Fortescue Metals Group Ltd For personal use only

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Fortescue Metals Group LtdTHE NEW FORCE IN IRON ORE

Train Unloader

Fortescue Port

Footprint

– 5km

Institutional Placement – July 2007

THIS DOCUMENT MAY NOT BE DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON

This presentation was prepared by Fortescue Metals Group Limited (ABN 57002 594 872) (“FMG”) and contains information regarding the proposed institutional placement (“Offer”) of securities in FMG. All information contained in this document (including this notice) and discussed at the presentation (“Information”) is confidential. By receiving the Information and attending the presentation you are deemed to agree that you will hold the Information in strict confidence, and keep it secret, and not reproduce, disclose or distribute the Information to any third party or publish theInformation for any purpose. The Information is being provided to you as, and by receiving this document you will be deemed to have represented and warranted that you are:

(a) if you are in Australia, a professional investor or sophisticated investor (as those terms are defined in s708 of the Corporations Act 2001 (Cwlth) (the "Corporations Act")) or other person specified in s708 of the Corporations Act who does not need to be given a prospectus or other disclosure document under Chapter 6D of the Corporations Act to lawfully receive an offer or recommendation to acquire securities in FMG; or

(b) if you are outside Australia, (i) you are not in the United States or a US person (as defined in Rule 902(k) under the United States Securities Act of 1933, as amended (“US Securities Act”)) nor acting for the account or benefit of a US Person and (ii) you are a person to whom an invitation or offer to subscribe for securities in FMG and any issue of such securities is permitted by the laws of the jurisdiction in which you are situated without the need for any registration, lodgment or other formality.

This document is not a product disclosure statement or prospectus for the purposes of the Corporations Act and does not constitute an offer, invitation, solicitation or recommendation in relation to the subscription, purchase or sale of securities or other securities in any jurisdiction and neither this document nor anything in it shall form the basis of any contract or commitment. The securities of FMG have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as defined in Rule 902(k) under the US Securities Act). No public offering of the securities discussed herein is being made in the United States. No responsibility is accepted by FMG or any of its directors, officers, employees, agents or affiliates, nor any other person, for any of the Information or for any action taken by you on the basis of the Information or opinions expressed in the course of this presentation. This presentation does not constitute investment, legal, taxation or other advice and the presentation does not take intoaccount your investment objectives, financial situation nor particular needs. You are responsible for forming your own opinions and conclusions on such matters and should make your own independent assessment of the Information and the Offer and seek independent professional advice in relation to the Information and any action taken on the basis of the Information.

FMG has prepared this presentation based on information available to it.. None of J.P. Morgan Australia Limited (“JPMorgan”), Southern Cross Equities Limited (“Southern Cross”) or any of their respective directors, agents, officers, employees or affiliates have authorised this presentation or are responsible for the issue or making of any statement or contents of this presentation. Except as required by law, no representation or warranty, express or implied, is made by FMG, JPMorgan or Southern Cross as to the fairness, accuracy, completeness or correctness of the Information, opinions and conclusions, or as to the reasonableness of any assumption contained in this presentation. By receiving the Information and to the extent permitted by law, you release FMG, JPMorgan and Southern Cross and their respective directors, officers, employees, agents and affiliates from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising as a result of the reliance by you any other person on anything contained in or omitted from this presentation. The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, FMG, JPMorgan and Southern Cross and their respective directors officers, employees, agents or affiliates. Actual future events may vary materially from the forward looking statements and the assumptions on which those statements are based. Given these uncertainties, you are cautioned to not place undue reliance on such forward looking statements. The distribution of this document outside Australia may be restricted by law.

In particular, this document or any copy of it must not be taken into or distributed or released in the United States or distributed or released to any U.S. person as defined in the US Securities Act. Persons who come into possession of this document should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicablesecurities laws.

