Fortescue Ltd

It's great to be back with you. And I can say that I have loved my time again, simply that it might be being this company's chief executive. As you know, we've only had three chief executives in our 20 year history. And I will be gladly handing over to Hutch and Fiona for our next quarterly half yearly annual results team. So you won't hear that much of me, but all of you can contact me anytime you like. I've loved this short period being able to speak with you like this. So look, it was only two weeks ago that we presented results which included our highest ever half-year shipments of 96.9 million tonnes. I won't repeat what we discussed then, but I would like to say we are consistent. We deliver very strong results. while at the same time we challenge ourselves further to step beyond fossil fuel to deliver across society's highest expectations. This, of course, has made us one of the highest, if not the highest, value-returning companies on the Australian Stock Exchange over 20 years. We've consistently delivered returns to our shareholders, building on the almost US$22 billion investment since we started this company from scratch. Two men and a dog, and we used to argue which one was the dog. Today, we've announced a 40-franc interim dividend of 75 cents, exactly in line with our guidance of between 50 and 80%. We've also maintained our position as the world's lowest-cost iron ore producer while decarbonising our operations profitably and becoming a global green energy metals and products business. And this is all team, all while delivering record iron ore shipments and finishing off construction on the massive groundbreaking Iron Bridge project. As you know, this has been a mammoth effort by our own construction teams, who I'm immensely proud of, and who, with the successful experience of turning Iron Bridge around, executing Iliwana and all our other very successful projects, match fit to go into arguably the highest growth period in this company's history through consolidating our Turbara and our African operations and delivering major construction projects around the world for green energy. Now, I have to say that with Ironbridge in particular, Like with FFI, we do the technical hard work first. We have been working furiously on green technology testing now for three years. You all know that we successfully piloted, at commercial scale, Ironbridge, because it's breakthrough technology, never been brought on in such a large plant, and certainly not in magnetite, but it worked perfectly at our commercial scale, 500 million US dollar pilot plant. So we are expecting great things when we start to fully commission and ramp up Ironbridge. In Gabon, and I don't want to undercook Gabon, Gabon is a huge iron ore province, undeveloped, and the Gabonese government didn't put us up to tender, didn't ask us to compete. They simply did what some great governments do and do their own research, their own global investigation. And then they invite the company they think is the best to develop their iron ore industry. And we're deeply honoured that the Gabonese government invited Fortescue to develop the Belinga project, which will, I believe, because this is how we roll, have a very positive impact both on the Australian hematite iron ore industry and three, the differences in minerals and metals within each other's ores have a very positive effect on the Gabonese iron ore industry as well. It will dovetail into our Pilbara operations, maximising the mineral content to our customers' satisfaction and extend and optimise the mine lives and efficiency of both our Pilbara and emerging Gabon metal complexes. And to do this, very fortescue this, to do this we're implementing a production plan now. A production plan that with our extreme sensitivity to community and endemic fauna and fauna studies, we believe we'll see our first iron ore shipped this year. Not this decade, not next decade, this year. This is possible because we're using an existing road and we're using an existing rail line, which limits the possibility of environmental delays, as these have already, of course, been approved because they're already operating. The necessary equipment, which normally has very long lead times, for a new start could be many, many years, is available to Port Askew right now. We're utilising our residual crushing and screening plant residual haul trucks, rail cars and our own locomotives. And it's due to Fortescue's clear and unambiguous industrial leadership away from climate change that we've attracted respect from governments around the world. Together, we're now switching on the world's first green iron facility through an electrolyser and expanding our major automation centre and our green fleet tech hub in WA that has been responsible for breakthroughs that our companies made in zero pollution trucks and mobile equipment, including advancing train and ship engines. Remarkably, this is the key, ladies and gentlemen, remarkably over this intense period of growth, we've actually reduced our debt. We've improved on what was already a very strong balance sheet and continue to create great value for all our stakeholders, including our shareholders. When Fortescue does well, ladies and gentlemen, the entire Australian community does well. We consistently contribute hundreds of millions to our state and federal government coffers every month. I'll now pass to Hutch. Hutch, how's FFI going, mate?

Good. Thanks, Andrew. We really are quite a unique inflection point for our business at the moment. We work extremely hard to bring at least five projects to FID this calendar year. No one has done what we are on track to do, and that's really to deliver green energy and green molecules of scale on a global basis. We totally believe that the global market is ready and waiting for our product. And actually, Andrew and I have traveled a bit over the last few weeks, including Davos, And it was really clear to us that, really, we're the only game in town doing multiple projects globally. As we see the world, and we kind of learn every day, really, we see four ecosystems building. The first is the United States. And there we have the Inflation Reduction Act, which has really created a serious advantage for product in America. This will be a very domestic focus market, and they will produce green energy and green hydrogen locally for that market. The second market is Europe, and this week we saw very positive signs from Europe with a long-awaited delegated act published by the European Commission. This act will create a clear definition for renewable and green hydrogen, providing the certainty that is needed for producers, manufacturers and investments to do business in the EU. We will be very much part of the EU ecosystem, and we also will supply Europe from places like Canada, Latin America, North Africa, and the Middle East. The third ecosystem developing is in Asia, where Singapore, Korea, and Japan will be big markets. We will supply these markets from Australia and India as well as possibly Canada and Latin America. The fourth market is China, which we just can't simply afford to forget. We will be traveling to China later this year and to better understand and gauge the local markets there. So in the United States, we're very much going to focus on Texas, Arizona, California, and this is where there's an immediate need for product. In Europe, we plan to focus initially on places like Norway, Because what we're looking for is really good, affordable energy. And we see some really wonderful opportunities in Norway to get going. In Latin America, Brazil is going to be a focus. In Africa, we're looking at places like Namibia and Kenya. In North Africa, Morocco is a target. And the Middle East, we've made great progress in Egypt and Jordan. And of course, Australia is a big priority for us. So as you can see, we're really creating a global business here. Now just projects aside, it's also important to acknowledge that we're making great progress on technology. This week, our research and development team had a major breakthrough on green iron and produced some in our Western Australia facility. So we're making great progress on many breakthroughs. And all this is to aim to build a global business that will continue to deliver returns for our shareholders well into the future.

