APPENDIX 4E
For the year ended
30 June 2021
This information should be read in conjunction with
Fortescue’s Annual Report, for the year ended 30 June 2021.
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 74% to
Up 117% to
Up 117% to
US$ million
22,284
10,295
10,295
Dividends
Financial year ended 30 June 2021:
Interim – ordinary
Final – ordinary
Total dividends
Previous corresponding period:
Interim – ordinary
Final – ordinary
Total dividends
Ex-dividend date of final dividend
Record date of final dividend
Payment date of final dividend
Amount
per security
Franked amount
per security
A$1.47
A$2.11
A$3.58
A$0.76
A$1.00
A$1.76
A$1.47
A$2.11
A$3.58
A$0.76
A$1.00
A$1.76
6 September 2021
7 September 2021
30 September 2021
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 five trading days
commencing on 9 September 2021.
Net tangible asset backing
Net tangible asset backing per ordinary
shares: US$5.76 (previous corresponding
period: US$4.30).
Previous corresponding period
The previous corresponding period is the
12 months ended 30 June 2020.
The last date for receipt of applications to participate in or to cease or vary
participation in the Plan is by 5:00pm (WST) on 8 September 2021. The
Directors have determined that no discount shall apply to the allocation price
and the Plan will not be underwritten. Shares to be allocated under the Plan
will be acquired on market and transferred to participants on 30 September
2021. A broker will be engaged to assist in this process.
A copy of the Plan Rules is available at www.fmgl.com.au/Investors
Audit
This report is based on financial
statements which have been audited.
Commentary on results
for the period
A commentary on the results for the
period is contained within the Annual
Report, including the Financial Report
that accompany this announcement.
Annual Report
FY21
ABN 57 002 594 872
Thriving communities | Global force
Thriving communities
Global force
Fortescue's unique Values drive
our performance in a way that
sets us apart from others
Culture
Fortescue is a values-based
business with a strong,
differentiated culture.
We believe that by leveraging
the unique culture of our
greatest asset, our people, we
will achieve our stretch targets
Our Values
Safety
Family
Empowerment
Frugality
Stretch targets
Integrity
Enthusiasm
Courage and
determination
Generating ideas
Humility
Contents
01
Overview
02
Operating and financial review
03
Ore Reserves and Mineral Resources
04
Our approach to sustainability
05
Corporate Governance
06
Our approach to climate change
07
Financial Report
08
Remuneration Report
09
Corporate Directory
03
25
43
53
58
61
65
122
159
Year at a glance
Iron ore shipped
C1 costs
Cash on hand
182.2 mt
US$
13.93
/wmt
US$
6. 9 bn
Net cash
US$
2.7bn
Net profit
after tax
US$
10.3bn
Total global
economic contribution
A$
30.2bn
01
Overview
Chairman's
message
The first iron ore company to have
a fully autonomous haulage fleet.
A railway capable of carrying
heavier loads faster than any
other on Earth. Radical new
technologies that will allow us to
access and transport high-grade
magnetite iron ore more efficiently
than any competitor
Dr Andrew Forrest AO
Fortescue has always
been a pioneer
The humbling questions I received from our women
and men while visiting five Fortescue operations –
Cloudbreak, Iron Bridge, Port Hedland, Solomon and
Eliwana in August – truly brought this home.
Will we make green, renewable hydrogen in the Pilbara?
Will Fortescue own the intellectual property behind the
renewable technologies we are developing? How will we
eliminate emissions from our trains? What are we doing
to reduce “red tape” standing in the way of
climate progress?
These were the questions of people who choose change,
rather than fearing it – people who understand that
to do things better, faster, safer and green, you must
constantly test your boundaries. It is the Fortescue way,
and it is precisely why, on behalf of the Fortescue Board
of Directors, I can report another stellar year, a year in
which we continued to break records and deliver results
for all of our stakeholders, under the leadership of CEO
Elizabeth Gaines.
That success was not only due to record iron ore
prices. The team achieved record results in safety and
production, record shipments, all while maintaining our
industry leading cost position during the year. True to our
Values, looking out for our mates and ourselves, holding
each other to ambitious stretch targets we continued
our records. It is all due to the character of our people,
our courage, determination and enthusiasm, our refusal
to be complacent and our bravery to step up and set
challenging stretch targets.
Against the backdrop of the continued challenge of
a global pandemic, our company, and the industry
overall, kept operating to massively support the Western
Australian and national economies at this unprecedented
time in our history.
And as we look forward, our newest operation at Eliwana,
and progression of the Iron Bridge Magnetite project will
position us strongly for future growth in our world class
iron ore business.
Eighteen years ago, I had a vision of creating an iron
ore business that would challenge the existing iron ore
majors. Yet nothing was guaranteed in our journey from
that first discovery at Cloudbreak to now consistently
producing over 180 million tonnes of iron ore per year.
4 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview Our success – and its stability – reflects what is possible
when we set a light on the hill and empower some of the
brightest and most motivated people of their generation to
find a way to it. Today, our assets and infrastructure rival
the best in the world.
It is from this outstanding platform that we are now ready,
once again, to set out as pioneers.
This year, we took a confident and bold step towards
diversification. Led by CEO Julie Shuttleworth,
Fortescue Future Industries (FFI) established a global
portfolio of renewable energy opportunities – all with
considerable upside for our stakeholders, yet with
minimal additional costs.
Through FFI, we are standing up a global green energy
and green materials industry, with a pioneering target to
achieve carbon neutrality by 2030. We are focusing our
efforts on renewable green hydrogen, because any other
kind of hydrogen – as a recent study by researchers at
Stanford and Cornell University confirmed – is a distraction.
At the helm of FFI is Fortescue’s Board of Directors and
our Leadership team, who are committed to and energised
by this new future and bring a wealth of experience and
expertise that will propel our business to new heights.
At its helm is Elizabeth Gaines, driving and optimising
our very large resources business while encouraging FFI
and leveraging Fortescue’s track record of innovation,
operational excellence, frugality and safety to also drive
FFI. As Fortescue goes green, both Fortescue and FFI
have the potential to position Australia as a global clean
energy superpower, while at the same time generating a
sustainable source of livelihoods that, like renewable
green hydrogen, will never be exhausted.
Fortescue’s success is also closely tied to our
philanthropic efforts. Supported by over A$2 billion of
Fortescue dividends, Minderoo Foundation this year
continued to aggressively tackle the greatest threats
facing humanity, most notably:
• Exposing for the first time the twenty petrochemical
companies and their handful of funders responsible
for more than 50 per cent of the world’s single-use
plastic waste.
• Funding a new ocean conservation project to protect
18 million square kilometres of ocean over the next
five years – an area twice the size of the continental
United States.
• Launching the Fire and Flood Resilience initiative
to make Australia the global leader in disaster
resilience by 2025, along with the rollout of more
than 250 Minderoo Foundation ‘recovery pods’, an
innovative temporary housing solution for those
who have lost their homes through bushfires or
other natural disasters.
• Bringing together Australians from all sides of politics
with the community to advocate for our nation’s early
learning childcare system to be high quality and
universally accessible, and;
• Continuing to eradicate the scourge of modern slavery
by transforming supply chains, including our own.
Eleanor Roosevelt once wrote, “We cannot any longer
take an old approach to world problems. They aren't the
same problems. It isn't the same world. We must not
adopt the methods of our ancestors; instead, we must
emulate that pioneer quality in our ancestors that made
them attempt new methods for a New World.”
The geography of the global energy trade is being
redrawn. Political climates and societies are shifting to
net zero, at speed. These changes represent an enormous
opportunity – but only to those that can move quickly and
confidently. To thrive, Fortescue must, as it has always
done, embrace rather than fear change.
There is a new light on the hill, and heavy industry must
now lead the way to it. We can do so charged by the
spirit, will and yearning of our employees, particularly the
younger generations – or, not listening, promptly jarred by
legislation and incentives. Those that lag behind will soon
find themselves in darkness.
To the entire Fortescue family, I thank you for your hard
work and your commitment to this great company. By
living by our culture and Values, by continuing to be
fearless pioneers and innovators rather than followers
and reactionaries, we will forge a new future.
Thank you.
Fortescue Metals Group Ltd FY21 Annual Report 5
01 Overview
In January 2021, Fortescue
Founder and Chairman
Dr Andrew Forrest AO delivered
his Boyer Lecture entitled
Oil vs Water: Confessions
of a Carbon Emitter. This is
an excerpt from the lecture
The Boyer lectures are traditionally lectures – a speaker
lecturing Australia about what it should do.
I’ve chosen a different path. This lecture is about what
I’m doing to fight climate change – under the premise
that actions speak louder than words. But first – I have a
confession to make.
The iron ore company I founded 18 years ago, Fortescue,
generates just over two million tonnes of greenhouse gas
– every year. Two million tonnes. That’s more than the
entire emissions of Bhutan.
It’s also just 0.004 per cent of the greenhouse gases
that enter the atmosphere every year – around 50 billion
tonnes. The answer isn’t to stop mining iron ore – which is
critical to the production of steel and to humanity.
The answer is iron ore and steel – made using zero-
emissions energy.
To put it in perspective, if the world’s renewable energy
resources were a power station, we’d be able to produce
not 70, but millions of Giga Watts of energy.
That’s green hydrogen, the purest source of energy in the
world – and one that could replace up to three quarters of
global emissions, if we improve the technology and had
the scale. But right now, we don’t use it for energy.
It’s just an ingredient used in industrial processes. And we
make it from fossil fuels – quaintly calling it grey hydrogen,
to hide the fact that it’s a pollutant.
Green hydrogen – the good stuff – is virtually ignored by
the economic world. We’re missing a colossal opportunity.
The green hydrogen market could generate revenues – at
the very least – of 12 trillion US dollars by 2050. Bigger
than any industry we have.
And Australia, with characteristic luck, is sitting on
everything it needs to be the world leader – but only if it
acts fast.
The tricky part is transporting it – but we are cracking
that. The journey to replace fossil fuels with green energy
has been moving at glacial speed for decades but is now
violently on the move.
There’s enough pollution-free, renewable energy out
there to power humanity for the entire Anthropocene. The
Anthropocene is the age of humans.
Almost every major business in the world has committed
to net zero emissions by 2050, including Australian
companies, marching ahead of government.
But unlike other geological eras, the markers of our age
won’t be Tyrannosaurus teeth or asteroid craters, they’ll be
giant landfills of single-swig, plastic water bottles – fossils
the moment they were made.
We have no idea how long the Anthropocene will last. But
if we don’t stop warming our planet – it will be geological
history’s shortest era.
The solution is hydrogen. Hydrogen is the most common
element in existence. In fact, the universe is 75 per cent
hydrogen by mass – so we’ll never run out of it. It’s also the
simplest. To make it, you just run electricity through water.
6 Fortescue Metals Group Ltd FY21 Annual Report
These are laudable and genuine ambitions. But if we wait
until 2050 to act, our planet will be toast.
We’re already way behind schedule.
There’s only one solution, and we will all have to act with
courage.
Zero-emissions energy needs to be available at an
industrial, global scale – and at a price that competes with
fossil fuels.
01 Overview When renewable energy becomes less expensive than fossil
fuel energy – that’s when we’ll reach the tipping point. That’s
when the world will begin the journey in earnest to become
zero-carbon.
Almost everyone I met in the industry said it was
impossible.
But we did it.
Steel is fundamental to everything you see around you,
from your home, to your car, the roads you drive on.
Now imagine if we could find a way to make steel without
coal – zero-carbon steel – in Australia.
Australia is in an absolutely unique position to scale
green steel.
We produce over 40 per cent of the world’s iron ore. And
our potential green energy and hydrogen resources are
immeasurable.
By the end of the decade, Fortescue’s trucks will run on
renewable energy. Imagine that: a fleet of vehicles that
produces nothing more than steam as exhaust.
How? It wasn’t down to luck or unexpected
breakthroughs. There was no one hero, there was no
single great technology.
Rather, it was thousands of people and thousands of
improvements that made our operations safer and more
efficient day by day, year by year. At Fortescue, we call
this the flywheel.
We nudge the wheel, make sure our systems work,
reduce costs, free up capital and create demand.
Then we encourage that momentum and reduce costs
further, creating an even larger, more reliable supply, that
again creates more demand. The flywheel begins to spin,
on its own, faster and faster.
We’re also aiming to develop green iron ore trains – that are
powered by either renewable electricity or green ammonia.
Now, we’re building – at global scale – the flywheel of
green energy. But let’s not underestimate the challenge.
And if a major player like Fortescue does it, substantially
reducing operating costs, then be assured business will
follow promptly.
There are two possible futures ahead of us. Stop flying,
driving, slash your standard of living – but you’re still
killing the planet.
Change takes courage. And that must be encouraged by
our society.
We must be prepared to fail in pursuit of improvement –
or we as individuals, or as societies, or as a nation – will
stagnate.
Often with change comes fear – and I’m used to fear. I feel
it as much as anyone else. My job is to persevere through it.
Eighteen years ago, I was just a young upstart trying to set
up Fortescue.
Everyone told me I was crazy to take on BHP and Rio Tinto.
They had a stranglehold on the Pilbara.
Or… the alternative, beyond symbolic gestures and
sacrifice, that demands far more courage – change.
One where quality of life increases, and we reduce
carbon emissions.
One where we de-couple our economy – for the first time
– from damage to our planet, damage that threatens our,
and the Anthropocene’s, very existence.
I choose change. I choose hydrogen. What do you
choose?
Fortescue Metals Group Ltd FY21 Annual Report 7
01 Overview
Chief Executive
Officer's message
Fortescue’s core iron ore business
continues to drive strong results
and deliver benefits for all our
stakeholders. With our eye on the
future, we are committed to our goal
of achieving carbon neutrality by
2030 and are pursuing exciting new
opportunities in renewable energy
and green industries, creating the
next new major export market
opportunity for Australia
Elizabeth Gaines
It has been a year of extraordinary achievements for the
entire Fortescue family.
Guided by our unique culture and Values, our team
members have looked out for each other and acted with
courage and determination as we manage the impact of
COVID-19.
Together with our industry peers, Fortescue has been in
a privileged position to continue operating through the
pandemic, maintaining jobs and contributing to economic
activity at a time of critical national need.
The health and safety of our team members, their families
and our local communities is our highest priority during
this period and our robust COVID-19 management
protocols remain in place to ensure COVID-19 does not
impact our operations.
A strong performance by our team members across the
entire supply chain contributed to Fortescue’s highest
ever annual shipments of 182.2 million tonnes in FY21,
exceeding our guidance for the year.
Reflecting our strong focus on cost management and
ongoing investments in innovation and technology, we
have maintained our industry leading cost position with
our C1 cost of US$13.93/wmt.
During the year, we celebrated a number of significant
operational milestones, including the delivery of our
newest mining operation at Eliwana, the shipment of our
1.5 billionth tonne in April, as well as the completion of
our Chichester Hub autonomous haulage project.
Today, our autonomous fleet represents one of the largest
in the world, with over 190 trucks in operation across our
Pilbara mine sites.
Record performance in FY21
In FY21, the Fortescue team delivered a second
consecutive year of record performance.
Importantly, our unwavering focus on safety has seen
the achievement of our lowest ever Total Recordable
Frequency Rate of 2.0 – a 17 per cent improvement from
30 June 2020.
Customers and market
Fortescue’s integrated operations and marketing strategy
continues to deliver significant benefits for the business,
allowing us to adapt and respond to market conditions
quickly.
Recovery in Chinese crude steel production from
COVID-19 impacted levels in early 2020 combined with
8 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview ongoing constraints in iron ore supply from traditional
producers resulted in strong market conditions, reflected
in a 72 per cent increase in Fortescue’s revenue per tonne
to US$135/dmt.
As a low cost supplier of seaborne iron ore to China,
we engage regularly with our customers and key
stakeholders in China. We are proud to be a long-term
sponsor of the prestigious Boao Forum for Asia, elevating
our commitment as a Strategic Partner for the 20th
anniversary of the conference in 2021.
Balance sheet strength
The strength of our operational performance combined
with record average revenue has resulted in strong
cashflow generation for the year, contributing to a record
net profit after tax of US$10.3 billion.
Cash on hand increased to US$6.9 billion at 30 June 2021,
and we ended the financial year with net cash of
US$2.7 billion. Total capital expenditure for FY21 was
US$3.6 billion including US$2.1 billion invested in our
major growth projects of Eliwana, Iron Bridge and
Pilbara Energy Connect.
Investing in the future
During the year, the Fortescue team successfully
delivered our newest mining operation at Eliwana,
with first ore through the ore processing facility in
December 2020.
The operations at Eliwana have successfully ramped up
with the operations team achieving the annualised rate
of production through the ore processing facility of
30 million tonnes per annum within six months.
Reflecting the low capital intensity of the project and
the current strength of the market, we are expecting to
achieve a short payback on our investment in Eliwana.
Our investment in the Iron Bridge Magnetite Project
represents one of the few large-scale iron ore growth
projects under construction globally.
In May this year, we completed the technical and
commercial assessment of the project with a revised
capital estimate of US$3.3 – US$3.5 billion. The project
will deliver 22mtpa of high grade 67% Fe magnetite
concentrate, with first production scheduled in
December 2022.
Building on our world class exploration capability,
we remain focused on driving growth in our iron ore
business with exploration activities continuing across our
tenement portfolio in the Pilbara.
Delivering returns to shareholders
Reflecting the team’s outstanding performance in
FY21 and our strong commitment to deliver shareholder
returns, Fortescue’s Board was pleased to declare our
largest ever final dividend of A$2.11 which, together with
the interim dividend of A$1.47 per share, represents total
dividends for FY21 of A$3.58 per share and a payout of
80 per cent of net profit after tax.
The ability to continue delivering increased returns
to our shareholders is underpinned by the successful
execution of our integrated operations and marketing
strategy, disciplined capital allocation, sustained focus on
productivity and efficiency, as well as the strength of the
iron ore market.
Empowering thriving communities
From the outset, it was Fortescue’s vision to ensure that
the communities in which we operate benefit from our
growth and development.
We have continued our focus on delivering training,
employment and business development opportunities
to Aboriginal communities. In 2021, we were pleased to
celebrate the 10th anniversary of our Billion Opportunities
program which has now awarded over A$3 billion in
contracts to Aboriginal businesses and joint ventures.
Ensuring we have a workforce that is reflective of
our broader society is a key priority, and we remain
strongly committed to increasing female and Aboriginal
employment across the business. In FY21, our female
employment rate increased to 21 per cent and we remain
one of the largest employers of Aboriginal people in
Australia with 14 per cent employed across our Pilbara
operations.
Carbon neutral by 2030
There can be no doubt that climate change is the single
largest issue facing our generation.
Fortescue has signalled our intention to be a global
leader in the battle against global warming, and in March
2021 we announced our bold, industry-leading target to
achieve carbon neutrality by 2030.
We have set clear short-term priorities on our pathway
to decarbonisation across key initiatives including green
fleet development and investment in renewable energy.
Critical to our decarbonisation strategy is our 100 per
cent renewable green energy and industry company,
Fortescue Future Industries, which is establishing a
global portfolio of renewable green hydrogen and green
ammonia operations to position us at the forefront of the
global renewable hydrogen industry.
Driving our future success
As we enter an exciting new phase of growth in
Fortescue’s journey, our work will continue to be
underpinned by our unique culture and Values.
The Fortescue family’s commitment to meeting key
safety, production and cost targets and their willingness
to challenge the status quo to deliver operational
excellence will be fundamental to the achievement of our
stretch targets and our future success.
On behalf of the Board and Fortescue’s Leadership team,
I would like to thank the entire Fortescue family, including
our contractors and suppliers, for their contributions
this year.
Fortescue Metals Group Ltd FY21 Annual Report 9
01 Overview
Fortescue Future Industries delivers on
ambitious stretch targets
At Fortescue, we are leading the
heavy industry battle against global
warming, transitioning from being
a major fossil fuel importer to a
significant green and renewable
energy and product exporter
Fortescue Future Industries (FFI) will be a key enabler of our target to achieve carbon
neutrality by 2030, investing in decarbonisation technologies to remove the use of diesel
across our Pilbara operations.
This year, FFI achieved significant progress on a number
of heavy industry decarbonisation initiatives including:
• Successful combustion of ammonia in a locomotive.
• Testing of battery cells for use on Fortescue haul
trucks, as well as the design and construction of a
hydrogen-powered haul truck.
• Finalisation of design work for the next-generation ore
carrier that will consume renewable green ammonia.
• Completion of design and construction of a
hydrogen-powered drill rig.
• Successful production of high-purity green iron from
Fortescue's ores at low temperature.
A disciplined approach is required to achieve our
2030 target and by taking a forward-looking strategic
position, we are ensuring that our capital investments
in decarbonisation are aligned with strategic decisions
such as fleet renewal.
Using our large industrial platform of operating mine
sites in the Pilbara, we are leading by example to
decrease emissions and demonstrate technologies in
completely renewable green hydrogen, green ammonia
and green electricity.
10 Fortescue Metals Group Ltd FY21 Annual Report
01 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
Our
Board
Dr Andrew Forrest AO
Chairman
Mark Barnaba AM
Lead Independent Director/
Deputy Chair
Elizabeth Gaines
Chief Executive Officer/
Managing Director
Lord Sebastian Coe CH,
KBE
Non-Executive Director
Jennifer Morris OAM
Non-Executive Director
Dr Jean Baderschneider
Non-Executive Director
Penny Bingham-Hall
Non-Executive Director
Dr Cao Zhiqiang
Non-Executive Director
Dr Ya-Qin Zhang
Non-Executive Director
Fortescue Metals Group Ltd FY21 Annual Report 11
01 Overview
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, subject to COVID-19
travel restrictions.
• 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, Risk
Management and Sustainability
Committee (ARMSC), 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 2021.
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 eight 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 FY21 Annual Report
01 Overview Dr Andrew Forrest AO
Mark Barnaba AM CitWA
Chairman
Chairman and Founder of Fortescue
Metals Group, Fortescue Future
Industries, Minderoo Foundation, and
Tattarang.
As Founder and Chairman, Dr Andrew
Forrest has led Fortescue from
inception to a US$60 billion listed
natural resources company that’s
invested over US$30 billion developing
some of the world’s most efficient
infrastructure. Fortescue is Australia’s
highest growth company over the last
two decades, and has devoted its
future to leading the decarbonisation
of the world’s heavy industry. In 2021,
Fortescue announced its commitment
to become zero-emissions by 2030, and
created FFI, a developer, financier and
operator of a global portfolio of
renewable energy resources to
produce green energy at a scale equal
to the oil and gas super-majors.
In 2001, Dr Forrest co-founded
Minderoo Foundation with his wife
Nicola and to date they’ve donated
more than US$1.6 billion supporting
300+ initiatives addressing modern
slavery, ocean health, cancer,
Indigenous disparity, childhood
development, artificial intelligence,
disaster resilience and plastic waste.
Dr Forrest has a PhD in Marine
Ecology from the University of Western
Australia, and serves as an IUCN Patron
of Nature, a World Economic Forum
Friend of Ocean Action, and a member
of the United Nations Environment
Programme’s Scientific Advisory
Committee on the Assessment on
Marine Litter and Microplastics.
Dr Forrest is Co-Chair of the
Australia-China Senior Business
Leaders’ Forum, Global Patron of the
Centre for Humanitarian Dialogue, and
served as a Councillor of the Global
Citizen Commission charged by the
United Nations in 2016 to modernise
the 1948 Universal Declaration of
Human Rights.
In 2017, Dr Forrest was appointed an
Officer of the Order of Australia (AO) for
distinguished service to philanthropy,
mining, employment and sustainable
foreign investment.
Committee memberships:
Finance Committee (Chair) and
Nomination Committee (Member)
Lead Independent Director/
Deputy Chairman
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 Global
Head of the Natural Resources
Group). He has previously chaired the
Black Swan State Theatre Company
of Western Australia, the West Coast
Eagles (an Australian Rules Football
League team) and several large
publicly listed (ASX) companies in
the mining and infrastructure sectors.
Mr Barnaba 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. He 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 Doctorate 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, Risk Management and
Sustainability Committee (Chair),
Nomination Committee (Member),
Remuneration and People Committee
(Member), Finance Committee (Member)
Elizabeth Gaines
Chief Executive Officer/
Managing Director
Chief Executive Officer/Managing
Director 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.
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 in the 2019
Fortune Magazine's Businessperson of the
Year, and in 2020 the Chamber of Minerals
and Energy of Western Australia awarded
her the ‘Women in Resources Champion’
at the 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 Master of Applied Finance and, in
2019, was awarded an Honorary Doctorate
of Commerce by Curtin University. She is
a Fellow of Chartered Accountants
Australia and New Zealand, and a member
of the Australian Institute of Company
Directors and Chief Executive Women.
Fortescue Metals Group Ltd FY21 Annual Report 13
01 Overview
Lord Sebastian Coe CH, KBE
Jennifer Morris OAM
Dr Jean Baderschneider
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director since
February 2018.
Non-Executive Director since
November 2016.
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.
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 the
International Association of Athletics
Federations (IAAF) in 2015 (now
World Athletics) 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. He was elected as a member
of the International Olympic Committee
in 2020, and became a director of the
British Olympic Association at that time,
having previously served as Chairman
of the British Olympic Association from
2012 to 2016.
Lord Coe 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 twelve 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)
Ms Morris is an accomplished
corporate executive and
non-executive director, with key
experience in advising corporations
and government entities on strategy
development, governance controls,
complex large-scale business
transformation, human capital-related
work, the embedding of environment,
social and governance-related
policies and the understanding of
high-performance environments
learned during her varied career,
including elite sport.
Ms Morris is a Non-Executive Director
of Sandfire Resources and is also a
member of the Risk Committee and
People and Performance Committees.
Ms Morris is also a Director on the
Australian Sports Commission.
Previously, Ms Morris was CEO of
Walk Free, a global human rights
organisation, and a senior executive
of Andrew and Nicola Forrest’s
Minderoo Foundation. She is a
former Partner of global professional
services firm Deloitte and also served
as Chair of Healthway and a Director
of AFL club, the Fremantle Dockers.
Ms Morris is also a former member
of the Australian Women’s Hockey
Team, in which she 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, Risk Management and
Sustainability Committee (Member)
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.
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.
She was a Presidential appointee to
the US Department of Commerce's
National Advisory Council on Minority
Business Enterprises and is a past
recipient of Cornell's Jerome Alpern
Award and Nomi Network's Corporate
Social Responsibility Award. She
holds a Master's degree from the
University of Michigan and a PhD
from Cornell University.
Committee memberships:
Audit, Risk Management and
Sustainability Committee (Member)
14 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview Penny Bingham-Hall
Dr Cao Zhiqiang
Non-Executive Director
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 and is currently a Non-
Executive Director of BlueScope Steel
Limited, Dexus Property Group and
Vocus Group. Ms Bingham-Hall is also
Chair of Taronga Conservation Society
Australia and the NSW Ministerial
Freight and Logistics Advisory Council
and is a Board member of Supply
Nation and the Crescent Foundation.
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.
Committee memberships:
Audit, Risk Management and
Sustainability Committee (Member),
Remuneration and People
Committee (Member), Finance
Committee (Member)
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.
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 WPP (NASDAQ:
WPPGY), 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.
