Fortescue Metals Group Ltd (the Company) and its Board of Directors are committed to achieving and demonstrating high standards of corporate governance. The Company and its controlled entities together are referred to as the Group in this statement.

The Board of Directors are responsible to the shareholders for the performance of the Group. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

Day-to-day management of the Group's affairs and the implementation of the corporate strategy and policy initiatives are delegated to the Chief Executive Officer and the senior executives. The relationship between the Board and senior management is critical to the Group's long term success.

A description of the Company's main corporate governance practices is set out below. The Company endeavours to follow ASX best practice recommendations except as set out in this statement. Areas where there is divergence from these best practice recommendations, and the reasons for doing so, are noted in this document. The ASX Corporate Governance Council recognises that not all recommendations are appropriate for all companies and that only suitable recommendations should be adopted.

Board Composition and Functions
The Board operates in accordance with the broad principles set out in its Code of Conduct.

Under the Company's Constitution, the Board is required to consist of at least three and no more than 12 Directors. If the Company has three or more Directors, one third of the Directors, with the exception of the Managing Director, must retire and seek re-election at the Annual General Meeting (AGM) each year. Additionally, any new Director appointed by the Board within a year must retire at the next AGM to be then offered for election under an ordinary resolution.

The Board's responsibilities and duties include the following:

• Appointing the Chief Executive Officer;
• Determining the strategic direction of the Group as an outcome of executive management recommendations and measuring performance against approved strategies;
• Adopting operating budgets at the commencement of each financial year and monitoring progress on a regular basis against budget by both financial and non-financial key performance indicators;
• Monitoring and overseeing the Group's financial position and risk management priorities;
• Evaluating the performance of the Chief Executive Officer and determining remuneration;
• Determining that satisfactory arrangements are in place for auditing the Group's financial affairs;
• Ensuring, where reasonable and appropriate, that policies and compliance systems consistent with the Company's objectives and industry best practice are in place, providing the necessary framework for the Group and its Officers to act legally, ethically and responsibly on all matters; and
• Ensuring a reasonable view from all relevant stakeholders is taken into account.

The Board of the Company currently consists of ten Directors including seven Non-Executive Directors and three Directors who are employed as full time Executive Directors including the Chief Executive Officer, the Executive Director Public Affairs and the Executive Director Commercial. The Chairman is a Non-Executive Independent Director and four of the other seven Non-Executive Directors are considered to be independent. Two of the Non-Executive Directors are not independent as they represent Leucadia National Corporation and Valin which are substantial shareholders in the Company. Regardless, all Directors are required to bring independent judgment to bear in their board decision making. The Company maintains a mix of Directors on the Board from different backgrounds with complementary skills and experience. The Chairman is elected by the full Board.

Directors' Independence
The Company has adopted guidelines for testing the independence of Directors.

A Director is considered to be independent if they satisfy certain criteria, the most significant being as follows:

• The Director must be in a non-executive role and any fees that may be paid by the Company for services provided must not be of an amount that could make the Director reliant on such remuneration. The Director must have no other material contractual relationship with the Company other than as a Director of the Company;
• The Director is not a substantial shareholder of the Company being defined in the Corporations Act as holding more than 5% of the voting shares of the company;
• The Director has not been employed in an executive capacity by the Company and has not been a principal of a material adviser or consultant to the Company within the last?three years (other than noted below); and
• The Director is free from any interest which could reasonably be perceived to materially interfere with the Director's ability to act in the best interests of the Company.
  

Directors External Commitments
It is the Company's practice to allow its Executive Directors to accept appointments outside the company with prior approval of the Board.

The commitments of Non-Executive Directors are considered by the Board prior to the Directors' appointment to the Board of the company and are reviewed each year as part of the annual performance assessment.

Prior to appointment or being submitted for re-election, each Non-Executive Director is required to specifically acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company.

Conflicts of Interest
The Board has implemented a Code of Conduct which has been designed to ensure that all Directors and employees of the Company act ethically and do not use confidential information for personal gain.

Independent Professional Advice
Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company's expense. Prior written approval of the Chairman is required, however this will not be unreasonably withheld.

Corporate Reporting
In respect of the Company's annual financial statements, the Chief Executive Officer and Chief Financial Officer are required to make the following certifications to the Board:

• That the Company files are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and Group and are in accordance with relevant accounting standards; and
• That they are founded on a sound system of risk management and internal compliance and control and which implements the policies adopted by the Board and that the Company's risk management and internal compliance and control is operating efficiently and effectively in all material respects.