And with that, I'll pass over to Andy. Thank you, Hutch. Good morning, all. And look, it's a real privilege for me to represent the finance team and step you through the key highlights of what was another period of strong earnings and cash flow generation. Starting at the top line, revenue for the half was $7.8 billion. Our focus on cost management, on productivity, contributed to EBITDA of $4.4 billion at a margin of 56%. Now, this represents EBITDA of $52 per dry ton sold. And in fact, it's the eighth consecutive half-year period generating a margin north of $50 a ton. And that's a result of Fortescue's industry-leading cost position and our integrated sales and marketing strategy. and it's achieved by focusing on what we can control. We reported NPAT of 2.4 billion for the half, and for those on the webcast, you can view the reconciliation to the first half of last year to H1FY23 in the waterfall on this slide. It's a clean and transparent set of numbers. You can see all the moving parts, including the impacts of price, volume, and costs. Now on the next slide, Next slide. It's clear that the business continues to generate exceptional cash flows with free cash flow generation of $1.6 billion in the half. Now that's capital investment including growth after capital investment including growth of $1.4 billion. The balance sheet remains really strong with cash on hand of $4 billion which includes reserved cash of about $1.6 billion for payment of the interim dividend that was declared today and a commitment of around $1 billion to FFI that's consistent with our capital allocation framework. Now, gross debt was unchanged over the period at $6 billion. You can see that we're positioned inside of our targeted investment grade credit metrics, and we have a well-balanced debt maturity profile. And our liquidity is further supported by an undrawn revolving credit facility and an undrawn term loan. Disciplined capital allocation is a core competency and it's really important to us. You can see from this slide on the webcast that since FY14, and that's the first year that production exceeded 100 million tonnes, Fortescue's generated $48 billion of operating cash flow. We've invested $16 billion. We've repaid $9 billion of debt and declared $23 billion of dividends That equates to almost 70% of net profit after tax over the period. So as you can hear, we've achieved outstanding operating and financial results for the first half of FY23 and we're really well placed to again deliver on our guidance. On that note, Ashley, I'll hand back to you to facilitate the Q&A where we welcome your questions.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Please limit your questions to two per person. If you wish to ask further questions, please rejoin the queue. Your first question comes from Raoul Anand with Morgan Stanley Australia. Please go ahead.

Thank you for that. Thanks for the call, guys. Look, the first one I wanted to ask was perhaps for Hutch. Hutch, you've talked about the five FID projects for FFI this year. Would you be able to provide perhaps a bit more colour? Which one's coming up first and how is that progressing? A bit more colour around that portfolio of the five projects perhaps? I mean it's a broad-based question but I guess a bit more visibility would be much appreciated. That's the first one, and then I'll come back with the second thing.

Yeah, so look, thanks for the question. Look, I think we have a number of kind of horses in the race, and that's what I want to see at this point of the year. So we have a number of projects we're working on. America is going to play a big part of this. As I mentioned, Norway. Australia is going to be a big part of that as well, and we have another few projects around the world, including Africa. So look, at the moment... really want to get the horses to run and see who gets to the finishing line there. But I can absolutely say we have certainty that we'll see five by the end of the year.

Okay, and any further colour in terms of, you know, are these hydrogen projects, are these sort of green ammonia, like is there anything specific that you're targeting in these regions?

So look, I think it really does depend on the market. As I mentioned in the discussion just before, The United States is a very different market than the rest of the world. It's going to be domestic, so it's going to be probably more like a hydrogen play, just plain hydrogen, because that's what the buyers want. So Texas, there's a huge hydrogen market. They're grey, and our job will be to try and replace that with green. So you will actually just produce hydrogen and replace that. Other places where we're going to export green hydrogen are you're probably going to turn those to ammonia. So, for example, Gibson Island, which is in Brisbane, will be an ammonia facility, green hydrogen, green ammonia to export.

Perfect. Thank you for that. Look, the second question is around Gabon, and I think it might be Andrew that might be able to help on that one. I just wanted a bit of understanding. I mean, you know, obviously... quite interesting to see that the existing infrastructure is going to allow the first shipment pretty quickly. I wanted to understand with that existing infrastructure, what type of run rates can you achieve? And then once you do get the environmental approvals, where do you envision this asset getting to in terms of size of production and product grades, et cetera, once you have all the kit and all the approvals in place?

Yeah, look, excellent questions. We're getting to know the existing surface infrastructure, road and rail. We've been pretty conservative. I said, look, let's take the initial operation to 2 million tonnes and just trial everything. Learn like crazy. We are completely comfortable with the operation being put together with Tiki Tape and Binder Twine, mate. but it will be safe. Our priority is safe. And we'll get into production, obviously, at a speed which you see in developments in Africa, which is breathtaking. And do that because of the ability to provide a very flexible, fast, efficient mining company with excellent infrastructure and export those skills and equipment straight into Gabon and use roads and use rail, which already exist. And, of course, you'd like me to speculate, and that's fair, on scale. Look, you've just got to go on format. I mean, we did cloud break at 40 million tonnes, you know, Christmas Creek at 50. We looked at Solomon at 60. Each one of these has overperformed. The only one is 30, overperformed. And we have the ability, we believe, if we wanted to probably settle this showdown, at around 50 million tonnes. And right from there. But look, it is speculation rule. We think we've got a minimum of 1.5 billion tonnes of high-grade, close-to-surface ore. It could be much, much larger than that, but it is a huge iron ore province which has totally taken the world by surprise. It's the last one remaining undeveloped. It's due to the Gabonese government's selection as opposed to finding it out in the courts or this or that, which colleagues have done with a speckled history of other African projects. This has been immensely, immensely clean and efficient. It comes from, of course, decades of understanding the deposit, but no development being encouraged. Whereas with Sportescue, we were chosen to develop the project and develop it quickly. environmentally sound, deep respect for endemic species, that's exactly what we're doing.

Your next question comes from Hayden Bairstow with Macquarie. Please go ahead.