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.
Fortescue Metals Group Ltd FY21 Annual Report 15
01 Overview
Executive
team
Fortescue’s Executive team is
accountable for the safety of our
people, upholding the Values and
acting with integrity and honesty
Elizabeth Gaines
Chief Executive Officer
Ian Wells
Chief Financial Officer
Julie Shuttleworth AM
Chief Executive Officer,
FFI
Danny Goeman
Director Sales and Marketing
Peter Huston
Director Corporate
Development, Legal and
Strategy
Derek Brown
Director Projects
Tim Langmead
Director Community,
Environment and Government
Linda O’Farrell
Director Fortescue People
Fernando Pereira
Director Operations
Alison Terry
Director Sustainability and
Corporate Affairs and Joint
Company Secretary
Rob Watson
Director Health and Safety
16 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview Elizabeth Gaines
Chief Executive Officer
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.
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 in the
2019 Fortune Magazine's
Businessperson of the Year, and in
2020 the Chamber of Minerals and
Energy of Western Australia awarded
her the ‘Women in Resources
Champion’ at the 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 Master of Applied
Finance and, in 2019, was awarded an
Honorary Doctorate of Commerce by
Curtin University. She is a Fellow of
Chartered Accountants Australia and
New Zealand, and a member of the
Australian Institute of Company
Directors and Chief Executive
Women.
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’
previous 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 and Philanthropic
Council.
Julie Shuttleworth AM
Chief Executive Officer, FFI
Ms Shuttleworth commenced as
Deputy Chief Executive Officer in
February 2018 and was appointed
CEO Fortescue Future Industries in
August 2020.
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 27 years’ experience in the
mining and resources industry in
Australia, China, Tanzania and South
America, including 19 years in gold/
copper working for Newcrest Mining,
Sino Mining and Barrick Gold prior to
joining Fortescue.
Ms Shuttleworth is a Fellow and
Chartered Professional of the
Australian Institute of Mining and
Metallurgy (AusIMM), a Graduate
Member of the Australian Institute of
Company Directors (AICD), a Member
of Chief Executive Women (CEW), a
Member of the Institution of
Engineers Australia (IEAust) and on
the International Committee of the
Society for Mining, Metallurgy and
Exploration (SME). 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.
Ms Shuttleworth was awarded 2011
Australian Mine Manager of the Year
and 2012 West Australian
Businesswoman of the Year. She is
listed in the 2013 WIM(UK) 100 Global
Inspirational Women in Mining, and is
one of the 2014 Australian Women of
Influence. In 2021, Ms Shuttleworth
was awarded a Member of the Order
of Australia for her significant service
to the minerals and mining sector.
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.
Fortescue Metals Group Ltd FY21 Annual Report 17
01 Overview
Peter Huston
Tim Langmead
Director Corporate Development,
Legal and Strategy
Director Community, Environment
and Government
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.
Derek Brown
Director Projects
Mr Brown was appointed as
Director Projects in February
2021, responsible for managing
Fortescue’s major project portfolio
including the Iron Bridge Magnetite
Project and Pilbara Energy Connect,
a US$700m program of works that
includes transmission and a hybrid
solar and gas generation solution.
Mr Brown joined Fortescue in
mid-2017 leading the asset
management and reliability team,
before moving to the role of General
Manager at Fortescue’s Cloudbreak
site. In 2020, he became the General
Manager of Solomon, successfully
leading organisational culture,
operational effectiveness, business
improvement and infrastructure
management for the Solomon Hub.
Mr Brown brings more than 35 years
of mining sector experience across
senior operational roles in South
Africa, Canada and Australia. He
has extensive experience in general
management, operations, project
delivery and mechanical engineering.
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 in 2018.
Holding a Graduate Diploma
in Energy Law, Mr Langmead
commenced his career as a journalist
and has held senior roles in federal
political offices and in the resources
sector. Mr Langmead is a Councillor
of the Association of Mining and
Exploration Companies.
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 Operations
Mr Pereira was appointed Director
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 20 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 30
years in a number of industries and
commodities. Mr Watson holds a
Master's degree in Occupational
Health and Safety.
18 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview
About
Fortescue
Established in 2003, Fortescue Metals Group Ltd (Fortescue) is a
proud West Australian company, recognised for our culture, innovation
and industry-leading development of infrastructure and mining assets
Underpinned by operational excellence and balance
sheet strength, we are focused on our strategic goals of
building thriving communities, optimising returns from
our operations through disciplined capital management
and diversifying to commodities that support
decarbonisation.
Together with FFI, our 100 per cent renewable green
energy and industry company, we are establishing a
global portfolio of green hydrogen and green product
operations that will position us at the forefront of the
global renewable hydrogen industry.
Our iron ore business comprises integrated mining,
rail, shipping and marketing teams working together to
export over 180 million tonnes of iron ore annually. Our
commitment to technology and innovation ensures we
remain one of the world’s lowest cost iron ore producers
and continues to guide our pursuit of green energy
opportunities.
Our operations include three mining hubs in the Pilbara,
Western Australia, which are connected to the five berth
Herb Elliott Port and the Judith Street Harbour towage
infrastructure in Port Hedland via 760 kilometres of the
fastest heavy haul railway in the world.
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.
The Fortescue Hive, our expanded integrated operations
centre based in our East Perth headquarters, brings
together our entire supply chain to deliver enhanced
safety, productivity, efficiency and commercial benefits,
and will underpin our future use of technology, including
artificial intelligence and robotics.
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.
Driven by our industry-leading target to be carbon
neutral by 2030, Fortescue is committed to lead the
heavy industry battle against global warming. In addition
to our ongoing investments in renewable energy to power
our Pilbara iron ore operations, we are also undertaking
a range of initiatives to decarbonise our mobile fleet
through the next phase of hydrogen and battery electric
energy solutions to eliminate the need for diesel across
our operations.
Fortescue was founded on the belief that the
communities in which we operate should benefit from
our success. Globally, we are empowering thriving
communities and delivering positive social and economic
benefits through training, employment and business
development opportunities, including for our Indigenous
employees and partners.
Fortescue is a values-based business with a strong,
unique culture which celebrates diversity and
inclusiveness. By empowering our people, we will
continue to generate economic growth and create jobs as
we take a global leadership position in the green energy
transition.
As we enter this new phase of growth in our journey, our
team will continue to challenge the status quo to sustain
operational excellence, achieve our stretch targets,
drive future success and deliver strong returns to our
shareholders.
Fortescue Metals Group Ltd FY21 Annual Report 19
01 Overview
Value chain
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)
20 Fortescue Metals Group Ltd FY21 Annual Report
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
01 Overview Overview of operations
Iron ore shipped
C1 costs
Cash on hand
182.2 mt
US$
13.93
/wmt
Revenue
US$
22.3bn
Gross debt
US$
4.3bn
US$
6. 9 bn
Net cash
US$
2.7bn
As one of the world’s largest producers of iron ore, Fortescue’s wholly owned
and integrated operations in the Pilbara include the Chichester, Solomon and
Western mining hubs. 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
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).
To further enhance our ore, the Christmas Creek OPF
infrastructure has been upgraded to include a Wet High
Intensity Magnetic Separator (WHIMS) to recover high
grade iron from the finer ore fed through the plants,
helping to improve product yield and reduce total
mining volumes.
Consistent and sustained performance delivered from
the OPFs has allowed us to optimise our product strategy
through enhanced blending and beneficiation, supporting
iron grades and reducing impurities.
This has contributed to lower mining cut-off grades, as we
optimise ore bodies with sustainably lower strip ratios.
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. Construction is underway to
extend the conveyor by a further 10km.
Fortescue Metals Group Ltd FY21 Annual Report 21
01 Overview
Solomon Hub
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, Kings
Valley and Queens Valley mines which together have a
production capacity of 75mtpa.
The expansion to Queens Valley will help maintain
production of the Kings Fines product.
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.
Western Hub
Fortescue is developing the Western Hub, which includes
significant amounts of high iron content bedded iron ore
and is now home to the Eliwana mine.
Located 140km to the west of Solomon, the Eliwana
mine spans over 50km and commenced operations in
December 2020. The operation includes 143km of rail
linking to the Hamersley rail line and a 30mtpa dry OPF.
Together with Eliwana’s innovative low profile designed
OPF and dual stacker reclaimer, Eliwana has the capacity
to direct load onto trains up to 9,000 tonnes per hour.
Eliwana is now producing at an annualised run rate
of 30mtpa, contributing to Fortescue’s low cost status
and providing greater flexibility to capitalise on market
dynamics.
Hedland Operations
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 760km of track, our railway is the fastest and
heaviest haul line in the world.
22 Fortescue Metals Group Ltd FY21 Annual Report
The efficient design and layout, optimal berthing
configuration and ongoing innovation to increase
productivity make 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.
Fortescue has been granted approval to increase the
licensed throughput capacity of Herb Elliott Port from
175mtpa to 210mtpa, in line with our strategy to deliver
growth through investment in significant projects including
the Iron Bridge Magnetite Project.
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.
Designed to complement our port infrastructure, the fleet of
eight 260,000 tonne capacity Fortescue Ore Carriers deliver
approximately 11 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$3.3 – US$3.5 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.
The innovative process design, including the use of a
dry crushing and grinding circuit, will deliver globally
competitive capital intensity and operating costs.
The Iron Bridge project includes the installation of a 135km
concentrate slurry pipeline to Port Hedland, together with a
return water pipeline.
01 Overview Iron Bridge
Magnetite Project
Innovative process
design, including
the use of a dry
crushing and
grinding circuit
In FY21, Fortescue completed a 12-week technical
and commercial assessment of the project to validate
the capital cost and schedule, with first production
scheduled by December 2022 and a ramp up period of
12 to 18 months.
The construction of a module offload facility at Lumsden
Point in Port Hedland commenced in FY21 to address
logistical constraints relating to the delivery of large
modules fabricated offshore.
Sales and marketing
Fortescue has an integrated operating and marketing
strategy, focused on meeting the needs of our customers
while maximising value.
Fortescue products are sold to a global customer base,
with the majority of tonnes sold to long-term customers
in China.
In 2019, we established our wholly owned Chinese sales
entity FMG Trading Shanghai, a portside sales capability
to supply our products directly to Chinese steel mills
from regional ports.
This capability is now well established and has
allowed us to enhance our service to small and
medium-sized customers through direct supply in
Renminbi, 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 fleet is among the largest in the world
and demonstrates our unique capability to manage and
operate a multi-class truck size autonomous haulage site.
In FY21, we celebrated the milestone of surpassing two
billion tonnes of material moved.
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 Hive 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.
It underpins our future use of technology, including artificial
intelligence and robotics, and will evolve to include the
generation and integrated distribution network for Pilbara
Energy Connect (PEC).
Energy infrastructure
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.
PEC, together with the Chichester Solar Gas Hybrid
Project, will deliver 25 per cent of our stationary energy
requirements from solar power.
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.
At 30 June 2021, over 660 of the 800 foundations for
transmission poles for Stage 1 were completed, 500 poles
stood and 150km of transmission line installed.
The new infrastructure builds on our previous energy
initiatives, including the construction of the Fortescue River
Gas Pipeline and the conversion of the Solomon Power
Station from diesel to gas generation.
Fortescue Metals Group Ltd FY21 Annual Report 23
01 Overview
Fortescue
Future
Industries
FFI will be a key enabler
of our industry-leading
target to achieve carbon
neutrality by 2030
Exploration
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.
Our exploration activities in the Western Hub, Solomon
Hub and Eastern Hamersley are focused on adding high
iron content, dry, low cost tonnes to our product suite,
providing further optionality for the business.
Study work is progressing at Nyidinghu and in FY21 we
acquired a strategic tenement adjacent to our Mindy
South iron ore tenement package in the Pilbara.
Recent Australian exploration activity has been primarily
focused on early stage target generation for copper-gold
in the Paterson, Rudall and Goldfields regions in Western
Australia. Additional exploration activity is underway in
New South Wales and South Australia, including through
the farm-in and joint venture agreement with Tasman
Resources in South Australia.
International footprint
We recognise that early stage exploration can unlock
significant value. 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 South
America. In Ecuador we have concessions prospective
for copper in exploration phase covering 135,000 hectares
(ha) and in Argentina we currently hold 323,000ha of
tenements, prospective for copper-gold.
We are also assessing exploration and development
opportunities in Peru, Chile and Brazil, as well as Portugal
and Kazakhstan.
Fortescue has a 19 per cent stake in TSX listed Candente
Copper Corporation. Our focus is on advancing the
Canariaco project in Peru.
Fortescue Future Industries
Our 100 per cent renewable green energy and industry
company, FFI, is establishing a global portfolio of
renewable green hydrogen and green ammonia
operations that will position it at the forefront of the
global renewable hydrogen industry.
FFI will leverage our world-leading track record of
innovation and development of large-scale integrated
infrastructure assets to deliver the vision of green
hydrogen becoming the most globally traded seaborne
energy commodity in the world.
FFI will be a key enabler of our industry-leading target
to achieve carbon neutrality by 2030, investing in
decarbonisation technologies to remove the use of fossil
fuels across our Pilbara operations, including stationary
power, buses, trucks, drill rigs, locomotives and ships.
Through the development of green electricity, green
hydrogen, green ammonia and other industrial projects,
FFI will provide the technology, solutions and capability
for heavy industry around the world to commercially
adopt other energy sources and carbon-free fuels.
24 Fortescue Metals Group Ltd FY21 Annual Report
01 Overview 02
Operating and
financial review
Fortescue Metals Group Ltd FY21 Annual Report 25
02 Operating and financial review
Safety
Production
C1 costs
2.0
Total recordable
injury frequency rate
182.2/wmt
Iron Ore Shipped
US$
13.93 /wmt
Key Performance
Indicators
26 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review Key Performance
Indicators
Safety
12-month rolling TRIFR,
per million hours worked
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
2.9
3.7
2.8
2.4
2.0
FY17
FY18
FY19
FY20
FY21
Excludes Fortescue Future Industries (FFI).
Each day, everyone at
Fortescue is empowered
to take control and look out for
their mates and themselves.
Fortescue is committed to
providing a safe working
environment for all employees
and contractors as we strive
to become a global leader in
safety with a commitment to
zero harm.
Fortescue’s rolling 12-month
total recordable injury
frequency rate (TRIFR)
improved by 17 per cent to
2.0 at 30 June 2021, from 2.4
at 30 June 2020.
Fortescue Metals Group Ltd FY21 Annual Report 27
02 Operating and financial review
Ongoing response to COVID-19
On 30 January 2020, the World Health Organisation
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. Our response, combined with measures
implemented by both the Australian and Western
Australian governments, has ensured that COVID-19 has
had a minimal impact on our operations. Key measures in
place through the year ended 30 June 2021 included:
Safety culture
During FY21, there were no fatalities and we focused on
both risk reduction and exposure reduction activities,
with a 13.5 per cent and 19.4 per cent reduction
respectively.
In pursuing the aim to reach our goal of zero harm, we are
committed to continuing to improve safety performance
across the following areas:
• Strengthening safety leadership through specific action
plans to address the priorities identified by the annual
company-wide Safety Excellence and Culture Survey.
• The continued provision of accommodation to our
interstate team members while travel restrictions set by
the Western Australian Government have been in place.
• Engagement with our contracting partners to ensure
compliance with Fortescue’s safety standards and a
safe workplace.
• The continued reduction of workplace exposures
through safety improvement opportunities.
• Continuing to improve the physical and mental health
of our people.
• Temperature checks and health screening.
• The introduction of initiatives at our village facilities,
including changes to food service and additional
cleaning services.
• Temporary changes to site operational rosters for the
duration of lockdowns (February, April and June 2021)
mandated by the Western Australian Government.
Office-based team members and non-critical site
based employees worked from home during these
periods.
Our Incident Management Team (IMT) chaired by the
CEO continues to meet regularly to review our operations
and the latest advice from the Commonwealth and
State governments. As the health guidelines changed,
we responded and adapted quickly, and regularly
communicated with our teams. As at 30 June 2021, there
have been no cases of COVID-19 across Fortescue’s
Pilbara operational sites.
Our focus on the health and safety of our workforce
extends to their mental health and wellbeing. All team
members have access to Fortescue Chaplains and our
Employee Assistance Program (EAP) 24 hours a day,
seven days a week.
28 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review Key Performance Indicators
Production
Successful commissioning of the Eliwana mine and rail project in
the Western Hub and record throughput in FY21
Production and shipments on a wet metric tonne basis (wmt) for the year are outlined below.
12 months to 30 June
Overburden removed
Ore mined
Ore processed
Shipments¹
Ore sold²
2021
million wmt
295.2
226.9
185.8
182.2
181.1
2020
million wmt
318.9
204.3
176.3
178.2
177.2
Movement
%
(7)
11
5
2
2
¹Volume references are based on wet metric tonnes. Product is shipped with approximately eight to nine per cent moisture.
2Our 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
197.8
184.5
206.7
204.3
226.9
172.2
165.7
176.9
176.3
185.8
170.4
169.8
167.7
178.2
182.2
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY21 Product mix
FY20 Product mix
5%
9%
9%
8%
Volume
181.1
million wmt
38%
31%
West Pilbara Fines
Kings Fines
Fortescue Blend
Fortescue Lump
Super Special Fines
Other
7%
10%
9%
41%
Volume
177.2
million wmt
33%
West Pilbara Fines
Kings Fines
Fortescue Blend
Fortescue Lump
Super Special Fines
Fortescue Metals Group Ltd FY21 Annual Report 29
02 Operating and financial review
Shipments, million wmt
182.2
178.2
170.4
169.8
167.7
FY17
FY18
FY19
FY20
FY21
Innovation and technology
Fortescue has been a leader in the implementation of
autonomous haulage across our iron ore operations and
our fleet now represents one of the largest in the world,
with 193 trucks operating across the Solomon and
Chichester hubs.
The introduction of automation has contributed to a safer
working environment for our team members, and has also
underpinned significant productivity and efficiency
improvements.
Fortescue continues to look for opportunities for
automation and artificial intelligence to drive greater
efficiency across the business, including the use of data
to predict outcomes and optimise performance, the
expansion of autonomous mining and the application of
relocatable conveyor technology.
Climate change
In March 2021, we announced our industry-leading target to
achieve carbon neutrality by 2030. We have set out clear
short-term priorities on our pathway to decarbonisation
across key initiatives, including green fleet development
and investment in renewable energy.
The Chichester Solar Gas Hybrid project will displace 100
million litres of diesel at our Chichester Hub and the PEC
project is estimated to provide 25 per cent of stationary
energy across our mining operations through solar power.
Critical to our decarbonisation strategy is our 100 per cent
renewable green energy and industry company, Fortescue
Future Industries (FFI).
Key considerations for the pathway to decarbonisation
include technology and development, future equipment
acquisition and potential regulatory changes. Any
investment analysis includes project economics and
asset carrying value assessments.
Key Performance Indicators
Production continued
Fortescue has continued to safely operate throughout
the COVID-19 pandemic, achieving record shipments
in the financial year ended 30 June 2021 of 182.2mt
through strong operational performance across
our supply chain, together with the successful
commissioning and integration of the Eliwana mine
and rail project. During FY21, we also increased sales
volumes through our Chinese trading entity FMG
Trading Shanghai (FMG Trading) locally in China.
Mining operations performed strongly with ore
mining 23mt above FY20 reflecting the successful
commissioning and transition of Eliwana to operations
in January 2021. The Queens development at Solomon
commenced production in FY21, providing product feed
to the existing Ore Processing Facilities (OPFs). The
strip ratio for FY21 was 1.3, a 17 per cent reduction from
FY20, reflecting mine plan sequence of developed areas
available at commencement of the year at our existing
operations.
The record OPF performance in FY21 reflects both the
successful commissioning and integration of Eliwana,
and sustained performance and reliability through our
existing OPFs, enabling a reduction of ancillary crushing.
Commissioning of the WHIMS plant at Christmas Creek
occurred through December 2020. WHIMS delivers
benefits in yield and grade with the plant ramping up to
capacity in the second half of FY21.
Mining, processing, railing and shipping combined
to deliver record shipments of 182.2mt in FY21. Sales
through FMG Trading continued to build during
the period with cumulative sales of 17.7mt from
commencement in June 2019 through to 30 June 2021.
This allows Fortescue to complement its sales channels
through the direct supply of products to Chinese
customers in smaller volumes, and in Renminbi (RMB)
directly from regional ports. The difference between ore
shipped and ore sold represents the change in inventory
held by FMG Trading at regional ports in China.
Marketing and product strategy
Fortescue’s world class, integrated operations and
customer-focused marketing strategy underpins
our strong market penetration in China and in other
countries.
Fortescue delivers a range of products to meet customer
requirements and maximise value.
Fortescue is a core supplier to China, which accounts for
more than 50 per cent of world steel production, as well
as an important supplier to other traditional markets in
North Asia. We also continue to explore non-China sales
opportunities to growth economies in South East Asia.
30 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review Key Performance Indicators
Costs
Focus on innovation
and technology
C1 cost, US$/wmt
12.82
12.36
13.11
12.94
13.93
FY17
FY18
FY19
FY20
FY21
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, offsetting the impacts of mine
plan cost escalation and economic inflation.
Focus on innovation and
technology
During the year, we continued to deliver on our integrated
operations and marketing strategy while increasing
capacity within our supply chain, and delivering
consistent and predictable operational performance
to achieve record sales volumes. Importantly, we have
remained a low cost producer of seaborne iron ore.
Strategic initiatives delivered in FY21 include:
• The Eliwana mine and rail project transitioned to the
operations team in January 2021, with the focus in the
second half of the financial year on commissioning
and ramp up to full production. The Eliwana project
is a high grade, low strip ratio operation with dry
processing, which contributes to our low cost structure.
• Commissioning of the WHIMS plant at Christmas Creek
occurred through December 2020. WHIMS delivers
benefits in yield and grade with the plant transitioning
to full capacity in the second half of FY21.
• The Queens Valley development at Solomon
commenced mining through FY21, providing feed to
existing OPFs.
• 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.
The ongoing focus on productivity gains through
innovation and technology has offset a higher AUD:USD
exchange rate, increasing energy costs and labour market
inflationary pressures.
Our ongoing response to COVID-19 also included
extending support to our suppliers through the provision
of 14 day payment terms to all small businesses and
through working collaboratively with all suppliers to
address any cashflow challenges.
We were able to continue to safely operate through all
COVID-19 restrictions, including lockdowns. COVID-19
related costs did not have a material impact on our FY21
results, and we did not seek any financial support or
assistance from government, lenders, landlords or others.
FY21 demonstrated our continued focus on innovation,
investment in technology and realising the benefits from
the reinvestment of capital within our operations. C1 costs
for the year have increased to US$13.93/wmt, an eight
per cent increase over the prior year, reflecting changes
in the AUD:USD exchange rate, external operating
conditions within the market, together with ramping up
Eliwana operations.
Fortescue Metals Group Ltd FY21 Annual Report 31
02 Operating and financial review
Financial
performance
Highlights
Our financial results demonstrate
continued operating excellence and strong
cash flow generation through the execution
of our integrated operations and
marketing strategy, resulting in record
shipments and operating margins
During the year ended 30 June 2021, Fortescue delivered a record net profit of US$10,295 million and earnings per share
of 334.6 US cents (448.0 AUD cents). This was driven by an increase in annual shipments, higher realised price and
maintaining low cost production. Key financial metrics include EBITDA margin of US$99/dmt or 73 per cent of revenue.
Return metrics were strong, with return on equity of 66 per cent.
Key metrics
Revenue, US$ 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 margin², US$/dmt
Key ratios
Underlying EBITDA margin, %
Return on equity, %
2021
22,284
16,375
10,295
334.6
448.0
135
13.93
99
73
66
2020
12,820
8,375
4,735
153.9
229.2
79
12.94
52
65
40
1 Refer to page 82 for the reconciliation of Underlying EBITDA to the financial metrics reported in the financial statements under Australian Accounting
Standards.
2 Excludes FFI costs recognised as an administration expense.
32 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review
Financial Performance
Revenue
Total iron ore revenue, US$ millions
Total shipping revenue, US$ millions
Other revenue, US$ millions
Note1
3
3
3
2021
20,853
1,378
53
2020
11,581
1,196
43
Operating sales revenue, US$ millions
22,284
12,820
Shipments, million wmt
Ore sold², wmt
Average 62% Fe CFR Platts index, US$/dmt
Average realised price, US$/dmt
1 Notes to the accompanying financial statements.
182
181
154
135
178
177
93
79
2 Our wholly owned trading entity 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$154/dmt in FY21 which is an increase of 65 per cent over the prior year
(FY20: US$93/dmt) with Fortescue’s realised price of US$135/dmt increasing by 72 per cent over the prior year
(FY20: US$79/dmt). The factors which influenced our realised price improvement include:
• Expansion of sales channels including increased sales through our China based trading company FMG Trading
Shanghai, which has transacted 17.7mt since commencement in FY19, strengthening our ability to maximise price
realisations.
• Execution of our integrated operations and marketing strategy with West Pilbara Fines contributing to 9 per cent of
sales in FY21 (10 per cent in FY20).
• Continued strength in Chinese steel production, growing by 11.8 per cent in the first half of calendar year 2021
compared to the prior equivalent period.
• Sustained strength in the benchmark iron ore price, reflecting the market supply and demand fundamentals.
Fortescue Metals Group Ltd FY21 Annual Report 33
02 Operating and financial review
Financial performance
Production costs
The reconciliation of C1 costs and total delivered costs to customers to the financial metrics reported in the financial
statements under Australian Accounting Standards is set out below.
Mining and processing costs, US$ millions
Rail costs, US$ millions
Port costs, US$ millions
C1 costs, US$ million
Ore sold, million wmt
C1 costs, US$/wmt
Shipping costs, US$ millions
Government royalty2, US$ millions
Administration expenses (excl FFI), 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
1 Notes to the accompanying financial statements.
Note1
5
5
5
5
5
6
2021
2,110
211
201
2,522
181
13.93
1,333
1,560
155
3,048
181
17
31
34
2020
1,938
186
169
2,293
177
12.94
1,190
845
114
2,149
177
12
25
27
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 also contributing to our FY21 operating cost performance are discussed on page 31. Total delivered costs
reflect an increase in State royalties in FY21, in line with an increase in the iron ore price, as well as an increase in
shipping costs which reflects a movement in the shipping index year on year and an increase in annual shipments.
34 Fortescue Metals Group Ltd FY21 Annual Report
02 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$16,375 million (FY20: US$8,375 million). FY21 includes US$104 million of operating
expenses related to FFI. The reconciliation of Underlying EBITDA to the financial metrics reported in the financial
statements under Australian Accounting Standards is presented below.
Operating sales revenue
Cost of sales excluding depreciation and amortisation
Net foreign exchange gain/(loss)
Administration expenses
Fortescue Future Industries (FFI) expenses
Other income/(expenses)
Underlying EBITDA
Finance income
Finance expenses
Depreciation and amortisation
Exploration, development and other expenses
Net profit before tax
Income tax expense
Net profit after tax
Cost of early debt repayment after tax
Underlying net profit after tax
1 Notes to the accompanying financial statements.
Note1
3
5
4, 6
6
6
4, 6
7
7
5, 6
6
14
2021
US$m
22,284
(5,448)
(142)
(155)
(104)
(60)
16,375
16
(240)
(1,366)
(63)
14,722
(4,427)
10,295
54
10,349
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
Key factors contributing to the 96 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$135/dmt in FY21 (FY20: US$79/dmt),
and FY21 sales volumes of 181.1mt increasing by two per cent (FY20: 177.2mt).
