(10,401)
1,418,735
Other Key Management Personnel of Fortescue
G Lilleyman
787,135
285,663
(221,688)
(11,178)
839,932
J Shuttleworth
559,470
190,442
(212,425)
(5,630)
531,857
I Wells
632,455
190,442
(259,484)
(7,555)
555,858
-
-
-
-
1,418,735
1,418,735
839,932
839,932
531,857
531,857
555,858
555,858
1 Performance Rights were granted in accordance with the short and long-term performance rights plan, as disclosed in note 18 of the Financial Report.
2 Relates to FY19 ESSIP and FY17 LTIP.
Fortescue Metals Group Ltd Annual Report FY20 153
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
g. KMP shareholdings
The numbers of shares in the Company held during the financial year by each Director and CLT, including their
related parties, are set out below:
Issued
Purchases
Sales
Transfers Other1
26,112,053
20,300
-
-
4,479
-
1,261
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(50,750)
-
-
-
-
-
-
-
-
-
-
Held at
30 June 2020
1,116,165,000
40,300
-
138,000
45,415
-
12,780
-
-
595,669
424,704
610,292
562,976
2020
Held at
1 July 2019
Received
on
conversion
of rights
Non-executive Directors of Fortescue
Dr A Forrest AO
1,090,052,947
M Barnaba AM
S Warburton1
Dr J
Baderschneider
20,000
50,750
138,000
P Bingham-Hall
40,936
Lord S Coe CH,
KBE
J Morris OAM
Dr C Zhiqiang
Dr Ya-Qin Zhang
-
11,519
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Executive Directors of Fortescue
E Gaines
389,375
206,294
-
Other Key Management Personnel of Fortescue
G Lilleyman
203,016
221,688
J Shuttleworth
397,867
212,425
I Wells
303,492
259,484
-
-
-
1Sharon Warburton resigned 31 March 2020.
154 Fortescue Metals Group Ltd Annual Report FY20
Remuneration Report 09
Corporate
Directory
Top 20 holders of ordinary shares
at 31 July 2020
Rank
Name
Shares number
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Minderoo Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Valin Investments (Singapore) Pte Ltd
Citicorp Nominees Pty Limited
Emichrome Pty Ltd
Valin Resources Investments (Singapore) Pte Ltd
AMNL Financing Pty Ltd
National Nominees Limited
AMNL Financing Pty Ltd
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Mr William Graeme Rowley
Pacific Custodians Pty Limited
HSBC Custody Nominees (Australia) Limited-Gsco Eca
HSBC Custody Nominees (Australia) Limited
Pacific Custodians Pty Limited
20
Peter & Lyndy White Foundation Pty Ltd
918,806,548
729,984,421
300,102,364
228,007,497
155,867,760
93,045,000
76,426,216
71,365,581
36,909,329
30,365,261
28,205,701
21,217,275
14,583,449
9,261,571
8,244,951
7,916,941
6,466,799
6,437,112
5,970,007
5,890,083
29.84
23.71
9.75
7.41
5.06
3.02
2.48
2.32
1.20
0.99
0.92
0.69
0.47
0.30
0.27
0.26
0.21
0.21
0.19
0.19
2,755,073,866
89.48
Substantial holders
Rank Name
Shares number
% of issued capital
1
Minderoo Group Pty Ltd, Forrest Family Investments
Pty Ltd and John Andrew Henry Forrest
2
Hunan Valin Iron and Steel Group Company
1,116,165,000
307,945,477
36.25
10.00
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
Shareholders number
36,482
24,125
5,541
4,031
262
70,441
Unmarketable parcels
There were 1,420 members holding less than a marketable parcel of shares in the Company.
156 Fortescue Metals Group Ltd Annual Report FY20
Corporate Directory
Glossary
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.
ASX
Australian Securities Exchange.
ASX 100 Resource Index
A capitalisation-weighted index
which measures the performance of the
resources sector of the ASX 100. The
index is calculated on an end of day
basis.
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).
bt
Billion tonnes.