Good morning, Andrew and team. Just a couple from me. The first one, just on the capital allocation, Andrew, on the dividend, I mean, your part ratio is back down to 65, but you do talk about a billion dollars of unallocated capital in FFI. I mean, is this effectively a precursor to these five projects coming, and there'll be a much bigger capital commitment in FY24. And where should we think about that payout ratio, given you're moving into starting to spend some real money?

Oh, look, Hayden, you've been around a long while, mate. You know that 65% payout ratio would have just been breathtaking only a few years ago. That is a very high impact payout ratio relative to what we've seen. Now, of course, mining companies around the world, after making disastrous investments in takeovers and the like, have pulled in their horns and they've followed Fortescue by saying, actually, we need to be really disciplined and we need to stop being so arrogant as to say that shareholders can't manage money better than we can. And we broke the mould, as you know, Hayden, with providing capital growth and income, which, you know, as you know from the analytics rule of the past, you could have either one or the other. And we broke that mould, Hayden. But 65%, I think it's really strong. Yes, it makes sure that we've got a huge amount of headroom, but I'm having no shareholder complain that 65% is not generous.

Okay, great. And the second one, just on... I guess the FFI projects in the Pilbara, I mean, these are the ones I guess you guys can control because you're running within the iron ore business. I mean, what are we seeing on the ground in the next sort of 12 months? Is it largely around the solar farm at Solomon or is there sort of other projects that we'll actually see, you know, physical construction as part of that sort of decar plan this year?

Well, Hayden, I know Hutch and I'll answer a broader question about yours specifically, but You do mention projects in the Pilbara. Ironbridge is satisfactory completing. We've had excellent performance from all our projects. We're adding 600 million tonnes of iron ore a year and only using 200 million tonnes. I mean, our Pilbara operations have never looked stronger nor more exciting. And that's a perfect environment for Hutch to have to come in and match that excellent construction and operating performance. We hereby publicly challenge you to do so. And Hutch, give us a rundown.

Bring it on. Bring it on. So really focused on the decarbonisation for the Pilbara. Really, that is the number one priority for the company. We came out and told the market we'll spend $6.2 billion on fully decarbonising this company. And we're off to the races. And that's going to be solar. It's going to be wind. We're going to be feeding renewable resources down the veins of our transmission lines in the Pilbara. And a lot of focus then on trucks, trains, and making sure everything else is pollution-free. I'm going to throw to Christian Haining, who heads the DCARP. So Christian, do you have any other comments?

Thank you, Christian, here. Just building on what Hutch was saying, we continue to build out our renewable assets already, mostly solar at the moment. That was already part of the plan, and we're accelerating that. At the same time, we're gearing up for significant additional investments in the pill bar for additional green energy infrastructure, but we haven't taken FRD on those yet, but we'll expect to do so in the next 12 months or so. And of course, then there is the trucks, which we will bring the first prototype truck to our operations this financial year. Battery electric whole truck, which will start productive use in the mines again in the next six months, which will give us invaluable insights to develop the production version of that truck, which will then bring in big numbers later this decade.

Thank you. Thank you.

The next question comes from Khan Pekka with Royal Bank of Canada. Please go ahead.

Hi, Andrew, Mark, Fiona and Andy. Two questions from me. Just firstly on Iron Beach, can we get an update on that, given that concentrate's expected to be shipped at 2Q? And also, assuming that we have sort of an 18-month ramp-up, it sounds roughly like 10 million tonnes should be expected in FY24. We'll circle back with the second question. Thanks.

Yeah, thank you, Warren. Did you hear that question clearly?

Yes, I did.

Yes. So Warren Harris is our chief instructor, deliverer, recoverer of IronBridge. And while I'd love to speak to this project, because I'm in love with it, I'm going to ask Warren to answer that, Karen.

OK, thanks, Andrew. So, yeah, look, Ironbridge is well progressed. We've had an extremely strong construction performance over the quarter, extremely safe as well. We're well into our commissioning phase of the project. That's going extremely well so far, and we are on track to get first production out in March this year.

Sure, thanks. Thanks. Just maybe on the Gladstone project, Electrolyzer Factory. Pod Power's CEO cited poor economics as part of the key reason for withdrawing from the project. Since we don't have any metrics, most people take this at face value, but would it not be easier to dispel some of those concerns with giving some project estimates? Thanks.

So let me handle that. I think with the Gladstone, our view is there's great economics in this. We are on track to have the facility ready in March and then our first electrolyzers this year. So our belief is a bit different than Plug. We still have a great relationship with Plug. We are very much part of our journey for green hydrogen. And we're going to make our own electrolyzers ourselves. We think there's a massive market globally, not just here in Australia, other parts of the world. So you'll see us do other facilities in due course in America and maybe some other places as well.

Yeah, and look, I'd like to build on that. We have a great relationship with Andy over at Plug Power. We're growing our own technology here furiously, as you know, Khan. We're a technology company like we'll soon be a manufacturing company. But for green technology, I don't think we'll have a peer in the world. Maybe one which should be in Colorado, which is the United States green energy facility, but we've contracted with them as their key partner. So we're capturing that technology as well. So it is unsurprising that we say, well, we can improve on these electrolyzers and improve on their performance. And Andy, we think your electrolyzers are great. We're not knocking them. We just would like to do our own. And again, still have plug power as a deliverer to our business of electrolyzers because we just need so many and so much. So I know Andy made that throwaway line and that he can get economics which are better elsewhere. That's a throwaway line which I wouldn't have thought any analyst worth their salt would have swallowed. But look, if you're looking for a reason to make a big brouhaha out of a rounding error, which is all that is, a rounding error in a small project, then you can jump all over it. But it just showed the EQ of a gnat. Andy made a throwaway line, which was basically saying that what if he's going to go their own way, but they're still going to be great friends, which is exactly what's happening.

Your next question comes from Lyndon Fagan with JP Morgan. Please go ahead.

Thanks very much. The first one is just on the green iron. You mentioned there was a breakthrough within the last month. I'm wondering if you're able to give us a bit more detail on that.