Level 2, 87 Adelaide TerraceEast Perth, Western Australia 6004

www.fmgl.com.au

Fortescue Metals Group Ltd

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FMG – establishing a 200mtpa iron ore producer

Placement Summary

• 265 million shares currently on issue

• New shares to be placed with institutions through a 3 day book build process

Placement Reason

• To complete financing to 55mtpa and secure platform for future growth

Fortescue Metals Group Ltd

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Executive Summary

Executive Summary

Fortescue is set to become one of the world’s leading iron ore companies

• Significant reserves and resources with very strong exploration upside

• World class asset expected to be in the bottom decile of the cost curve

• Off take agreements in place for first 95mtpa and First ore on ship May 2008

Institutional placement will raise approx. US$300 million

• Remaining step (and only equity funding) to optimise project production (T55)

• Leucadia committed

• Facilitates faster ramp up of production (eg lump circuit and rail super lift)

• General liquidity to support the very strong launch to 200mtpa projectFor

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Executive Summary

Fortescue’s perfect timing - the iron ore market is the strongest it has ever been

• Chinese demand is fuelling prices

• Supply cannot keep up with demand

• Forecast Market price increases of 25% in 2008

Fortescue has positioned itself very well

• Management initiatives to de-risk project and secure First Ore on Ship schedule

• Initiatives to bring production in earlier

• Optimisation planning underway (55mtpa), Expansion plans (200mtpa) advanced

Executive Summary

Planning for optimisation of existing project (to 55mtpa) is well progressed

• Incorporates full lump circuit, additional crushing/screening capacity, wharf extension to create 2nd operational berth

• Program for work largely complete – no impact to May FOOS schedule or costs

• Costings complete and being reviewed

• Expected cost of optimisation < A$600m (excluding incremental leased mining equipment)

The expansion path for Fortescue is likely to involve two steps

• Brings forward development of Christmas Creek – move to 100mtpa

• Central Pilbara tenements – to move to 200mtpaFor

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The China Story

Urbanisation• Currently 44% (circa 580m people) live in urban areas

• Increasing by approximately 1% pa (10 -15m people) and is independent of economic cycles

Urbanisation is a juggernaut – unaffected by economic cycles

“- isations” –Driving China’s Unprecedented Demand for Iron ore

• Urban construction running behind migration

• In excess of 100m people in transition

• Currently around 60% of steel goes into construction

• Residential construction is the biggest driver

Urbanisation is the biggest driver yet still has a major lag factor

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Industrialisation• Pools of able people willing to work for low wages

• Rapidly growing internal market

• High savings rate underpinning investment

• Industrial output 3rd globally and growing > 10% pa

• Major advances in manufacturing and services

• Already a world class capability

Urbanisation is driving Industrialisation


Globalisation• Reduced barriers to international trade

• Investment and capital flows mobile

• China attractive location with undervalued exchange rate

• World’s factory


urbanisation

x industrialisation

x globalisation

= ULTRA-FAST DEVELOPMENT

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Ultra-fast Development = New Risks

Underestimating Demand Again • expansion plans risk being too little too late

• “isations” = more demand sooner

• more than “compound growth”

• “logistic growth” – 120Mt higher by 2011

Rearview mirror forecasting doesn’t see the changes coming

0

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1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

WA Exports to China

Chinese Import History

Chinese Logistic Growth Forecast

China Exponential Growth

Supply side response has been slow

120Mt in 2011

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est

Source: Tex Report; FMG

Chinese Imports by Source

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Infrastructure constraints limit Australian response leading to falling market share

China Requires that Australia Recover Market Share

China needs the Pilbara

• Australia is the most competitive supplier to Asia

• Three companies globally set price and dominate the seaborne market

• Fortescue plans to be the 4th major seaborne supplier Source: CRU – 2007 Jan to May average $US landed price per tonne in China

Brazilian Ore US$82.32Australian ore US$66.10

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Infrastructure Constraints

Access to infrastructure essential for a major new producer

• No access = no nimble competitors

• We mistook structural change as merely cyclical waves

Absence of latent capacity

• Effective capital management? or

• Avoidance of potential third party access?