C1 Cost
Operating costs of mining, processing,
rail and port on a per tonne basis,
including allocation of direct
administration charges and production
overheads.
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.
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.
Corporations Act
Corporations Act 2001 of the
Commonwealth of Australia.
Direct employees
Total number of employees including
permanent, fixed term and part-time.
Does not include contractors.
dmt
Dry metric tonne.
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 blend
A blend of ore from Christmas Creek
and Firetail mines, with an iron grade of
58.2% Fe.
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, end 30 June.
Gearing
Debt / (debt + equity).
Ha
Hectares.
Hematite
An iron ore compound with an average
iron content of between 57% and 63%
Fe. Hematite deposits are typically
large, close to the surface and mined
via open pits.
Indigenous Land Use Agreement
(ILUA)
Statutory agreement between a native
title group and others about the use of
land and waters.
Indicated Mineral Resource
An ‘Indicated Mineral Resource’ is that
part of a Mineral Resource for which
quantity, grade (or quality), densities,
shape and physical characteristics are
estimated with sufficient confidence
to allow the application of Modifying
Factors in sufficient detail to support
mine planning and evaluation of the
economic viability of the deposit.
Geological evidence is derived from
adequately detailed and reliable
exploration, sampling and testing
gathered through appropriate
techniques from locations such as
outcrops, trenches, pits, workings
and drill holes, and is sufficient to
assume geological and grade (or
quality) continuity between points
of observation where data and
samples are gathered. An Indicated
Mineral Resource has a lower level
of confidence than that applying to a
Measured Mineral Resource and
may only be converted to a Probable
Ore Reserve.
Inferred Mineral Resource
An ‘Inferred Mineral Resource’ is
that part of a Mineral Resource for
which quantity and grade (or quality)
are estimated on the basis of limited
geological evidence and sampling.
Geological evidence is sufficient
to imply but not verify geological
and grade (quality) continuity. It is
based on exploration, sampling and
testing information gathered through
appropriate techniques from locations
such as outcrops, trenches, pits,
workings and drill holes.
An Inferred Mineral Resource has a
lower level of confidence than that
applying to an Indicated Mineral
Resource and must not be converted
to an Ore Reserve. It is reasonably
expected that the majority of Inferred
Mineral Resources could be upgraded
to Indicated Mineral Resources with
continued exploration.
International Financial Reporting
Standards
International Financial Reporting
Standards (IFRS) is a single set of
accounting standards, developed
and maintained by the International
Accounting Standards Board with the
intention of those standards being
capable of being applied on a globally
consistent basis.
IUCN
International Union for Conservation
of Nature.
JORC Code
The Australasian Code for Reporting of
Exploration Results, Mineral Resources
and Ore Reserves 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.
Fortescue Metals Group Ltd Annual Report FY20 157
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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 content
of 57.3% Fe.
LOM
Life of Mine, being the number of years
over which available reserves will be
extracted.
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 Mineral Resource
A ‘Measured Mineral Resource’ is
that part of a Mineral Resource for
which quantity, grade (or quality)
densities, shape, and physical
characteristics are estimated with
confidence sufficient to allow the
application of Modifying Factors
to support detailed mine planning
and final evaluation of the economic
viability of the deposit. Geological
evidence is derived from adequately
detailed and reliable exploration,
sampling and testing gathered
through appropriate techniques from
locations such as outcrops, trenches,
pits, workings and drill holes, and is
sufficient to confirm geological and
grade (or quality) continuity between
points of observation where data and
samples are gathered. A Measured
Mineral Resource has a higher level
of confidence than that applying to
either an Indicated Mineral Resource
or an Inferred Mineral Resource. It
may be converted to a Proved Reserve
or under certain circumstances to a
Probable Ore Reserve.
mt
Million tonnes.
mtpa
Million tonnes per annum.
Net gearing
(Debt - cash) / (debt - cash + equity).
NPAT
Net profit after tax.
OPF
Ore Processing Facility.
Pilbara
The Pilbara region in the north west of
Western Australia.
