Fortescue’s hydrogen, green energy jobs spree tops 500
The workforce for Fortescue’s ambitious green energy transformation has jumped by more than 40 per cent.
The number of workers Fortescue Metals Group has devoted to its ambitious green energy transformation plans has jumped more than 40 per cent over the last few months, with more than 500 staff now working for its hydrogen and green energy arm.
Chief executive Elizabeth Gaines said on Thursday the company now had 500 to 550 employees dedicated to Fortescue Future Industries projects, up from 350 when the company delivered its last quarterly production report in July.
That July revelation — along with the company’s disclosure it planned to spent $US400 to $600m on FFI projects this financial year — had led to a pushback from analysts on Fortescue’s June quarter briefing, with Ms Gaines repeatedly challenged to provide more detail on how the company’s spending was adding value for shareholders.
Since then, FFI has made a fresh suite of commitments over future green energy projects, including deals to examine hydrogen projects in India, invest an initial $114m to build a electrolyser manufacturing plant in Gladstone, and study construction of a $400m hydrogen plant at Incitec Pivot’s Brisbane ammonia plant.
FFI has also bought a 60 per cent stake in Dutch solar manufacturer High yield Energy Technologies, agreeing to fund the expansion of its European manufacturing plant.
And this week FFI recruited Paul Browning, the former boss of Mitsubishi Power’s North American arm, to head its own US-based operations suggesting a further expansion of the company’s reach into new markets is imminent.
While Fortescue left its annual spending guidance on FFI spending unchanged on Thursday, Ms Gaines confirmed FFI was rapidly increasing its staffing levels as commitments were made to study new projects.
“The headcount is approximately 500 to 550. The team are increasing the resourcing given the extent of the activity across FFI,” she told reporters.
“To achieve the goals that we’ve set, we need to add more capability. So there has been an increase in numbers but that is entirely in line with our expectations.”
Fortescue founder Andrew Forrest and senior FFI management have spent the last year crisscrossing the world since he revealed plans to transform Fortescue into a green energy powerhouse at its 2020 annual shareholder meeting.
FFI has committed to study green energy and manufacturing hubs in Papua New Guinea, a massive and the long-stalled Grand Inga hydro dam project in the Democratic Republic of Congo – which has costs previously estimated at more than $100bn – and similar schemes in Brazil and other parts of South and Central America.
Speaking to journalists on Thursday, however, Ms Gaines noted that Fortescue had not made any final investment decisions on FFI projects yet, and was still working through feasibility studies that would outline the costs and returns of individual projects.
While record iron ore prices propelled Fortescue to a $US10.3bn ($14bn) annual profit last financial year and pay a final dividend worth $US4.7bn, those prices have since tumbled.
Fortescue shipped 45.6 million tonnes of iron ore in the September quarter, but the price it received for its products slumped as the iron ore price fell.
Fortescue Metals shipped 45.6 million tonnes of iron ore in the September quarter, but the price it received for its products slumped as the iron ore price fell.
Fortescue said on Thursday it received an average $US118 ($157) a dry metric tonne for cargoes in the September quarter, down $US50 a tonne from the June period.
And it was paid an average of only 77 per cent of the benchmark iron ore price, down from 88 per cent in the three months to the end of June, as steel mills looked for higher quality ore.
The iron ore price fell about $US100 a tonne over the period, tumbling from $US218.40 a tonne at the end of June to $US118.25 on September 30.
Despite ongoing cost escalation across the WA mining industry, Fortescue said its own cash costs of production remained in line with the previous quarter, at $US15.25 a tonne.
“Our C1 cost was in line with the previous quarter, reflecting our strong focus on cost management to mitigate inflationary pressures. Strong performance across the supply chain, together with the contribution of Eliwana continues to drive record operational performance,” Ms Gaines said.
The September quarter is traditionally a slow period for output in the mining sector as company’s conduct major maintenance campaigns, and Fortescue mine output fell 5 per cent compared to the June quarter to 48.4 million tonnes.
Its 45.6 million tonnes of exports were 8 per cent lower than the June period, but up 3 per cent compared to the September 2020 quarter.
RBC analyst Kaan Peker said the price Fortescue received for its iron ore was better than expectations, but he said the price Fortescue received for contract cargoes in the period – worth about 77 per cent of the benchmark price – suggested discounts on contract prices were larger than anticipated.
“We forecast price realisation of $US110 a tonne – this implies realisation of 68 per cent (32 per cent discount). The contractual realisation achieved in the quarter was 77 per cent (implies 4 per cent discount for provisional pricing),” he said in a client note.
“We had assumed a much larger provisional pricing adjustment. Given the QoQ index price decrease, we assume a negative ~$25 a tonne provisional pricing adjustment, which was too large/conservative. This suggests contractual pricing discounts are larger than expected.”
Chief financial officer Ian Wells noted that, despite lower price realisations, the September quarter had delivered Fortescue the seventh highest quarterly revenue on record, with iron ore prices still delivering more than healthy margins to its operations.
Fortescue said its Iron Bridge magnetite mine remained on track for first production at the end of next year, with the company maintaining its revised capital guidance of $US3.3bn to $US3.5bn despite critical shortages in some parts of the WA labour market.
The group also maintained guidance for spending for its Fortescue Future Industries subsidiary, which has been accelerating the pace at which it announces new projects and signs new early-stage investment deals, at $US400m to $US600m for the current financial year.
Fortescue had net debt of $US175m at the end of September, after paying out a record $US4.7bn in dividends and spending $US744m on capital projects.
Fortescue shares closed up 0.1 per cent at $14.02 on Thursday, in a lower market.