So I'll hand over to my good friend, Christian. Shoot me.

Thanks. And then Christian here. Yes, as you know, most of our emissions are actually in the downstream scope three when our iron ore is used to make steel. Traditionally, that's done in blast furnaces, which create a lot of CO2. In order to make sure that the world is on a better trajectory, we need to find a better way of making steel out of our iron ore. So with that in mind, Fortescue has already started a few years ago a technological development to come up with a reduction process that allows us to make steel without producing any CO2. That has been started from the ground up with fundamental research. And the breakthrough that we've achieved this month is that we've now produced sizable volumes of green metallics out of our own iron ore without producing any CO2 in our production facility in Western Australia, which is extremely encouraging to go from a few grams to a scale significantly larger than that. Back to you, Andrew.

So what is the flow sheet of that, if I can just press a little more?

Look, Matt, I could tell you, but then I'd have to kill you. That's fair enough.

But...

Let me just say that to give a clue to all our competitors out there, it uses a membrane and they're going to have to come and talk to us if they want to borrow the membrane.

Okay, thanks for that. I did have another one. Andrew, on the last call, you mentioned the replacement hub for Cloudbreak wasn't necessarily Nidinew. I'm wondering if you can maybe just elaborate a bit more about whether it's still FID and FY25 that we need this thing and, you know, what it may be, you know, what sort of extension of perhaps the Western Hub could be a replacement for Cloudbray?

Colin, typically, excellent question. Mate, you're damn right. We're pushing knitting you back into the 2030s out of the 2020s and that is because we have had a great deal of exploration success. We're consolidating around our existing operations. We're consolidating in our near operations. Nittanyou will be a huge project one day but as it's not required given the exploration success we've had Don't let this go to your head, Nick Nitschke. But the young lad who's only been with me for half his life, 17 years, is doing a really good job. And if he doesn't miss niobium and rare earth deposits, he might even get a raise. So, yeah, look, I'd say this. We have... really consolidated in the Pilbara. We've grown our resources there. We're not in a hurry to develop knitting new because it will be a very large project and we have the resources to easily push that back into the 2030s.

Your next question comes from Paul Young with Goldman Sachs. Please go ahead.

Morning Andrew, Mark and Andy. A few questions on your project pipeline. A lot going on even in the last two weeks since you did your last call. Maybe a question first of all for Mark on FFI. Thanks for providing that list of five countries, Mark, that might sort of form the five projects that go to FID at the end of the year. The fact that you've actually outlined those five countries means that I guess those projects are pretty advanced as far as scope's concerned. So wondering if you can provide some information as far as you know collective hydrogen production those five projects are targeting also you know broadly speaking or rough numbers around collective capex for those five projects please.

Look I'd say that's a little bit too early for that because I said we have a few projects in the race and you know as we bring this to FID this will become a lot clearer to you and you know I think we We want to make sure we tell you the information that is correct and rather than speculate where it's going to go.

Can I just maybe add why, you know, because there have been a couple of commentators saying Hutch has been a little vague. He did outline the five countries, but I can say there are projects within each country which are competing to go for FID. If he specifically names them, then the other projects are going to down tools. And so... That's what we're seeking to avoid. We want all projects working really hard. People love to compete within a family environment. And that's the only reason why we're not specifically naming projects. And by the way, if you did name projects right now and then chose another one, you'd say, well, you know, you missed lettuce perhaps. And that wouldn't be deliberate. So because we've got really, really solid competing projects in those countries, That's the only reason why Hutch isn't naming them.

They're the first to come to FID. We do have others in the pipeline behind that. So it's a matter of getting the right focus in the organization, getting the teams focused on getting... We want to make hydrogen as quickly as we can. Yeah.

Yeah, and just maybe to add, so that tells me that, or does that indicate there's a fair bit of variance amongst production, potential production by project and also capex by project?

Absolutely.

Okay, thanks. Thanks, Mark. Maybe the next question, back onto Gabon, Andrew. You know, this deposit's been around for many decades. I know it's big and large, but... Gabon is probably the most protected and pristine countries in Africa. It's French. Arimat's probably the only company that has actually been successful in developing a project in Gabon. And developing in Africa is not easy. That's the reason why all the other projects that you've been referring to have taken so much time to develop. So I guess the question I have for you is, doesn't Gabon just add a lot of jurisdiction and environmental risk to your portfolio?

Look, Everything you've said is true. It's a beautiful country. From a foundation perspective and ecological perspective, we are looking at significant opportunities to invest in the preservation of rainforest and jungle on scale. That's on the foundation side because we do love that country. we pride ourselves at Fortescue that you can tell where we have mine, but only because the country is a little richer and not because we've left an indelible scar anywhere or made a knock to any species which can't be immediately replicated, i.e. they're very endemic. And that's the track record. I don't think it was a bad thing. I'm a PhD in ecology, which the president of Gabon was attracted to and his first words were, you know, I really expect you to build but protect my country. And I've said I will do both, sir. So we have a very good relationship with what is a very stable government, a popular presidency, a popular government. I'm not the only... Ecologists, when we get in the room on the Gabon side, they've got a highly educated ministry, particularly on the conservation and environmental side, with very strong views. And we respect those views because they're right. And they've seen what we've done in the Pilbara. They know that we're extremely sensitive to the environment. They know that we've committed our company well. deleting the industrial world away from pollution, which will eventually destroy us. And there's no country, I'd say, more delicately poised against climate change apart from, say, the low-lying countries in the Asia-Pacific, but who are very sensitive to ecological destruction from climate change than Gabon. So... We will be extremely sensitive in how we develop and ensure that anything we do has the flora and fauna able to be fully replicated and fully replaced. And Paul, thank you for that observation.

Your next question comes from Robert Stein with CLSA. Please go ahead.

Hi, Shane. Thanks for the opportunity. Just a question on Gabon to start with. How are you thinking about the market impact of additional volumes? And this is the scaled-up facility, the 50 million tonnes I'm talking about. Do you view it as an option if global steel picks up again or if steel's peak is supply coming no matter what, potentially impacting long-run prices?