Probable Ore Reserve
As defined in the JORC Code, the
economically mineable part of an
Indicated Resource, and in some
circumstances, a Measured 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 Ore Reserve
As defined in the JORC Code, the
economically mineable part of a
Measured 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 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. Ore reserves
are sub-divided in order of increasing
confidence into Probable Ore
Reserves and Proved Ore 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 Mineral
Resources.
Senior Executive
Leadership position title of Director or
Group Manager.
Solomon Hub
A mining hub with two operating iron ore
mines, Firetail, Kings and Queens.
Super Special Fines
Fortescue’s iron ore product from the
Chichester Hub, with an iron content of
56.4% Fe.
TRIFR
Total Recordable Injury Frequency Rate
per million hours worked, comprising lost
time injuries, restricted work and medical
treatments.
Total global economic contribution
Payments that contribute to the global
economy including payments to suppliers,
employees (salaries and wages),
governments (taxes and royalties),
shareholders and investors (dividends
and debt repayments).
Underlying EBITDA
Underlying EBITDA is defined as earnings
before interest, tax, depreciation and
amortisation, exploration, development
and other expenses.
Underlying EBITDA margin
Underlying EBITDA / Operating sales
revenue.
Underlying Net Profit After Tax
Net profit after tax (NPAT) adjusted for the
after tax impact of one-off refinancing and
early debt repayment costs.
VTEC
Vocational Training and Employment
Centre.
Western Hub
The Western Hub includes the Eliwana
mine.
wmt
Wet metric tonne.
158 Fortescue Metals Group Ltd Annual Report FY20
Corporate Directory Awards
Winners
Chamber of Minerals and Energy (WA) Women
in Resources Awards
- Women in Resources Champion
(CEO, Elizabeth Gaines)
- People’s Choice Award
(Superintendent Fixed Plant Planning,
Briohny Evans)
AIM WA Pinnacle Awards
- Workplace Diversity Excellence Award
Australian Resources and Energy Group
(AMMA)
- Diversity and Inclusion Award
(VTEC)
- Workforce and Workplace Innovation
Award
(Rapid Trades Upskilling Program)
Chief Executive Women
- Executive Development Program
Scholarship
(General Manager, Ecuador and Colombia,
Alexa Morcombe)
Finalists
Fortune Magazine
- Rank 2 – Businessperson of the Year 2019
List (CEO, Elizabeth Gaines)
Chamber of Minerals and Energy (WA)
Women in Resources Award
- Outstanding Operator/Technician/Trade
Women (Superintendent Fixed Plant
Planning, Briohny Evans).
Fortescue Metals Group Ltd Annual Report FY20 159
Overview | Operating and financial reviewOre Reserves and Mineral ResourcesOur approach to sustainabilityCorporate GovernanceOur approach to climate changeFinancial ReportCorporate DirectoryRemuneration Report
Contact details
Fortescue Australia
Fortescue Shanghai, China
Unit 3, Floor 15 No. 1366 Lujiazui
Ring Road Pudong New Area
Shanghai, P.R China
Singapore
FMG International,
The Central
8 Eu Tong Sen St,
24-91 Singapore 059818
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East Perth, WA 6004
T: +61 8 6218 8888
F: +61 8 6218 8880
E: fmgl@fmgl.com.au
www.fmgl.com.au
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South Hedland, WA 6722
T: +61 8 9158 5800
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E: hedlandcommunity@fmgl.com.au
E: vtec@fmgl.com.au
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Number
ABN 57 002 594 872
Auditor
PwC
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Perth, WA 6000
www.pwc.com.au
Securities 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
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250 St Georges Terrace
Perth, WA 6000
Locked Bag A14
Sydney South, NSW 1235
T: 1300 733 136 (within Australia)
T: +61 2 8280 7603 (International)
F: +61 2 9287 0309
www.linkmarketservices.com.au
Fortescue’s FY20 Sustainability
Report, FY20 Climate Change Report
and FY20 Modern Slavery Statement
are available on our website at
www.fmgl.com.au