• Andrew Forrest says FMG’s new African iron ore project will complement, not compete with its growing Pilbara iron ore business
  • The company smashed its first half shipment record even before the start of production at its new Iron Bridge mine
  • Renewed emphasis on exploration as FMG mulls future Pilbara orebodies and begins push into rare earths, copper and lithium

Iron ore prices have bounced past US$120/t this year on a benchmark 62% Fe basis, lending credence to expectations throughout last year that a pullback linked to China’s Covid slumber would unwind once its economy reopened.

Last year saw largely incremental gains from the majors, with Brazil’s Vale again deciding to dial back plans to revisit the epic 400Mtpa it had plotted before its disastrous Brumadinho dam collapse forced Vale to reduce production and leave the market in a shortage.

Now, growth across the industry is back on the agenda, with Australia’s Pilbara miners moving to set new records, while a new front in Africa is moving at a more certain pace than before after years of false dawns.

Fortescue Metals Group (ASX:FMG) highlighted the growth ambitions of the Pilbara set in its most recent quarterly results today, with its conventional iron ore business overshadowing its billionaire boss Andrew Forrest’s green energy dreams.

FMG shipped a record 96.9 through the first half of FY23, well ahead of its guidance of 187-192Mt, including 49.4Mt in the December quarter.

That is before the introduction of the Iron Bridge magnetite mine, due to deliver up to 1Mt in FY23 ahead of a ramp up of the US$3.6-3.8b development to its full 22Mtpa runrate.

FMG also plans to begin drilling at the Belinga iron ore project in Gabon in March, coming as Rio Tinto (ASX:RIO) and a host of Chinese, French and local interests begin to build infrastructure for the fabled Simandou development in Guinea, also in West Africa.

The development of Simandou with its 3.8Bt of iron ore resources at over 65% Fe has been long mooted as a potential killer to iron ore prices, with China putting the force of its largest steelmaker Baowu behind the mine to help get it developed.

 

Complementary iron ore

But Forrest says FMG’s Belinga gambit will be designed to complement its lower grade hematite operations in WA, which look to be pushing towards a 200Mtpa runrate after a limitation on export capacity was lifted from 188Mt to 210Mt by the State Government.

He suggested Gabon’s anticipated higher grades would be used to create a blend or virtual blend in steel mills with its Pilbara ore.

“(Simandou is) kind of presented as a challenge and a threat to Australia and who knows, that it may be, but that’s not how we’re doing Gabon,” Forrest told media and analysts this morning.

“We’re seeing a bilateral relationship between Gabon and Australia, which is really great for both countries. That orebody has very high grade, that can really be improved with the massive orebodies which we have here in the Pilbara on a blended basis so that both countries win.

“We’re not developing Gabon, say – as we’ve heard speculated by the developers of Simandou – as a challenge or threat to Australia.

“We’re developing Gabon as an absolute complement to the very large iron ore fields we have, different mineralogy to Gabon … the blend is spectacular and it is the strength of both countries and both orebodies which will lift them both.”

 

Rare as the earth

Forrest remains bullish on China, say pent up demand being released from the pandemic lockdowns will see it remain “a major growth centre” which absorbs “huge amounts of commodities from around the world”.

While its push into the green hydrogen and renewable energy space is well documented, FMG appears to be increasing its investment in exploration in both iron ore and its new divisions in rare earths and battery metals.

FMG’s exploration director Nick Nitschke said the miner completed 40,000m of drilling in the Pilbara with ‘stretch targets’ to add 600Mt of new hematite and 400Mt of magnetite resources in FY23.

It is also drilling in WA and Latin America on copper assets, while looking into early stage opportunities in its new rare earths business, with Nitschke flagging ltihium as another priority commodity in its more speculative drilling initiatives.

“I think there may be a renewed emphasis on exploration on setting ourselves a target. How we got Fortescue up and away super fast is with, really, stretch targets and we’ve been a little quiet on how we described exploration,” Forrest said.

“But it’s always been one of the most exciting parts of this business, that’s why I brought Nick Nitschke back in to be able to speak about exploration.

“If a mining company is not a successful explorer, it ceases to be a mining company pretty quick.”

FMG spent US$49m on exploration and studies capex in the December quarter, including resource definition drilling at its Nyidinghu and Mindy South hubs in the Eastern Hamersley region, and copper-gold drilling in WA at McKay Range and Isdell.

 

Fortescue Metals Group (ASX:FMG) share price today:


 

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