• Created inability to respond to market demand surge

Result to Australian market share

• Japan > 60%; Korean > 60%; Taiwan > 60%

• China < 40% and falling

Fortescue will meet the challenge

Open Access Infrastructure

• Built to support Chichester Range Project

• Very easy to expand

Aggressive expansion plans

• 0 to 55mtpa – FOOS: May 2008

• 55 to 100mtpa – target 2009/2010

• 100 to 200mtpa

• As much as possible as soon as possible

Fortescue: not missing the boat to ChinaFor

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FMG Snapshot and

Project Update

Fortescue snapshot

• Major Australian company, market capitalisation of approximately A$10 billion

– 29th largest company listed on the ASX as at 10 July 2007

– S&P/ASX 200 and MSCI Index inclusion

• Approx 40,000 square kilometers of mining tenements (licences), the largest in the Pilbara

• Significant ore reserves – currently 1.1 billion tonnes (>4 billion tonnes targeted)

• Advanced development of Cloud Break iron ore mine and infrastructure project

• Plans to be low cost producer

• Targeting First Ore on Ship (“FOOS”) in May 2008

• Off take agreements signed for up to 95mtpa

– Agreements with all major Chinese steel mills including Baosteel and Tangshan

• Major shareholders include:

– Andrew Forrest (CEO): ~ 38%

– Harbinger Capital Partners: ~ 16%

– Leucadia: ~ 10%

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Massive Pilbara holdings40,000 square kilometres

Exploration Covering 40,000 square kilometres efficiently

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gina

(Rio)

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ngelas

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muldi /

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nnes

• One of the largest bedrock hosted iron ore discoveries in Australia

• Ore reserves of 1.1 Bt, including proved ore reserves of 120 Mt, providing sufficient ore for approximately 20 year mine life at 45Mtpa

Note:- Total resources are exclusive of total reserves- Data derived or calculated from best available company, technical and government public report

Unparalleled Assets – Significant Reserves & Resources

Comparison of Fortescue Fines Products with Competitors

*45%59.00*FMG Rocket Fines

34%63.6518%61.5025%58.9023%57.04RIO

*55%60.20*FMG HG Fines

• FMG has discovered significant Yandi and Brockman resource targets

• Source: Tex report, BHPB, Rio, FMG

40%63.6021%61.8039%58.50BHP

% TotalGrade% TotalGrade% TotalGrade% TotalGrade

BrockmanMMYandiMesa J

FMG’s Fe grade approximates the middle ground of iron ore Fe grade exported last year

Competitor comparisons

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Ore Body Characteristics• More than 2.4Bt of high quality hematite resource, 1.1Bt reserve• Free digging over burden low cost removal • Mineralisation gently undulating - typical dip at 2° to 5°• Mineralised thickness varies between 3 metres and 20 metres• Multiple mining faces facilitate high productivity and blending flexibility

Unparalleled Assets – Shallow & Extensive Ore Body

Footwall BIF + shales

Ore horizon Hardcap and detritals

rburden

Target Interval

20 METRES

UP TO 4,000 METRES Down Dip

Microplaty Hematite

North

* Vertical exaggeration over 10 x

Unparalleled Assets – Simple Mining Methods

• Superior grade control techniques

• Selective mining capability

– Straight forward grade prediction from model and mapping

– Textures and grades clearly visible after cutting

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Cumulative Production (mn wmt)

US c

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tuAustralian mines

FMG mineBrazilian mines

CRU forecast Fortescue to be bottom decile on industry cost curves in 2008The price of Iron Ore is linked to the high production cost of Magnetite

(1) Site Operating Costs are those costs used to determine free cashflow and include raw material costs and conversion costs.

Source: CRU Strategies, July 2006.

Iron Ore Fines Site Cost Curve1) 2008

Unparalleled Assets – Competitive Cost

Latest Project Highlights

• Project completion (excluding proposed optimisation) forecast within existing funding

• First Ore On Ship (FOOS) expected mid May 2008

• Port dredging complete, marine structure piling advanced

• Longest lead time Project (Port) 60% complete

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BHPB ship enjoying the dredged turning circle (as we soon will be)

The Port

Port construction ahead of schedule

with reclaim area of 200+ mtpa capacity

T55 train unloader

55 mtpa

100-200 mtpa+45=100

mtpa

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Port Hedland Port Operations

Train Unloader – on Schedule

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Rail Corridor

Total Rail Line Cleared (260 kms)

Rail earthworks on eight separate construction fronts and all bridges underway

East Turner River Bridge Concrete Piers

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Fortescue’s construction locos at welding depot