Net foreign currency losses on Australian dollar denominated payables, including income taxes, royalties and trade
payables, of US$142 million (FY20: net foreign currency gains of US$52 million) reflect the continued appreciation of
the AUD:USD exchange rate throughout FY21, from 0.69 at 30 June 2020 to 0.76 at 30 June 2021.
Total administration expenses have increased to US$155 million (FY20: US$114 million).
FFI initiatives totalling US$104 million (FY20: nil) includes early stage project assessments and feasibility studies and
is discussed further on page 37.
Fortescue Metals Group Ltd FY21 Annual Report 35
02 Operating and financial review
Financial performance
Underlying EBITDA continued
FY20 vs FY21 NPAT (US$m)
9,376
198
715
223
144
2
34
2,472
10,295
8,000
4,735
200
296
FY20
Underlying
EBITDA
Volume
Costs
Price Cashflow
hedge
adjustment
Royalty
Fx & fair
value
change in
derivatives
Other Financing
costs
Depreciation Income
Tax
FY21
The Underlying EBITDA of US$16,375 million for FY21 represents an Underlying EBITDA margin of US$99/dmt or
73 per cent of revenue. As illustrated in the chart below, Fortescue has maintained strong EBITDA margins through
market cycles, demonstrating our ongoing focus on productivity, efficiency and innovation.
US$/dmt
160
140
120
100
80
60
40
20
21
FY16
30
FY17
20
FY18
39
FY19
99*
52
FY20
FY21
Underlying EBITDA, US$/dmt
62% Platts CFR Index, US$/dmt
Average Fortescue realised price, US$/dmt
Fortescue realised price, US$/dmt
Average Underlying EBITDA, US$/dmt
*Excludes FFI costs recognised as an administration expense.
Non-operating events
Key non-operating matters forming part of the financial result include:
• Finance expenses of US$240 million include interest on borrowings and lease liabilities of US$143 million which
decreased by 32 per cent compared to the prior period, as a result of early debt repayments and refinancing completed
in the second half of FY21, lowering Fortescue’s overall cost of capital and an increase in average debt maturity.
• Depreciation and amortisation expense of US$1,366 million (FY20: US$1,400 million) decreased by two per cent
compared to the prior period.
• Income tax expense for the year of US$4,427 million at an effective income tax rate of 30.1 per cent
(FY20: US$1,955 million, at an effective rate of 29.2 per cent) remains in line with underlying financial results.
36 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review
Financial performance
Underlying EBITDA continued
Fortescue Future Industries
During FY21, we announced the establishment of FFI,
Fortescue’s 100 per cent renewable green energy and
industry company. FFI is taking a global leadership
position in the green energy and green products industry
by harnessing the world’s renewable energy resources
to produce green electricity, green hydrogen, green
ammonia and other green industrial products. FFI is
advancing a global portfolio of renewable energy and
green product opportunities and is a key enabler of
Fortescue’s decarbonisation strategy.
FFI currently has a portfolio of projects underway
associated with renewable hydrogen production,
including:
• A partnership with the CSIRO for the development of
new hydrogen technologies, including a world first
membrane technology which provides the potential for
large-scale hydrogen extraction from ammonia.
• A$32 million hydrogen mobility project at Christmas
Creek comprising the construction of a renewable
hydrogen refuelling facility and the deployment of a
fleet of hydrogen fuel cell passenger coaches from
mid-2021.
• A partnership with ATCO Australia to build and operate
the first combined green hydrogen production and
refuelling facility in Western Australia.
• A Memorandum of Understanding with Hyundai Motor
Company and CSIRO to advance renewable hydrogen
technology for domestic transport.
• A feasibility study for a 250MW green hydrogen plant in
Tasmania, with a green ammonia production capacity
of 250,000 tonnes per annum for domestic use and
international exports.
The following milestones have been achieved in FY21:
• Deed of Agreement with Papua New Guinea (PNG)
Government and its wholly owned corporation
to investigate the feasibility of developing PNG’s
hydropower resources to support green industrial
operations for both global and domestic consumption.
• Deed of Agreement with the Republic of Indonesia
providing FFI with first priority to conduct development
studies into the feasibility of projects utilising
Indonesia’s hydro and geothermal power for green
industries, principally for global consumption.
• Establishment of a global liquid hydrogen consortium
to develop a supply chain between Australia and
Japan through a Memorandum of Understanding with
Kawasaki Heavy Industries and Iwatani Corporation,
to develop a business model for the supply of liquid
hydrogen to Japan.
In FY21, we achieved a number of key strategic initiatives
to solidify our pathway to developing FFI, and supporting
Fortescue's achievement of net zero emissions by 2030.
These include:
• Successful combustion of ammonia in a locomotive
fuel, with a pathway to achieve completely renewable
green fuel.
• Completion of design and construction of a combustion
testing device for large marine (ship) engines, with
pilot test work underway and a pathway to achieve
completely renewable green shipping fuel.
• Finalised design of a next generation ore carrier (ship)
that will consume renewable green ammonia, with
the Classification Society giving in principle design
approval.
• Testing of battery cells to be used on Fortescue haul
trucks.
• Design and construction of a hydrogen powered haul
truck for technology demonstration complete, with
systems testing underway.
• Design and construction of a hydrogen powered
drill rig for technology demonstration complete, with
systems testing underway.
• Successful production of high purity (>97 per cent)
green iron from Fortescue ores.
• Successful initial trialling to use waste from the green
iron process noted above, with other easily sourced
materials, to make green cement.
Fortescue’s capital allocation framework includes a
dividend payout ratio of between 50 and 80 per cent
of NPAT with an objective to target the top end of that
range. As part of the capital allocation framework, 10 per
cent of NPAT is allocated to FFI.
Expenses incurred throughout FY21 amount to US$104
million recognised within administration costs with a
further US$18 million of capital expenditure incurred
through FY21.
Refer to note 23(n) which describes the accounting
treatment and considerations for research, studies and
development expenditure.
Fortescue Metals Group Ltd FY21 Annual Report 37
02 Operating and financial review
Financial
position
Highlights
Disciplined capital
management enhances
strong liquidity position
At 30 June 2021, Fortescue had US$7.9 billion of liquidity, being cash on hand of US$6.9 billion and a US$1 billion undrawn
Revolving Credit Facility. Total debt was US$4,252 million, inclusive of US$810 million of leases. Gross gearing ratio was
19 per cent.
Note1
9
9
9
9
2021
US$m
3,442
810
4,252
6,930
(2,678)
17,735
19
(18)
2020
US$m
4,234
879
5,113
4,855
258
13,244
28
2
Key metrics
Borrowings
Lease liabilities
Total debt
Cash and cash equivalents
Net debt/(net cash)
Equity
Key ratios
Gearing, %
Net gearing, %
1 Notes to the accompanying financial statements.
38 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review Financial position
Debt and liquidity
Fortescue’s balance sheet is structured on low cost, investment-grade terms with gearing and liquidity levels that
support ongoing operations. The debt capital structure also allows optionality and flexibility to fund future growth.
During July 2020, Fortescue repaid the US$1,025 million Revolving Credit Facility (RCF) which was drawn as at
30 June 2020 as a proactive capital management initiative in response to global uncertainty due to the COVID-19
outbreak. The voluntary repayment reflected confidence in market conditions and cash flow in the first half of FY21.
On 19 March 2021, Fortescue completed a US$1.5 billion offering of senior unsecured notes (‘Notes’) at an interest
rate of 4.375 per cent with a 10-year maturity of 1 April 2031. Proceeds from the offering of the Notes were applied to
the repayment of Fortescue’s US$750 million 2022 Notes and the US$500 million 2023 Notes, with the remainder
used for general corporate purposes.
Fortescue's debt maturity profile at 30 June 2021, after the effect of the above debt transactions, is set out below.
Fortescue has no financial maintenance covenants across all instruments.
Debt maturity profile (excluding leases), US$m
750
600
600
1,500
CY2021
CY2022
CY2023
CY2024
CY2025
CY2026
CY2027
CY2028
CY2029
CY2030
CY2031
Senior unsecured notes
Term loan
Cash generated by operations
Fortescue continued to generate strong underlying cash flows from operations during the year with cash on hand at
30 June 2021 of US$6,930 million. Cash generated from operations was 96 per cent higher compared to the prior year,
consistent with the 96 per cent increase in Underlying EBITDA.
Cash flows
Cash generated from operations
Cash flows from operating activities
Capital expenditure (including joint operations)
Free cash flow
2021
US$m
16,810
12,594
(3,633)
8,961
2020
US$m
8,287
6,415
(1,966)
4,449
Net cash flows from operating activities include interest payments of US$216 million (FY20: US$235 million) and
income tax paid of US$4,015 million (FY20: US$1,685 million).
Capital expenditure for the year inclusive of payments for deferred joint venture contributions was US$3,633 million
(FY20: US$1,966 million) and includes expenditure incurred on the Eliwana mine and rail, Iron Bridge Magnetite
and PEC growth projects, which were a significant focus of FY21. Refer to page 43 for further discussion of capital
expenditure on our major projects.
Fortescue Metals Group Ltd FY21 Annual Report 39
02 Operating and financial review
Financial position
Dividends and shareholder returns
In October 2020, Fortescue paid a fully franked final dividend of 100 AUD cents per share for the financial year
ended 30 June 2020.
In March 2021, Fortescue paid a fully franked interim dividend of 147 AUD cents per share for the financial year
ended 30 June 2021.
In FY21, Fortescue generated earnings of 334.6 US cents per share (FY20: 153.9 US cents per share), with return
on equity of 66 per cent (FY20: 40 per cent). On 30 August 2021, we declared a fully franked final dividend of 211
AUD cents per share for the financial year ended 30 June 2021. The final dividend for the current period represents
a payout ratio of 80 per cent of net profit after tax, in line with Fortescue's policy of a payout ratio of between 50
and 80 per cent.
Net profit after tax, US$ millions
Basic earnings per share, US cents per share
Basic earnings per share, AUD cents per share1
Return on equity, %
Interim dividend, AUD cents per share
Final dividend, AUD cents per share
Total dividend, AUD cents per share
Dividend payout ratio, %
2021
10,295
334.6
448.0
66
147
211
358
80
2020
4,735
153.9
229.2
40
76
100
176
77
1 Australian dollar earnings per share is calculated by translating the US dollar earnings per share at the average exchange rate for the period of 0.7469
AUD:USD (FY20: 0.6715 AUD:USD).
Our full year dividend payout ratio of 80 per cent of net profit after tax is consistent with our policy of a payout ratio of
between 50 and 80 per cent, and our stated objective to target the top end of that range.
The increase in dividend is consistent with our commitment to shareholder returns, and enabled by the success of
our integrated operations and marketing strategy and record shipments, together with strong demand for iron ore.
A$ /share
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
Dividends declared and payout ratios
62%
52%
38%
36%
Payout ratio
78%
77%
80%
1.76
1.14
2.11
1.47
80%
60%
40%
20%
0%
21%
17%
16%
21%
0.07
FY11
0.08
FY12
0.10
0.20
FY13
FY14
0.05
FY15
0.45
0.15
0.23
FY16
FY17
FY18
FY19
FY20
FY21
Dividend, A$/share - paid
Dividend, A$/share - declared
Payout ratio - statutory NPAT
As announced in February 2021, our capital allocation policy was updated to include an allocation of 10 per cent of
NPAT to fund FFI, which for the first half of FY21 totalled US$408 million. The results for the second half of FY21 have
resulted in the Board allocating 10 per cent of second half NPAT or US$621 million to FFI. This takes full year NPAT
allocation to FFI to US$1,029 million.
40 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review Financial position
Capital expenditure
Total capital expenditure of US$3.6 billion in FY21
(FY20: US$2.0 billion) as investment in major projects
achieved key milestones:
• Sustaining, hub and operational development capital of
US$1.3 billion (FY20: US$1.1 billion).
• Exploration and studies of US$186 million
(FY20: US$116 million).
• Eliwana mine and rail, Iron Bridge Magnetite and
Pilbara Energy Connect major projects US$2.1 billion
(FY20: US$771 million).
Major projects
Eliwana
The Eliwana mine and rail project comprises 143km of
rail, a 30mtpa dry ore processing facility and associated
infrastructure. The Eliwana mine and rail project
transitioned to the Operations team in January 2021,
with the focus in the second half of the financial year on
commissioning and ramp up to full production.
Achieving practical completion at Eliwana is a significant
milestone in the development of Fortescue’s iron ore
operations in the Pilbara, supporting our low cost
status and providing incremental product mix flexibility,
representing the first mining area in the Western Hub.
Iron Bridge
Iron Bridge will deliver a production capacity of 22mtpa
of a low impurity 67% Fe magnetite product, with first
production scheduled by December 2022.
During FY21, Fortescue announced the outcome of a
detailed 12 week technical and commercial assessment
of the Iron Bridge Magnetite project, considering specific
items such as:
• Assessment of the magnetite concentrate
transportation solution and return water pipelines to
Port Hedland.
• Enhanced utilisation of Fortescue’s port and rail
infrastructure.
• Contractor strategy and selection.
• Logistics infrastructure to maintain the schedule for
the delivery of large modular components through
Port Hedland.
On completion of the 12 week review, a revised capital
estimate for project completion of US$3.3 – US$3.5
billion was announced. FMG Iron Bridge Ltd, Fortescue's
subsidiary participating in the Iron Bridge Joint Venture,
has a joint venture share of US$2.5 – US$2.7 billion with
Fortescue's investment of US$1.2 billion at 30 June 2021.
Outcomes from the assessment include:
• Additional geotechnical investigation of the pipeline
corridor further validating the original design. This
comprises installation of a 135km concentrate slurry
pipeline from Iron Bridge to Port Hedland together with
a water return pipeline.
• Resolving the logistics bottleneck for the delivery of
modules, with construction of a module offload facility
underway at Lumsden Point at Port Hedland.
• First production by December 2022 and ramp up to full
production run rate in 12-18 months.
Iron Bridge’s estimated operating cost has a life of mine
C1 cost of US$33-38/wmt, inclusive of fees for port and
power services, and a life of mine sustaining capital cost
estimate of US$5-7/wmt.
Fortescue remains focused on maintaining the schedule
in an uncertain global environment, consistent with our
track record of project delivery.
The Iron Bridge Magnetite Project is an Unincorporated
Joint Venture between FMG Magnetite Pty Ltd
(69 per cent), and Formosa Steel IB Pty Ltd (31%). FMG
Magnetite was previously owned by Fortescue
(88 per cent) and Baosteel Resources International
Company (12 per cent). Baosteel has reduced its
ownership in accordance with the terms of the
Shareholders Agreement, with Fortescue now controlling
100 per cent of FMG Magnetite at 30 June 2021.
Fortescue Metals Group Ltd FY21 Annual Report 41
02 Operating and financial review
Financial Position
Capital expenditure continued
Energy
Exploration
Fortescue continued development and construction of
the US$0.7 billion energy infrastructure through the PEC
program of works. This program will be constructed,
owned and operated by Fortescue and comprises:
• The US$250 million Pilbara Transmission Project which
consists of 275km of high voltage transmission lines
connecting Fortescue’s mine sites.
• The US$450 million Pilbara Generation Project which
includes 150MW of gas-fired generation, together
with 150MW of solar photovoltaic (PV) generation,
supplemented by large-scale battery storage.
PEC will integrate Fortescue’s stationary energy facilities
in the Pilbara into an efficient network and enable the
integration of additional renewable energy in the future.
The project continues to progress with bulk earthworks
complete at the Solomon power generation site, and over
660 of the 800 foundations for the transmission line are
complete.
The Chichester Solar Gas Hybrid Project, owned and
operated by Alinta Energy, consists of a 60MW solar
PV generation facility at the Chichester Hub and 60km
transmission line linking the Christmas Creek and
Cloudbreak mining operations with Alinta Energy’s
Newman gas-fired power station. The project will provide
a low emission energy solution expected to displace
around 100 million litres of diesel used per year in the
existing Christmas Creek and Cloudbreak power stations.
Energisation of the project is due during Q2 FY22.
Fortescue holds the largest tenement portfolio in the
Pilbara region of Western Australia. Fortescue's iron
ore tenements are key to maintaining mine life and
sustaining product quality in our core iron ore business.
The Western Hub Resources include significant amounts
of high iron content bedded iron ore, adding dry, low cost
tonnes to Fortescue’s product suite.
FY21 iron ore exploration in the Pilbara included target
and resource definition drilling in the Western Hub,
Solomon Hub and Eastern Hamersley with study work
progressing at Nyidinghu. In June 2021, Fortescue
acquired a strategic tenement adjacent to Fortescue’s
Mindy South iron ore tenement package in the Pilbara,
with mapping and drilling to be prioritised in FY22.
Exploration activity on the Australian copper-gold
portfolio included the completion of airborne magnetic
and electromagnetic surveys and a ground gravity
survey over the Paterson and Rudall projects in Western
Australia. Planning for a follow-up drilling program at the
Arcoona Project in South Australia is underway following
an initial campaign.
International exploration in FY21 included the restart
of field activities and drilling in Ecuador and the
commencement of drilling in Kazakhstan. The drilling
season concluded in Argentina during the June quarter,
with geological reviews underway in preparation for the
2021/22 field season.
42 Fortescue Metals Group Ltd FY21 Annual Report
02 Operating and financial review 03
Ore Reserves and
Mineral Resources
Fortescue Metals Group Ltd FY21 Annual Report 43
03 Ore Reserves and Mineral Resources
Ore Reserves and
Mineral Resources
Reporting is grouped
by operating and
development properties
and includes both
hematite and
magnetite deposits
Hematite Ore Reserves total 2.08 billion dry tonnes (bt) at
an average iron (Fe) grade of 57.4%. Combined Hematite
Mineral Resources total 13.66bt 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 per cent for a 67% Fe
grade product. Magnetite Mineral Resources total 5.5bt
at an average mass recovery of 22.7 per cent.
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 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 27 August 2021).
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 27 August
2021, 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's Audit, Risk Management and
Sustainability Committee (ARMSC). Specific auditing of the
Ore Reserve process was performed in 2011, 2013, 2015, 2016,
2017, 2019 and 2021. These audits were managed by
Fortescue’s internal audit service provider with external
technical subject experts. The 2015, 2016, 2017, 2019 and 2021
Ore Reserves audits were carried out by independent external
technical consultants. In addition, specific auditing of Mineral
Resource models was undertaken in 2015, 2016, 2017, 2018,
2019 and 2020. An audit of the resource estimation process
used in the Chichester Hub was also completed during the
financial year.
44 Fortescue Metals Group Ltd FY21 Annual Report
03 Ore Reserves and Mineral Resources The ARMSC 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 Ore Reserve estimate for the Solomon Hub is 567mt
at an average Fe grade of 57.2%, a decrease of 64mt
mainly due to depletion and density adjustments for the
Queens deposit (-ve), and updated metallurgical testwork
(-ve). Proved Ore Reserves comprise 26 per cent of the
tonnage in the total Solomon Reserve.
The Ore Reserve for the Eliwana deposit is estimated to
be 221mt at an average Fe grade of 60.0%. The estimate
is 12mt higher than previous reporting due to pit-design
modifications (+ve) and an updated geological model
(+ve). Proved Ore Reserves comprise 92 per cent of the
tonnage in the total Eliwana Ore Reserve, an increase of
23 per cent compared to previous reporting.
The combined Chichester, Solomon and Eliwana Hematite
Ore Reserves for 2021 are estimated to total 2,082mt at an
average Fe grade of 57.4%.
The 2021 Hematite Ore Reserve estimates were subject
to comprehensive review and update addressing:
• Ore depletion as a result of sales (decrease).
The Ore Reserve is quoted as at 30 June 2021 and is
inclusive of ore and product stockpiles at mines. Product
stockpiles at port have been excluded from contributing to
Ore Reserves. The proportion of higher confidence Proved
Ore Reserve has increased to 937mt (from 826mt in 2020)
as a result of ongoing in-fill drilling at the Solomon and
Eliwana deposits.
The Chichester Hub (Cloudbreak and Christmas Creek
deposits) contains 1,294mt at an average Fe grade of
57.0%, a net decrease of 111mt due to depletion (-ve),
a review of the densities in the underlying resource
models (-ve), more conservative metallurgical factors
and reconciliation factors (-ve). Proved Ore Reserve
constitutes 45 per cent of the Chichester Ore Reserve,
a slight increase from 2020. 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).
• Revisions of ore loss and dilution factors based on
12 months of operational history at all mines (increased
recovery and tonnage increases at the Chichesters and
the Kings/Queens deposits, offset by a decrease at
Firetail).
• Revisions to the processing response through all
OPFs based on updated metallurgical test work and
operational history (minor).
• Updated metallurgical test work to the Christmas Creek
and Queens Deposit (decrease).
• Re-optimisation of mine geometries to maximise the
benefit of changes to the resource base.
• A revised life of mine (LOM) plan that addresses the
listed items and incorporates the latest information
on long term product strategy, including the Western
Pilbara Fines 60% Fe product.
Fortescue Metals Group Ltd FY21 Annual Report 45
03 Ore Reserves and Mineral Resources
Ore Reserves Operating Properties - Hematite – as at 30 June 2021
30 June 2021
30 June 2020
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
329
204
533
Christmas Creek
Proved
Probable
Total
259
502
761
57.4
56.9
57.2
56.8
56.9
56.9
Sub-total Chichester Hub
Proved
Probable
588
706
Total
1,294
Firetail
Proved
Probable
Total
2
64
66
Kings and Queens
Proved
Probable
Total
144
357
501
57.1
56.9
57.0
59.2
59.3
59.3
57.1
56.8
56.9
Sub-total Solomon Hub
Proved
Probable
Total
Eliwana
Proved
Probable
Total
146
421
567
203
18
221
57.2
57.2
57.2
60.0
59.7
60.0
5.28
5.76
5.47
6.42
6.30
6.34
5.79
6.14
5.98
6.24
5.72
5.73
6.36
6.51
6.47
6.36
6.39
6.38
4.77
4.93
4.78
2.82
2.90
2.86
2.98
3.14
3.08
2.89
3.07
2.99
2.79
2.35
2.37
2.66
2.57
0.054
0.061
0.057
0.046
0.049
0.048
0.051
0.053
0.052
0.128
0.117
0.117
8.37
8.05
8.25
7.83
7.60
7.68
8.13
7.73
7.91
5.47
6.68
6.64
0.077
0.076
8.75
9.18
2.60
0.076
9.06
2.66
2.54
2.57
2.63
2.76
2.64
0.077
0.082
0.081
0.132
0.104
0.130
8.71
8.81
8.78
5.89
5.97
5.90
7.74
8.10
7.94
266
294
560
315
528
843
581
822
1,404
2
82
84
99
451
550
101
533
634
143
66
209
826
1,421
2,247
57.2
57.2
57.2
56.9
57.0
57.0
57.1
57.1
57.1
59.3
59.9
59.9
57.3
57.3
57.3
57.3
57.7
57.6
60.6
58.9
60.1
57.7
57.4
57.5
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
Total Ore Reserves Operating Properties – Hematite
Proved
937
Probable
1,146
Total
2,082
57.7
57.1
57.4
5.66
6.21
5.96
2.80
2.87
0.072
0.064
2.84
0.068
Notes in reference to table
• The diluted mining models used to report the 2021 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
were updated for local pit areas as infill drilling is completed, with updates included through to 2021.
• Diluted mining models are validated by reconciliation against historical production.
• Proved Ore Reserves are inclusive of ore stockpiles at the mines which total approximately 50.8mt on dry product basis.
• 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 optimise Cloudbreak and Christmas Creek OPF utilisation.
• Tonnage figures have been rounded and may not add up to the totals quoted.
46 Fortescue Metals Group Ltd FY21 Annual Report
03 Ore Reserves and Mineral Resources
Ore Reserves Operating Properties –
Magnetite
The 2021 Ore Reserves for Magnetite are from Iron Bridge.
Ore Reserves for the project total 716mt at an average
mass recovery of 29.4 per cent for a 67.0% Fe grade
product. The Ore Reserves are quoted as at 30 June 2021,
on a dry in-situ tonnes basis prior to processing.
The Mineral Resource model for the Iron Bridge Magnetite
Project 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
resource model, using detailed information on mining,
geotechnical and metallurgical processing parameters
and cost assumptions, as used in the 2019 Iron Bridge
Feasibility study.
Within North Star mining pits, mining within 100m of the
Pilbara leaf-nosed bat cave identified as Cave 13 is
prohibited by the current Stage 2 Ministerial Approval
(Condition 10) until such time it can be demonstrated that
ground disturbing activity in the area maintains the
viability of the bat population. Baseline environment
studies and data collection are significantly advanced for
the Glacier Valley resource; however, any approvals for
Glacier Valley mining area development are yet to be
sought. At this stage, neither of the above is expected to
have a material impact on ore reserves as plans have been
developed and action is underway to address each of the
points.
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
Reserves due to the lack of full scale production history, as
no sales or production have occurred for Magnetite as at
30 June 2021.
Ore Reserves Operating Properties - Magnetite – as at 30 June 2021
30 June 2021
30 June 2020
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 Ore Reserves Operating Properties – Magnetite
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 Magnetite Project agreements, Fortescue owns 69 per cent 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.
Fortescue Metals Group Ltd FY21 Annual Report 47
03 Ore Reserves and Mineral Resources
Mineral Resources Operating Properties –
Hematite
80 per cent of the tonnage in the Measured and Indicated
Mineral Resource categories.
Mineral Resources for the operating properties, including
the Chichester, Solomon and Western Hubs, are stated on
a dry in-situ tonnage basis. Mineral Resources from the
Western Hub now include those from Flying Fish, reported
here for the first time; previously these were included with
the development properties as part of the Greater Western
Hub. The Mineral Resources, including stockpiles, are
quoted inclusive of Ore Reserves.
The total Solomon Hub Mineral Resource is estimated to
be 1,934mt at an average Fe grade of 55.2%, with 69 per
cent of the tonnage in the Measured and Indicated Mineral
Resource categories.
The total Western Hub Mineral Resource is estimated to
be 1,055mt at an average Fe grade of 58.3%, with 39 per
cent of the tonnage in the Measured and Indicated Mineral
Resource categories.
As at 30 June 2021, the total Mineral Resource for the
Chichester, Solomon and Western Hubs, including Flying
Fish, is estimated to be 5,367mt at an average Fe grade of
56.3%, a decrease of 465mt over that stated in the prior
year. This was accompanied by a minor decrease in the
proportion of higher confidence Measured and Indicated
Mineral Resources from 70 per cent to 68 per cent.
The total Chichester Hub Mineral Resource is estimated
to be 2,379mt at an average Fe grade of 56.3%, with
In-situ bulk densities at the Cloudbreak, Christmas Creek,
Valley of Queens, Eliwana and the majority of the Flying
Fish deposits have been revised following analysis of
data from an extensive program of diamond drilling and
downhole geophysical data. These revisions account for
the bulk of the 465mt decrease in Mineral Resources.