I've got a second one. Thank you. Look, we're not beating our chest about this being a threat to the Pilbara or any such thing with its scale. We're simply saying that between Gabon and the Pilbara, you've got very different ores which react very differently in the blast furnace, but you put them together, you start getting the best of both worlds. So I think we're going to create a very, very interesting real and virtual product and one which ensures the duration, maximises the mine life, the efficiency and the performance of both countries' hematite industries. So, look, we take a highly complementary attitude between the Australian and the Gabonese iron ore industry and make sure that they will not only dovetail in together, but enhance the futures of both countries.

So, are you potentially lowering cut-off grades to extend the resource life? in the Pilbara by blending either synthetically or physically the Gabonese ore? Is that a potential thing that you're looking at?

Oh, look, we could, but we don't have to, Robert, because we're finding so much iron ore, mate. So that option isn't available to us. No, we're going to maintain grades in the Pilbara. We're just going to enhance it in Gabon. These metallurgical characteristics of our of our portable ores, which are immensely attractive. They fire like a rocket. They convert very quickly to iron. Some of the fastest of any ores in the world, which of course reduces operating costs in the blast furnace. You add to that higher grade from Gabon, you've got a magic mix.

Your next question comes from David Coates with Bell Potter Securities. Please go ahead.

Good morning, everyone. Thanks so much for the opportunity, Andrew, Mark and Andy. Just following on some of those other questions on Gabon and the development pipeline. Just wondering if at some point we'll see, so I guess the equivalent of something along the lines of a feasibility study released, so we've got good visibility on metrics like OPEX and production rates, fiscal terms, and as you've sort of just been describing, how it dovetails in with the Pilbara operations.

Yeah, look, remember we got invited to develop Gabon a few seconds ago and we've been working furiously ever since. We may have known of the ore body and looked at it closely for about four years, but the decision by the government to choose decisively us to develop it has only just come down the pike so we i'm i'm i don't want to speculate what is optimal i want to look at the the iron ore industry the iron ore price we do not want to hurt the australian pulver operations of either bhp rio tinto or ourselves um we're not about beating our chest and being the biggest in the world what we're always looking for at fortescue is to be the highest profit per tonne and uh and be a very meaningful player and important to all our host customer countries. So I'm still yet to do with my team, still yet to do all those analytics, all that strategic research to make sure we enhance the global iron ore industry, we enhance the global steel industry, we don't cause damage anywhere.

Okay thanks Andrew and just the follow-up you know with the plan to commence production this year you mentioned the use of residual plant does that mean you guys are shipping sort of haul trucks and locos and processing equipment to combine to sort of facilitate that that rapid start?

Yeah it does David and if you want to ride mate it'll be a great voyage.

Your next question comes from Glenn Lawcock with Baron Joey. Please go ahead.

Oh, good morning, Andrew. Andrew, just on the five green projects for FFI, can you just help me understand your thinking around the funding? Has that changed at all as you move forward with these projects?

Yeah, I can say that everything is changing, but everything stays the same, Glenn. I'm going to say how everything...

staying the same and then hutch is going to talk to you about change what's going to stay the same is the is the uh binary ferocious protection of our balance sheet hutch over to you yeah so uh look i i think what you have to understand are these projects so you let's start with the off takes the off takes is going to be germany it's going to be singapore it's going to be japan korea so from a From a bankability perspective, I believe these projects will be very bankable. So we will look at these in a traditional project finance manner where we will bring in non-recourse project finance for these projects against a very bankable offtake. So that's in train. And then on the equity side, we have the option to do it ourselves or bring in partners. And there's an enormous amount of capital out there waiting for us to come with projects. I think the big Big advantage we have is we have a pipeline of projects. Several others around the world have a project to do. We've talked to many investors, including some of the sovereigns, and the fact we have a pipeline of projects is extremely interesting to them. So, look, that's the way we'll finance them. We will build these, we will operate them, and we'll be very smart about the way we finance them.

Yeah, and we share a bit of equity on the way through. We share a bit of equity on the way through.

Yeah.

Well, we'll certainly keep you posted. In the instant there's anything looking like a decision made, I'm going to let you know. But the world of finance is changing dramatically. There's never been a huge green hydrogen industry or green energy industry. There's never been the government incentives. There's never been an IRA. These all make massive impacts and adjusting dramatically the entire non-recourse project finance ecosystem as it relates to not destroying the planet.

Yeah. Sorry, Andrew, if I could just add on this. I mean, I think we've been talking to a number of investors and the signals from the governments around the world is really clear here. Really clear. If you're an investor looking to where do I put my money, the world's governments are saying green hydrogen.

Yeah. Okay. Yeah.

I mean, remember... It's a miracle molecule, Glyn, which you can make so much of from.

Okay, so Andrew, is that, so therefore a potential FMG equity stake into one of these FFI projects this year is a distinct possibility in your mind?

Well, Glyn, I mean, if we don't have an equity stake, Hutch is fired. So let's just put that straight out there. Yeah, but... But does it mean we'll add in further capital? Yeah, mate, I don't know. I don't know. Do we have heaps of capital to add in? Yeah, does it mean we will? No. That decision's got to be made. We're going to put our capital up against the enthusiastic equity capital we have seen, not only from Davos, but around the world, but particularly the US capital markets. You know, we have, we get, the regular statements from bankers and fund managers that they have trillions of dollars of capital available and no freaking projects, Glyn. And when we have a pipeline of 100 plus projects and as technology changes to match projects, we choose them. Markets change to match projects, we choose them. Then we're going to come back to you with financing details. But Glyn, I'm not saying we're going to repeat the Fortescue miracle where we project finance everything and wind up with 100% of all our projects. I'm not as young and rash as I was, mate. So I think we will dilute in those projects. I'm not sure. But will we have a substantial equity stake because of the massive value add, which our technology, our projects, our risk over the last several years, putting up with all the crap from analysts and public relations people saying that we don't know what we're doing, we're nuts. Now they're all gone very quiet. So we will have a reward for that and that's called carried equity.

The next question comes from Lachlan Shaw with UBS. Please go ahead.

