Oakajee Port and Rail is back from the abyss with Fortescue steering the ship
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Remember the Oakajee Port and Rail project?
The multi-billion dollar pipe dream 23km north of the coastal WA town of Geraldton is back on the agenda after Andrew Forrest’s Fortescue Metals Group (ASX:FMG) announced a deal to study the development with Chinese steel giant Sinosteel of its Midwest Magnetite Project.
Under the MoU announced to the ASX after Friday’s close, FMG will undertake a rapid 12-month assessment of the project with the option to acquire up to 50% of the Midwest Magnetite Project and up to 100% of the port and rail infrastructure.
It would provide FMG with another avenue into the high grade iron ore market it is entering with the US$3.5 billion Iron Bridge magnetite mine currently under construction, and critical port and rail infrastructure in an area earmarked by the WA Government for its potential as a green energy export hub.
$65 billion-capped FMG, one of the world’s largest iron ore miners, gives the project the heft it hasn’t previously had.
Oakajee Port and Rail has been on the backburner since the end of the last boom and was memorably the subject of the announcement of a $6.5 billion funding deal that never was by junior Padbury Mining back in 2014.
The disclosure scandal led the Federal Court to ban directors Gary Stokes and Terence Quinn from managing corporations for three years in 2016.
In FMG and Sinosteel its new backers have a bit more credibility.
Sinosteel, the 40% owner of Rio Tinto’s Channar mine in the Pilbara, bought out Japanese giant Mitsubishi’s interest in Oakajee and the Jack Hills iron project in 2019.
“The signing of this MoU demonstrates Fortescue’s commitment to our strategic pillars of investing in the long-term sustainability of our iron ore business, expanding into new regions and continuing to deliver strong returns to our stakeholders,” FMG CEO Elizabeth Gaines said.
“We look forward to working with Sinosteel on the next steps for this important project for Western Australia which, in addition to the magnetite and infrastructure development, offers the opportunity for a co-ordinated project combining Fortescue’s iron ore and infrastructure pedigree with Fortescue Future Industries’ green energy objectives.”
Sinosteel President Andong Liu said: “Sinosteel, like other pioneers in developing the Midwest region, has long cherished the vision of developing this world-class magnetite project in this area.
“Fortescue is not only a leading iron ore producer, but also a pioneer in green energy initiatives.
“In this cherished land of the Midwest, we are confident that together with Fortescue we will make the Midwest a low-carbon, green, high-quality iron ore centre and lead a new era of magnetite development in the Midwest.”
Given Twiggy and Fortescue’s interest in green energy it’s worth noting Oakajee has been talked up as an ideal location for a green hydrogen production by the WA Government and Hydrogen Industry Minister Alannah MacTiernan thanks to its abundance of wind and solar energy.
“These initial results are extremely encouraging and confirm that Western Australia has a world-class renewable resource that is ideal to support a successful green hydrogen industry,” she said in May.
“The Oakajee SIA is ideally located for the production and export of renewable energy both to local and international markets and there has been strong global interest in developing the site.
“We know there is incredible demand for clean, renewable energy and we are determined to ensure Western Australia is a market leader in the production of renewable hydrogen.”
Forrest has been open in his desire to diversify FMG, of which he holds around 36%, to become a leader in the burgeoning green energy industry.
He has set targets for its Fortescue Future Industries arm, seeded with 10% of the company’s iron ore profits, to sell 15Mtpa of green hydrogen by the end of the decade and 50Mtpa long term.
FMG has announced billions of dollars of prospective green energy projects around the world over the past year, much of it in announcements either regarded as “not price sensitive” or issued outside the ASX platform.