Fortescue Metals Group, one of the world’s largest iron ore miners, has produced its first magnetite concentrate from its $5.9 billion Iron Bridge magnetite project.
The project, which has experienced cost blowouts of up to 50%, has been beset with problems and cost the jobs of three senior Fortescue executives. However, it represents a significant step for the company as it moves away from the simpler product that constitutes the bulk of Australia’s iron ore exports.
The Iron Bridge magnetite ore is a higher-grade steelmaking ingredient compared to unprocessed haematite. Despite flat iron ore exports of 46.3 million tonnes for the March quarter, Fortescue Metals CEO, Fiona Hick, remains optimistic about the market’s fundamentals. She sees China’s economic growth as a key priority for 2023 and a supportive factor for the iron ore market. BHP, Fortescue’s Pilbara rival, shares Hick’s optimism, stating that the market would benefit from healthy demand for iron ore from Chinese and Indian customers.
Fortescue Metals’ ambitious plans include its target of making a final investment decision on five green hydrogen projects this year. The fuel and chemical feedstock are produced by separating hydrogen from water using renewable energy. Green hydrogen can be used to make ammonia for ease of transport or as a fertiliser ingredient.
Fortescue Future Industries (FFI) CEO, Mark Hutchinson, announced that 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.
Fortescue’s Chairman, Andrew Forrest, has ambitious goals for the company to produce 15 million tonnes of green fuel and chemical feedstock annually by 2030, equivalent to more than 200 Gibson Islands. Hutchinson could not reveal the likely cost for the projects until later this year when commercial terms were agreed, but he is encouraged by the Australian government’s potential incentives to match the Inflation Reduction Act in the United States.
Fortescue shares fell 3.4% to $20.76 a share after the announcement. In contrast, fellow Perth-based resource company South32 saw a 7.4% drop in shares to $4.12 due to a dip in production for all its commodities compared to the preceding three months. Alumina tonnage dropped 9% due to maintenance at a refinery in WA, and difficult mining conditions in NSW drove metallurgical coal output down 16%.
Potential challenges for Fortescue Metals Group include the renewable energy industry’s uncertainty, the high energy cost of green hydrogen production, and its ability to deliver its green hydrogen projects in line with its aggressive timeline.
Overall, Fortescue’s diversification into green hydrogen projects represents a strategic move by the company to tap into renewable energy sources, support the global push towards decarbonisation, and expand its business beyond iron ore.