Fortescue Metals Group
|Traded as||ASX: FMG
|Headquarters||East Perth, Western Australia|
|Key people||Nev Power (CEO)
Andrew Forrest (Chairman)
|Products||Iron ore, Steel|
|Net income||$1,746,000,000 (2013)|
Fortescue Metals Group Ltd is an Australian iron ore company. Fortescue is the fourth largest Iron ore producer in the world as of March 2011. The company has holdings of more than 87,000 km² in the Pilbara region of Western Australia making it the largest tenement holder in the state, larger than both BHP Billiton and Rio Tinto.
The group has two main areas of operation located within the Pilbara region of Western Australia; the Chichester Hub and Solomon Hub. Plans to develop a third, Western Hub are currently at developmental stage.
Located in the heart of the Pilbara, the Chichester Hub is made up of Fortescue’s flagship minesite Cloudbreak and the second minesite Christmas Creek. Together, the two minesites currently produce 55 million tonnes per annum and will ramp up to a combined 155 million tonnes per annum when the planned expansion is completed.
Fortescue’s first minesite Cloudbreak currently mines and processes over 110,000 tonnes each day. The horizontal nature of the deposits at Cloudbreak called for a new mining approach to those used at other mines which operate on vertical deposits of ore. Overburden removal is done using conventional blast, truck and shovel methods while specially designed surface miners cut and load the ore into trucks for transport to the run of mine stockpiles. Screening, crushing and desand plants at the Cloudbreak ore processing facility prepare and refine the product before the ore is stockpiled ahead of transport to port. The train loadout facility at Cloudbreak is capable of feeding 16,000 tonnes of ore per hour on the 2.7 kilometre long trains ready for the journey along the 256 kilometre heavy haul railway to the facilities at Herb Elliott Port.
Mining began at Christmas Creek, 50 kilometres (31 mi) to the east of Cloudbreak, in May 2009. Currently more than two million tonnes of ore is mined at Christmas Creek each quarter and trucked to Cloudbreak for processing. The operations at Christmas Creek are undergoing expansion and in late 2010 a 50 kilometres (31 mi) extension to the existing Port Hedland to Cloudbreak rail line was completed to transport the ore to Cloudbreak. A new ore processing facility was also constructed at Christmas Creek with wet commissioning scheduled for March 2011. Work is also underway on construction of a 800 bed permanent operations village to house the growing Christmas Creek workforce.
In January 2013, Fortescue awarded MacMahon Holdings a $1.8 billion mining services contract for its Christmas Creek mine expansion. The Christmas Creek expansion increases the capacity of the Chichester operations to 95 million ton-a-year, and was a key component of the company’s 155 million ton-a-year expansion plans.
Centrally located in the middle of Fortescue’s 87,000 km2 (34,000 sq mi) Pilbara tenement area, the Solomon Hub is Fortescue's next major project. It has almost twice the resource and less than half the strip ratio of the Chichester Hub. Fortescue’s Exploration team has already delineated more than 2.86 billion tonnes (2.81×109 long tons; 3.15×109 short tons) of resource at the Solomon Hub and there are identified exploration prospects targeting up to 5 billion tonnes (4.9×109 long tons; 5.5×109 short tons). In May 2013, Fortescue officially opened its Firetail mine at Solomon. The Firetail mine is expected to produce 20mpta while the second stage of the development, the Kings mine, will produce 40mpta. Developing the Solomon Hub is part of Fortescue's plan to reach a target of 155 million tonnes per annum (Mt/a) in 2013 and the "Three Hubs, Two Ports" strategy involving building the new Anketell Port.
BC Iron is a much smaller mining company with iron ore deposits at Nullagine. The two companies have created a "mine gate" joint venture in which Fortescue will take BC's iron by rail to port in exchange for 50% of the deposit.
The company has built a mine, a 260-kilometre (162 mi) private railway and a new port at Point Anderson (aka Herb Elliott port) near Port Hedland. The Fortescue rail line has a flyover over the Mt Newman Railway, and a crossing of the BHP Billiton railway. The "first ore on ship" on the line occurred in May 2008, 3.5 years after construction started.
The railway's 220-wagon iron ore trains are amongst the heaviest trains in the world, The 1,435 mm (4 ft 8 1⁄2 in) (standard gauge) heavy haul railway is used by 35,200-tonne (34,644-long-ton; 38,801-short-ton) trains up to 2.5 kilometres (1.6 mi) long carrying 29,000 tonnes (28,542 long tons; 31,967 short tons) of ore at 40-tonne (39-long-ton; 44-short-ton) axleload (the weight of the two 4,000-horsepower (3.0 MW) engines is extra). The railway is available to other miners for a fee. Atlas Exports has signed a commercial agreement to use the line and port.
