In January, Fortescue non-executive director Elizabeth Gaines made headlines for suggesting that the future of the company could be tied more to renewable power than its traditional iron ore business.
At the Reuters Global Markets Forum, Gaines said that “it’s not unreasonable to think that ultimately renewable energy will probably out-scale our iron ore business significantly,” an assessment that is not implausible to make in the mining industry, but one that is striking for a former mining CEO to verbalise.
And not just any CEO, but the former head of one of the world’s biggest iron ore miners. The company plans to produce around 192 million tonnes of iron ore by the end of the 2023 financial year, and has reported increased profits and production in recent months. From July to December 2022, the first half of the 2023 financial year, the company saw iron ore production increase by 9%, and shipped an additional 4%, compared to the same period in 2021.
While Gaines’ comments are unlikely to herald an immediate shift towards renewable power production, the fact that senior figures at such a major iron ore player are aware of the tenuous long-term viability of iron production is significant. Fortescue has already invested considerably in clean energy projects, both to decarbonise its own operations and support overseas power facilities, and this gradual shift to a greater focus on renewables could set a precedent for other miners.
Fortescue has been eager to highlight its recent focus on environmentally sustainable work, aiming for carbon neutrality across its operations by 2030. Perhaps significantly, in the miner’s 2022 sustainability report, Gaines explicitly names the minimising of scope one, two and three emissions as targets for the company, an important step in a sector where scope three emissions in particular have often evaded the attention of major companies.
“Fortescue is the first and only major heavy industry company globally to establish a fully-costed decarbonisation roadmap to achieve real zero emissions across its iron ore operations – scope one and two – by 2030,” says a Fortescue spokesperson, when asked about the company’s priorities with regard to decarbonising its operations. The miner has announced a total of $6.2bn in capital investments for decarbonisation projects, a significant sum of money that could go a long way to achieving these goals.
“We will eliminate emissions, not produce them, and we will do this profitably,” the spokesperson continues. “We are establishing a new global renewable energy value chain spanning technology, manufacturing, green energy generation and distribution, which will deliver significant returns to our shareholders.”
This is not just bluster, either, as the miner has taken a number of practical steps to decarbonise its own operations. According to its sustainability report, power generation alone accounted for around 14% of the company’s scope one emissions, producing 303,000 tonnes of carbon dioxide equivalent (CO2) as the miner generated electricity for various mining and processing activities.
Fortescue has announced its Pilbara Energy Connect (PEC) project as a potential solution, a considerable $700m investment into power infrastructure in the region that will power operations at the Iron Bridge project through “a hybrid solar gas energy solution,” as the company calls it.
Regarding its broader environmental impact, the shipping of minerals mined in Pilbara produced over two million tonnes of CO2e, with more than three-quarters considered scope three emissions, produced by vessels chartered by Fortescue.
The miner has set a target of cutting scope three emissions from these vessels to 50% of 2021 levels by 2030 and announced changes to a number of shipping processes to further cut emissions, such as the development of an “ammonia-powered marine engine” for use in the company’s fleet.
Going above and beyond
Impressively, Fortescue’s plans do not stop at minimising emissions at its own operations. According to its sustainability report, the miner aims for net-zero emissions across its entire value chain by 2040, a direct targeting of scope three emissions that its stakeholders believe will deliver both environmental and financial benefits.
“We are going to turn the highly successful company we have built over 20 years into a green energy and resources global powerhouse that his helping to step beyond fossil fuels,” says the spokesperson. “Our decarbonisation strategy outlines the technology, timetable and costings required to decarbonise profitably; avoid financial, commercial, environmental and social risk; and future-proof the business.
The PEC project is the clearest example of this, with some of the power supplied by new battery storage facilities. The 26MW Iron Bridge battery facility and the 16MW Solomon Power Station will be charged by a new 150MW solar photovoltaic plant that the miner plans to build in the area, and the entire project could prove to be something of a proof of concept for decarbonising mining infrastructure from the ground up.
Overseas, the company’s green energy arm has become similarly directly involved in renewable power projects. Fortescue Future Industries (FFI) has announced that it will work with African Rainbow Energy, a South African energy company, to develop green hydrogen projects across the country.
While details on this plan have not yet been announced – including key information such as FFI’s financial involvement, and how this green hydrogen will feed into both companies’ power structures – direct work with another company and in another country is a big commitment from Fortescue.
“FFI is on track to produce commercial green hydrogen at scale by 2024,” adds the spokesperson. “To do that, our ambition is for five green energy projects to progress to a final investment decision in 2023. Our focus is razor-sharp on project delivery, and we have a clear line of sight on projects that will be delivered first, they are likely to come from Australia, America, Brazil and Norway.”
Answering the existential question
Fortescue’s commitments to minimise its carbon footprint are admirable, but the existential question facing all miners, and to an extent all companies involved in heavy industry, remains: can this work coexist with the radical sustainability pledges needed to ensure the long-term health of the planet? The miner would answer with an emphatic ‘yes’, perhaps unsurprisingly.
“It is a $6.2bn investment to eliminate fossil fuel risk and reduce operating costs by $818m per year by 2030,” says the company spokesperson. “This saves money from day one. We don’t believe you can have the green energy transition the world needs without mining and iron ore.”
“Steel will be needed to build the infrastructure to support green energy and renewable projects,” the spokesperson continues, suggesting that mining is not only a necessary evil with regard to minimising the world’s carbon footprint, but a process that can actually accelerate sustainable activities. “Mining can be both decarbonised and profitable, we intend to show heavy industry it can be done.”
Ultimately, Fortescue’s clean power ambitions come alongside continued ramp-ups of production – the miner expects to produce more iron ore in the 2023 financial year than the previous period – so these commitments exist alongside the caveat that the miner’s primary priority remains iron ore production.
Making that production more efficient is certainly a positive step, but the argument remains that, for the world to truly protect its climate, industries such as mining would have to dramatically cut down on industrial activity in general, and mineral extraction in particular.
Fortescue has positioned itself as one of the industry leaders in walking this tightrope, trying to reduce carbon emissions without the parallel cut in mineral production that logic would dictate as necessary. Perhaps the only way to know for sure would be to wait and see how miners function in the long-term, but until then, Fortescue is making a genuine effort to thread this needle.