Monsters of Rock: How much do we know about FMG’s green energy revolution?
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Mining stocks went on a big run this afternoon as investors found a second wind, posting a delayed reaction to a host of good commodity price moves this morning.
After an indifferent start, ASX 200 and 300 miners fired up for the second half with $44 billion capped iron ore miner Fortescue Metals Group (ASX:FMG) leading the way with a 5.26% gain to power the materials index to a 1.2% rise.
While the benchmark iron ore price climbed above US$120/t last week, capping its second straight weekly gain after three months of losses and pulling Rio Tinto (ASX:RIO), Mineral Resources (ASX:MIN) and Champion Iron (ASX:CIA) into the winner’s circle, for FMG it was all about its founder Andrew Forrest’s push into green hydrogen.
Twiggy has been scouring the globe for locations on which to centre his green energy initiatives, bundled up within Fortescue as Fortescue Future Industries, which is being funded from FMG’s iron ore profits.
His latest venture has taken him to Queensland, where on Sunday he announced alongside the State’s Premier Annastasia Paluszczuk Australia’s largest electrolyser facility would be built in Gladstone.
Today they added to that wave of investment with a commitment on a feasibility study with Incitec Pivot to convert its gas-fed ammonia production plant on Gibson Island near Brisbane into a green ammonia plant fed by a 50,000tpa onsite green hydrogen facility, which would supply low carbon fuel to the Port of Brisbane and Brisbane Airport.
The market reaction today has been great for FMG, which has suffered a ~40% hit to its share price year to date after iron ore prices hit record levels then fell into a steep drop, seeping sentiment from the big miner.
For some analysts though, they say more details are needed before the impact of FMG’s green energy investments can be truly quantified.
RBC’s Kaan Peker carries FFI as a US$600m expense to FMG, saying the investment bank is yet to include green hydrogen or ammonia assets in its base case because they view economics for the energy transition technologies as “challenged.”
Peker said it was unclear what would be covered by the US$83m “initial electrolyser investment” FFI will make at the six stage green energy manufacturing centre in Gladstone, or what will be included in the total US$650m investment touted by FMG.
He was also cautious about the economic outlook to support FMG’s green hydrogen and green ammonia investments.
“A high carbon price, tiered pricing and government incentives are required to ensure green ammonia production will be economic over the medium term. More details around these incentives and project economics are needed,” he said.
“We believe one of FMG’s biggest challenges will be finding large opportunities for renewable growth which generate an adequate return.
“The European oil majors already have large, scalable green energy portfolios, large ambitions and budgets for growth (targeting 20-50GW and US$2-5bpa spend by 2030).”
Base metals like nickel, which rose more than 5% to break the US$19,000/t barrier, and copper were up at the end of last week.
Coal prices were also higher, with Newcastle thermal coal fetching around US$238/t after falling from record highs of almost US$270/t early last week.