By Peter Milne
Fortescue Metals Group’s $5.9 billion Iron Bridge magnetite project is finally ready to deliver, but details of the company’s further diversification into green hydrogen remain elusive as it reported flat iron ore exports of 46.3 million tonnes for the March quarter.
While the quarterly shipments of haematite were unchanged from a year ago, costs for the period ticked up 12 per cent as doubts grow over demand from China. Iron ore futures have been slipping, as excess inventory in Chinese ports and a softer than expected demand from Chinese steel mills has dampened investor sentiment.
Fiona Hick joined Andrew Forrest’s Fortescue in February after 22 years with Woodside.Credit: Tony McDonough
Fortescue Metals chief executive Fiona Hick said the higher price of diesel and explosives, rising wages in Western Australia and ore that was harder to access had combined to force up the miner’s direct costs to $US17.73 ($26.56 a tonne).
Presenting her first quarterly results since leaving Woodside to head FMG’s core mining business, Hick said despite the current volatility in iron ore prices the market fundamentals remained strong.
“Economic growth in China remains a key priority for 2023, and we see this supporting the iron ore market,” she said on Monday.
Hick’s optimistic take was similar to that delivered by Fortescue’s Pilbara rival BHP, which on Friday said the market would benefit from healthy demand for the key ingredient in steelmaking from Chinese and Indian customers.
Meanwhile, the troubled $US3.9 billion ($5.84 billion) Iron Bridge project, which has been beset with cost blowouts of up to 50 per cent and cost the jobs of three senior Fortescue executives, including chief operating officer Greg Lilleyman, has produced its first magnetite concentrate.
The magnetite ore from the energy-intensive Iron Bridge plant is a higher-grade steelmaking ingredient compared to unprocessed haematite, and is Fortescue’s first move away from the simpler product that constitutes the vast bulk of Australia’s iron ore exports.
More ambitious moves are ahead, as Fortescue is sticking to its target of making a final investment decision on five green hydrogen projects this year. The fuel and chemical feedstock is produced by separating hydrogen from water using renewable energy. It can be used to make ammonia for ease of transport or as a fertiliser ingredient.
Fortescue Future Industries (FFI) chief executive Mark Hutchinson said contenders for a 2023 investment included making hydrogen to power transport in Arizona and Texas, exporting ammonia from Brazil and Norway to Europe, producing fertiliser in Kenya, and converting an Incitec Pivot gas-fuelled Gibson Island ammonia plant near Brisbane to manufacture the green product.
The Queensland project would consume 500 megawatts of energy to make 70,000 tonnes of hydrogen annually.
Geothermal energy in Kenya and hydroelectricity in Norway will both provide about 300 megawatts of clean energy to Fortescue’s projects, indicating an annual production of about 42,000 tonnes of hydrogen each. FFI is considering a pipeline of more than 100 projects.
Forrest wants Fortescue to produce 15 million tonnes of the green fuel and chemical feedstock annually by 2030, the equivalent of more than 200 Gibson Islands.
Hutchinson said he could not reveal the likely cost for the projects until later this year when commercial terms were agreed.
“All I can say is we’re learning every day and working very hard to make sure we get five to a final investment decision this year,” he said.
The former General Electric executive said there were encouraging signs the Australian government might offer incentives to clean energy investments to match the Inflation Reduction Act in the United States, which would keep Australia “in the game”.
Fortescue shares fell 3.4 per cent on Monday to $20.76 a share.
Meanwhile, shares in fellow Perth-based resource company South32 plunged 7.4 per cent to $4.12 after the diversified miner’s March quarter production dipped for all its commodities compared to the preceding three months.
Alumina tonnage dropped 9 per cent due to maintenance at a refinery in WA, and difficult mining conditions in NSW drove metallurgical coal output down 16 per cent.
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