Fortescue’s rail track laying underway

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Fortescue’s rail track laying underway

Airport complete – Cloud Break Mine

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Permanent Camp – Cloud Break Mine

Screening Plant

Artist’s Impression

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Crushing Plant


Loading Vault


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Marketing – Sold out

• 55Mtpa contracted for minimum of 10 years

• Approximately 40Mtpa contracted for “Fortescue Expansion” tonnage

• All “top 10” Chinese Mills have agreements

• The focus has been on agreements directly with mills who have approval to expand and already receive supply from BHPB, Rio or CVRD

• Annual price review tied to industry benchmark

Major Market Developments since August 2006

• Price up 9.5% in 2007 and forecast to rise by 25% in 2008

• Indian export tax on 100mtpa China iron ore exports

• Chinese Government evaluating domestic iron ore mining restructures

• Major expansions from Rio, BHPB and CVRD all late

• China imports of iron ore up by more than 15% on 2006

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• 55mtpa – 10mtpa to Baosteel

• Of expansion tonnes, additional 10mtpa to Baosteel.

• Underwrites future expansion beyond 55mtpa

• Major product endorsement for other global steel mills.

• Technical program to optimise Fortescue ore for market.

• Preferentially advance additional opportunities for mutual benefit.

• Opened up Japanese and Korean discussions

• Two additional major mills requesting 20mtpa each

and and Tangshan

Straightforward Construction

• Multiple sites facilitate parallel construction

• Contract risk spread – no single contract >10% of total capex

• Well-serviced mining project precinct

• Well proven technical construction risk / typical Pilbara iron ore project

• FMG and WorleyParsons’ strong track record

Engineering Design

Scoping Study

PrefeasStudy

Ship

Commission

Construction

Tender Process

Approvals Finance

LOW

MEDIUM

HIGH

EXTREME

Interim Prefeas Study

Definitive Feasibility – Infrastructure

Definitive Feasibility – Mine

ConstructionRisk

2003 200620052004 2007

TODAY

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2008

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Cost Over-run & Back-up Reserve

Infrastructure Contingency

Mining & Working Capital

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Actual / Forecast

F.O.O.S.15/05/2008

Significant liquidity

Optimising Project – 55mpta

• Design incorporated latent capacity which can be exploited largely through upgrade of Cloud Break and certain port facilities.

– Add additional screening and crushing capacity

– Bring forward the lump circuit

– Extend the length of trains and rail “super lift”

– Convert the lay-by berth into an operational berth

• No impact on current project schedule:

– Leverage off demobilising resources from existing project

• Total capital cost expected to be less than A$600m (excluding incremental mining equipment) For

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1Km

Optimise Project – 55 mtpaFirst Ore on Ship May 2008

2 Loading Berths1 Ship loader2.5mt stockpileSingle loop1 x 2 car train unloader Lumpcircuit

Production Growth Strategy55 – 200mtpa

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Expansion program is being driven by demand.

• All first phase 55mtpa contracted for 10 years +

• Further 40mtpa contracted for expansion tonnage

• Baosteel, Tangshan and several others

FMG’s China Headquarters in

Shanghai

Exploration CID (Yandi) occurs undercover and in massive outcrop

Channel Iron Deposit (CID) –

Solomon Project

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Progressive Growth Trajectory

• Fortescue has built a team of experienced staff and contractors

– FMG/Worley Alliance performing strongly

– Blue chip contractors committed to project success

• Staged, continuous T200 growth, maximises stakeholder value and minimises risk

– Remobilising contractors is very costly

– New contractor availability is uncertain in booming market

• Initial project design allows continual modular expansion

Expansion plan – 200 mtpa

• From Targets to Resource Definition

– Target in Chichesters (Eastern Pilbara) ~3.3 Bt.

– Target in Central Pilbara > 1 Bt.