Review of the densities for the Kutayi and Valley of Kings
deposits is planned for FY22.
Mineral Resources Operating Properties - Hematite – as at 30 June 2021
30 June 2021
30 June 2020
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
452
255
100
808
Christmas Creek
Measured
Indicated
Inferred
379
812
379
Total
1,571
56.7
56.1
56.3
56.5
56.7
56.2
55.6
56.1
Sub-total Chichester Hub
Measured
832
Indicated
1,068
Inferred
479
Total
Firetail
2,379
Measured
7
Indicated
Inferred
Total
127
100
234
Kings and Queens
Measured
Indicated
Inferred
298
908
494
Total
1,700
56.7
56.2
55.7
56.3
57.3
57.7
56.1
57.0
55.4
55.0
54.6
54.9
5.91
6.63
6.17
6.17
6.42
6.62
7.01
6.67
6.14
6.62
6.83
6.50
7.42
7.20
7.96
7.53
7.87
8.20
8.93
8.36
3.37
3.37
3.62
0.056
0.063
0.056
3.40
0.058
3.20
3.60
3.80
3.55
3.29
3.54
3.76
0.050
0.051
0.054
0.052
0.053
0.054
0.055
3.50
0.054
3.69
3.76
3.76
3.21
3.25
3.30
3.82
0.119
0.124
0.108
0.117
0.081
0.082
0.075
3.44
0.080
8.5
8.0
7.8
8.2
7.9
7.8
7.8
7.8
8.2
7.9
7.8
8.0
6.2
6.9
7.4
7.1
9.0
9.2
8.5
9.0
419
401
117
936
480
922
447
1,849
898
1,323
564
56.6
56.2
56.4
56.4
56.7
56.1
55.6
56.1
56.7
56.1
55.8
2,785
56.2
3
166
102
271
204
1,111
535
1,851
57.1
57.9
56.1
57.2
55.3
55.0
54.6
54.9
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
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
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
48 Fortescue Metals Group Ltd FY21 Annual Report
03 Ore Reserves and Mineral Resources
Mineral Resources Operating Properties - Hematite – as at 30 June 2021 cont.
30 June 2021
30 June 2020
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
%
Sub-total Solomon Hub
Measured
305
Indicated
1,035
Inferred
Total
Eliwana
594
1,934
Measured
290
Indicated
Inferred
Total
Flying Fish
Measured
Indicated
Inferred
Total
50
539
880
29
43
103
175
55.4
55.3
54.8
55.2
59.3
57.7
57.8
58.3
58.3
60.2
57.3
58.2
Sub-total Western Hub
Measured
Indicated
Inferred
319
93
643
Total
1,055
59.2
58.8
57.7
58.3
7.86
8.08
8.77
8.26
5.39
7.06
6.29
6.04
5.40
4.77
6.14
5.68
5.39
6.00
6.27
5.98
3.26
3.23
3.81
3.41
2.76
2.93
3.45
3.19
2.50
2.00
3.45
2.94
2.74
2.50
3.45
3.15
0.082
0.087
0.080
0.084
0.128
0.099
0.102
0.110
0.062
0.060
0.055
0.057
0.122
0.081
0.095
0.102
9.0
9.0
8.3
8.8
6.1
6.4
6.8
6.5
8.0
6.5
7.3
7.2
6.3
6.4
6.9
6.7
Total Mineral Resources Operating Properties – Hematite
Measured
1,456
Indicated
2,195
Inferred
Total
1,716
5,367
57.0
55.9
56.2
56.3
6.34
7.28
7.29
7.03
3.16
3.35
3.66
3.40
0.074
0.071
0.078
0.074
7.9
8.3
7.6
8.0
Notes in reference to table
208
1,277
636
2,121
229
122
575
926
-
-
-
-
229
122
575
926
1,335
2,722
1,776
5,832
55.3
55.3
54.9
55.2
60.0
58.4
58.1
58.6
-
-
-
-
60.0
58.4
58.1
58.6
57.0
55.9
56.2
56.2
7.71
8.02
8.74
8.21
4.89
5.44
5.69
5.46
-
-
-
-
4.89
5.44
5.69
5.46
6.13
7.22
7.13
6.94
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
-
-
-
-
2.61
2.77
3.45
3.16
3.21
3.38
3.66
3.43
-
-
-
-
0.141
0.096
0.102
0.111
0.073
0.069
0.079
0.073
9.1
8.7
8.3
8.6
5.8
7.2
6.9
6.7
-
-
-
-
5.8
7.2
6.9
6.7
8.0
8.2
7.7
8.0
• Chichester Hub Mineral Resources are quoted above a cut-off of 53.5% Fe, Solomon Hub and Western Hub Mineral Resources are quoted above a
cut-off grade of 51.5% Fe.
• The Measured Mineral Resource estimate includes mine stockpiles totalling approximately 47mt.
• Areas identified as being of significant cultural heritage have been excluded from reporting.
• 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.
Mineral Resources Development Properties
– Hematite
Updates have been announced to the Greater Western
and Pilbara Other deposits in the development properties
Mineral Resource as a result of exploration drilling.
A portion of the Flying Fish deposit in the Greater
Western Hub has been transferred to the operating
properties and is now reported as part of the Western
Hub. This reduction in tonnes in the Greater Western
Hub has been partly offset by increases to our existing
Elevation and Farquhar deposits. The Pilbara Other
update is an addition of 354mt which includes the new
Mindy South deposit and an update to the Wonmunna
deposit. This update is an overall increase of 236mt to
the development properties Mineral Resources and is
reported in accordance with the 2012 JORC Code as
identified in the Fortescue ASX release of 27 August 2021
that includes the supporting technical data.
As of 30 June 2021, the total Mineral Resource for
development properties, which excludes and is
additional to the operating properties, is estimated to be
8,296mt at an average Fe grade of 57.0%. This comprises
433mt for the Greater Chichester deposits, 2,682mt for
the Greater Solomon deposits, 1,968mt for the Greater
Western deposits, 2,475mt for the Nyidinghu deposit and
738mt for the Pilbara Other deposits.
Fortescue Metals Group Ltd FY21 Annual Report 49
03 Ore Reserves and Mineral Resources
Mineral Resources Development Properties - Hematite – as at 30 June 2021
30 June 2021
30 June 2020
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
%
-
-
-
-
3.77
3.77
0.058
0.058
-
3.45
3.79
3.76
-
2.45
2.99
-
0.083
0.083
0.083
-
0.162
0.081
-
-
7.0
7.0
-
8.3
7.2
7.3
-
7.1
9.1
-
-
433
433
-
254
2,427
2,682
-
99
1,987
-
-
56.4
56.4
-
56.6
56.9
56.9
-
59.1
57.1
2.96
0.085
9.0
2,086
57.2
Greater Chichester
Measured
Indicated
Inferred
Total
-
-
433
433
Greater Solomon
Measured
Indicated
Inferred
Total
-
254
2,427
2,682
Greater Western
Measured
Indicated
-
99
Inferred
1,868
-
-
56.4
56.4
-
56.6
56.9
56.9
-
59.1
56.7
Total
1,968
56.8
Nyidinghu
Measured
Indicated
Inferred
Total
Pilbara Other
Measured
Indicated
Inferred
Total
22
575
1,878
2,475
-
-
738
738
59.7
58.0
57.1
57.3
-
-
57.7
57.7
-
-
7.10
7.10
-
6.70
6.87
6.85
-
5.32
6.02
5.99
3.56
4.60
5.17
5.02
-
-
2.08
2.97
3.41
0.140
0.148
0.148
3.30
0.148
-
-
-
-
8.1
8.5
8.8
8.7
-
-
7.9
7.9
6.46
6.46
2.61
2.61
0.101
0.101
22
575
1,878
2,475
-
-
384
384
22
929
7,109
8,060
59.7
58.0
57.1
57.3
-
-
57.1
57.1
59.7
57.7
57.0
57.1
Total Mineral Resources Development Properties – Hematite
Measured
Indicated
Inferred
Total
22
929
7,345
8,296
59.7
57.7
56.9
57.0
3.56
5.25
6.19
6.08
2.08
3.05
3.37
3.33
0.140
0.132
0.099
0.103
8.1
8.3
8.1
8.1
Notes in reference to table
-
-
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
3.56
5.25
6.11
6.00
-
-
-
-
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
2.08
3.05
3.37
3.33
0.140
0.132
0.097
0.101
-
-
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
• The Greater Chichester Mineral Resources includes the Investigator, White Knight and Mount Lewin deposits.
• The Greater Solomon Mineral Resource 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, Mindy South 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.
50 Fortescue Metals Group Ltd FY21 Annual Report
03 Ore Reserves and Mineral Resources
Mineral Resources Operating Properties –
Magnetite
Resource estimate for the Iron Bridge deposit, which is
planned to be completed in the first half of FY22.
The Mineral Resource for the North Star, Eastern Limb,
West Star and Glacier Valley deposits (part of the Iron
Bridge Project, 69 per cent Fortescue) was completed
by Snowden Mining Industry Consultants in 2019. The
remodelling of the resource resulted in a downgrade
of the Indicated and Inferred Resources, compared
with the previous model. These changes resulted from
the following: a new geological interpretation derived
from mapping, geophysics and assay data; improved
geological understanding leading to improvements
in estimation methodology; 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 2021 remains unchanged
from the 2019 Mineral Resource estimate. Ongoing
drilling will be incorporated into a revised Mineral
Following external review and the remodelling of the
Iron Bridge Mineral Resources in 2019, 2-3bt of material
(at 28–32% Fe, 39–43% SiO2 and 2–3% Al2O3, with
an average mass recovery of 20–24 per cent) was
reclassified in 2019 as an Exploration Target. The Iron
Bridge Exploration Target remains unchanged as of 30
June 2021 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.
Heritage sites of cultural significance have been identified
which may impact the Glacier Valley Mineral Resource.
The Mineral Resource estimate for Iron Bridge will be
updated in FY22 which will include a review of the
identified heritage sites and any resulting impacts.
Mineral Resources Operating Properties - Magnetite – as at 30 June 2021
30 June 2021
30 June 2020
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
2,217
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
40.2
41.3
41.5
41.4
-
39.4
39.6
39.6
-
-
43.8
43.8
2.06
2.74
2.84
2.79
-
1.73
1.94
1.92
-
-
3.36
3.36
109
825
2,217
3,150
-
191
1,480
1,671
-
-
627
627
Total Mineral Resources Operating Properties – Magnetite
Measured
109
Indicated
1,016
Inferred
Total
4,324
5,448
25.0
24.3
22.3
22.7
33.2
30.9
30.3
30.4
40.2
41.0
41.2
41.1
2.06
2.55
2.61
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
-
-
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
2.59
Notes in reference to table
• As per the Iron Bridge Magnetite Project agreements, Fortescue owns 69 per cent of the reported Total Magnetite Mineral Resource estimate, which are reported
on a 100% basis.
• All magnetite Mineral Resources are reported above a nine per cent Mass Recovery cut-off, based on David Tube Recovery (DTR) test work.
• All Mineral Resources are reported on a dry-tonnage basis.
• 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 FY21 Annual Report 51
03 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 2021 were
compiled by Mr Jamie Davies, 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 2021 were compiled by Mr Martin
Slavik and Mr Mudit Tandon, full-time employees and
shareholders of Fortescue.
Mr Robinson is a Fellow of, and Mr Nitschke, Ms Retz,
Mr Frost-Barnes, Mr Davies, Mr Slavik, Mr Wang,
Mr Tandon 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 Davies, Mr Slavik, Mr Wang, Mr Tandon 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 Davies, Mr Slavik, Mr Wang, Mr Tandon 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.
52 Fortescue Metals Group Ltd FY21 Annual Report
03 Ore Reserves and Mineral Resources 04
Our approach
to sustainability
Fortescue Metals Group Ltd FY21 Annual Report 53
04 Our approach to sustainability
Year at
a glance
SAFETY
0 Fatalities
2.0
TRIFR
EMPLOYMENT
10,164
Employees
(including labour hire)
ENVIRONMENT
Zero
Significant
incidents
A$2.6m
Research and
conservation
programs
DIVERSITY
954
Aboriginal people
employed across
our operations
14%
Aboriginal
employment across
our Pilbara operations
25%
Female employment
in senior leadership
roles
54 Fortescue Metals Group Ltd FY21 Annual Report
04 Our approach to sustainability Fortescue is
committed to
empowering
thriving
communities
Targets
Opportunities
and objectives
Policies
Voluntary
commitments
and principles
Code of Conduct
and Integrity
Our Purpose
and Values
We integrate sustainability into all aspects of our
business. At the heart of our approach is a commitment
to create value for our investors, protect the health and
safety of our employees, empower our communities and
protect the environments in which we operate.
Strong governance is critical to ensuring the integration
of sustainability across the business and our Board is
responsible for the oversight of all sustainability issues,
receiving regular updates through our Audit, Risk
Management and Sustainability Committee (ARMSC).
Our Values form the foundation of our approach to
sustainability, and integrity is key to building trust with
our stakeholders and setting the ethical and moral
compass by which we operate. Integrity inspires us 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.
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 we do business with. This
strong base supports our commitments and principles
and leads to the development and implementation of
policies, opportunities and objectives. These inform
specific targets, processes and plans applied across
our business.
At the operational level, sustainability is managed by our
Chief Executive Officer with support from the Director
Sustainability and Corporate Affairs. We have established
an executive Sustainability Committee that meets at
least quarterly to oversee all sustainability matters. The
implementation of our sustainability strategy, related
policies and targets is coordinated by the Sustainability
team and applied across the business.
A key responsibility of the Sustainability Committee is to
ensure that the sustainability strategy, related policies
and targets are integrated into investment decision
making. Our sustainability strategy provides guidance
on what should be considered at each stage of the
process. The early identification and assessment
of sustainability matters, including environmental,
economic, social and governance risks, alerts Fortescue
to potential risks, and enables the planning of mitigation
strategies. These assessments may result in amendments
to a project or avoidance if the risk of proceeding is found
to be too high.
Compliance with all relevant legislation and obligations,
including those that govern health, safety and
environment, is the absolute minimum standard to which
we operate. Sustainability is integrated into our decision
making processes.
The FY21 Sustainability Report, FY21 Climate Change
Report and FY20 Modern Slavery Statement are
available on our website at www.fmgl.com.au, with our
FY21 Modern Slavery Statement due to be published in
December 2021.
Our FY21 Sustainability Report is available at www.fmgl.com.au
Fortescue Metals Group Ltd FY21 Annual Report 55
04 Our approach to sustainability
United Nations
Sustainable
Development
Goals
Our priority SDGs
The United Nations Sustainable Development Goals
(SDGs), adopted in 2015, set the 2030 global agenda
for sustainable development. The SDGs 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 our approach to sustainability with
the SDGs and will continue to work with our host
governments as they strive to meet these goals. We
have prioritised eight of the SDGs.
56 Fortescue Metals Group Ltd FY21 Annual Report
04 Our approach to sustainability Material issues
Fortescue's FY21
Sustainability Report
identifies the issues that are
material to our business
5
Review
1
Research
4
Validation
2
Identification
3
Prioritisation
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, external stakeholder views, our internal
subject matter expertise and third-party due diligence.
The assessment involves a cycle of research,
identification, prioritisation, validation and review.
During FY21, our materiality assessment considered
the following:
• Our sustainability initiatives and targets.
• Corporate risk assessments and audits.
• Company policies, standards and guidelines.
• Results of internal and external stakeholder
engagement.
• 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 captured under three sustainability pillars
Setting high
standards
Safeguarding
the environment
• Employee health and safety
• Climate change action and
• Economic contribution
• Workforce diversity
• Protecting Aboriginal heritage
• Ethical business conduct
disclosure
• Protecting biodiversity and
water resources
Creating positive
social change
• Creating employment and
business opportunities for
Aboriginal people
• Building sustainable communities
• Tailings management
• Human rights
Fortescue Metals Group Ltd FY21 Annual Report 57
04 Our approach to sustainability
05
Corporate
Governance
58 Fortescue Metals Group Ltd FY21 Annual Report
05 Corporate Governance Overview of
Corporate Governance
Good corporate governance
is critical to the long-term,
sustainable success of Fortescue.
Governance is the collective
responsibility of the Board and all
levels of management
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 requirements of these
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.
Our FY21 Corporate Governance Statement is available at www.fmgl.com.au
Fortescue Metals Group Ltd FY21 Annual Report 59
05 Corporate Governance
05 Corporate Governance
Fortescue seeks
to adopt leading
practice, contemporary
governance standards
and apply these in a
manner consistent with
our culture and Values
STAKEHOLDERS
GOVERNMENT
AND
REGULATORS
BUSINESS
PARTNERS AND
INVESTORS
SHAREHOLDERS
EMPLOYEES
COMMUNITY
BOARD
MANAGEMENT RESPONSIBILITY
Audit, Risk Management
and Sustainability
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
EXECUTIVE AND 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
60 Fortescue Metals Group Ltd FY21 Annual Report
06
Our approach to
climate change
Fortescue Metals Group Ltd FY21 Annual Report 61
Approach to
climate change
Fortescue is committed to taking
a leadership position on climate
change. Climate change is the most
pressing challenge of our generation
as well as a once in a lifetime
opportunity for economic growth and
value creation that generates a better,
cleaner, more sustainable world
uilding re sili e
B
n c e
Reducin
g
Climate
change strategy
e
m
i
s
s
i
o
n
s
Four key
elements of our
strategy
M
o
p
a
p
x
i
o
r
t
u
m
ising
nities
E n g
g
a
c
e
o ll a
d
m ent an
b oration
We accept the scientific consensus as assessed by the
Intergovernmental Panel on Climate Change (IPCC) and
are taking steps to realise the Paris Agreement goal of
limiting global temperature rise to well below 2°C above
pre-industrial levels.
• Establishing our decarbonisation pathway, through
applying renewable energy and battery storage to
meet our stationary energy requirements, and green
hydrogen, green ammonia and battery electric
solutions to decarbonise our mobile fleet.
During FY21, we accelerated our transition from being
a major fossil fuel importer to a major clean and
renewable energy company by:
• Setting ourselves the target of carbon neutrality by
2030, which requires our net Scope 1 and Scope 2
emissions across existing and future operations to
reduce to zero by 2030.
• Creating FFI to lead the global energy transition
by developing a portfolio of renewable energy and
green hydrogen projects that will accelerate the
decarbonisation of hard-to-abate sectors such
as metals processing, long-haul transport and
industrial heating.
• Expanding our research, development, engagement
and collaboration to reduce emissions across our
downstream value chain, focusing on shipping and
iron and steel production.
Our FY21 Climage Change Report is available at www.fmgl.com.au
62 Fortescue Metals Group Ltd FY21 Annual Report
62 Fortescue Metals Group Ltd FY21 Annual Report
06 Our approach to climate change
CASE STUDY
Green Hydrogen Plant
Bell Bay, Tasmania
FFI is studying the development of a multi-phase green
hydrogen hub in Bell Bay, Tasmania, and has signed an
Option Agreement with Tasmanian Ports Corporation
to exclusively negotiate all land and operating access
requirements for the proposed project.
Phase one of the world-leading project envisages:
• Construction of a green hydrogen plant at the
Bell Bay Industrial Precinct.
• Green ammonia production of 250,000 tonnes per
year for domestic use and international export.
• Powered entirely by Tasmanian renewable energy.
FFI is working to maximise employment, training and
business outcomes for Tasmania from the project.
We believe this project will be a vital step in positioning
Australia at the forefront of a bulk export market for
green hydrogen.
This project is targeted for an investment decision by
Fortescue’s Board in 2021.
We've set ourselves the target
to be carbon neutral by 2030
Our decarbonisation pathway
Physical risks – acute
Our pathway to decarbonisation is focused on addressing
our largest sources of emissions: stationary power
and our mining fleet. FFI will be key to Fortescue’s
decarbonisation pathway through the supply of
renewable energy, green hydrogen and green ammonia
for our operations.
• Increased severity of extreme weather events
• Increased frequency and intensity of bushfires.
Physical risks – chronic
• Rising sea levels and storm surge inundation
• Change in precipitation patterns.
Risks and opportunities
FY21 performance
The transition to a net zero world presents both
opportunities and risks for us.
We undertook our annual climate change focused risk
assessment in May 2021, which identified the following
material climate-related risks and opportunities:
Transitional risks
• Policy and regulatory changes
• Technical viability of decarbonisation strategy
• Reduced demand for products
• Reputational damage.
Our FY21 gross emissions from our operations were
2.22 million tonnes of CO2-e, including:
• 2.06 million tonnes of CO2-e Scope 1 emissions
• 0.16 million tonnes of CO2-e Scope 2 emissions.
In line with our commitment to reduce emissions
annually from our FY20 baseline, we have procured
and surrendered high quality offsets to reduce our net
emissions to 2.01 million tonnes, which is three per cent
below our FY20 operational emissions baseline.
Our Climate Change Report is aligned with the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) and is available on our
website at www.fmgl.com.au
Fortescue Metals Group Ltd FY21 Annual Report 63
06 Our approach to climate change
CASE STUDY
FFI delivers on ambitious targets
FFI achieved its 30 June 2021 decarbonisation targets.
FFI CEO Julie Shuttleworth AM said, "We set out to
test the hypothesis that there was sufficient 100 per
cent renewable green energy, hydrogen, ammonia and
industrial manufacturing potential for products such
as green fertiliser, green iron and steel, to fully satisfy
the world's needs. To do so, Fortescue Chairman,
Dr Andrew Forrest AO, led two significant overseas
expeditions alongside 50 area experts, spending more
time on the road than at home in the last 12 months. As
a result, the Company has confirmed that hypothesis."
FFI’s specialist teams have made groundbreaking
progress including:
• Successful combustion of ammonia in a locomotive
fuel, with a pathway to achieve completely
renewable green fuel.
• Completion of design and construction of a
combustion testing device for large marine (ship)
engines, with pilot test work underway and a
pathway to achieve completely renewable green
shipping fuel.
• Finalised design of a next generation ore carrier
(ship) that will consume renewable green ammonia,
with the Classification Society giving in principle
design approval.
• Testing of battery cells to be used on Fortescue
haul trucks.
• Design and construction of a hydrogen powered
haul truck for technology demonstration complete,
with systems testing underway.
• Design and construction of a hydrogen powered
drill rig for technology demonstration complete,
with systems testing underway.
• Successful production of high purity (>97 per cent)
green iron from Fortescue ores.
• Successful initial trialling to use waste from the
green iron process noted above, with other easily
sourced materials.
Fortescue CEO Elizabeth Gaines said, “At Fortescue,
we are leading the heavy industry battle against
global warming, transitioning from being a major
fossil fuel importer to a significant green and
renewable energy and product exporter. We are
leading by example to decrease emissions across
our operations, using our large industrial platform
of operating mine sites in the Pilbara to trial and
demonstrate technologies in completely renewable
green hydrogen, green ammonia, and green
electricity."
64 Fortescue Metals Group Ltd FY21 Annual Report
64 Fortescue Metals Group Ltd FY21 Annual Report
06 Our approach to climate change 07
Financial
Report
Fortescue Metals Group Ltd FY21 Annual Report 65
07 Financial Report
Directors’ Report
At 30 June 2021
Directors
The Directors of Fortescue 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 Directors’ meetings, including meetings of the
Company’s Board of Directors and of each Board
Committee held during the year ended 30 June 2021,
and the number of meetings attended by each Director
are shown in section 2.3 of the Corporate Governance
Statement¹.
The relevant interests of each Director in the shares
and share rights issued by Fortescue, as notified by
the Directors to the Australian Securities Exchange in
accordance with section 5205G(1) of the Corporations
Act 2001, at the date of this report are as follows:
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
1,131,365,000
40,300
981,073
138,000
-
47,961
15,701
12,000
-
-
-
926,125
-
-
-
-
-
-
¹FY21 Corporate Governance Statement is available on Fortescue’s website at www.fmgl.com.au
The remuneration of Directors and Key Management Personnel is detailed in the Remuneration Report on pages
122 to 158.
66 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Directors’ Report For the year ended 30 June 2021
Operating and financial review
Fortescue’s principal activities during the year were
exploration, development, production, processing and
sale of iron ore.
During the year ended 30 June 2021, Fortescue
established FFI to identify and develop renewable energy
opportunities globally.
On 30 January 2020, the World Health Organisation
announced that COVID-19 was a global health
emergency and later 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 continues to maintain and
expand a range of measures to protect the health and
safety of its people and contribute to efforts to contain
the spread of COVID-19 across its operations and
the wider community. These measures have enabled
Fortescue to maintain planned production and shipping
schedules. 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 2021, or on its
ability to continue as a going concern.
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 3 to 24, Operating
and Financial Review on pages 25 to 42 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 2020 – paid in October 2020
Interim ordinary dividend for the year ended 30 June 2021 – paid in March 2021
Total – declared and paid during the year
Declared since the end of the financial year:
Final ordinary dividend for the year ended 30 June 2021 – to be paid in September 2021
2021
US$m
10,295
A$ cents
100
147
247
211
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
2021 as a result of the exercise of options.
Company Secretary
Cameron Wilson and Alison Terry are Company
Secretaries of Fortescue. Details of their qualifications
and experience are set out on pages 15 and 18 of this
report.
The details of Fortescue’s environmental performance
including compliance with the relevant environmental
legislation are presented in Fortescue's FY21
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 FY21 Sustainability Report².
¹ FY21 Corporate Governance Statement is available on Fortescue’s website at www.fmgl.com.au
²FY21 Sustainability Report is available on Fortescue’s website at www.fmgl.com.au
Fortescue Metals Group Ltd FY21 Annual Report 67
07 Financial Report
Directors’ Report For the year ended 30 June 2021
Directors' and Officers' indemnities and
insurance
Since the end of the previous year, Fortescue 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
Fortescue 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, Risk
Management and Sustainability 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, Risk Management and Sustainability 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 69 and forms part of this report.
68 Fortescue Metals Group Ltd FY21 Annual Report
Future developments
The Overview section set out on pages 3 to 24 and the
Operating and Financial Review section set out on pages
25 to 42 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 30 August 2021, the Directors declared a final
dividend of 211 Australian cents per ordinary share
payable in September 2021.
This report has been made in accordance with a
resolution of the Directors.
Dr Andrew Forrest AO
Chairman
Dated in Perth this 30th day of August 2021.
07 Financial Report Auditor’s independence declaration
Auditor’s independence declaration
As lead auditor for the audit of Fortescue Metals Group Ltd for the year ended 30 June 2021, I declare that to
the best of my knowledge and belief, there have been:
Auditor’s Independence Declaration
As lead auditor for the audit of Fortescue Metals Group Ltd for the year ended 30 June 2021, 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
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
the audit, and
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
(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.
This declaration is in respect of Fortescue Metals Group Ltd and the entities it controlled during the
period.
Justin Carroll
Partner
PricewaterhouseCoopers
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
Perth
30 August 2021
30 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Fortescue Metals Group Ltd FY21 Annual Report 69
Liability limited by a scheme approved under Professional Standards Legislation.
