Mining’s  energy  challenges  and  strategic  options

Forward  looking  statements

Disclaimer

Important  NoticeThe  purpose  of  this  presentation  is  to  provide  general  information  about  Fortescue  Metals  Group  Limited  ("Fortescue").  It  is  not  recommended  that  any  person  makes  any  investment  decision  in  relation  to  Fortescue  based  on  this  presentation.  This  presentation  contains  certain  statements  which  may  constitute  "forward-­looking  statements".  Such  statements  are  only  predictions  and  are  subject  to  inherent  risks  and  uncertainties  which  could  cause  actual  values,  results,  performance  or  achievements  to  differ  materially  from  those  expressed,  implied  or  projected  in  any  forward-­looking  statements.

No  representation  or  warranty,  express  or  implied,  is  made  by  Fortescue  that  the  material  contained  in  this  presentation  will  be  achieved  or  prove  to  be  correct.  Except  for  statutory  liability  which  cannot  be  excluded,  each  of  Fortescue,  its  officers,  employees  and  advisers  expressly  disclaims  any  responsibility  for  the  accuracy  or  completeness  of  the  material  contained  in  this  presentation  and  excludes  all  liability  whatsoever  (including  in  negligence)  for  any  loss  or  damage  which  may  be  suffered  by  any  person  as  a  consequence  of  any  information  in  this  presentation  or  any  error  or  omission  therefrom.  

Fortescue  accepts  no  responsibility  to  update  any  person  regarding  any  inaccuracy,  omission  or  change  in  information  in  this  presentation  or  any  other  information  made  available  to  a  person  nor  any  obligation  to  furnish  the  person  with  any  further  information.    

Additional  InformationThis  presentation  should  be  read  in  conjunction  with  the  Annual  Report  at  30  June  2016  together  with  any  announcements  made  by  Fortescue  in  accordance  with  its  continuous  disclosure  obligations  arising  under  the  Corporations  Act  2001.

Any  references  to  reserve  and  resources  estimations  should  be  read  in  conjunction  with  Fortescue’s  Ore  Reserves  and  Mineral  Resources  statement  for  its  Hematite  and  Magnetite  projects  at  30  June  2016  as  released  to  the  Australian  Securities  Exchange  on  19  August  2016,  and  ASX  releases  dated  20  May  2014  and  8  January  2015  as  they  relate  to  Hematite  Mineral  Resources  Development  Properties.  Fortescue  confirms  in  the  subsequent  public  report  that  it  is  not  aware  of  any  new  information  or  data  that  materially  affects  the  information  included  in  the  relevant  market  announcement  and,  in  the  case  of  estimates  of  mineral  resources  or  ore  reserves,  that  all  material  assumptions  and  technical  parameters  underpinning  the  estimates  in  the  relevant  market  announcement  continue  to  apply  and  have  not  materially  changed.

All  amounts  within  this  presentation  are  stated  in  United  States  Dollars  consistent  with  the  functional  currency  of  Fortescue  Metals  Group  Limited,  unless  otherwise  stated.  Tables  contained  within  this  presentation  may  contain  immaterial  rounding  differences.

Delivering  on  targets

Focus  on  safety,  productivity  and  efficiency

ü Safety

ü 165-­170mt  shipped

ü Productivity  +  efficiency  

ü Lowest  cost  producer

ü Debt repayments

ü Consistent dividend policy3

China's  Iron  Ore  Supply  CFR  Costs (including  royalties  &  ocean  freight)

Moving  down  the  global  cost  curve

Source:    Metalytics 25

2012

2016

Creating  opportunities  through  training,  employment  and  business  development

Building  strong  communities

5

WA’s  natural  gas  potential

The  gas  opportunity  

Recognise  renewables  and  storage  role  in  future  energy  solutions

• Gas  critical transition fuel  and  good  for  our  economy

• Switch from  imported  diesel  and  enable  integrated  NWIS

• A  grid  with  gas  base  load  enables  Pilbara renewables  

7

Sensitivity  to  energy

Mining  is  an  energy-­intensive  business

Fortescue's  C1  costs

Solomon

Chichesters

Port

Rail

Mining  Fleet

Energy

Nameplate  Capacity  of  Existing  Domgas Plants

Domestic  Gas  Production  Capacity

0

500

1,000

1,500

2,000

2,500

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Capacity  (TJ  per  day) Red  Gully

Xyris

Beharra  Springs

Dongara

Wheatstone

Gorgon

Macedon

Devil  Creek

Varanus  Island

KGP

Source:  GSOO  2016,  AEMO

Continued  development  of  reserves  crucial  to  post-­2021  supply  to  avoid  the  cliff

AEMO  scenario  highlights  domgas market  risk

Source:  GSOO  2016,  AEMO

0  

200  

400  

600  

800  

1,000  

1,200  

1,400  

1,600  

1,800  

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

TJ  per  day

Base  scenario  gas  demand Base  scenario  potential  gas  supply Remaining  gas  reserves  for  the  WA  domestic  market

Concern  about  what  this  means  for  future  supply

Drilling  rates  at  historic  lows

0

20

40

60

80

100

120

140

160

180

200

Number  of  wells  drilled  

Bonaparte Browse Carnarvon Canning Perth

Source:  GSOO  2016,  AEMO

Significant  number  of  RLs  mature  ahead  of  possible  domgas cliff

The  Retention  Lease  bulge

Source:  NOPTA  NEATS  data  and  Fortescue  analysis

19871991

19921993

1994

1994 1995 1996

20002001

2003

2003

2004

2006

2006

2006 2007

2011

2011

2012

2013

2014

2015

2016

0 5 10 15 20 25 30 35 40

2021

2020

2019

2018

2017

2016

Number  of  RLs  due  to  expire

Year  of  RL  expiry

Retention  Lease  Expiry  Schedule  (NOPTA)  and  Initial  Date  of  Grant

Gas  important  in  transition  to  renewables

More  domestic  gas  fields  need  to  be  developed

• Policy settings to  enable  transition  

• Maintain  competitive  advantage

• “Use  it,  or  lose  it”  tension needed

13

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