Fortescue Metals Group Ltd has amended its leading heavy industry decarbonisation strategy to eliminate fossil fuel use and achieve real zero terrestrial emissions (Scope 1 and 2) across its iron ore operations by 2030.
In a statement, Fortescue said the expenditure would eradicate Fortescue’s fossil fuel risk profile and allow it to provide carbon-free products to its customers.
According to Fortescue, the plan will see the company lead the market in terms of how it responds to expanding customer demand and public and investor expectations to reduce carbon emissions. Fortescue anticipates that the operating costs savings from eliminating diesel, natural gas, and carbon offset purchases from its supply chain will result in favourable economic returns on its investment. Fortescue added that it is well-situated to benefit from first-mover advantage and the capacity to commercialise decarbonisation technologies.
The announcement was made at the invitation of US President Biden’s First Movers Coalition and the United Nations Global Compact, with the UN Secretary-General at the CEO roundtable on “Business leadership to rescue the Sustainable Development Goals”.
The company also announced that the Science Based Targets Initiative (SBTi) would validate and audit Fortescue’s emissions reduction efforts. SBTi was established to guarantee that companies meet the Paris Agreement goal of limiting global warming to 1.5 degrees.
According to Fortescue, its decarbonisation journey began on the commencement of the first significant trip on 25 August 2020, securing the technology, demand, and resources for the ecosystem of green energy. Fortescue added that its journey further strengthened with the successful completion of the 100- day sprint to develop the world’s first hydrogen-powered mining truck.
Once fully implemented, Fortescue’s decarbonisation plan and related investment will deliver significant economic and environmental benefits by 2030, including:
- A reduction in annual emissions of 3 million tonnes of CO2 equivalent;
- Net operating cost savings of US$818 million per year starting in 2030, based on current market costs of gas, diesel, and Australian Carbon Credit Unit (ACCUs);
- 3 billion dollars in total operating cost savings by 2030 and capital payback by 2034, at current market prices;
- Fortescue’s exposure to fossil fuels and the corresponding price volatility will be eliminated, which will reduce the risk associated with the operating cost profile;
- removing Fortescue’s exposure to the price risks and regulatory risks associated with the carbon tax that comes with relying on carbon offsets;
- Develop a significant new green growth opportunity by producing carbon-free iron ore and commercialising decarbonisation technologies;
- Guaranteeing future access to green capital markets.
The investment, estimated at US$6.2 billion, includes the deployment of an additional 2-3 GW of renewable energy generation, battery storage, and the incremental costs related to green mining fleet and locomotives.
The fleet’s capital purchase will be part of Fortescue’s sustaining capital expenditure and will coincide with the asset replacement life cycle. Studies are being conducted to maximise the available local wind and solar resources.
Fortescue Executive Chairman Dr. Andrew Forrest AO said the energy landscape has unquestionably changed significantly over the past two years, and the change has accelerated since Russia invaded Ukraine.
“We are already seeing direct benefits of the transition away from fossil duel — we avoided 78m litres of diesel usage at our Chichester Hub in FY22 — but we must accelerate our transition to the post-fossil fuel era, driving global scale industrial change as climate change continues to worsen. It will also protect our cost base, enhance our margins, and set an example that a post-fossil fuel era is good commercial, common sense,” Forrest stated.
According to Forrest, Fortescue, FFI, and FMG are transforming quickly into a global green metals, minerals, energy, and technology firm that can provide green iron ore and the minerals, know-how, and technology essential to the energy transition.
“Consistent with Fortescue’s disciplined approach to capital allocation, this investment in renewable energy and decarbonisation is expected to generate attractive economic returns for our shareholders through energy cost savings and a sharp reduction in carbon offset purchases, together with a lower risk cost profile and improvement in the integrity of our assets,” he added.
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