Board Committees
The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the Remuneration and Nominations Committee and the Audit and Risk Management Committee. As required under ASX rules, the Audit and Risk Management Committee is comprised entirely of Non-Executive Directors with a minimum membership of three people. The Remuneration Committee also has three members, with one member an Executive Director.

Minutes of committee meetings are tabled at the subsequent Board meeting. Additional requirements for specific reporting by the committees to the Board are addressed in the charter of the individual committees.

Remuneration and Nominations Committee:
The Remuneration and Nominations Committee consists of the following people:

Herb Elliott (Chairman) - Non-Executive Director
Ken Ambrecht - Non-Executive Director
Ian Cumming - Non-Executive Director
Andrew Forrest - Executive Director

The Remuneration and Nominations Committee operates in accordance with its charter.

The Committee considers matters such as succession planning and senior executive compensation policy (including short and long term incentive plans) and the Company's recruitment, retention and termination policies, and advises the Board accordingly. The Committee makes recommendations to the Board regarding the specific remuneration of the Chief Executive Officer and other Executive Directors (including base pay, incentive payments, equity awards, retirement rights and service contracts). The remuneration of Non-Executive Directors is a matter that is determined by the Board and previously shareholders have approved an amount to pay Directors. The Committee is entitled to and may request, management or external consultants to provide necessary information upon which the Board may make its determination. With regard to nominations the Committee considers membership of the Board and its sub-committees and senior executive appointments.

The Committee has available to it the services of independent professional advisors to assist in the search for high-caliber people at all levels and ensure that the terms and conditions offered by the Company are competitive with those offered by comparable companies.

Audit and Risk Management Committee
The Audit and Risk Management Committee consists of the following Non-Executive Directors:

Herb Elliott
Geoff Brayshaw (Chairman)
Ken Ambrecht

The Company follows best practice recommendations which suggest a committee be made up of at least three Directors with the majority being independent.

The Audit and Risk Management Committee has appropriate financial expertise and all members are financially literate and have good general industry experience and knowledge.

The Audit and Risk Management Committee operates in accordance with its charter.

The responsibilities of the Audit and Risk Management Committee are bound only by the existence of other committees of the Board established to govern such other aspects of the Company's affairs outside of the financial sphere, and by the primary responsibility of management to undertake the accounting and reporting of transactions.

The Audit and Risk Management Committee reviews the financial statements, adequacy of financial controls and the annual audit arrangement. It monitors controls and financial reporting systems, applicable Company policies, national and international accounting standards, and other regulatory or statutory requirements.

The Audit and Risk Management Committee liaises with the Company's auditors, reviews the scope of their activities, reviews the external auditors' remuneration and advises the Board on their appointment. The lead audit partner and review partner are not permitted to serve for more than five consecutive years. The Audit and Risk Management Committee reviews the processes in place for the identification, management and reporting of business risk, and reviews the findings reported.

The Committee has authority to seek any pertinent information it requires from any employee or external party.

Procedure for the Selection of New Directors
Corporate performance is enhanced when the Board has an appropriate mix of skills and experience. Candidates are nominated by the Remuneration and Nominations Committee and independent search consultants are able to be utilised if considered necessary. Where a Director nominates a candidate for the Board, the Director must disclose any pre-existing relationship with the nominee.

New Directors will be provided with a letter of appointment setting out their responsibilities and rights, and also will be provided with a copy of the Company's Constitution.

External Auditors
The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality and independence. BDO are the current external auditors. It is the policy of BDO (the Company's external auditors) to rotate audit engagement partners every five years in line with CLERP 9 reforms to the Corporations Act 2001.

The external auditor is requested to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Risk Assessment and Management
The Board, through the Audit and Risk Management Committee, is responsible for the identification of significant areas of business risk, implementing procedures to manage such risks and developing policies regarding the establishment and maintenance of appropriate ethical standards to:

• ensure compliance in legal, statutory and ethical matters;
• monitor the business environment;
• identify business risk areas;
• identify business opportunities; and
• monitor systems established to ensure prompt and appropriate responses to shareholder complaints and enquiries.

Continuous Disclosure and Shareholder Communication
The Company Secretary has been nominated as the person responsible for communications with the Australian Stock Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and facilitating information disclosure to the ASX. The Chief Financial Officer has been nominated as the person with primary responsibility for communications with analysts, brokers, shareholders, the media and the public.

All information disclosed to the ASX is posted on the Company's website as soon as it is disclosed to the ASX.

All shareholders receive a copy of the Company's annual report. In addition the company seeks to provide opportunities for shareholders to participate through electronic means. In order to facilitate this, all Company announcements, media briefings, details of Company meetings, press releases and financial reports are made available on the Company's website.