Yeah, morning Andrew. Just two questions. So firstly, just on the iron ore market, what are your guys seeing in China at the moment in terms of anticipated steel demand this year?

Okay, look, I'm right across this, but I've got an expert here. And Vivian, I'd be delighted if you could answer that question. How are you seeing the iron ore market and particularly the appetite for our products within the iron ore markets?

So we're seeing certainly a pickup in demand post the Chinese New Year break. So, you know, particularly in the construction and real estate sectors, we're seeing some positive activity in that space. Steel margins are still low. So we are seeing really good demand for low-grade products and in particular the Fortescue products. And we see that across the inventory in our supply chain as well. So all in all, really positive in terms of the sign we're seeing, and we expect that to continue. The government has been quite vocal in terms of their support for the construction and real estate sectors, so we expect to see that translate to real steel demand later on in the year.

Understood. Thank you. And then just a second question. So obviously, just back to Gabon, and given the development here and the rapid acceleration there, does this mean anything for the Sinosteel Midwest JV? Is that perhaps less of a priority for the business going forward? Thank you.

Great question, Lachlan. No, it's not less of a priority. We're still evaluating that project on its merits, I must admit. when you're so close to victory with Ironbridge and you want to really see what the commercial scale benefits are once we enter ramp up and complete ramp up, that I'm delighted that we'll be able to bring across that real-time expertise and knowledge into the process flow sheet. of that project. So I think it's fair to say we're excited about that project, but I want to apply not forecast economics and not forecast engineering assumptions, but actual against a very large operation then called Ironbridge, and we'll input all that knowledge into it. So I just want to make that clear, Lachlan. We're in an enviable position unique in the world to develop magnetite projects and that Sino project will certainly be one.

Your next question comes from Adrian Prendergast with Morgan's Financial. Please go ahead.

Thank you guys. Just two questions for me. First back on Gabon and sorry for another one. It's just an interesting project but you can certainly see the potential scale of it but Just noting how far it is from the Trans-Gabon Railway and Libreville. I understand it's too early for feasibility type talk, but stepping back in a big way, just conceptually, would the idea on the bigger build be to also build your own infrastructure or form some sort of agreement to build as far as that open access rail?

No, look. Like Lachlan, like all these questions, they're showing a lot of vision. They're showing a lot of foresight in the information you're looking for. So, Adrian, I'm very happy to take these questions. I'll be completely honest with you and say to you that just give me one second. Adrian, sorry mate, just had to clear my throat. So let me just be absolutely clear. In terms of locality to existing infrastructure, it's really close. We have a road nearby which the government wants us to use that goes to a railway line which the government wants us to use. Will that infrastructure sustain a Pilbara scale project we're used to building? Not a snowflake's chance in hell. So will we do a pipeline? We've got showing real form in pipelines through Ironbridge. Will we use a rail line? We built and operate the most efficient, fastest, heaviest bulk rail lines in the world. I mean, these are reasons why we were chosen, Adrian. Now, we're putting the technical... solutions up against each other. And we're going to work this out. A pipeline's fantastic if you produce a slurry. What does that do for, say, lump iron? It means you crush it. So do you use a lump premium? Possibly. Is that set off against the operating cost efficiencies and speed of a pipeline? Possibly. So, Adrian, good question. And this is the delightful environment which Fortescue's in, which this world of opportunity between green energy and green resources gives us. But then the instant after that, it's a world of challenges. And we will continue to tiptoe through the minefield of optimising things how we meet those challenges to produce for you, our stakeholders, the best possible result.

That's very helpful. Thanks, Andrew. And just one more back on the Pilbara. It's good news to hear that through exploration success, Nardingu won't have to be developed until 2030. And just thinking of it from a CapEx profile around the Pilbara iron ore business stand, should we essentially wipe out any associated infrastructure spend or with the exploration success, will that bring with it some need for additional infrastructure? So we still keep some capex in there.

No, look, Adrian, it's a great question. Look, unfortunately, you can't get anything for free, so keep some capex in there, but take out your really big capex.

Your next question comes from Peter Kerr with the Australian Financial Review. Please go ahead.

Hello, everybody. Thank you for your time. Mark Hutchison, it sounds like a very big year for FFI coming up. Can you please help clear up on a global basis, you know, is FFI's headcount going to rise or fall this year? And could you also help with that question in terms of Australian headcount? Do you expect that to rise or fall this year?

Look, you know, I've been in the job for six months. And loving it. And loving it. It reminds me every day. And look, we have a dynamic business here. So what we'll do is as we kind of focus in on projects, the headcount is going to ebb and flow just like business as normal. So will headcount increase over time? Absolutely, as we build out projects around the world because we're going to need a lot of people to build projects in all the places I've mentioned. And that includes Australia. So, you know, it'll be business as normal. We will ebb and flow as we need resources. And, you know, I think this year will be a big year for us in many ways.

Yeah, and look, if I could add to that, Peter, we didn't go from two people to 20,000 people in a straight line, mate. And it's such a nonsense to call out when we consolidate to when we grow. This is the typical...

pattern of Fortescue we we grow steady the ship consolidate grow again now we that's just what we do every day we come to work mate okay and Andrew just in politics we've seen the Greens here in Australia in the last 24 hours say that they will potentially block the safeguards mechanism legislation unless there is a ban on new coal and gas uh mines in australia could i get your view on that um i mean do you think that is a good idea worth holding up the safeguards mechanism for or do you think it's more a case of not we shouldn't let the perfect stand in the way of good um peter thank you for that excellent uh smack in the middle of a land mine field um question um uh

So I'm just being brought up for speed and I'm looking at this headline, green risk setting back climate policy 10 years. Look, all I'd say is that I can answer it this way. There is a huge belt of frozen methane, carbon dioxide, organic matter, two and a half times the size of Australia, which is frozen for now. But big infrastructure has started to fall into that where it's been built on it. And there are big holes appearing in it as the Arctic, which is warming quicker than anywhere else on the planet, starts to warm. And if that frozen tundra lets go, then you might have, several degrees Celsius increase, or as Russian scientists tell me, a sharp 10 degrees Celsius increase in temperature, that's going to change oceanic and atmospheric flows all over the world. So I just say this, people who do not understand the grave risk of climate change should not be in any position of influence. And if they exploit those who are trying to work against climate change, then history will judge them very, very badly. We are on a climate edge here, Peter, and I want every legislator, not just in the Greens, not just in Labor, not just in liberal or country, every legislator in the world to bring themselves up to speed with the science. If they don't believe the science, then they can just fuck off. They should be nowhere near having any responsibility whatsoever. But every legislator in the world should bring themselves up to speed on the science and act accordingly. We need to be ambitious. This company, Fortescue, is leading by example. And I'm urging governments all over the world, wherever I go, it's why I hit the road in the middle of COVID-19 for effective years of my time to educate governments that we are facing a real and present danger and there are solutions. They do not have to wipe out our planet.