• Expansion Target for Port Hedland is 200 mtpa

– Port capacity for FMG, Cape and Panamax size vessels

– Maximises port footprint

• Optimal target developments

– Step 1 – 100mtpa

– Step 2 – 200mtpaFor

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Expansion map – 200 mtpa

Newman

Dampier

Port Hedland

50Kms

Point Samson

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Christmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud Break

Mt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt Lewin

Glacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier Valley

Fig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig Tree

White KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite Knight

FlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomon

Flying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwana

Glacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier Valley

Tongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt Nicholas

Mt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt Lewin

Christmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud Break

Fig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig Tree

White KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite Knight

FlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomon

Flying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwana

FMG TenementsOre Processing Plant

FMG Rail Extension

LEGEND

Other RailFMG Rail

FMG Kennedy Rail

120+ Mtpa

200Mtpa

80+ Mtpa

Infrastructure for 200mtpa

• 100mtpa– New mine at Christmas Creek with a 50mtpa processing capacity– Extension of rail line to Christmas Creek– Expand train unloading facilities at the port– Expand port facilities to accommodate three ships– Approvals underway

Step 2 – Central Pilbara Solomon Project – 200mtpa

• 200mtpa – work to support expansion underway, including– “Kennedy Line” spur – Main Government FNA approval - granted– A range of approvals (environmental, native title, governmental) – in train– Feasibility work underway– Optimising funding package– 5 rigs drilling out reserves

Step 1 – Christmas Creek – 100mtpa

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1Km

100 mtpaAnderson Point

3 berths5mt stockpileDouble loop2x 2 car train unloaders

Port Expansion to 100 mtpa

200 mtpaAnderson Point

6 X Cape size + 1 X Panamax berths)3rd Rail Loop3rd Train Unloader200mtpa stock yard

07_038_0521_COR

Port Expansion to 200 mtpa

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Summary and Basis for Expansion Stages

Step 1 – Expansion to 100mtpa

• Optimum and shortest time expansion step in Chichester. Mines proven resources and maximises three berth capacity

Step 2 – Expansion to 200mtpa

• Progressive step up allowed by dredging approvals and mining timelines. Maximisestwo train unloaders and 4th berth in South West Creek

• Final Cape size stage following capacity extension to Port Hedland port (150+).

• Exploits CID and Brockman products and resources along Kennedy Line.

• Panamax vessels suited to some customers/products and assists maximise port capacity for Fortescue.

Timing – As much as possible, as soon as possible

• Fortescue is the Pilbara’s most aggressive developer

– Completion of feasibility work

– Optimising funding package

– Ensuring May 2008 FOOS is not impacted

– Utilising available resources

• Fortescue is committed to expanding to match contracts and growing demand

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Funding

Funding – optimisation plans

• Proceeds will be used for :

– Optimisation activities

– General liquidity

2.772.77

0.49Cash for optimization0.09Cash flow after FOOS

0.25Debt service costs30.30Equity (estimate)

0.13Cash flow to FOOS0.35Leasing

1.90Infrastructure / mining22.03Existing debt facilities

US$bnUses to 30 June 20081US$bnSources to 30 June 20081

Notes: 1. From 31 March 2007. Assumes AUD1:USD0.862. Based on current project cost of A$2.571bn. Assumes contingency of A$102m (US$86m) is fully spent3. Net of interest income on cash balances

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Funding – 200mtpa

• Mining Equipment and Ore Preparation – Free cash flow from project

• Transport infrastructure – Sale and Lease back of Port and Rail facilities

• Alternatives from U.S. 144A Capital Markets (Citigroup )

– Hybrid and other non dilutive project financing alternatives

Presentation Conclusion& Equity Execution Timetable

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Transaction timetable

• There are a number of key dates in relation to the Institutional Placement which are detailed in the table below:

• Preference given to new (and existing) FMG long term capital partners

Key event Date and Time (AEST)

Stock into voluntary trading halt/suspension After 6.30pm, Thursday 12 July 2007

Management presentations (Europe/Asia/Australia) From Trading Halt

Institutional book build opens From Trading Halt

Institutional book build closes 7.00pm, Tuesday 17 July 2007

Allocations advised After 7.00pm, Tuesday 17 July 2007

Settlement of placement securities (T+3) Monday 23 July 2007

Allotment and normal trading of placement securities Tuesday 24 July 2007

JP Morgan and Southern Cross Equities have been appointed Joint Lead Managers

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Fortescue Metals Group Ltd For personal use only

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