07 Financial ReportDRAFT
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 2021 and of its financial performance for
the year then ended, and
(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 2021
• 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 significant accounting policies and other
explanatory information, and
• the directors’ declaration.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
70 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 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 2021 and of its financial performance for the year then ended, and (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 2021 • 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 significant accounting policies and other explanatory information, and • the directors’ declaration. 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 & 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.
Independent auditor’s report For the year ended 30 June 2021
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 & 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 $430 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.
Fortescue Metals Group Ltd FY21 Annual Report 71
07 Financial Report
Independent auditor’s report For the year ended 30 June 2021
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, Risk Management and Sustainability Committee.
Key audit matter
How our audit addressed the key audit matter
Revenue from provisional pricing adjustments – sale of iron ore
(Refer to note 3 and 24(f))
Fortescue’s sales contracts 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 2021, the Group
recognised a net increase to revenue of
US$1,175 million from provisional pricing adjustments
to iron ore 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 revenue:
• We performed tests of IT systems and key controls
over the calculation of provisional pricing adjustments
to 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.
72 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Independent auditor’s report For the year ended 30 June 2021
Restoration and rehabilitation obligations (Refer to note 13(a) and 24(e))
The Group recognised provisions for restoration and
rehabilitation obligations of US$958 million as at
30 June 2021.
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
activities, 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 exercised in circumstances where there has
been limited restoration and rehabilitation activity by
the Group or historical precedent against which to
benchmark estimates of future costs. These factors
combine to make this area a Key Audit Matter.
• We developed an understanding of how the Group
identified the relevant methods, assumptions and
sources of data, and the need for changes in them,
that are appropriate for developing the closure plans
and associated cost estimates in the context of the
Australian Accounting Standards.
• We developed an understanding of the relevant control
activities associated with developing the closure plans
and associated cost estimates.
• Where experts were engaged by the Group to review
closure plans, we evaluated the competency and
objectivity of these experts.
• We assessed the appropriateness of the Group’s
significant assumptions used in the closure plans and
associated cost estimates.
• We assessed the appropriateness, reliability and
relevancy of the Group’s key data used in the closure
plans and associated cost estimates.
• We evaluated the expected timing of restoration and
rehabilitation activities.
• We tested the mathematical accuracy of the calculations
and assessed whether they were in accordance with the
method.
• We benchmarked key market-related assumptions
including inflation rates and discount rates against
external market data.
• We assessed provision movements in the year relating to
restoration and rehabilitation obligations to determine
whether they were consistent with our understanding
of the Group’s operations and associated rehabilitation
plans.
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 2021, 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.
Fortescue Metals Group Ltd FY21 Annual Report 73
07 Financial Report
Independent auditor’s report For the year ended 30 June 2021
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.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 122 to 158 of the directors’ report for the year ended
30 June 2021.
In our opinion, the remuneration report of Fortescue Metals Group Ltd for the year ended 30 June 2021 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
30 August 2021
74 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Directors’ declaration
Dr Andrew Forrest AO
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 76 to 121 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 2021 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 30th day of August 2021.
Fortescue Metals Group Ltd FY21 Annual Report 75
07 Financial Report
Consolidated income statement
For the year ended 30 June 2021
Operating sales revenue
Cost of sales
Gross profit
Other income
Other expenses
Profit before tax and net finance expenses
Finance income
Finance expenses
Profit before tax
Income tax expense
Profit for the year after tax
Profit for the year is attributable to:
Equity holders of the Company
Non-controlling interest
Profit for the year after tax
Earnings per share attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
Note
3
5
4
6
7
7
14
Note
8
8
2021
US$m
22,284
(6,794)
15,490
-
(544)
14,946
16
(240)
14,722
(4,427)
10,295
10,295
-
10,295
Cents
334.6
333.3
2020
US$m
12,820
(5,742)
7,078
58
(224)
6,912
50
(272)
6,690
(1,955)
4,735
4,735
-
4,735
Cents
153.9
153.2
Consolidated statement of comprehensive income
For the year ended 30 June 2021
Profit after tax
Other comprehensive income:
2021
US$m
10,295
2020
US$m
4,735
Items that may be reclassified to profit or loss in subsequent periods,
net of tax:
Exchange differences on translation of foreign operations
(14)
Items that will not be reclassified to profit or loss in subsequent periods,
net of tax:
Gain on investments taken to equity
Other comprehensive income / (loss), net of tax
Total comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to:
Equity holders of the Company
Total comprehensive income for the period, net of tax
2
(12)
10,283
10,283
10,283
5
1
6
4,741
4,741
4,741
The above consolidated income statement and consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
76 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Consolidated statement of financial position
As at 30 June 2021
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings and lease liabilities
Provisions
Deferred joint venture contributions
Current tax payable
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings and lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Note
9(b)
10(a)
10(c)
12
10(b)
9(a)
13
17(c)
14(c)
9(a)
13
14(d)
9(d)
2021
US$m
6,930
713
1,212
104
8,959
24
19,387
10
3
19,424
28,383
1,918
167
327
-
1,468
3,880
13
4,085
955
1,715
6,768
10,648
17,735
1,105
46
16,576
17,727
8
17,735
2020
US$m
4,855
543
828
71
6,297
2
17,073
7
19
17,101
23,398
1,057
186
277
251
1,024
2,795
50
4,927
738
1,644
7,359
10,154
13,244
1,167
62
12,002
13,231
13
13,244
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Fortescue Metals Group Ltd FY21 Annual Report 77
07 Financial Report
Consolidated statement of cash flows
For the year ended 30 June 2021
Note
Cash flows from operating activities
Cash receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash inflow from operating activities
9(c)(i)
Cash flows from investing activities
Payments for property, plant and equipment - Fortescue
Payments for property, plant and equipment - joint operations
Payments of deferred joint venture contributions
Proceeds from disposal of plant and equipment
Purchase of financial assets
2021
US$m
22,181
(5,371)
16,810
15
(216)
(4,015)
12,594
(2,585)
(797)
(251)
7
(1)
2020
US$m
12,704
(4,417)
8,287
48
(235)
(1,685)
6,415
(1,768)
(177)
(21)
7
(9)
Net cash outflow from investing activities
(3,627)
(1,968)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Finance costs paid
Dividends paid
Acquisition of non-controlling interest
Purchase of shares by employee share trust
Net cash outflow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
9(b)
1,500
(2,281)
(170)
(97)
(5,684)
(40)
(121)
(6,893)
2,074
4,855
1
6,930
1,625
(792)
(113)
(32)
(1,925)
-
(44)
(1,281)
3,166
1,874
(185)
4,855
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
78 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Consolidated statement of changes in equity
For the year ended 30 June 2021
Attributable to equity holders of the Company
Contributed
equity
US$m
Reserves
US$m
Balance at 1 July 2019
Adjustment on adoption of AASB 16
Restated total equity at 1 July 2019
Net profit after tax
Other comprehensive income
Total comprehensive income for the period, net of
tax
Transactions with owners:
Purchase of shares under employee share plans
Employee share awards vested
Equity settled share-based payment transactions
Dividends declared
Other
Balance at 30 June 2020
Balance at 1 July 2020
Net profit after tax
Other comprehensive income
Total comprehensive income for the period, net of tax
Transactions with owners:
Purchase of shares under employee share plans
Employee share awards vested
Equity settled share-based payment transactions
Shares in subsidiary issued to non-controlling interests
Acquisition of non-controlling interest
Dividends declared
Other
1,181
-
1,181
-
-
-
(42)
28
-
-
-
1,167
1,167
-
-
-
(121)
59
-
-
-
-
-
42
-
42
-
6
6
-
(28)
42
-
-
62
62
-
(12)
(12)
-
(59)
94
(8)
(32)
-
1
Retained
earnings
US$m
Total
US$m
9,365
10,588
(7)
9,358
4,735
-
(7)
10,581
4,735
6
4,735
4,741
-
-
-
(42)
-
42
(2,093)
(2,093)
2
2
Non-
controlling
interest
US$m
13
-
13
-
-
-
-
-
-
-
-
Total
equity
US$m
10,601
(7)
10,594
4,735
6
4,741
(42)
-
42
(2,093)
2
12,002
13,231
13
13,244
12,002
13,231
13
13,244
10,295
10,295
-
(12)
10,295
10,283
-
-
-
-
-
(121)
-
94
(8)
(32)
(5,720)
(5,720)
(1)
-
-
-
-
-
-
-
8
(13)
-
-
8
10,295
(12)
10,283
(121)
-
94
-
(45)
(5,720)
-
17,735
Balance at 30 June 2021
1,105
46
16,576
17,727
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Fortescue Metals Group Ltd FY21 Annual Report 79
07 Financial Report
Notes to the consolidated
financial statements
For the year ended 30 June 2021
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
80 Fortescue Metals Group Ltd FY21 Annual Report
Key financial position 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
23 Summary of significant accounting policies
24 Critical accounting estimates and judgements
97
98
99
99
99
100
101
101
102
102
103
103
105
106
107
108
109
120
81
82
83
83
83
84
84
84
85
85
88
88
89
90
91
91
91
91
92
92
94
95
96
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Basis of preparation
01 Basis of preparation
The financial statements cover the consolidated
group comprising of 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
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.
(e) Rounding of amounts
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.
Fortescue Metals Group Ltd FY21 Annual Report 81
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Financial performance
02 Segment information
Fortescue’s chief operating decision maker is identified as the Chief Executive Officer (CEO) and its segments
are identified based on the internal reports that are reviewed and used by the CEO in assessing performance and
determining the allocation of resources. Accordingly, one reportable operating segment has 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 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
2021
US$m
16,375
16
(240)
(1,366)
(63)
14,722
(4,427)
10,295
2020
US$m
8,375
50
(272)
(1,400)
(63)
6,690
(1,955)
4,735
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. The amounts presented exclude fair value loss in derivatives
designated as cash flow hedges of US$198 million (30 June 2020: nil).
Revenues from external customers
China
Other
(b) Major customer information
2021
US$m
20,164
2,318
22,482
2020
US$m
12,126
694
12,820
Revenue from two customers amounted to US$2,226 million and US$1,912 million respectively (2020: US$1,395 million
and US$1,754 million), arising from the sale of iron ore and the related shipment of product.
82 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Financial performance
03 Operating sales revenue
Iron ore revenue
Provisional pricing adjustments - iron ore
Cash flow hedging adjustment¹
Total iron ore revenue²
Shipping revenue
Provisional pricing adjustments - shipping revenue
Total shipping revenue²
Other revenue³
Operating sales revenue
2021
US$m
19,876
1,175
(198)
20,853
1,314
64
1,378
53
2020
US$m
11,721
(140)
-
11,581
1,192
4
1,196
43
22,284
12,820
¹ Cash flow hedging adjustment represents the effective loss reclassified from other comprehensive income (OCI) to profit or loss on close out of the
hedge position during the year.
² Certain sales contracts are provisionally priced at the initial revenue recognition (bill of lading) date, with the final settlement price based on a
pre-determined quotation period. Operating sales revenue from these contracts each comprise two parts:
(i) Iron ore revenue and shipping revenue recognised at the bill of lading date at current prices
(ii) Provisional pricing adjustments which represent any difference between the revenue recognised at the bill of lading date and the final settlement
price.
Shipping revenue and the provisional pricing adjustments to shipping revenue are recognised over the period during which the shipping service has
been provided.
³ Other revenue includes towage services provided by Fortescue (commenced in September 2019) which is recognised as performed.
04 Other income
Net foreign exchange gain
Other
05 Cost of sales
Mining and processing costs
Rail costs
Port costs
Shipping costs
Government royalty
Depreciation and amortisation
Other operating expenses
2021
US$m
-
-
-
2021
US$m
2,110
211
201
1,333
1,560
1,346
33
6,794
2020
US$m
52
6
58
2020
US$m
1,938
186
169
1,190
845
1,383
31
5,742
Total employee benefits expense included in cost of sales and administration expenses is US$1,143 million
(2020: US$869 million).
Fortescue Metals Group Ltd FY21 Annual Report 83
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Financial performance
06 Other expenses
Administration expenses
FFI expenditure
Exploration, development and other
Depreciation and amortisation
Fair value change in derivatives not designated as hedging instruments
Net foreign exchange loss
Other
07 Finance income and finance expenses
Finance income
Interest income
Finance expenses
Interest expense on borrowings and lease liabilities
Loss on early debt redemption
Interest on prepayment
Other
08 Earnings per share
(a) Earnings per share
Basic
Diluted
(b) Reconciliation of earnings used in calculating earnings per share
Profit attributable to the ordinary equity holders of the Company used in
calculating basic and diluted earnings per share
2021
US$m
2020
US$m
155
104
63
20
59
142
1
544
114
-
63
17
30
-
-
224
2021
US$m
2020
US$m
16
16
143
77
-
20
240
2021
cents
334.6
333.3
US$m
10,295
50
50
209
16
13
34
272
2020
cents
153.9
153.2
US$m
4,735
(c) Weighted average number of shares used as denominator
Number
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
3,077,082,330
3,077,324,924
Adjustments for calculation of diluted earnings per share:
Potential ordinary shares
11,355,549
12,713,541
Weighted average number of ordinary and potential ordinary shares used
as the denominator in calculating diluted earnings per share
3,088,437,879
3,090,038,465
(d) Information on the classification of securities
Share rights granted to employees under the Fortescue incentive plan are considered to be potential ordinary shares
and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
Details relating to the share rights are set out in note 18.
84 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
09 Capital management
Fortescue’s capital management policy supports its strategic objectives and provides a framework to maintain a
strong capital structure to deliver consistent returns to its shareholders as well as invest in future developments and
expansion of the business.
Fortescue’s capital includes shareholders’ equity, reserves and net debt. Net debt is defined as borrowings and lease
liabilities less cash and cash equivalents.
Borrowings
Lease liabilities
Cash and cash equivalents
Net debt/(net cash)
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Capital management involves a continuous process of:
Note
9(a)
9(a)
9(b)
2021
US$m
3,442
810
(6,930)
(2,678)
17,727
8
17,735
2020
US$m
4,234
879
(4,855)
258
13,231
13
13,244
• Evaluating capital requirements against the risks arising from Fortescue’s activities and its operating environment.
• Raising, refinancing and repaying debt.
• Development, maintenance and implementation of the dividend policy, including the dividend reinvestment plan.
To achieve its primary capital management objective of maintaining a strong capital structure, Fortescue has
developed target ranges for a number of financial indicators. These indicators include gearing, net gearing, debt to
Underlying EBITDA and interest coverage ratio, which are monitored together with a number of other financial and
non-financial indicators. Target ranges for the financial ratios are based on investment grade metrics which may
vary upon the investment and commodity cycles. During periods of intensive investment, for example expansion
programs, or a commodity downturn, the capital management policy contemplates interim ratio levels returning to a
targeted longer term level. Interim levels acknowledge and consider the requirements, in certain circumstances, for
remedial actions to be taken.
As per previous disclosures, Fortescue has a share buy-back program in place and is an important part of the capital
management strategy. The program was put in place in 2018 and was extended in October 2020 for an unlimited
duration.
(a) Borrowings and lease liabilities
Senior unsecured notes
Syndicated term loan
Revolving credit facility
Lease liabilities
Total current borrowings and lease liabilities
Senior unsecured notes
Syndicated term loan
Revolving credit facility
Lease liabilities
Total non-current borrowings and lease liabilities
Total borrowings and lease liabilities
2021
US$m
31
7
-
129
167
2,824
580
-
681
4,085
4,252
2020
US$m
24
8
9
145
186
2,583
585
1,025
734
4,927
5,113
Fortescue Metals Group Ltd FY21 Annual Report 85
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
09 Capital management (continued)
(a) Borrowings and lease liabilities (continued)
(i) Senior unsecured notes
On 19 March 2021, Fortescue completed a US$1.5 billion offering of senior unsecured notes (‘Notes’) at an
interest rate of 4.375 per cent, with a 10 year maturity at 1 April 2031. Proceeds from the offering of the Notes were
applied to the repayment of Fortescue’s US$750 million 2022 Notes and the US$500 million 2023 Notes, with the
remainder being retained as cash on hand. The Notes rank pari passu with all existing and future senior unsecured
indebtedness.
As at 30 June 2021 the Company had the following senior unsecured notes on issue:
Date of issue
Date of maturity
Non-call
period
Face value
US$m
Carrying value
US$m
Coupon rate
%
Currency
May 2017
May 2024
7 years
September 2019
September 2027
8 years
March 2021
April 2031
10 years
750
600
1,500
2,850
750
603
1,502
2,855
5.125%
4.500%
4.375%
USD
USD
USD
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
The syndicated term loan matures in June 2025, and as at 30 June 2021 had a carrying value of US$587 million
(30 June 2020: US$593 million) with a coupon rate linked to LIBOR plus a fixed margin. The facility has principal
repayment of 1 per cent per annum with early repayment of the facility at Fortescue’s option without penalty.
(iii) Revolving credit facility
Fortescue elected to repay the full amount of the revolving credit facility, which was drawn on 2 April 2020, of
US$1,025 million plus accrued interest on 29 July 2020. The facility remains available for redraw and repayment
until the maturity date of 28 July 2023. If drawn, interest accrues based on a variable rate linked to LIBOR plus a
fixed margin and is payable at the end of the interest period selected (either one, two, three or six months), with the
principal due at maturity.
(iv) Lease liabilities
The Group enters into contractual arrangements for leases of mining equipment, vehicles, buildings and other assets.
Typically, the duration of these contracts is for periods of between 2 and 5 years, some of which include extension
options and are recognised within lease liabilities.
2021
US$m
2020
US$m
Expense relating to short-term leases
Expense relating to leases of low-value assets that are not shown above as
short-term leases
Expense relating to variable lease payments not included in the
measurement of lease liabilities
Future cash flows from leases not yet commenced
190
3
102
69
96
1
40
45
86 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
09 Capital management (continued)
(a) Borrowings and lease liabilities (continued)
(v) Summary of movements in borrowings and lease liabilities
Senior
unsecured notes
US$m
Syndicated
term loan
US$m
Revolving
credit facility
US$m
Lease
liabilities
US$m
Balance at 1 July 2019
Initial recognition
Additions
Interest expense
Payments
Transaction costs
Foreign exchange gain
Balance at 30 June 2020
Additions
Interest expense
Payments
Transaction costs
Foreign exchange loss
Balance at 30 June 2021
2,001
-
600
127
(113)
(8)
-
2,607
1,500
134
(1,374)
(12)
-
2,855
1,378
-
-
33
(830)
12
-
593
-
14
(20)
-
-
587
Total
US$m
3,952
237
1,816
231
573
237
191
62
(177)
(1,120)
-
(7)
879
104
57
4
(7)
5,113
1,604
208
-
-
1,025
9
-
-
-
1,034
-
3
(1,037)
(276)
(2,707)
-
-
-
-
46
810
(12)
46
4,252
Information about Fortescue’s exposure to interest rate risk and foreign exchange rate risk is disclosed in note 11.
Fortescue Metals Group Ltd FY21 Annual Report 87
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
09 Capital management (continued)
(b) Cash and cash equivalents
Cash at bank
Short term deposits
2021
US$m
5,465
1,465
6,930
Cash and cash equivalents do not have any restrictions by contractual or legal arrangements.
(c) Cash flow information
(i) Reconciliation of profit after income tax to net cash inflow from operating activities
2021
US$m
10,295
1,366
63
94
8
79
-
49
(69)
824
(192)
(384)
(13)
-
62
341
71
12,594
Net profit after tax
Depreciation and amortisation
Exploration, development and other
Share-based payment expense
Net unrealised foreign exchange loss
Cost of early debt repayment
Rehabilitation expenditure
Depreciation in inventory
Other non-cash items
Working capital adjustments:
Increase in payables
(Increase) / decrease in receivables
Increase in inventories
Increase in other assets
Decrease in deferred income
Increase in provisions
Increase in provision for income taxes payable
Increase / (decrease) in deferred tax liabilities
Net cash inflow from operating activities
88 Fortescue Metals Group Ltd FY21 Annual Report
2020
US$m
3,074
1,781
4,855
2020
US$m
4,735
1,400
63
41
19
16
(2)
18
(81)
71
380
(56)
(42)
(486)
72
311
(44)
6,415
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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 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
Purchase of shares under
employee share plans
Employee share awards
vested
-
-
(9,394,611)
(9,394,611)
8,984,665
8,984,665
-
-
At 30 June 2021
3,078,964,918
(1,660,510)
3,077,304,408
1,195
(14)
(42)
28
(28)
(121)
59
(90)
US$m
1,181
(42)
28
1,167
(121)
59
1,105
(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 did not acquire any of its own shares on market under the share buy-back program
which was extended on 10 October 2020 for an unlimited duration. The maximum number of shares which can be
bought back is determined periodically by the Company’s 10/12 limit, being that a company cannot buy back more
than 10 per cent of its voting shares within the span of any 12 month period.
Fortescue Metals Group Ltd FY21 Annual Report 89
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
09 Capital management (continued)
(e) Dividends
(i) Dividends paid during the year
Final fully franked dividend for the year ended 30 June 2020: A$1.00 per
share (30 June 2019: A$0.24 per share)
Interim fully franked dividend for the half-year ended 31 December 2020:
A$1.47 per share (31 December 2019: A$0.76 per share)
(ii) Dividends declared and not recognised as a liability
Final fully franked dividend: A$2.11 per share (2020: A$1.00 per share)
(iii) Franking credits
Franking credit account balance at the end of the financial year at 30%
(2020: 30%)
Franking credits/(debits) that will arise from the payment/(receipt) of
current tax payable/(receivable) as at the end of the year
Franking debits that will arise from the payment of the final dividend for the
year
2021
US$m
2,215
3,505
5,720
2021
US$m
4,710
2021
A$m
4,198
1,915
(2,784)
3,329
2020
US$m
519
1,574
2,093
2020
US$m
2,233
2020
A$m
2,111
1,459
(1,320)
2,250
90 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
10 Working capital
(a) Trade and other receivables
Trade debtors
GST receivables
Other receivables
Total current receivables
2021
US$m
568
73
72
713
2020
US$m
475
30
38
543
Trade receivables with embedded derivatives for provisional pricing are measured at fair value through profit and loss
under AASB 9 Financial Instruments. Other receivables are recognised at amortised cost using the effective interest
method, less an allowance for impairment.
The Group applies the expected credit loss model to other receivables. A provision for doubtful receivables is
established based on the expected credit loss model and reviewed on an ongoing basis. Expected credit losses on
other receivables held at amortised cost are insignificant and no provision has been recognised at 30 June 2021
(2020: Nil).
The carrying value of the receivables approximates their fair value. Information about Fortescue’s exposure to
foreign currency risk, interest rate risk and price risk pertaining to the trade and other receivables balances is
disclosed in note 11.
Disclosures relating to receivables from related parties are set out in note 17.
(b) Trade and other payables
Trade payables
Royalty accrual
Other payables
Total current payables
(c) Inventories
Iron ore stockpiles
Warehouse stores and materials
Total current inventories
2021
US$m
1,008
569
341
1,918
2021
US$m
870
342
1,212
2020
US$m
623
258
176
1,057
2020
US$m
512
316
828
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 2021 amounted to US$3,868 million (2020: US$3,676 million).
During the year, inventory write-offs of US$31 million (2020: US$31 million) were recognised in relation to specific
items of warehouse stores and materials that were identified as obsolete.
Fortescue Metals Group Ltd FY21 Annual Report 91
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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, Risk Management
and Sustainability Committee. The day to day management responsibility for execution of the risk management
framework has been delegated to the CEO and CFO. Periodically, the CFO reports to the Audit, Risk Management and
Sustainability 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 statement of financial position
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 of discharge. The estimated
consideration in relation to the provisionally priced contracts is marked to market using the spot iron ore price at
the end of each reporting period with the impact of the iron ore price movements recorded as provisional pricing
adjustments to revenue. At 30 June 2021, Fortescue had 3.2 million tonnes of iron ore sales (2020: 5.7 million tonnes)
that remained subject to provisional pricing, with the final price to be determined in the following financial year.
A 5 per cent movement in the realised iron ore price on these provisionally priced sales would have an impact on the
Group’s profit of US$26 million (2020: 10 per cent movement would have an impact on the Group’s profit of
US$27 million, including the derivatives balance), before the impact of taxation. This analysis assumes all other factors,
including the foreign currency exchange rates, are held constant.
The Group’s risk management policy includes consideration of hedging a portion of its estimated commodity price
risk exposure in respect of forecast sales that remained subject to provisional pricing at any point in time. During the
period and in accordance with its risk management framework, Fortescue entered into iron ore option arrangements
(i.e. zero cost collars) that were designated in cash flow hedge relationships. The Group also used short-term
structured iron ore and foreign currency option arrangements that are not designated into hedging relationships. All
options arrangements are measured at fair value.
All cash flow hedges have been settled during the financial year. Hedge ineffectiveness has been assessed as
negligible in relation to the iron ore options and no amount has been recognised in profit or loss.
92 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
11 Financial risk management (continued)
(a) Market risk (continued)
(ii) Interest rate risk
The Group’s interest rate risk arises from variable rates on the syndicated term loan, the revolving credit facility to the
extent it is drawn, and the lease liabilities relating to the ore carriers. Changes in rates applicable to the short-term
deposits forming part of cash and cash equivalents also give rise to interest rate risk.
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
Note
9(b)
9(a)
9(a)
2021
US$m
5,465
(587)
-
(345)
4,533
2020
US$m
3,074
(593)
(1,034)
(367)
1,080
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 10 basis points in interest rates in variable instruments would have an impact on the Group’s profit of
US$5 million (2020: a change of 100 basis points would impact profit by US$11 million), before the impact of taxation.
This analysis assumes that all other factors remain constant, including foreign currency rates.
(iii) Foreign currency exchange risk
Fortescue operates in Australia with a significant portion of its operating costs and capital expenditure incurred and
paid in Australian dollars, and as such, is exposed to the movements in the Australian dollar exchange rate.
Fortescue’s risk management policy is to target specific levels at which to convert United States dollars to Australian
dollars by entering into either spot or short-term forward exchange contracts or structured foreign currency option
arrangements (i.e. collars) to fix a portion of the Group’s Australian dollar exposure to within a Board-approved range.
The Group has not applied hedge accounting to any of these contracts during the year.
The increase in sales volume through Fortescue’s wholly owned Chinese sales entity, FMG Trading Shanghai Co., Ltd.,
and the pricing of those sales in Chinese Yuan, has resulted in an increased exposure to the Chinese Yuan exchange
rate.
Fortescue Metals Group Ltd FY21 Annual Report 93
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
11 Financial risk management (continued)
(a) Market risk (continued)
(iii) Foreign currency exchange risk (continued)
The carrying amounts of the financial assets and liabilities denominated in Australian dollars and Chinese Yuan (CNY)
(expressed in US dollars), are set out below:
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total financial assets
Financial liabilities
Borrowings and lease liabilities
Trade and other payables
Current tax payable
Total financial liabilities
AUD denominated
CNY denominated
2021
US$m
2020
US$m
2021
US$m
2020
US$m
2,147
76
6
2,229
436
1,405
1,468
3,309
871
39
4
914
442
804
1,024
2,270
147
-
-
147
1
96
-
97
141
-
-
141
1
24
-
25
A change of 3 per cent in the Australian dollar exchange rate would have a net impact on the Group’s profit of
US$32 million (2020: a change of two per cent would have an impact of US$27 million), before the impact of taxation.