Your next question comes from Melanie Betten with Wisconsin Thompson. Please go ahead.

Hi there. Thanks for your time. I'm wondering if you could give us any detail on how talks are going with China's CMRG buying group. Have you guys made any deals? Are they looking at volume and brand type as well? Any colour on how those negotiations are going would be great. Thank you.

Look, excellent question, Melanie. I'm going to ask Vivian, you've asked for colour. Let's have Vivian give you the colour.

Hi, Melanie. Firstly, I'll just reiterate, you know, our approach is built on respectful and constructive engagement with all participants in the industry, customers as well as groups like CMR Group. We don't comment on commercially sensitive and confidential negotiations. So I'll just leave it as we'll continue to engage directly with all stakeholders. And that approach underpins our marketing strategy and how we get customers the value of Fortescue's products in line with market fundamentals.

Your next question comes from Sue Lennon with ABC News. Please go ahead.

Hi, Andrew. Thanks for your time. Look, I just wanted to ask you about the pending Yinjibandi compensation, native title compensation case. Have you done any initial assessment on what it could cost you if you lose or if you're prepared to settle, whether you're going to defend the case or whether you're going to settle.

So the question, Sue, it's Warren Fisher. I think, you know, that is before the courts. We certainly can't comment at all on quantum at this stage.

Sure, okay. So I'd just say that we've treated all claimants all our traditional custodians fairly and equally um and where we're asked to treat one like with the receipts of a government um we're going to say we don't think that's fair on everyone else and so um with deep respect to the indigenous people who i grew up with who i still call auntie and uncle um uh we will resist doing anything out of the ordinary um and uh And that's as far as I possibly can comment to when a case is before the courts. But we operate through the lens of fairness all the time. And when asked to be unfair, we'll resist.

Okay. If I could just follow up. I mean, you often use the term native title welfare. I just want to be mean by that because the Njibandi won their case twice, first in the original federal court, then in the full court. You were refused leave to appeal. So it's actually the law that you need to negotiate compensation. And all the other big miners, even Gina Reinhart, have royalty agreements with the traditional owners. So why is it that Fortescue has not yet come to agreement and agreement?

Okay, Sue, so thank you. I don't recall, I've looked around my colleagues if I've ever used the term native title welfare. And of course, we act strictly according to the law and go far, far over and above that. Our $4 billion of jobs and training, education and contracts is way above anything in the lawsuit. And I believe in real practical action to end the savage disparity, which has grown and grown over the period that I have been alive. And I know why it has. I know why you get Alice Springs alcohol disasters. I know why, Sue. It's because people are without work and cash welfare without work has obviously typical, predictable results with communities all over the world. Don't think it's confined to our vulnerable population. It's not. And while we insist on not providing the education, the opportunities, while we insist on not making the choice of drugs and alcohol the easiest choice, then the result will continue to be predictable, Sue. So for the people who I love and for the people who I grew up with, and sadly for the people whose funerals I regularly go to. I'll be going to one shortly who didn't have cash welfare, who did work, who took huge pride in her family and has outlived all her kids. And that is because she escaped this era of cash for nothing. And I believe like Noel Pearson and others, that you have responsibility with opportunity. And I always do that. And so we have, we integrate as a company, I don't have to integrate, I'm already there, with our Indigenous brothers and sisters, because that's how we see them. And we treat them all fairly and we give them the most opportunity we possibly can within our philosophy that we're not going to exacerbate Sue opportunity without responsibility which has caused the deep social harms which we're witnessing today.

If I could just add on to the end of that, if you don't mind, you know, something also not to forget is that we have seven other NATO title agreements with other NATO title parties that seem to be working fine.

Which work perfectly and that's the exact fairness, Warren. Thanks for pointing that out. I think Sue may have noticed that, but just in case, Sue, We've got seven other major agreements all within that same community. I mean, they have family members across each one. You probably know that, Sue. And they cross-fertilise like crazy. And we're just not going to have one single out because it might suit our commercial interests. This is something I am deeply passionate about, Sue. Ending the Indigenous disparity is not done with cash. And, Sue... Let me trot you down to Alice Springs if you want any proof.

Your next question comes from Nick Evans with The Australian. Please go ahead.

Good day, Andrew. Good day, guys. Thanks for your time. Andrew, just noting in your preamble, you spoke briefly about your time as chief executive almost as in the past tense. Am I sort of misreading what you were saying? Or are you about to step back as an executive chairman Back to your previous role as a non-exec chair.

Nick, great question, mate. And you're overdue to shut me a beer. I'd say, Nick, that with Hutch coming on board, doing a superb job, Fiona Hick just shows a steady ease with this company's culture and values has been getting around as a tourist, just getting to know it. You know, we have really two great chief executives, Nick, coming in. I will stay executive chairman for as long as it takes to guide, to navigate this company through this massive transition period. And then once that settles, and I feel sure that the three of us have met all the leadership challenges we need to, then there will be two again, Nick. And I'll step back to being non-executive. I have said, mate, as you're aware, that I've only become executive to help the company steer its way through what is a massive transition. And I'm delighted by that. The company which emerges from it will be much bigger, much stronger and much more contributing to society company. And I just, I'll stay with it for that period as an executive. But as soon as I can, I'll be stepping away from it.