The railway parallels another iron ore railway, the BHP Billiton railway, for over 100 kilometres (62 mi). Fortescue had sought access to use this line, but BHP declined. The matter remains in litigation.
Opposition to Solmon Hub mining lease
FMG lodged applications for three mining leases in the Solomon Hub area in 2008, and began negotiations with the native title holders through the Yindjibarndi Aboriginal Corporation (YAC). Negotiations broke down and the YAC lodged its opposition to the grant of the three licenses to the Native Title Tribunal in 2009, initially failing to win orders preventing the grant of the licenses. The YAC also failed in its initial Federal Court appeal of that decision last year, and the State Government issued the mining licenses to FMG in late November 2010. Both FMG and the YAC are now waiting on the results of a new appeal to the Full Bench of the Federal Court.  The company estimated the extraction of 2.4bn tons of ore over the next 40 years, worth $280bn, offering less than a deal struck by Rio Tinto that would provide $2bn over 40 years.
On 8 April 2011, Slater & Gordon, representing the Yindjibarndi Aboriginal Corporation in its negotiations with FMG, requested FMG compensate the Yindjibarndi community. In March 2011, FMG was accused of supporting a break-off group to divide the local Yindjibarndi community during negotiations for access to traditional Yinjibarndi land for the planned $8.5 billion Solomon Hub project, in the Pilbara region. While the law firm admitted FMG has put compensation money up, it said it was insufficient in comparison with the profits that will be made from this mine on the client's traditional land, as well as the royalty (tax) amounts that have been paid to non-Aboriginal people.
Misleading and deceptive conduct court case
In late 2004 and early 2005, Fortescue chairman and then CEO Andrew Forrest made a series of announcements that Fortescue had entered into “binding agreements” with three significant Chinese state owned entities to build and finance infrastructure for the company.
In 2006, Australian Securities and Investment Commission (ASIC) commenced civil proceedings against Fortescue alleging the company had engaged in “misleading and deceptive conduct”, had breached the disclosure provisions in the provisions in the Commonwealth Corporations Act 2001, by claiming to have binding contracts with China and Mr Forrest had breached his duties as a director of a company.
The matter was first heard by Justice Gilmour in the Federal Court with the judge dismissing ASIC’s claims in their entirety. ASIC appealed and in February 2011 the Full Court of Federal Court unanimously upheld the ASIC appeal.
Fortescue appealed the decision and in 2012 the High Court ruled the Fortescue's representations of the agreements was "neither false nor misleading". In his judgement, Justice Honour concluded that Fortescue’s releases “correctly represented that there was an agreement, and that it was in the view of the parties binding from the time of board approval”.
Despite the early announcement, in 2008, the group loaded its first iron ore shipment bound for China. Fortescue have at least 10 Chinese steel mill contracts lasting for around 10 years. Baosteel was the first company to receive their iron ore.
In August 2013, CEO Nev Power announced the company had achieved its target of awarding $1 billion in contracts to Aboriginal business by the end of 2013. Fortescue had made the commitment in 2011 to award $1 billion in contracts to businesses at least 25% owned by Aboriginal Australians through its Billion Opportunities program.
In reaching its target six months early, the company had signed 102 contracts and subcontracts with 50 businesses  including $500m worth of contracts with six Aboriginal joint ventures and Morris Corporation representing the largest ever package of contracts awarded to Aboriginal businesses. Of the contracts awarded, Fortescue said more than 80% were awarded to Aboriginal businesses that were at least half indigenous owned. Fortescue chairman Andrew Forrest told The Guardian. "The depth of what the Indigenous people have achieved and the change in direction they're taking is really historic."
- Annual General Meeting 2010
- "Fortescue rejects Rio's Pilbara land swipe". The Australian. AAP. 22 March 2011.
- Macmahon wins major Christmas Creek contract, International: Mining Weekly, 2013
- Australian Financial Review 25 July 2012, p26
- John Kirk (July 2008). "Fortescue opens the world's heaviest haul railway". Railway Gazette International. p. 427.
- Nick Kingsley (1 March 2007). "Fortescue goes its own way". Railway Gazette International.
- Perth Now
- The West Australian
- Lloyd Jones (18 April 2011). "FMG's Andrew Forrest faces human rights complaint". PerthNow.
- Cowie, Tom (11 April 2011). "FMG native title meeting a 'shambles'". ABC News.
- "Fortescue chief accused of undermining land owners" The Age
- "FORTESCUE METALS GROUP AND ANDREW FORREST SUCCEED IN HIGH COURT APPEAL AGAINST ASIC".
- "High Court ends long row on Fortescue". The Sydney Morning Herald.
- "High Court win for Twiggy over ‘misleading investors’ claim".
- "Fortescue loads iron ore shipment". The Sydney Morning Herald. 15 May 2008.
- "b in work for Aboriginal businesses". The Australian. 6 August 2013.