A change of 3 per cent in the Chinese Yuan exchange rate would have a net impact on the Group’s profit of
US$1 million (2020: a change of two per cent would have an impact of US$2 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.
At 30 June 2021, Fortescue had US$1 million (2020: US$7 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.
94 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Capital management
11 Financial risk management (continued)
(b) Credit risk (continued)
Fortescue has not recognised any bad debt expense from trading counterparties in the years ended 30 June 2021 and
30 June 2020.
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 credit risk 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 2020
Trade and other payables
2,081
Borrowings
Lease liabilities
Lease expenditure
commitments
Effect of discounting
95
90
119
(29)
2,266
30 June 2021
Trade and other payables
3,385
Borrowings
Lease liabilities
Lease expenditure
commitments
79
67
92
Effect of discounting
(25)
3,531
-
89
55
81
(26)
144
-
84
62
85
(23)
146
50
936
110
158
(48)
-
3,131
207
324
(117)
-
670
417
649
(232)
2,131
4,921
1,331
1,331
-
2,131
4,234
879
1,096
3,338
1,087
8,383
7,244
-
162
101
143
(42)
263
1
1,669
182
284
(102)
12
2,471
398
603
(205)
3,398
4,465
1,207
1,207
-
3,398
3,442
810
1,852
2,881
9,070
7,650
Management monitors rolling forecasts of the Group’s cash and overall liquidity position on the basis of expected cash flows.
Fortescue Metals Group Ltd FY21 Annual Report 95
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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
2021
2020
Carrying value
Fair value
Carrying value
Fair value
US$m
2,855
US$m
3,067
US$m
2,607
US$m
2,662
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 2021.
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.
96 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Key financial position 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 2019
10,690
650
Initial recognition
Transfers of assets
Additions
Disposals
(729)
383
-
(15)
-
14
-
-
Depreciation
(1,031)
(68)
Changes in restoration
and rehabilitation
estimate¹
-
-
-
Other
At 30 June 2020
Cost
Accumulated
depreciation
Net carrying value
At 1 July 2020
Transfers of assets
Additions
Disposals
9,298
596
16,775
1,075
(7,477)
(479)
9,298
1,836
-
(13)
596
115
-
-
Depreciation
(1,004)
(70)
Changes in restoration
and rehabilitation
estimate¹
Other
At 30 June 2021
Cost
Accumulated
depreciation
-
-
-
-
10,117
18,527
641
1,190
(8,410)
(549)
539
-
(6)
107
(14)
-
-
-
626
626
-
626
(86)
157
(44)
-
-
-
653
653
-
889
-
(427)
1,890
(2)
-
-
(8)
2,342
2,342
3,303
-
31
-
-
(185)
52
-
3,201
4,833
-
871
-
184
(22)
(122)
-
-
911
1,157
-
84
-
25
-
16,071
226
(5)
2,206
(53)
(10)
(1,416)
-
-
99
108
52
(8)
17,073
26,916
-
(1,632)
(246)
(9)
(9,843)
2,342
(2,500)
3,368
-
-
-
4
3,214
3,214
3,201
626
-
-
911
-
55
(11)
(210)
(118)
206
-
3,823
5,665
-
(1,842)
-
-
837
1,198
(361)
99
-
12
(1)
(8)
-
-
102
118
(16)
17,073
(9)
3,592
(69)
(1,410)
206
4
19,387
30,565
(11,178)
¹ 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.
Fortescue Metals Group Ltd FY21 Annual Report 97
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Key financial position items
13 Provisions
Employee benefits
Restoration and rehabilitation
Total current provisions
Employee benefits
Restoration and rehabilitation
Total non-current provisions
2021
US$m
322
5
327
2
953
955
(a) Provision for restoration and rehabilitation
Movements in the provision for restoration and rehabilitation during the financial year are set out below:
At 1 July 2020
Changes in restoration and rehabilitation estimate
Unwinding of discount
Payments for restoration and rehabilitation activities
At 30 June 2021
2021
US$m
753
206
(1)
-
958
2020
US$m
260
17
277
2
736
738
2020
US$m
706
52
(3)
(2)
753
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.
98 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Taxation
14 Taxation
For the year ended 30 June 2021, 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
2021
US$m
4,356
71
4,427
2020
US$m
1,996
(41)
1,955
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 2021, the Group’s global effective tax rate was 30.1 per cent. This is in line with the Australian
corporate tax rate of 30 per cent.
Consolidated
group 2021
US$m
Australian
group 2021
US$m
Consolidated
group 2020
US$m
Australian
group 2020
US$m
Profit before income tax expense
Tax at the Australian tax rate of 30 per
cent (2020: 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
Non-deductible expenditure
Share-based payments
Other
Income tax expense
Effective tax rate
14,722
4,417
14,635
4,391
6,690
2,007
(3)
(3)
33
6
16
(42)
3
4,427
30.1%
(3)
(4)
33
14
16
(42)
-
4,405
30.1%
(2)
(17)
(31)
6
-
(8)
-
1,955
29.2%
6,624
1,987
(2)
(20)
(31)
13
-
(8)
4
1,943
29.3%
Fortescue Metals Group Ltd FY21 Annual Report 99
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Taxation
14 Taxation (continued)
(c) Reconciliation of income tax expense to current tax payable/(receivable)
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
Consolidated group
2021
US$m
4,427
(71)
4,356
1,024
(4,022)
110
1,468
2020
US$m
1,955
44
1,999
762
(1,687)
(50)
1,024
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
2021
US$m
709
(2,424)
(1,715)
2020
US$m
712
(2,356)
(1,644)
100 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Taxation
14 Taxation (continued)
(d) Deferred tax assets and liabilities (continued)
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
2021
US$m
2020
US$m
2021
US$m
2020
US$m
2021
US$m
2020
US$m
-
-
-
-
-
383
276
50
709
-
-
-
-
29
344
288
51
712
(151)
(689)
(169)
(597)
(1,405)
(1,400)
(171)
(8)
-
-
-
(147)
-
(39)
-
(4)
(2,424)
(2,356)
(18)
92
5
24
37
(78)
12
(3)
71
21
9
94
8
(25)
(35)
(97)
(16)
(41)
¹ The movement in deferred tax liabilities related to property, plant and equipment for the year ended 30 June 2020 included US$3 million credited to equity
on adoption of AASB 16 Leases. No deferred tax expense was recognised in equity in 30 June 2021.
(e) Unrecognised tax losses
At 30 June 2021, the Group had income tax losses with a tax benefit of US$37 million (2020: US$36 million) which are
not recognised as deferred tax assets. The Group recognises the benefit of tax losses only to the extent of anticipated
future taxable income or gains in relevant jurisdictions. These losses do not expire.
Fortescue Metals Group Ltd FY21 Annual Report 101
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Unrecognised items
15 Commitments and contingencies
(i) Capital commitments
Within one year
Between one and five years
Later than five years
Total commitments
(ii) Contingent assets and liabilities
2021
US$m
1,163
13
-
1,176
2020
US$m
1,018
147
-
1,165
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 exclusive possession native title over part 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 Land Access 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 made.
Fortescue had no material contingent assets or contingent liabilities at 30 June 2021 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 30 August 2021, the Directors declared a final dividend of 211 Australian cents per ordinary share payable in
September 2021.
102 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
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
2021
US$'000
5,647
5,059
118
10,824
2020
US$'000
5,874
5,783
122
11,779
Detailed information about the remuneration received by each key management person is provided in the remuneration
report on pages 122 to 158.
(c) Transactions and balances with other related parties
Transactions with joint operations partners
Other revenue
Balances at 30 June
2021
US$'000
4,080
2020
US$'000
9,281
Deferred joint venture contributions - current
Other receivables - current
-
14,695
251,388
4,122
18 Share-based payments
(a) Employee share rights plans
During the year ended 30 June 2021, Fortescue issued 1,012,293 (2020: 1,261,819) short term share rights and 1,615,688
(2020: 3,180,213) 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
2021
Number
2020
Number
14,453,162
13,062,093
2,627,981
(984,310)
(3,749,003)
12,347,830
4,862,706
(447,602)
(3,024,035)
14,453,162
Fortescue Metals Group Ltd FY21 Annual Report 103
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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 2021 was A$16.12 per right
(2020: A$8.80) for the short term share rights and A$10.34 per right (2020: A$7.59) 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 2021
were:
• Share price: A$17.04 (2020: A$9.26)
• Exercise price: nil (2020: nil)
• Volatility: 42 per cent (2020: 112 per cent)
• Effective life: 1.8 years (2020: 2.3 years)
• Dividend yield: 7.6 per cent (2020: 6.5 per cent)
• Risk free interest rate: 0.1 per cent (2020: 0.7 per cent).
Details of share rights outstanding at 30 June 2021 are presented in the following table:
Exercise
price
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Remaining
contractual
life
Vesting conditions
A$
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
Short term share rights 2021
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
Long term share rights 2021
-
-
-
-
-
-
-
-
-
-
-
-
149,920
149,920
444,435
444,435
388,523
388,523
339,683
339,683
298,953
298,953
955,624
-
400,078
400,078
399,486
399,486
1,102,919
1,102,919
3,418,890
2,911,480
1,537,839
-
-
-
12,347,830
3,523,997
9.5
10.5
11.3
12.5
13.5
14.5
9.5
10.5
11.3
12.3
13.5
14.5
-
-
-
-
-
-
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
104 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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
2021
US$m
94
2020
US$m
41
2021
US$'000
2020
US$'000
1,042
415
1,457
229
1,686
306
306
1,992
825
265
1,090
166
1,256
218
218
1,474
Fortescue Metals Group Ltd FY21 Annual Report 105
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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 2021 along with the consolidated statement of financial
position at 30 June 2021 for the closed group represented by the above companies are materially the same as that
of the Group.
106 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
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
2021
US$m
285
9,747
10,032
1,636
-
1,636
8,396
1,105
73
7,218
8,396
5,306
5,306
2020
US$m
290
9,722
10,012
1,136
65
1,201
8,811
1,167
12
7,632
8,811
2,101
2,101
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; and
• Profit for the year includes dividends received from subsidiaries of US$5,896 million (2020: US$2,147 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(ii) but otherwise did not have any contingent
liabilities at 30 June 2021 or 30 June 2020.
Fortescue Metals Group Ltd FY21 Annual Report 107
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
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):
Country of
incorporation
Class
of shares
2021
%
2020
%
Equity holding
Controlled entities
Chichester Metals Pty Limited
FMG International Pte Limited
Australia
Ordinary
Singapore
Ordinary
FMG International Shipping Pte Ltd
Singapore
Ordinary
FMG Iron Bridge Limited¹
Hong Kong
Ordinary
FMG Magnetite Pty Limited
FMG North Pilbara Pty Limited
FMG Pilbara Pty Limited
Pilbara Marine Pty Limited
FMG Procurement Services
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
FMG Resources (August 2006) Pty Limited
Australia
Ordinary
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
FMG Trading Shanghai Co., Ltd
China
Ordinary
Fortescue Future Industries Pty Ltd
Australia
Ordinary
100
100
100
99.6
99.6
99.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
88
88
88
100
100
100
100
100
100
100
100
100
100
100
100
100
1 On 28 June 2021, Fortescue acquired Baosteel Resources International Company Limited's minority shareholding in FMG Iron Bridge Limited. Fortescue’s indirect
ownership of FMG Iron Bridge Limited‘s two whollyowned subsidiaries, FMG Magnetite Pty Limited and FMG North Pilbara Pty Limited, increased accordingly.
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
2021
2020
Iron Bridge
Joint Venture
Australia
FMG Magnetite Pty Ltd
Development of magnetite
assets and production of
magnetite concentrate
69
69
Participating interest %
On 14 August 2020, the Iron Bridge and Glacier Valley Joint Ventures were amalgamated and are reported together as
the Iron Bridge Joint Venture.
108 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies
The principal accounting policies adopted in the
preparation of these consolidated financial statements
are set out below.
(a) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the
financial statements of the Company and its subsidiaries,
being the entities controlled by the Company. Control
exists when the Group is exposed to, or has 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.
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.
These have been incorporated in the financial statements
under the appropriate headings. Details of the joint
operations are set out in note 22(b).
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 statement of financial position.
(b) Employee share trust
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.
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.
(ii) Joint arrangements
(c) Foreign currency translation
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.
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.
Fortescue Metals Group Ltd FY21 Annual Report 109
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(d) Revenue recognition
(e) Deferred income
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.
(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.
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.
110 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(f) Income tax (continued)
(h) Trade and other receivables
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.
(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.
Other receivables are recognised at amortised cost
using the effective interest method, less an allowance for
impairment. Trade receivables with embedded derivatives
for provisional pricing are measured at fair value through
profit and loss under AASB 9.
The collectability of trade and other receivables is
reviewed on a monthly basis. Uncollectable amounts for
trade receivables are considered in the measurement
of fair value through the income statement under AASB
9. Other receivables are determined using the expected
credit loss model. 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.
Fortescue Metals Group Ltd FY21 Annual Report 111
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(i) Inventories (continued)
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.
(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 statement of financial position 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.
112 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(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(p).
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.
The estimated useful lives, residual values and
depreciation method are reviewed at the end of each
reporting period and the effect of any changes in
estimate is accounted for on a prospective basis.
Units of production method
Where the useful life of an asset is directly linked to
the extraction of iron ore from a mine, the asset is
depreciated using the units of production method.
The units of production method is an amortised charge
proportional to the depletion of the estimated proven and
probable reserves at the mines.
Fortescue Metals Group Ltd FY21 Annual Report 113
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(l) Property, plant and equipment (continued)
(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.
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.
(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.
114 Fortescue Metals Group Ltd FY21 Annual Report
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.
(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,
and the associated costs are 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.
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(m) Stripping costs (continued)
• 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) Intangible Assets
The Group capitalises amounts paid for the acquisition of
identifiable intangible assets, such as software, licenses,
trademarks and patents, where it is considered they will
contribute to future periods through revenue generation
or reductions in cost. The cost of intangible assets
acquired in a business combination are recognised at fair
value at the acquisition date. Following initial recognition,
intangible assets are carried at cost less amortisation
and any impairment losses. Intangible assets with finite
lives are amortised on a straight-line basis over their
useful lives and tested for impairment whenever there is
an indication that they may be impaired. The amortisation
period and method is reviewed at each financial year end.
(i) Research and development costs
Research costs are expensed as incurred. Development
expenditures on an individual project are recognised
as an intangible asset only when the Group can
demonstrate all of the following:
• The technical feasibility of completing the intangible
asset so that the asset will be available for use or sale
• Its intention to complete and its ability and intention to
use or sell the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during
development
Following initial recognition of the development
expenditure as an asset, the asset is carried at cost
less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins
when development is complete and the asset is available
for use. It is amortised over the period of expected
future benefit. Amortisation is recorded in cost of sales.
During the period of development, the asset is tested for
impairment annually.
(o) Leases
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 statement of financial
position 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 the 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.
Fortescue Metals Group Ltd FY21 Annual Report 115
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(o) Leases (continued)
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.
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.
(p) 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
116 Fortescue Metals Group Ltd FY21 Annual Report
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.
(q) 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 biannually, 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.
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(r) Finance costs
(t) 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 used to finance an asset form part of general
borrowings, the amount capitalised is calculated using a
weighted average of rates applicable to relevant general
borrowings during the construction period.
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
(s) 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.
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.
(ii) Long service leave
(u) Dividends
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.
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.
(v) 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 FY21 Annual Report 117
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
(w) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of
the amount of associated GST, except where the amount
of GST incurred is not recoverable from the Australian
Taxation Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset
or as part of an item of the expense. Receivables and
payables in the statement of financial position 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 statement of financial position.
When a derivative is designated as a cash flow
hedging instrument, the effective portion of changes
in the fair value of the derivative is recognised in other
comprehensive income (OCI) and accumulated in the
hedging reserve. The effective portion of changes in
the fair value of the derivative that is recognised in
OCI is limited to the cumulative change in fair value of
the hedged item, determined on a present value basis,
from inception of the hedge. Any ineffective portion of
changes in the fair value of the derivative is recognised
immediately in profit or loss.
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.
(x) Derivative financial instruments and hedge
accounting
From time to time, the Group holds derivative financial
instruments to hedge its foreign currency and commodity
price risk exposures. Derivatives are initially measured at
fair value. Subsequent to initial recognition, derivatives
are measured at fair value, and changes therein are
generally recognised in profit or loss. The Group
designates certain derivatives as hedging instruments to
hedge the variability in cash flows associated with highly
probable forecast transactions arising from changes
in commodity prices or foreign exchange rates. At
inception of designated hedging relationships, the Group
documents the risk management objective and strategy
for undertaking the hedge. The Group also documents
the economic relationship between the hedged item and
the hedging instrument, including whether the changes
in cash flows of the hedged item and hedging instrument
are expected to offset each other.
The Group designates only the intrinsic value of option
contracts as the hedging instrument in cash flow hedging
relationships. The time value is recognised in other
comprehensive income to the extent that it relates to the
hedged item and is accumulated in a separate cost of
hedging reserve. For all hedged forecast transactions,
the amount accumulated in the hedging reserve and the
cost of hedging reserve is reclassified to profit or loss
in the same period or periods during which the hedged
expected future cash flows affect profit or loss. If the
hedge no longer meets the criteria for hedge accounting
or the hedging instrument is sold, expires, is terminated
or is exercised, then hedge accounting is discontinued
prospectively. When hedge accounting for cash flow
hedges is discontinued, the amount that has been
accumulated in the hedging reserve remains in equity
until it is reclassified to profit or loss in the same period
or periods as the hedged expected future cash flows
affect profit or loss. If the hedged future cash flows are
no longer expected to occur, then the amounts that have
been accumulated in the hedging reserve and the cost of
hedging reserve are immediately reclassified to profit or
loss.
118 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(y) Comparatives
Where applicable, certain comparatives have been adjusted to conform with current year presentation.
(z) New accounting standards and interpretations
(i) New and amended standards adopted by the Group
The following new standards and amendments to standards are mandatory for the first time for the financial year
beginning 1 July 2020 and have been adopted by the Group:
Accounting standard
Description of change
AASB 2018-7
Amendments to
Australian Accounting
Standards – Definition of
Material (AASB 101 and
AASB 108)
Amends the definition of ‘material’ and clarifies that materiality will depend on the nature
or magnitude of information, either individually or in combination with other information,
in the context of the financial statements. A misstatement of information is material if it
could reasonably be expected to influence decisions made by the primary users. These
amendments had no impact on the consolidated financial statements of, nor is there
expected to be any future impact, to the Group.
Conceptual Framework
for Financial Reporting
and AASB 2019-
1 Amendments to
Australian Accounting
Standards
AASB 2019-5
Amendments to
Australian Accounting
Standards – Disclosure
of the Effect of New
IFRS Standards Not
Yet issued in Australia
(AASB 1054)
IFRIC agenda decisions
(March 2019 and
April 2021) regarding
Software-as-a-Service
(SaaS)
The Conceptual Framework is not a standard, and none of the concepts contained
therein override the concepts or requirements in any standard. The purpose of the
Conceptual Framework is to assist preparers to develop consistent accounting policies
where there is no applicable standard in place and to assist all parties to understand
and interpret the standards. The revised Conceptual Framework includes some
new concepts, updated definitions and recognition criteria for assets and liabilities
and clarifies some important concepts. These amendments had no impact on the
consolidated financial statements of the Group.
This Standard amends AASB 1054 Australian Additional Disclosures by adding a
disclosure requirement for entities complying with IFRS to disclose the potential effect
of an IFRS that has not yet been issued by the AASB to enable an entity complying with
Australian Accounting Standards to also assert compliance with IFRS.
The International Financial Reporting Interpretations Committee (IFRIC) has addressed
accounting for customisation and configuration costs on cloud based software solutions
when the software is a Software-as-a-Service (SaaS) contract, providing clarification
on whether an intangible asset can be recognised, cost recognised over the duration
of the contract or costs are expensed. Fortescue has considered current software
implementation programs and identified the impact as immaterial on the 30 June 2021
financial statements. Fortescue will review future Software-as-a-Service contracts
applying the IFRIC interpretation.
Fortescue Metals Group Ltd FY21 Annual Report 119
07 Financial Report
Notes to the consolidated financial statements For the year ended 30 June 2021
Other
23 Summary of significant accounting policies (continued)
(z) New accounting standards and interpretations (continued)
(ii) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for the
30 June 2021 reporting period. Those that are applicable to Fortescue, and which may have an effect on the Group’s
accounting policies, financial position or performance, are disclosed below. These standards and interpretations have
not been early adopted.
Accounting standard
Description of change
AASB 2020-1
Amendments to
Australian Accounting
Standards -
Classification of
Liabilities as Current or
Non-current
AASB 2020-3
Amendments to AASB
116 – Property, Plant &
Equipment: Proceeds
before Intended Use
AASB 2020-3
Amendments to
AASB 9 – Fees in
the ’10 per cent’ Test
for Derecognition of
Financial Liabilities
This amendment to AASB 101 Presentation of Financial Statements
clarifies the requirements for classifying liabilities as current or
non-current.
Under AASB 116 net proceeds from selling items produced
while constructing an item of property, plant and equipment are
deducted from the cost of the asset. This amendment prohibits this
treatment and instead requires an entity to recognise proceeds
from selling any such items and the related cost of production in
profit or loss, in accordance with the applicable standards. These
amendments are applied retrospectively, but only to items of
property, plant and equipment that are ‘ready to use’ on or after the
beginning of the earliest period presented. The amendment will be
considered in accounting for the commencement of operations at
the Iron Bridge Joint Venture.
Under AASB 9, an existing financial liability that has been modified
or exchanged is considered extinguished when the contractual
terms of the new liability are substantially different, measured by
the '10 per cent' test. The amendment to AASB 9 clarifies that fees
included in the 10 per cent test are limited to fees paid or received
between the borrower and the lender, including amounts paid or
received by them on the other’s behalf.
Application date
Standard: 1 July
2023
Group: 1 July 2023
Standard: 1 January
2022
Group: 1 July 2022
Standard: 1 January
2022
Group: 1 July 2022
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.
120 Fortescue Metals Group Ltd FY21 Annual Report
07 Financial Report Notes to the consolidated financial statements For the year ended 30 June 2021
Other
24 Critical accounting estimates and judgements (continued)
(d) Property, plant and equipment – recoverable
amount
The determination of fair value and value in use requires
management to make estimates about expected
production and sales volumes, commodity prices,
reserves (see ‘iron ore reserve estimates’ above),
operating costs, rehabilitation costs and future capital
expenditure. Management also considers the impact
of material climate-related risks, both transitional and
physical on estimates of future costs and useful lives
of assets. 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.
(a) Iron ore reserve estimates (continued)
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
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 the income
statement.
Fortescue Metals Group Ltd FY21 Annual Report 121
07 Financial Report
08
Remuneration
Report
From the Remuneration and
People Committee Chair
On behalf of the Directors of
Fortescue Metals Group Ltd,
I am pleased to present the
Remuneration Report for the year
ended 30 June 2021
Jennifer Morris OAM
Performance Outcomes
Safety
C1 Costs
2.0
Total Recordable Injury
Frequency Rate
17% IMPROVEMENT
COMPARED TO FY20
US$
13.93
wmt
Production
Culture
182.2
mt shipped
2% HIGHER THAN FY20
99%
Participation in Safety
Excellence and Culture survey
Underlying
EBITDA
US$
16.38
billion
96% HIGHER THAN FY20
Dividends
A$
3.58
Per share
+ 31 NET
PROMOTER SCORE
DIVIDENDS DECLARED
103% HIGHER THAN FY20
Fortescue Metals Group Ltd FY21 Annual Report 123
08 Remuneration Report
Dear Shareholders,
Fortescue’s remuneration strategy is underpinned by
our core Values and pay for performance culture. We set
challenging stretch targets, strive to achieve them and
reward performance that benefits shareholders. Safety is
paramount to our culture, as we work towards achieving
zero harm.
FY21 Performance
The Fortescue team has achieved excellent results
in FY21 across our key company safety, production,
cost and culture metrics. This performance was
achieved despite the ongoing challenges of COVID-19
management and significant wet weather during January
to April 2021. Highlights for the year include:
• Strong safety performance achieving a 17 per cent
reduction in our Total Recordable Injury Frequency
Rate (TRIFR) from 2.4 to 2.0.
• Mining, processing, rail and shipping combined to
deliver record shipments of 182.2mt in FY21, above
guidance, 4.2mt above budget and 2.2 per cent higher
than FY20.
• The team have worked very hard across the business
to optimise volumes in the current market environment
and to also maintain the Australian dollar expenditure
below budgeted levels. Despite strong discipline
evident in maintaining costs, the budgeted stretch C1
cost target of US$13.00/wmt was not achieved due to
the Australian dollar being significantly higher than
budgeted. However, the measure was achieved in
Australian dollars.
• The Company delivered outstanding financial results
including an increase in Net Profit After Tax (NPAT) by
117 per cent to US$10.3bn.
• The Company’s strong financial performance resulted
in Earnings Per Share (EPS) of US$3.35 compared to
US$1.54 per share in FY20, an increase of 117 per cent.
• Employee engagement levels were maintained at high
levels, measured by a net promotor score of +31 and an
outstanding response rate of 99 per cent to the annual
Safety and Culture Survey. These results were achieved
despite cultural challenges relating to the Iron Bridge
Project, recognising the importance of supporting
Fortescue’s unique and differentiated culture.
Record returns to shareholders continued. Fortescue
declared a final dividend of A$2.11 representing a payout
ratio of 80 percent of NPAT and consistent with our goal
to target the top end of our dividend policy to payout
50-80 percent of full year NPAT, bringing total dividends
for FY21 to A$3.58.
Fortescue is also committed to maintaining a strong
balance sheet, which is structured on low-cost
investment-grade terms, maintaining flexibility to support
our ongoing operations and the capacity to fund future
growth. We are extremely proud of all our people who
have worked tirelessly to sustain our contribution to the
Western Australian and national economies through the
reliable and secure supply of iron ore.
124 Fortescue Metals Group Ltd FY21 Annual Report
FY21 Remuneration Outcomes
In assessing remuneration this year, the Board has
taken a holistic view of performance in determining its
approach to outcomes - beyond the formulaic Executive
and Senior Staff Incentive Plan (ESSIP) scorecard and
Long Term Incentive Plan (LTIP) vesting outcome. In
making its assessment to determine what it considers
a fair outcome in the circumstances, the Board has
considered and balanced the tailwinds driving up iron ore
prices reflected in Fortescue’s share price, the cultural
challenges identified with the Iron Bridge project, and
discretionary executive effort.
While our results are exceptionally strong, the review
of the Iron Bridge project (announced to the market in
February 2021) identified that the Fortescue Projects
area had overrun on costs and lost sight of its critical
focus on the Company’s core Values, noting that this was
confined to the Projects area and was not across our iron
ore Operations teams, as evidenced by the outstanding
operational performance in FY21. Our leadership accept
accountability for these learnings and have taken the
opportunity to reset the Company’s focus. Mr Greg
Lilleyman, Chief Operating Officer resigned from his
position on 16 February 2021, however continued
to provide support to Fortescue until 1 July 2021. In
recognition of his significant contribution to the Company
and his continued support throughout the remainder of
FY21, Mr Lilleyman remained eligible for his FY19 LTIP.