And secondly, this week the board will admit to sign off on the the financial report. At that board meeting, did the board approve any major cost saving measures or sort of a job loss program? And if so, how many jobs do you expect from both Fortescue and FFI ranks over the next couple of months as a result?

Yeah, okay, Nick. Your reporting on this has been really balanced. Thank you. Look, there has been some irresponsible reporting on it by one media outlet in particular, salacious, huge numbers, biased, dramatic, trying to cause concern in the community, trying to cause fear in the community. Nick, there's none of that. There's a range of resolutions, which is as much as I'll, of course, share, because it's inborn in confidence, that continues the march of this company to grow, steady the ship, consolidate, grow again. And, you know, are there wanton job cuts coming? Absolutely not. Are we continuing to constantly improve and evolve? Absolutely, we are, Nick. But this is just business as usual.

Your next question comes from Peter Milne with WA Today. Please go ahead.

Yeah, thanks very much. Look, question for you, Andrew. Major resource company, obviously, maintaining social license is always a huge issue, issues, environment, you know, local content and the like. And yet you've chosen yesterday to pick a fight with the biggest media outlet in your home state. Why did you do that? And two, are you concerned that that's going to damage Fortescue's place in the community going forward?

No, I think just the opposite. I mean, we're bringing in local content. I'm sure you know, Peter, that Caterpillar, which... whose franchisee owns the West Australian, has for a long time said they're not going to be able to bring pollution-free trucks into the mining industry until the 2030s. Now, I made really clear, really clear that if they didn't change that stance, I don't bluff, I will bring them in. And of course, there was no way they could see I could do that So they just called my bluff. And now we've ordered 120 trucks. We'll be putting in local content. Let me underline that for you, Peter. Batteries, which we'll be installing here, which we'll be eventually manufacturing here at large scale, like we will hydrogen fuel cell drive trains at large scale. And that's all local content, mate. And... We're not just shipping in from North America or where Caterpillar does the whole thing. We're actually going to manufacture it, maintain it here. So I think we're actually going to accelerate local content, accelerate local employment. Where this has come from, though, Peter, is that that is a direct business threat to that Caterpillar franchise. I'm very happy to speak to the Stokes family and make sure that we keep them really busy and that they too can profit and enjoy distributing the trucks, which we will be partly responsible for, which is certainly our drivetrains. There's massive business which could be available to companies like Westrac. So what we've got to do, Peter, is see the opportunity and not try and fight it because you're really standing in the road of the tide. Everyone loves the fact that there's major change in technology, major change in efficiency, in community benefit. They can get less happy when it's actually happening to them if they're not changing too.

Okay, thanks Andrew.

Your next question comes from Simone Grogan with Business News. Please go ahead. Apologies, your next question comes from Danielle Lemassure with the West Australian. Please go ahead.

Good morning, Andrew and Matt. I was just hoping to ask about operating expenses and investments at FFI. I saw the report showed operating expenses were up pretty significantly to US$283 million while investments fell to US$49 million. I was just wondering what the cause of that was. And just the second question, I see Fortescue now providing further transparency on FFI's financial results in the notes to the financial statements. I was just wondering whether that new disclosure is partly due to pressure from investors and analysts. Thanks.

Look, I think you're an excellent journalist and they're great questions. I would really think carefully about not cooperating with the With your particular outlet, I don't know if you're under a lot of pressure or not, but we've had some really salacious misreporting, inaccurate, trying to put fear into the West Australian community, give the West Australian community the poor impression of this company. That hasn't worked at all. We have been barraged with support from all over our state and Perth. So I'm particularly sensitive about asking, about answering questions from the West. We'd normally not cooperate, but these are excellent questions. So touch... I'd like you, Andy, to respond. I don't think we're under any pressure from our investors. Our investors absolutely love us. I think you know, Danielle, we're one of the highest, if not the highest-performing value-accreting companies which Australia or this state has ever seen. So we're not having any investors complaining when they're making fortunes, mate. Over to you, Andy.

Yeah, thanks, Andrew. Danielle, so FFI's OPEX in H1 was $283 million. That included some expenditure incurred on behalf of Fortescue related to DCARB. So if we strip that out, it was a little bit below $283 the midpoint of guidance for this year, which is OPEX of 500 to 600. So well on track and on plan with relation to that. And look, in terms of the segment reporting, absolutely not in terms of responding to investors. That's just, you know, best in class transparency and good corporate governance. Thank you. Thanks.

That is all the time we have for questions today. I'll now hand back to Dr. Forrest for closing remarks.

Oh, I'd say to John and Lyndon and Nick, don't hesitate to call. We've just got to keep this show pretty disciplined. Look, I am... And Nick, just picking up, I don't intend to stand down any time soon, but I do intend to do whatever it takes to provide maximum support to Fiona and Mark. And... And I'm really delighted about this company. I just cannot see anywhere across its spectrum that it's not doing the very best it ever has. From consolidating a huge position into massive commercial opportunity in the Pilbara to developing the largest undeveloped iron ore deposit I think it will emerge in the region and the world to Ironbridge, to everything which FFI is doing, the potential that pipeline of over 100 projects and FFI marks got the unenviable responsibility of choosing at least five, but minimum five, but out of 100, that's a very difficult choice. That could lead to a green energy company which could rival the success of the iron ore company. So, um, I just, I just think the company is in superb shape, both for how it is right now and for its future prospects. In closing, I just cannot thank the team enough. I'm looking around at people who've been with me forever. Some of my oldest friends and some of my newest, like Vivian, just fabulous to have you on board. Um, and, uh, And this half gives us a very strong start to what will be a great year for Fortescue. I don't think I should be changing guidance teams to just reiterate 187 to 192 for Tums. Hematite cost of around $18 to $18.75. CapEx of 2.7 to 3.1. But look, Fortescue may well do what it does, which is perform. And I want to thank everyone for your excellent questions. It's been a really top quality call. And really appreciate all of your interest in Fortescue. We love this company. We'd love to have you on the journey with us. Thank you.