Fortescue Metals : FY2017 Corporate Governance Statement

Statement

ABN 57 002 594 872

OVERVIEW OF GOVERNANCE

1. Overview of Governance

2. Board of Directors

1. Board committees

2. Management

12 Risk management

18 Assurance functions

1. Security holders

2. Business ethics and integrity

19 Market disclosures

19

Compliance with Corporate Governance Standards

2 FORTESCUE METALS GROUP LIMITED I 2017 CORPORATE GOVERNANCE STATEMENT

OVERVIEW OF GOVERNANCE

Effective corporate governance is a critical element contributing to the longer term success of Fortescue. The Board and all levels of management are fully committed

to maintaining and enhancing corporate governance so that it continues to contribute to Fortescue's vision to be the safest, lowest cost, most profitable iron ore producer.

Fortescue supports the intent of the ASX Corporate Governance Council Principles and Recommendations 3rd Edition (Principles and Recommendations) and meets the specific requirements of the Principles and Recommendations, unless disclosed otherwise. The cornerstone principles of corporate governance at Fortescue are:

Transparency: Being clear and unambiguous about the Company's structure, operations and performance,

both externally and internally, and maintaining a genuine dialogue with, and providing insight to, stakeholders

and the market generally.

Integrity: Developing and maintaining a corporate culture committed to ethical behaviour and compliance with the law.

Corporate accountability: Ensuring that there

is clarity of decision making within the Company,

with processes in place to ensure that the right people have authorised approval to make effective and efficient decisions, with appropriate consequences delivered for failures to follow those processes.

Stewardship: Developing and maintaining a company- wide recognition that Fortescue is managed for the benefit of its shareholders, taking account of the interests of other stakeholders.

Fortescue's governance framework

Board of Directors

Board sub-committees

Audit and Risk Remuneration

Finance

Management Committee

and Nomination

Committee

Committee

Policies and procedures

Delegation of Authority

Risk Management

Framework

Chief Executive Officer

Executive and Line management

Independent Assurance Functions

FORTESCUE METALS GROUP LIMITED I 2017 CORPORATE GOVERNANCE STATEMENT 3

BOARD OF DIRECTORS

1. BOARD OF DIRECTORS

2. Role and responsibilities

   The Board is responsible to the shareholders for the performance of the Company. The Board's focus is to enhance and protect the interests of shareholders and other key stakeholders and to ensure that the Company is properly managed. The Board understands the importance of a strong and healthy working relationship with management.

   The Board ensures that the management team is appropriately qualified and experienced to discharge their responsibilities and has established a Statement of Matters Reserved for the Board identifying the key responsibilities of the Board as follows:

   • Appointing, evaluating the performance of, rewarding and, if necessary, removing the Chief Executive Officer (CEO)

   • Development of corporate objectives and strategy with management and approving plans, new investments, major capital and operating expenditures and major funding activities proposed by management

   • Monitoring actual performance of the Company and senior executives against defined performance expectations and reviewing operational information to understand, at all times, the state of health of the Company

   • Overseeing management of business risks, including economic, environmental, operational, cyber and social sustainability risks

   • Satisfying itself that the financial statements

     of the company fairly and accurately set out the financial position and financial performance of the company for the period under review

   • Satisfying itself that there are appropriate reporting systems and controls in place to assure the Board that proper operational, financial, compliance, risk

     management and internal control processes are in place and functioning appropriately. Further, approving and monitoring financial and other reporting

   • Ensuring that the Company acts legally and responsibly on all matters and assuring itself that the Company has adopted a Code of Conduct and the Company practice is consistent with that Code

   • Assuring itself that appropriate audit arrangements are in place

   • Reporting to and advising shareholders.

   The Board has also established Delegations of Authority for matters delegated to the authority of the CEO and hence the CEO remains accountable to the Board, through those delegations, for the overall performance of the Company. Whilst the CEO remains accountable to the Board, the

   CEO is empowered to make decisions he/she believes are appropriate for the business, within the boundaries establish by the Board.

   A key focus of Board meetings is monitoring the decisions of the CEO. Appropriate time is allocated during Board meetings for consideration of the CEO's report to the Board on key operational issues and progress towards achievement of corporate objectives. The Board has established the Key Performance Indicators (KPIs) against which the performance of the CEO is evaluated. These KPIs are discussed in the Remuneration Report within the 2017 Annual Report.

   Both the Statement of Matters Reserved for the Board and the Delegations of Authority are reviewed annually to assess continued relevance and to identify any areas requiring improvement or change. Where changes are required to these documents, such changes are approved by the Board.

3. Board composition

Under the Company's Constitution, the Board must have a minimum of three and a maximum of twelve directors.

No director, other than the Managing Director may retain office without re-election for more than three years or past the third annual general meeting following the director's appointment, whichever is the longer. Additionally, any new director, with the exception of the Managing Director appointed by the Board must retire and may seek

re-election in the year of appointment.

The Board believes that its composition represents an appropriate balance of executive and non-executive directors to achieve the promotion of shareholder interests and effective governance of the business. The Board also has access to, and ability to engage with, senior executives who may also attend Board and Board Committee meetings by invitation.

Gender Diversity at 30 June Geographic Diversity at 30 June Tenure at 30 June

44 %

Male Female

WA

1 Other-

1 Australia

China

0-3 years

1 4-6 years

7+years

56 %

6 1 5 3

USA

4 FORTESCUE METALS GROUP LIMITED I 2017 CORPORATE GOVERNANCE STATEMENT