Other than his statutory entitlements to unused leave and
payment in lieu of notice, Mr Lilleyman will not receive
any other termination benefits or retain any interest in the
FY20 or FY21 LTIP.
Fixed remuneration changes
To remain competitive in a tight market for talent, a
market increase was applied to Key Management
Personnel (KMP) total fixed remuneration levels as
detailed in section 4 of this Report. No changes were
made to Non-Executive Director fees during the
financial year.
FY21 ESSIP
The Board set aggressive stretch targets for the
FY21 ESSIP, to drive business operations, financial
performance and maximise shareholder value. While we
recognise our approach to using cliff-vesting under the
ESSIP is uncommon across the market, it is a deliberate
strategy that aligns with our core value of setting stretch
targets and a culture of outperformance, evidenced by
our track record to date.
The FY21 ESSIP performance conditions included
operational, people and culture and individual strategic
measures. Under operational measures, stretch targets
were exceeded on safety, production and revenue
measures. While the C1 Cost and Cashflow stretch
targets were not met, primarily due to fluctuations in the
Australian dollar and the translation to US dollar being
outside the control of the Executive team, the Board
agreed that the C1 Cost target would have otherwise
been met and approved the full award for the C1 cost
measure and partial vesting on the Cashflow measure.
People and culture and individual strategic measures
were also met at stretch target levels.
08 Remuneration Report The Chief Executive Officer, Chief Financial Officer and
former Chief Operating Officer elected to forego their
FY21 ESSIP in recognition of the Iron Bridge review
findings. As a result, of the four KMP, only the ESSIP
outcome for Fortescue Future Industries (FFI) Chief
Executive Officer will vest, at 96.4 per cent of target.
FY19 LTIP
Vesting of the FY19 LTIP is assessed over a three year
performance period from 1 July 2018 to 30 June 2021
against the combined 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 FY19 LTIP were tested
and vested at 100 per cent based on:
• The average AROE for the performance period of
46.2 per cent exceeding the stretch target and vesting
at 150 per cent.
• TSR meeting the stretch target and ranking at the
100th percentile with vesting at 150 per cent. We are
proud to have achieved the number one ranking in the
ASX 100 Resources Index comparator group for total
shareholder returns two years in a row.
• Strategic measures are crucial to driving innovation
and growth outcomes which support Fortescue’s
longevity and long-term business success. Our
strategic metric over the three year period was below
target with 90 per cent of share rights vesting.
The Board is cognisant of community and shareholder
views on excessive executive pay and the circumstances
where executives may benefit from windfall gains in
vesting. The intent of the LTIP is to ensure no windfall
gains or undue penalty. In reviewing these exceptional
outcomes under the FY19 LTIP, the Board determined
that strong share price growth has been driven, in part,
by strong iron ore prices which are outside the control of
management. In balancing rewarding management effort
and the tailwinds driving upward iron ore prices, the
Board has determined to exercise its discretion to cap the
value of awards vesting with a 50 per cent cap applied to
the grant price of A$4.348 per share, resulting in 28 per
cent of the awards vesting.
In recognition of the factors outlined above as well as
the Iron Bridge review findings, the Board exercised its
discretion in consultation with the Chief Executive Officer,
Chief Financial Officer and former Chief Operating Officer
in determining their benefits relating to the third year of
the FY19 LTIP would not accrue.
Special recognition awards
In balancing the impact of the discretionary cap on the
FY19 LTIP with the exceptional performance delivered
over FY21, the Board has determined to make a one-off
cash payment equivalent to 50% of TFR to the Chief
Executive Officer, Chief Financial Officer and FFI Chief
Executive Officer.
In addition, the FFI Chief Executive Officer was required
to undertake significant travel during the year in support
of FFI having spent approximately four continuous
months away from home and travelling to challenging
locations. Accordingly, the Board approved a one-off
exertion payment to Julie Shuttleworth of A$100,000.
FY22 Remuneration Changes
Our executive remuneration framework remains under
review as our strategy evolves, particularly as we
establish and grow Fortescue Future Industries.
A market increase is planned for FY22 in line with
the broader employee annual salary review to ensure
executive remuneration remains competitive against
market peers.
In a similar way to the discretionary cap applied to
the FY19 LTIP outcomes, the Board has formalised the
maximum value limit which will apply to awards made
under the FY21 LTIP onwards.
As announced to the market on 15 March 2021, Fortescue
has set a target to achieve carbon neutrality by 2030, ten
years earlier than the previous target. Consistent with this
industry leading objective, we are looking to incorporate
carbon emissions targets into our formal remuneration
structure, including short and long-term incentives
across the Company. We will report to the market on our
formalised approach next year.
Further details of these changes will be communicated
in our 2021 Notice of Meeting and FY22 Remuneration
Report.
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. Further details on the
Company’s exceptional performance and the Board’s
deliberations on FY21 ESSIP and FY19 LTIP outcomes can
be found in the respective sections of the Report.
On behalf of the Directors, we look forward to welcoming
you and receiving your feedback at our 2021 AGM.
Yours sincerely,
Jennifer Morris
REMUNERATION & PEOPLE COMMITTEE CHAIR
Fortescue Metals Group Ltd FY21 Annual Report 125
08 Remuneration Report
Contents
1.
Introduction and FY21 Key Management Personnel
2. Remuneration snapshot
3. Business performance highlights
4. Remuneration outcomes
5. Incentive plan operation
6. Executive contract terms
7. Non-Executive Director remuneration
8. Remuneration governance
9. Statutory disclosures
126 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 1. Introduction
and FY21 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
includes Executive Directors and Other KMP.
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. Certain non-IFRS
financial information, including C1 cost, Underlying
EBITDA, Underlying return on equity, sustaining
capex and TSR, is presented throughout this
report and where included has not been subject
to audit.
All Executives are paid in Australian dollars. As
noted in the FY20 Remuneration Report, we have
transitioned to reporting the value of remuneration
in US dollars 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 KMP of the Group for FY21 were:
Name
Position
Non-executive Directors
Dr Andrew Forrest AO
Chairman
Mark Barnaba AM
Deputy Chair and Lead
Independent Director
Time as
KMP
Full year
Full year
Dr Jean Baderschneider Non-Executive Director Full year
Penny Bingham-Hall
Non-Executive Director Full year
Sebastian Coe CH, KBE Non-Executive Director Full year
Jennifer Morris OAM
Non-Executive Director Full year
Cao Zhiqiang
Non-Executive Director Full year
Ya-Qin Zhang
Non-Executive Director Full year
Executive Directors
Elizabeth Gaines
Chief Executive Officer
and Executive Director
Full year
Other Key Management Personnel (Executives)
Greg Lilleyman
Chief Operating Officer
Julie Shuttleworth
Fortescue Future
Industries Chief
Executive Officer
Part year to
16 February
2021
Full year
• The contractual terms and currency in which our
Ian Wells
Chief Financial Officer
Full year
Executives are paid (see section 7)
• Whether any changes have been made to
There have been no changes to KMP after the reporting date.
Executive remuneration.
For this year only, we will provide disclosures in
US dollars and Australian dollars to assist with the
transition to US dollars reporting going forward.
Fortescue Metals Group Ltd FY21 Annual Report 127
08 Remuneration Report
2. Remuneration snapshot
Remuneration Strategy principles
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.
Our
Values
Safety
Family
Empowerment
Frugality
Stretch targets
Integrity
Enthusiasm
Courage and
determination
Generating ideas
Humility
128 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report Remuneration framework components
Our remuneration framework is designed to support Fortescue’s Values and
to bring to life our remuneration strategy
Fixed component
Variable / At – risk component
Total Fixed Remuneration
(TFR)
Executive and Senior Staff
Incentive Plan (ESSIP)
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.
• A portion (at least 50%) granted
at the start of the financial year
to create immediate shareholder
alignment.
• Performance assessed against
balanced scorecard.
• Targets set at stretch levels to
promote outperformance with
cliff vesting.
Purpose
How that
component
drives our
Values and
Remuneration
Strategy
Long Term Incentive Plan (LTIP)
Long term incentive opportunity
focused on growth strategy, long-
term priorities and alignment with
shareholder value creation over a
three year performance period.
• 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
movement in share price over
the three years ensuring strong
correlation with shareholder returns.
• A maximum value limit of 50% of
share price growth from the grant
price applies at vesting.
FY21
approach
Benchmarked against
median comparator group
or above for outstanding
performance.
Comparators: ASX 30,
ASX 50 and resources
companies in the ASX 100.
Performance measure breakdown
Performance measure breakdown
Operations (60%) – Safety, cost,
production, cashflow and revenue
People and culture (20%)
Strategic KPIs (20%)
Project delivery, strategy
and business development
Total Shareholder Return (33%)
Average Return on Equity (33%)
Key Strategic Measures (34%)
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 KMP.
TFR
ESSIP
LTIP
Base salary,
superannuation
and benefits
1
Balanced scorecard of
measures assessed over the
annual performance period
2
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
3
1
Share rights granted
following election of
equity portion by the
participant
Year 1
2
Year 2
Year 3
3
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 FY21 Annual Report 129
08 Remuneration Report
Remuneration mix
The graph below shows the remuneration mix for superior performance when stretch hurdles have been met for both
the CEO and other KMP.
CEO
28%
31%
41%
Other
KMP
0%
36%
27%
50%
37%
TFR
ESSIP (at risk)
LTIP (at risk)
Total at risk
72%
64%
100%
FY21 ESSIP vesting outcomes
Operations
People and
culture
Strategic
KPIs
STRETCH
TARGET
E
C
N
A
M
R
O
F
R
E
P
E
M
O
C
T
U
O
Awards made in relation to the
FY21 ESSIP reflect achievement of:
• Strong safety, operating and financial performance
• Improvements in the already high levels of safety culture
and employee engagement
• Substantial diversification and growth strategy progress
Regardless of the outstanding performance achieved against the ESSIP performance measures, the CEO, CFO and
COO have elected to forego their entire award for FY21 in light of the challenges associated with the Iron Bridge project.
FY19 LTIP vesting outcomes
Share price over the last 3 years, A$/share
Measure Weighting
%
33
33
34
TSR
AROE
Strategic
KPIs
Total
Capped
at
Outcome
%
Vesting
%
150
150
90
49.5
49.5
30.6
129.6
100
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
Jul-18
O ct-18
Jan-19
A pr-19
Jul-19
O ct-19
Jan-20
A pr-20
Jul-20
O ct-20
Jan-21
A pr-21
In reviewing the expected vesting outcomes under the FY19 LTIP, the Board balanced executive effort against iron
ore prices driving significant share price gains over the period. While the TSR performance outcome is exceptional,
the increase in the LTIP award value from the initial allocation value was determined to be excessive. As a result, the
Board has exercised its discretion to apply a cap on the value of award, such that executives may only benefit from
50% growth in the share price from the initial grant value, resulting in 28 per cent of the awards vesting.
In light of the factors outlined above as well as the Iron Bridge challenges, the Board exercised its discretion in
consultation with the CEO, CFO and COO in order to determine that the benefits of the third year of the FY19 LTIP
would not accrue to them.
130 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report
FY21 special recognition award
While the Board has exercised its discretion to apply a cap to the FY19 LTIP in a manner which is consistent with the
approach to be applied to grants going forward, it has determined that, on review and subsequent to year end, the
exceptional performance delivered to shareholders warrants a one-off cash award to be made to all executives, equal
to 50% of TFR. For the relevant KMP, this equates to:
• Chief Executive Officer: A$1,000,000
• Chief Financial Officer: A$525,000
• FFI Chief Executive Officer: A$515,000
The financial impact of these FY21 special recognition awards will be brought to account in FY22.
Additionally, the Board approved a one-off exertion cash payment to Julie Shuttleworth of A$100,000, to recognise the
significant amount of travel and support required on the FFI project in her role as FFI Chief Executive Officer.
3. Business
performance
Highlights
Through the outstanding efforts of the entire team,
Fortescue has delivered excellent results for FY21,
achieving the majority of our stretch targets. The results
were underpinned by improved safety outcomes,
operational excellence and the successful execution of
our integrated operations and marketing strategy.
Our TRIFR improved to 2.0 in the 12 months to 30 June
2021, 17 per cent lower than 2.4 at 30 June 2020. This
reflects our core value of Safety and our commitment to
look out for each other and ourselves.
Safety is deeply ingrained in our culture and our
outstanding levels of engagement and commitment to
achieving global leadership in safety was demonstrated
by an excellent participation rate of 99 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.
Operating performance delivered record results in FY21
with mining, processing, rail and shipping combining to
deliver record shipments of 182.2mt in FY21, exceeding
market guidance of 182mt.
The ability to achieve our C1 cost and sustaining capital
expenditure targets in US dollars was significantly
impacted by the strengthening Australian dollar. In
Australian dollars, our C1 cost target was achieved and
sustaining capex was marginally above target (3%).
Fortescue’s record financial performance for FY21 was
underpinned by consistent operating performance, strong
customer demand, record shipments and an optimised
product mix to deliver higher margins delivering record
net profit after tax of US$10.3bn, an increase of 117 per
cent on FY20.
In a year that has continued to be impacted by border
closures and a tightening labour market due to COVID-19
Fortescue sustained our strong contribution to the
Western Australian and national economies through the
reliable and secure supply of iron ore to our customers.
Fortescue Metals Group Ltd FY21 Annual Report 131
08 Remuneration Report
Safety
2.0
Total Recordable Injury
Frequency Rate
Production
182.2
mt shipped
Cost
US$
13.93
/wmt
Revenue
US$
22,284
million
Sustaining Capex
US$
862
million
Culture
99%
Participation in Safety
Excellence and Culture Survey
The following graphs show our Group performance against key financial measures in FY21:
Cost
C1
US$/wmt
Production
wmt
12.82
12.36
13.11
12.94
13.93
170.4
169.8
167.7
178.2
182.2
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
Free cashflow
US$m
Revenue
US$m
8,961
22,284
3,539
3,328
4,449
704
12,820
9,965
8,447
6,887
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
132 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report The graphs below shows Fortescue’s EBITDA vs ESSIP outcomes and TSR vs LTIP outcomes over the last 3 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
)
%
(
R
S
T
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
600%
500%
400%
300%
200%
100%
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
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
P
M
K
r
o
f
y
t
i
n
u
t
r
o
p
p
o
2019
2020
2021
Underlying EBITDA
Average ESSIP award as a % of maximum opportunity for KMP
TSR vs LTIP outcomes
)
%
(
s
e
m
o
c
t
u
o
g
n
i
t
s
e
v
I
T
L
120%
100%
80%
60%
40%
20%
0%
3 years to
30/06/19
3 years to
30/06/20
3 years to
30/06/21
Vesting dates
Fortescue Metals Group TSR
LTI vesting
Fortescue Metals Group Ltd FY21 Annual Report 133
08 Remuneration Report
a. 5 year Group performance
Fortescue continues to deliver operational and financial improvements across
the business. Our performance against key financial measures for FY21 and the
five years FY17 to FY21 (inclusive) are set out below
Underlying
EBITDA
US$
16.38
billion
Net profit
after tax
US$
10.3
billion
Underlying
return on
equity
67 %
Dividends
A$
3.58
Per share
Total tonnes shipped (wmt)
Revenue (US$m)
Underlying EBITDA (US$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 (A$)
Change in share price (A$)
Change in share price (%)
2021
182.2
22,284
16,375
10,295
67
19
3.58
23.34
9.49
69
2020
178.2
12,820
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
8,447
4,744
2,093
23
31
0.45
5.22
1.72
49
134 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 4.
Remuneration
Outcomes
As reported in section 3, Fortescue has again delivered
strong, consistent results against the majority of key
targets for FY21, underpinned by our values-based
culture and the commitment of the entire Fortescue team.
a. FY21 fixed remuneration changes
A market review of KMP 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, in a tight market for talent, the Board approved an
increase to KMP fixed remuneration to the following:
KMP
% Increase
TFR A$
Non-executive Directors
E Gaines
G Lilleyman
J Shuttleworth
I Wells
8
3
3
5
2,000,000
1,545,000
1,030,000
1,050,000
Increases were effective from 1 July 2020 and remain
aligned with external benchmarks.
b. FY21 ESSIP performance outcomes
Fortescue strives to focus on both ‘what’ must be
achieved (financial targets), as well as ‘how’ it should be
achieved (non-financial and strategic targets). Our ESSIP
operations, people and culture and strategic measures
have financial and quantifiable effects on the Company.
While Fortescue does not set ‘threshold‘ and ‘target‘
levels of performance under the ESSIP, each measure is
set at stretch levels of performance and is determined
by the Board after applying significant rigour and
undertaking due diligence in setting the remuneration
framework on an annual basis.
While we recognise our approach to using cliff-vesting
under the ESSIP is uncommon across the market, it is
a deliberate strategy that aligns with our core value of
setting stretch targets and a culture of outperformance,
evidenced by our track record to date.
Fortescue Metals Group Ltd FY21 Annual Report 135
08 Remuneration Report
The ESSIP performance objectives and achievement outcomes in FY21 are shown in the table below:
Measure
Weighting
Detail
Operations – 60%
Stretch
target
Assessed
Outcome Commentary
Fortescue TRIFR
Fatality hurdle
applies
No more
than 2.2
Exceeded Fortescue’s rolling twelve-month TRIFR
decreased by 17 per cent from 2.4 at
30 June 2020 to a record low of 2.0 at
30 June 2021
Safety*
Production
C1 Cost
Cashflow
Revenue
12
12
• Total iron ore
tonnes shipped
• Annualised Run
Rate in Q4
12
Achieve C1 cost
12
Sustaining Capex
12
Achieve:
• EBITDA margin
• Ship higher value
product volumes
• Sell a portion of
product direct
to Chinese
customers through
Fortescue’s wholly
owned Chinese
trading subsidiary
People and Culture – 20%
People and
Culture
20
Measured through
the Safety and
Culture Survey
as well as Board
assessment:
• Participation Rate
• Net Promoter
Score
180mt
Exceeded Record shipments of 182.2mt delivered
183mt
No more
than
US$13.00/
wmt
No more
than
US$751m
in FY21 with an annualised run rate of
198mt in Q4
Achieved While the C1 Cost and Cashflow
Partially
Achieved
measures were not met at stretch
target levels, this was primarily due to
fluctuations in the Australian dollar,
and the translation to US dollars being
outside the control of the Executive
team, the Board agreed that the C1
Cost target would have otherwise been
met and approved partial vesting on
the Cashflow measure.
>60%
Achieved 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 73%
• 121.7mt of Fortescue high value
product shipped
• 12.39mt of product sold directly to
customers from ports in China
90%
Positive
Exceeded The Safety Excellence and Culture
Survey participate rate of 99% and net
promotor score of +31 both exceeded
stretch targets.
*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.
136 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report Measure
Weighting
Detail
Strategic KPIs – 20%
Stretch
target
Assessed
Outcome Commentary
Strategic
KPIs for
the CEO
of FFI
20
• Progress FFI and green energy
strategy including:
• Trialling technology on our
locomotives to run on green
ammonia
• Developing a ship design
powered by green ammonia
and trialling that design in new
ammonia engine technology, at
scale
• Testing large battery technology in
our haul trucks
• Trialling hydrogen fuel cell power
for our drill rigs
• Conducting trials to use
renewable energy in the Pilbara
to convert iron ore to green iron at
low temperatures, without coal
Achieved • Successful combustion of ammonia
in a locomotive fuel, with a pathway
to achieve completely renewable
green fuel
• Completion of design and
construction of a combustion
testing device for large marine
(ship) engines, with pilot test
work underway and a pathway to
achieve completely renewable green
shipping fuel
• Finalised design of a next generation
ore carrier (ship) that will consume
renewable green ammonia, with
the Classification Society giving in
principle design approval
• Testing of battery cells to be used on
Fortescue haul trucks
• Design and construction of a
hydrogen powered haul truck for
technology demonstration complete,
with systems testing underway
• Design and construction of a
hydrogen powered drill rig for
technology demonstration complete,
with systems testing underway
• Successful production of high purity
(>97%) green iron from Fortescue
ores at low temperature in a
continuous flow process
• Successful initial trialling to use
waste from the green iron process
noted above, with other easily
sourced materials, to make green
cement.
Fortescue Metals Group Ltd FY21 Annual Report 137
08 Remuneration Report
The table below details the maximum ESSIP cash and share awards against the actual outcomes for FY21.
FY21
US$
R
F
T
)
R
F
T
f
o
%
(
y
t
i
n
u
t
r
o
p
p
o
I
P
S
S
E
m
u
m
i
x
a
M
s
e
r
a
h
s
n
i
g
n
i
t
h
g
e
W
i
1
)
%
(
I
h
s
a
c
P
S
S
E
m
u
m
i
x
a
M
y
t
i
n
u
t
r
o
p
p
o
I
s
e
r
a
h
s
P
S
S
E
m
u
m
i
x
a
M
y
t
i
n
u
t
r
o
p
p
o
E Gaines2
1,493,580 112.5% 50% 840,139
79,527
G Lilleyman2
1,153,791
75% 100%
J Shuttleworth
769,194
75% 100%
I Wells2
784,130
75% 100%
-
-
-
81,913
54,609
96.4%
55,669
-
Nominal Value
of ESSIP Vested
Rights3
Nominal total
ESSIP value3
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
6
4
1
.
4
1
$
A
t
n
a
r
g
t
a
e
c
i
r
p
e
r
a
h
S
.
6
7
5
3
2
$
A
g
n
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t
s
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v
-
-
-
-
t
a
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a
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S
2
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4
1
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4
1
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A
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n
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-
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S
.
6
7
5
3
2
$
A
g
n
i
t
s
e
v
-
-
556,133
926,849
556,133 926,849
-
-
-
-
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.74679.
FY21
A$
R
F
T
)
R
F
T
%
(
y
t
i
n
u
t
r
o
p
p
o
I
P
S
S
E
m
u
m
i
x
a
M
s
e
r
a
h
s
n
i
g
n
i
t
h
g
e
W
i
1
)
%
(
I
h
s
a
c
P
S
S
E
m
u
m
i
x
a
M
y
t
i
n
u
t
r
o
p
p
o
I
s
e
r
a
h
s
P
S
S
E
m
u
m
i
x
a
M
y
t
i
n
u
t
r
o
p
p
o
E Gaines2
2,000,000 112.5% 50% 1,125,000
79,527
G Lilleyman2
1,545,000
75% 100%
J Shuttleworth 1,030,000
75% 100%
I Wells2
1,050,000
75% 100%
-
-
-
81,913
54,609
96.4%
55,669
-
Nominal Value of
ESSIP Vested Rights3
Nominal total
ESSIP value3
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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c
i
r
p
e
r
a
h
S
2
6
4
1
.
4
1
$
A
t
n
a
r
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a
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p
e
r
a
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S
.
6
7
5
3
2
$
A
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S
2
6
4
1
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4
1
$
A
t
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a
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a
h
S
.
6
7
5
3
2
$
A
g
n
i
t
s
e
v
-
-
-
-
-
-
-
-
744,698
1,241,111
744,698
1,241,111
-
-
-
-
e
m
o
c
t
u
o
P
S
S
E
I
%
-
-
e
m
o
c
t
u
o
P
S
S
E
I
-
-
%
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$14.1462).
2 Elected to forego the FY21 ESSIP and accordingly, no performance rights have vested for this plan.
3 Nominal value of ESSIP vested rights is non-IFRS financial information and has not been subject to audit.
138 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report
c. FY19 LTIP performance outcomes
Each LTIP performance measure has a minimum performance hurdle 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.
However, the overall cap for the LTIP is 100% of the maximum number of share rights granted.
The FY19 LTIP was tested over the period from 1 July 2018 to 30 June 2021. Executives have achieved all performance
measures as shown in the table below resulting in 100 per cent of share rights vesting.
FY19 LTIP Performance Outcomes
Measure
TSR
AROE
Key strategic measures
- FY19 (banked)
- FY20 (banked)
- FY21 (new)
Weighting %
Threshold
Result
Achieved %
33%
33%
60th percentile
100th percentile
15%
46.2 %
150%
150%
Weighted
Average %
49.5%
49.5%
34%
5 out of 15
10 out of 15
10 out of 15
8 out of 15
90%
30.6%
FY19 LTIP vesting outcome
100%
Overall outcome capped at 100%
129.6%
100%
1The strategic measures under the FY19 LTIP were assessed against three annual tranches – being the FY19, FY20 and FY21 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 FY19 and FY20 measures have already been assessed and banked as set out in last year’s Remuneration Report
and summarised further below. For the FY21 tranche, the Board agreed to set the same measures as those set in FY20
as they were still relevant to Fortescue’s strategic priorities but these were assessed over the FY21 period
(i.e., a different annual period). We remind shareholders that this will be the last year that we test and report on
strategic measures under the LTIP in this way. 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 the
three year performance period.
As previously noted, the Board determined to apply a cap on the vested value of the FY19 LTIP to prevent executives
receiving a windfall gain as a result of unprecedented growth in Fortescue’s share price over the allocation value of
the award.
The cap has been determined and applied as follows:
Base FY19 LTIP Award x 150% = Maximum FY19 LTIP Value Limit
Maximum FY19 LTIP Value Limit / VWAP at vesting = Maximum number of Performance Rights that may vest.
The following table is an example calculation showing how the maximum value limit is applied.
FY19 Performance Rights granted
FY19 LTIP value at grant price being $4.348
Value cap (50% share price growth)
Maximum LTIP Value Limit (Base LTIP Award x 150%)
VWAP at end of the LTIP Performance Period
Maximum FY19 LTIP Performance Rights
(maximum value cap divided by VWAP)
100,000
A$434,800
150%
A$652,200
A$23.576
27,664
The calculation results in 28 per cent of the rights at the beginning of the performance period being awarded for all LTIP participants.
Fortescue Metals Group Ltd FY21 Annual Report 139
08 Remuneration Report
Performance measure and objective
Result
award vested % Comment
Proportion of
100th
percentile
150%
In the period from 1 July 2018 to 30
June 2021, Fortescue achieved a
TSR of 490 per cent and ranking at
the 100th percentile achieving the
stretch target for this measure.
TSR (33%)
In line with the Company’s approach
to setting stretch targets, the Board
determined that a vesting schedule more
aggressive than standard market (local
and global) 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; and
• stretch at the 100th percentile, resulting
in 150% of rights vesting.
AROE (33%)
The vesting criteria:
46.2%
150%
• threshold was set at 15%, resulting in
25% of rights vesting;
• target was set at 30%, resulting in 100%
of rights vesting; and
• 150% of rights will vest for greater than
30%.
Strategic Measures (Annual FY21 assessment) (34%)
Fortescue’s AROE performance over
the three years ending 30 June 2021
exceeded the AROE stretch target
performance hurdle of 30 per cent
achieving an average AROE over the
three year period of 46.2 per cent.
Iron ore growth
• Progress on iron ore strategy
8 out
of 15
• Increase long term product flexibility with
no net decrease in mine life
• Progress agreed long term sales strategy
The three year
cumulative
outcome for this
measure is 90%
Iron ore growth
Significant progress of the iron ore
strategy has been made, including:
Achieved
Global high grade opportunities
evaluated.
Not Achieved
Achieved
Challenges with the Iron Bridge
Magnetite Project necessitated
a technical and commercial
assessment of the project resulting
in revised capital costs and
completion dates.
Strong results produced from
Western Hub and Eastern Hamersley
drilling.
Not Achieved
Eliwana project delivery target not
met.
Achieved
20 year mine life maintained.
Achieved
Long term sales strategy on target.
140 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report Performance measure and objective
Result
award vested % Comment
Proportion of
Strategic Measures (Annual FY21 assessment) (34%) continued
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
Other growth
Considerable progress has been
made on Fortescue’s diversification
strategy, including:
Achieved
Exploration and Drilling
Significant field activities and drilling
carried out in South America with
caution due to COVID-19.
Achieved
Copper and Lithium
Copper and lithium projects continue
to be identified and analysed.
Achieved
Autonomy
Supervisory Control System (SCS)
being extended for the Autonomous
Light Truck.
Vehicle to Everything (V2X)
technology developed and being
deployed at Christmas Creek.
Mapping technology developed for
rail assets.
Significant progress made on mobile
and fixed plan autonomy.
Achieved
Hydrogen
Fortescue Future Industries (FFI)
established.
Green Fleet Development Hazelmere
facility established.
Advancing projects aimed at
decarbonising operations.
FY21 strategic measures are assessed on an overall basis at the discretion of the Board and subject to a score from 0 to 15.
Banked performance against the FY19 and FY20 performance measures is also set out below. Further detail on
performance against these measures is contained in the FY19 and FY20 Remuneration Reports.
Objective
Measures
• Progress identified iron ore strategy
FY19
FY20
FY21
Result
Iron ore
growth
• Increase long term product flexibility with no net
decrease in mine life
Achieved
Achieved
Partially
achieved
• Progress agreed long term sales strategy
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
Overall annual result
Overall result
Achieved
Achieved
Achieved
100%
100%
90%
70%
Fortescue Metals Group Ltd FY21 Annual Report 141
08 Remuneration Report
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):
US$
Name
E Gaines
G Lilleyman8
J Shuttleworth
I Wells
1
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
F
1,493,580
730,208
769,194
784,130
I
P
S
S
E
1
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
1
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
9
1
Y
F
t
n
e
m
y
a
P
r
e
h
t
O
1,911,411
746,7906
1,031,277
-
l
a
t
o
t
l
i
a
n
m
o
N
n
o
i
t
a
r
e
n
u
m
e
r
1
2
Y
F
n
i
d
e
n
r
a
e
4,151,781
1,761,485
926,849
1,013,504
459,2766,7
3,168,823
-
690,492
392,0656
1,866,687
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.74679 with the exception of the FY19
LTIP which has been translated at 0.71122.
A$
Name
E Gaines
G Lilleyman8
J Shuttleworth
I Wells
1
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
F
2,000,000
977,795
1,030,000
1,050,000
I
P
S
S
E
1
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
1
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
9
1
Y
F
t
n
e
m
y
a
P
r
e
h
t
O
l
a
t
o
T
l
i
a
n
m
o
N
n
o
i
t
a
r
e
n
u
m
e
R
1
2
Y
F
n
i
d
e
n
r
a
E
2,687,523
1,000,0006
5,687,523
1,450,018
-
2,427,813
1,241,111
1,425,028
615,0006,7
4,311,139
-
970,860
525,0006
2,545,860
1 Fixed remuneration includes cash salary, paid leave and superannuation.
2 FY21 ESSIP share rights granted at the beginning of the performance period at a VWAP of A$14.1462.
3 FY21 ESSIP vested rights awarded have a nominal value based on A$23.576 being the five day VWAP at the beginning of FY22. The increase in share price
over the respective performance period has resulted in an unrealised increase in equity value to KMP in respect to this plan.
4 FY19 LTIP share rights granted at the beginning of the performance period at a VWAP of A$4.3480.
5 FY19 LTIP vested rights awarded have a nominal value based on A$23.576 being the five day VWAP at the beginning of FY22. The increase in share price
over the respective performance periods has resulted in an unrealised increase in equity value to KMP in respect to these plans.
6 Discretionary payment equal to 50% of TFR in recognition of FY21 financial and operational performance.
7 J Shuttleworth was required to undertake significant travel during the year in support of FFI having spent approximately four continuous months away
from home and travelling to challenging locations. Accordingly, the Board approved the payment of a one-off exertion payment of A$100,000.
8 G Lilleyman creased to be a KMP from the date of his resignation on 16 February 2021. The values in the above table reflect actual remuneration up to
that date.
142 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report
5. Incentive
plan operation
a. ESSIP
The purpose of the ESSIP is to incentivise and reward key Fortescue Executives (including KMP) for achieving annual
stretch Company and Individual performance objectives that drive shareholder value.
Below we have set out the key terms of the ESSIP for FY21:
Element
Description
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).
Delivery
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 are calculated based on the 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 per share
right.
• If the share price at the time of award is lower, the value to executives is decreased.
Valuing
awards
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 focussing on operational and strategic targets
with people and culture also being a key driver of success.
In FY21, the Board set a number of challenging targets in respect of operations, including product,
customer mix, 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.
Performance
measures
• 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
corporate 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 KMP and
Executives in order to deliver long term sustainable shareholder value.
The measures for the FY21 ESSIP are outlined in section b.
Fortescue Metals Group Ltd FY21 Annual Report 143
08 Remuneration Report
Element
Description
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 (and avoid gaming of thresholds). 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.
Awards under the ESSIP are at all times 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; and
• 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.
Board
discretion
b. LTIP
The LTIP operates under the Performance Rights Plan Rules as approved by Shareholders at the Company’s Annual
General Meeting on 15 November 2018.
Below we have set out the key terms of the LTIP for FY21:
Element
Description
Change
from FY20
A maximum value limit has been introduced for the FY21 LTIP onwards. Further details are provided
in the Board Discretion section of this table.
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.
3 years.
The LTIP is measured against three weighted, independent performance measures being TSR,
AROE and key strategic measures unique to Fortescue.
Delivery
Performance
period
Summary of
performance
objectives/
measures
144 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report Element
Description
Element
Description
A key element of Fortescue’s culture is to set challenging stretch targets and strive to outperform
those targets (in line with our Values).
As such, all targets are set at stretch levels of performance with a ‘cliff vesting’ outcome to promote
a focus on outperformance (and avoid gaming of thresholds). Board discretion applies as set out
Target
setting
below.
ESSIP targets are linked to the annual stretch budget and Fortescue’s strategic plan focusing on
core drivers of shareholder value.
Awards under the ESSIP are at all times 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; and
• 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.
Board
discretion
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 (below). It combines share price appreciation and dividends paid to show
the total return to the shareholder expressed as a percentage. Relative TSR hurdles are valuable
because the Company needs to outperform a peer group of participants to receive any reward and
therefore, is aligned to relative market performance.
Performance
measures
The comparator group for the FY21 grant comprises the companies in the ASX 100 Resources
Index. The ASX 100 Resources Index has been chosen as the comparator group because this is
a transparent market indicator, includes Fortescue’s ASX Listed commodity market peers and
represents the peer group that Fortescue competes with for investment.
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 the
Company’s long-term strategic objectives and not focussing on annual short term goals alone. The
strategic objectives devised by the Board specifically relate to key milestones and objectives that
are fundamental to the Company’s sustainability, continuing development and growth and delivery
of shareholder value.
Each LTIP performance measure has a minimum performance hurdle 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.
Whilst 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 the Company’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 cap described above) where Fortescue delivers
the market leading total shareholder return over the performance period.
Vesting
conditions
The TSR vesting schedule is as follows:
LTIP TSR target and vesting schedule
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
aggregate performance cap.
Fortescue Metals Group Ltd FY21 Annual Report 145
08 Remuneration Report
Element
Description
The Board acknowledge that a relative TSR hurdle 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
hurdle 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%
20%
>30%
Nil
25 per cent of share rights vest
100 per cent of share rights vest
150 per cent 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 aggregate performance cap.
Key strategic measures
Vesting
conditions
continued
In line with the recommendations of the Remuneration and People Committee, the LTIP
performance measures comprise strategic measures with associated key performance indicators
for the Company aimed at directing performance towards the Company’s long-term objectives
(Strategic Objectives). The strategic measures for the FY21 grant are set out below.
Strategic Measures
Targets in respect to
Iron ore growth
Commodity diversification
Energy strategy and emissions reduction
Heritage management
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
Did not meet
Threshold
Target
Exceeded
Score
Portion of tranche that vests
>5
5
10
15
Nil
25 per cent of share rights vest
100 per cent of share rights vest
150 per cent 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
aggregate performance cap.
146 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report Element
Description
Board
discretion
The LTIP is subject at all times to the Board’s absolute discretion.
The Board has introduced a Maximum Value Limit which will apply to awards made under the
FY21 LTIP onwards. The Maximum Value Limit caps the number of share rights that will vest in
circumstances where there has been a significant increase in share price over the performance
period. The Maximum Value Limit baseline is 50 per cent share price growth over the performance
period noting that the Board may approve higher levels of vesting when considering Company
performance and/or any other fact, event or circumstance that may impact the outcomes of
the LTIP. In determining the level of the Maximum Value Limit to be applied, the Board will have
consideration to any perceived windfall gain in Fortescue’s share price, influenced in part by iron
ore prices outside the control of management.
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
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?
Clawback
Policy
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, which is around September of each
year, post release of audited and approved
full year results.
Individuals who commence during the year
similarly will have awards under the ESSIP
pro-rated based on service during the
performance period.
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 will be
initiated 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;
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 FY21 Annual Report 147
08 Remuneration Report
6. Executive
contract terms
KMP are employed on a rolling basis with no specified fixed term. KMP are required to provide written notice of six
months (as specified in their individual service agreement) to terminate their employment. Contractual termination
benefits for KMP comply with the limits set by the Corporations Act 2001.
KMP are remunerated on a TFR basis inclusive of superannuation and allowances. The table below details the
remuneration details for KMP for FY21 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
CEO
FFI
CFO
E Gaines
2,000,000
112.5
2,250,000
150
3,000,000
7,250,000
G Lilleyman
1,545,000
J Shuttleworth
1,030,000
I Wells
1,050,000
75
75
75
1,158,750
100
1,545,000
4,248,750
772,500
100
1,030,000
2,832,500
787,500
100
1,050,000
2,887,500
1 Includes superannuation and allowances, TFR is reviewed annually by the RPC.
148 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 7.
Non-Executive
Director
remuneration
a. NED 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; and
• 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$3 million, which was approved
by shareholders at the Annual General Meeting on 29 October 2019. There have been no further changes to the
aggregate fee pool since October 2019.
Most Non-Executive Directors receive fees for both Board and Committee membership (the exception being the
Chairman, who has elected to forgo all Board fees). The payment of additional fees for serving on a Committee
recognises the additional time commitment required by Non-Executive Directors who serve on a Committee.
Non-Executive Director fees for FY21 were as follows:
Position
Board Chairman1
Deputy Chair and Lead Independent Director
Non-Executive Director
Audit, Risk Management and Sustainability Committee (ARMSC) Chair
ARMSC Member
Remuneration and People Committee (RPC) Chair
RPC Member
Finance Sub-Committee Member
Nomination Committee Member
Fee A$ effective
1 January 2020
-
1,100,0002
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 Inclusive of Committee membership fees.
Non-Executive Directors do not receive retirement benefits, nor do they participate in any incentive programs of the Company.
We note there have been no changes to Non-Executive Director fees in FY21 since last year.
Fortescue Metals Group Ltd FY21 Annual Report 149
08 Remuneration Report
b. Special Exertion Payment – Jean Baderschneider
The Board approved a one-off exertion cash payment to Jean Baderschneider of A$100,000, to recognise the
additional work beyond her day-to-day Board and Committee responsibilities through her role on the FFI Steering
Committee and the support she has provided the FFI team.
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.
Tested rights may be exercised at any time, up to 15 years from date of grant.
Shares will be held by 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 Director.
150 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 8.
Remuneration
Governance
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 FY21 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 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 2021, 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 FY21 Annual Report 151
08 Remuneration 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.
A minimum shareholding 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:
Other KMP:
200 per cent of total fixed remuneration
100 per cent of total fixed remuneration
Participants are required to meet their respective minimum shareholding within a reasonable timeframe, generally
within 5 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 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 at
www.fmgl.com.au.
152 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 9. Statutory
disclosures
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 for 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. The decision by the Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer to voluntarily forego their FY21 ESSIP entitlements does not result in a reversal of the corresponding
expense under Accounting Standards. The FY21 special recognition awards were determined by the Board
subsequent to year end and were not part of a formal incentive plan. These payments are therefore required to be
recognised as part of FY22 statutory remuneration. For details of remuneration actually paid to the Chief Executive
Officer and executives in FY21 refer to section 4.
The tables below include statutory remuneration disclosures for FY21 and FY20.
Disclosures are provided in USD and AUD.
US$
Short-term employee benefits
Post
employment
benefits
Share-based
payments
Total
Statutory
Remuneration
l
e
u
a
v
h
s
a
c
P
S
S
E
I
l
r
a
e
y
n
a
p
1
2
Y
F
r
o
f
l
y
r
a
a
s
h
s
a
C
s
e
e
f
d
n
a
Executive Director
E Gaines
Other KMP
G Lilleyman
J Shuttleworth
I Wells
FY21
1,474,910
-
FY20 1,225,926
699,029
FY21
718,391
FY20
990,817
FY21
752,991
FY20
657,625
FY21
767,927
FY20
657,625
-
-
-
-
-
-
y
r
a
t
e
n
o
m
-
n
o
N
s
t
i
f
e
n
e
b
2,880
3,029
-
-
h
s
a
C
r
e
h
t
O
t
n
e
m
y
a
P
-
-
-
-
74,679
1,488
-
-
-
-
2,880
3,029
n
o
i
t
a
u
n
n
a
r
e
p
u
S
18,670
16,794
11,816
16,794
16,202
14,115
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
946,082
1,113,412
3,555,954
660,994
1,500,927
4,106,699
974,467
(306,790)
1,397,884
714,594
845,953
2,568,158
626,261
648,227
2,119,848
476,392
551,847
1,699,979
16,202
662,259
395,577
1,844,845
14,115
476,392
556,230
1,707,391
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.74679 for FY21 and 0.67174 for FY20.
Fortescue Metals Group Ltd FY21 Annual Report 153
08 Remuneration Report
A$
Short-term employee benefits
Post
employment
benefits
Share-based
payments
Total
Statutory
Remuneration
l
a
t
o
T
4,761,652
6,113,524
1,871,857
3,823,141
l
y
r
a
a
s
h
s
a
C
s
e
e
f
d
n
a
Executive Director
l
e
u
a
v
h
s
a
c
P
S
S
E
I
l
r
a
e
y
n
a
p
1
2
Y
F
r
o
f
h
s
a
C
r
e
h
t
O
t
n
e
m
y
a
P
y
r
a
t
e
n
o
m
-
n
o
N
s
t
i
f
e
n
e
b
n
o
i
t
a
u
n
n
a
r
e
p
u
S
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
FY21
1,975,000
-
FY20 1,825,000
1,040,625
- 3,856
- 4,509
25,000
25,000
1,266,8653
1,490,931
984,003
2,234,387
E Gaines
Other KMP
G Lilleyman1
J Shuttleworth
I Wells
FY21
961,972
FY20 1,475,000
FY21
1,008,304
FY20
978,988
FY21
1,028,304
FY20
978,988
-
-
-
-
-
-
-
-
-
-
100,0002
1,993
-
-
- 3,856
- 4,509
15,822
25,000
21,696
21,012
21,696
21,012
1,304,8743
(410,811)
1,063,795
1,259,346
838,604
868,018
2,838,615
709,191
821,519
2,530,710
886,8073
529,703
2,470,366
709,191
828,044
2,541,744
1G Lilleyman ceased to be a KMP from the date of his resignation on 16 February 2021. The values in the above table for FY21 reflect remuneration up to that date.
2Exertion Payment.
3The decision to voluntarily forego FY21 ESSIP entitlements does not result in a reversal of the corresponding expense under Accounting Standards.
c. NED remuneration
The remuneration of NEDs for the year ended 30 June 2021 and 30 June 2020 is detailed below.
US$
Dr A Forrest AO
M Barnaba AM
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
Base
fees
Committee
fees
Other
benefits
Superannuation
Total
-
-
802,799
598,777
149,507
134,482
135,300
121,703
149,507
134,482
149,507
134,482
136,418
122,038
149,507
112,068
-
-
-
21,721
16,019
5,341
34,792
23,090
-
-
-
-
53,154
34,136
-
-
-
-
-
-
74,6791
-
-
-
-
-
-
-
-
-
-
-
-
-
18,670
16,794
-
-
17,859
15,203
-
-
-
-
18,670
15,942
-
-
-
-
821,469
637,292
240,205
139,823
187,951
159,996
149,507
134,482
149,507
134,482
208,242
172,116
149,507
112,068
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.74679 for FY21 and 0.67174 for FY20.
154 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report
A$
Dr A Forrest AO
M Barnaba AM
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
1 Exertion payment.
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
Base
fees
-
-
1,075,000
891,382
200,200
200,200
181,176
181,176
200,200
200,200
200,200
200,200
182,673
181,675
200,200
166,833
Committee
fees
Other
benefits
Superannuation
Total
-
-
-
32,336
21,450
7,951
46,589
34,373
-
-
-
-
71,177
50,817
-
-
-
-
-
-
100,000(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
-
-
23,915
22,632
-
-
-
-
25,000
23,733
-
-
-
-
1,100,000
948,718
321,650
208,151
251,680
238,181
200,200
200,200
200,200
200,200
278,850
256,225
200,200
166,833
d. Details of performance grants to Executive Directors
Details of performance rights granted in FY21 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 FY21
79,527
212,072
291,599
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.
Fortescue Metals Group Ltd FY21 Annual Report 155
US$
Dr A Forrest AO
M Barnaba AM
Dr J Baderschneider
P Bingham-Hall
Lord S Coe CH, KBE
Dr C Zhiqiang
J Morris OAM
Dr Y Zhang
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
-
-
802,799
598,777
149,507
134,482
135,300
121,703
149,507
134,482
149,507
134,482
136,418
122,038
149,507
112,068
Base
fees
Committee
fees
Other
benefits
Superannuation
Total
-
-
-
-
-
-
-
-
-
21,721
16,019
5,341
34,792
23,090
53,154
34,136
74,6791
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,670
16,794
17,859
15,203
18,670
15,942
-
-
-
-
-
-
-
-
-
-
-
-
821,469
637,292
240,205
139,823
187,951
159,996
149,507
134,482
149,507
134,482
208,242
172,116
149,507
112,068
Remuneration values have been translated from Australian dollars to US dollars using an average exchange rate of 0.74679 for FY21 and 0.67174 for FY20.
08 Remuneration 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 2019 to 30 June 2021. The value of the rights has been determined using the amount of the grant
date fair value.
l
n
a
P
P
I
T
L
e
t
a
d
t
n
a
r
G
E Gaines2
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY21
11/11/2020
G Lilleyman2
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY21
18/11/2020
J Shuttleworth
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY21
18/11/2020
I Wells2
FY19 03/12/2018
FY19 10/06/2019
FY20
18/11/2019
FY21
18/11/2020
e
c
n
a
m
r
o
f
r
e
P
d
o
i
r
e
p
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
s
e
V
%
d
e
t
s
e
V
.
o
N
/
d
e
t
i
e
f
r
o
F
d
e
s
p
a
l
US$ A$
US$
A$
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/20 to
30/6/23
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/20 to
30/6/23
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/20 to
30/6/23
1/7/18 to
30/6/21
1/7/18 to
30/6/21
1/7/19 to
30/6/22
1/7/20 to
30/6/23
517,480
2.61
3.57 1,350,623 1,847,404 100%
28% 95,437 249,550
100,621
5.54
7.91
557,440
795,912 100%
28% 18,557
48,524
301,985
5.13
7.55 1,549,183 2,279,987
Determined in 2022
212,072
7.55 10.34 1,601,639 2,192,824
Determined in 2023
275,989
2.61
3.57
720,331
985,281 100%
28% 50,900 133,093
57,498
5.54
7.91
318,539 454,809 100%
28% 10,604
27,728
163,236
5.13
7.55
837,401 1,232,432
109,217
7.55 10.34 824,843 1,129,304
-
-
-
-
- 163,236
-
109,217
160,994
2.61
3.57
420,194
574,749 100%
28% 44,538 116,456
57,498
5.54
7.91
318,539 454,809 100%
28% 15,906
41,592
108,824
5.13
7.55 558,267
821,621
Determined in 2022
72,812
7.55 10.34
549,901
752,876
Determined in 2023
189,743
2.61
3.57 495,229
677,383 100%
28% 34,994
91,052
33,540
5.54
7.91
185,812
265,301 100%
28%
6,186
16,174
108,824
5.13
7.55 558,267
821,621
Determined in 2022
74,225
7.55 10.34 560,572
767,487
Determined in 2023
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.
2 Despite 100% of the LTIP performance targets being met, FY19 performance rights granted have been reduced by one third prior to application of the
maximum value limit.
156 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report
f. KMP Share Rights
Share rights granted under the ESSIP at the beginning of FY21 (granted at the VWAP for Fortescue shares traded
over the first five trading days of the performance year) and under the LTIP at the beginning of FY19 which vested in
FY21 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
FY21 ESSIP
FY19 LTIP
G Lilleyman
FY21 ESSIP
FY19 LTIP
J Shuttleworth
FY21 ESSIP
FY19 LTIP
I Wells
FY21 ESSIP
FY19 LTIP
1 Unvested share rights lapse
Share
rights granted
Share
rights lapsed1
Share
rights forfeited
Share
rights vested
79,527
618,101
81,913
333,487
54,609
218,492
55,669
223,283
-
298,074
-
160,821
1,966
158,048
-
107,676
79,527
206,033
81,913
111,162
-
-
55,669
74,427
-
113,994
-
61,504
52,643
60,444
-
41,180
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 KMP, including their related parties is as follows:
Balance
at the
start of
the year Granted1
FY21
Executive Directors of Fortescue
Exercised /
converted2
Forfeited
/ lapsed2
Other3
Balance
at the
end of
the year Vested Unvested
Not
exercisable
E Gaines
1,418,735
291,599
(498,649)
(285,560)
-
926,125
Other Key Management Personnel of Fortescue
G Lilleyman
839,932
191,130
(343,209)
(193,075)
(494,778)
-
J Shuttleworth
531,857
127,421
(204,541)
-
I Wells
555,858
129,894
(223,751)
(130,096)
-
-
454,737
331,905
-
-
-
-
926,125
926,125
-
454,737
331,905
-
454,737
331,905
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 FY20 ESSIP and FY18 LTIP exercised/converted and the forfeiture of FY21 ESSIP and one third of FY19 LTIP.
3 Negative amounts reflect the number held at the date of ceasing to be a KMP.
Fortescue Metals Group Ltd FY21 Annual Report 157
08 Remuneration Report
g. KMP shareholdings
The numbers of shares in the Company held during the financial year by each Director and KMP, including their related
parties, are set out below:
Received
on
conversion
of rights
Held at
1 July 2020
Non-executive Directors of Fortescue
Dr A Forrest AO
1,116,165,000
M Barnaba AM
40,300
Dr J
Baderschneider
138,000
P Bingham-Hall
45,415
Lord S Coe CH,
KBE
-
J Morris OAM
12,780
Dr C Zhiqiang
Dr Ya-Qin Zhang
-
-
-
-
-
-
-
-
-
-
Executive Directors of Fortescue
E Gaines
595,669
498,649
Other Key Management Personnel of Fortescue
G Lilleyman
424,704
343,209
J Shuttleworth
610,292
204,541
I Wells
562,976
223,751
-
-
-
-
-
-
-
-
-
-
-
-
Issued Purchases
Sales
Transfers Other1
16,000,000
(800,000)
-
-
2,546
-
2,921
-
12,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held at
30 June 2021
1,131,365,000
40,300
138,000
47,961
-
15,701
-
12,000
-
(113,245)
-
-
981,073
252
(250,000)
251
-
4,216
(57,162)
-
-
-
(518,165)
-
-
-
815,084
733,781
1Negative amounts reflect the number held at the date of ceasing to be a KMP.
158 Fortescue Metals Group Ltd FY21 Annual Report
08 Remuneration Report 09
Corporate
Directory
Top 20 holders of ordinary shares at 25 August 2021
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
AMNL Financing Pty Ltd
Valin Resources Investments (Singapore) Pte Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd Six Sis Ltd
Pacific Custodians Pty Limited
HSBC Custody Nominees (Australia) Limited
Peter & Lyndy White Foundation Pty Ltd
Pacific Custodians Pty Limited
BNP Paribas Nominees Pty Ltd ACF Clearstream
Invia Custodian Pty Limited
20
Pelmavigel Pty Ltd
918,806,548
737,872,982
278,525,262
228,007,497
127,772,405
93,045,000
71,365,581
37,876,216
27,998,523
23,273,078
16,232,801
14,961,792
14,421,733
9,678,726
9,443,252
8,600,155
8,448,515
8,381,363
8,244,951
5,683,491
29.84
23.96
9.05
7.41
4.15
3.02
2.32
1.23
0.91
0.76
0.58
0.49
0.47
0.31
0.31
0.27
0.27
0.27
0.27
0.18
2,648,639,871
86.02
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
1,131,365,000
267,395,477
36.74
8.68
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
73,772
35,918
7,272
5,250
310
122,522
Unmarketable parcels
There were 3,276 members holding less than a marketable parcel of share in the Company.
160 Fortescue Metals Group Ltd FY21 Annual Report
09 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.
FFI
Fortescue Future Industries Pty Ltd.
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.
FMG Iron Bridge Ltd
Fortescue's subsidiary participating in
the Iron Bridge Joint Venture.
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, 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 FY21 Annual Report 161
09 Corporate Directory
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 standalone 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.
Pilbara Energy Connect (PEC)
Fortescue's energy generation and
transmission program of works.
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 subdivided 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 Firetail, Kings and
Queens mines.
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.
162 Fortescue Metals Group Ltd FY21 Annual Report
09 Corporate Directory Awards
Parity.org Best Companies for Women to Advance List
- Listed for the second year
CME Women in Resources
Pooja Haria
- Outstanding Young Woman in Resources winner
- People's Choice
40 under 40 Awards
Katie Charuga-Andrijasevic
- Winner
Dr Bart Kolodziejczyk
- Finalist
BCA Biggies Awards
- Finalist
Fortescue Metals Group Ltd FY21 Annual Report 163
09 Corporate Directory
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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FortescueMetalsGroup
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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
Fortescue VTEC and
Community office
1B/2 Byass Street
South Hedland, WA 6722
T: +61 8 9158 5800
F: +61 8 6218 8880
E: hedlandcommunity@fmgl.com.au
E: vtec@fmgl.com.au
Australian Business
Number
ABN 57 002 594 872
Auditor
PwC
Level 15, 125 St Georges Terrace
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
Level 12, QV1 Building
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
164 Fortescue Metals Group Ltd FY21 Annual Report
09 Corporate Directory
Fortescue's FY21 Sustainability
Report and FY21 Climate Change
Report is available on our
website at www.fmgl.com.au
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