All images: FMG.




IT’S all systems go for Fortescue Metals Group (FMG). After launching its higher grade West Pilbara Fines iron ore in December, the miner is now gearing up to begin construction at Eliwana – the third new iron ore project green lit for WA’s Pilbara region.

The shipment of a higher grade West Pilbara Fines (WPF) product in December was the beginning of a new chapter for iron ore giant FMG.

Up until now, FMG was best known for its 58 per cent iron ore mined from its Chichester and Solomon Hubs.

But, over the last 12 months FMG grappled with wide discounts for this lower grade product, as Chinese steel mills appetite for higher grade ore grew.

The average 15 per cent discount FMG received for its 58 per cent ore (compared to the benchmark 62 per cent ore specification), climbed to as much as 42 per cent.

However, the launch of the 60.1 per cent WPF product would act as a key plank in FMG’s marketing strategy going forward, enabling greater flexibility to customers.

WPF would initially be blended using higher iron, low alumina ore from the western pits at Cloudbreak with ore from the Firetail mine.

FMG chief executive Elizabeth Gaines said for the last decade, the company delivered a range of differentiated products with a high value in use for its customers.

“As we look out to FY19 and beyond, West Pilbara Fines will further enhance the range of ores available, as we continue to ensure that our quality control and product consistency are maintained at the highest levels for our customers in China, Asia and Europe,” Ms Gaines said.

This message was reinforced further at a media and investor tour of its Chichester Hub mine, and port operations in late November.

FMG’s core leadership team gave an in-depth update into its business, from operations, to finance, marketing and automation.

A common thread was that its balance sheet was in the best shape in years, and that the spread between higher and lower grade ore was narrowing.

Ms Gaines said China would remain a key focus for the company despite environmental reforms.

It was only in November that FMG signed a further eight Memoranda of Understanding (MOU) deals with major public and private Chinese steel mills on the side-lines of the inaugural China International Import Expo (CIIE).

Maiden shipments have also been made to Vietnam and Malaysia, with sales to non-China customers now accounting for 10 per cent of total shipments.

In FY19, FMG was aiming to ship between 165 million tonnes and 173 million tonnes of ore, C1 costs to hover between $US12-13 per wet metric tonnes, and capital spend to reach $US1.2 billion.

Recent results from the December quarter showed the miner was on track, with a six per cent increase in shipments to 42.5 million tonnes bringing half year shipments to 82.7mt.

Average prices realised for its ore also increased to $US48 per dry metric tonne, with C1 costs decreasing to $US13.02 per wet metric tonne.

Ms Gaines said the strong quarter was bolstered by the completion of the first long term contract for WPF, with a number of customers already committing to future off-take.

“The first cargo of our 60.1 per cent iron grade West Pilbara Fines product was shipped to China on 16 December 2018 and we now expect to deliver between 8-10mt of this product in FY19,” she said.

“Initial customer feedback has been excellent.”

Ms Gaines said WPF was not just a short-term product either, with a view to maintain the 60.1 per cent grade out to 2050 through Eliwana.


Building Eliwana


Approved by the board in May 2018, the $US1.275 billion Eliwana project was set to begin construction mid this year, with the aim of first production in December 2020.

The project involved extending the rail line from FMG’s Solomon Hub via 143km of new tracking, including two bridges; and two construction camps.

Eliwana had a mining inventory of 540 million tonnes, with an 18-year mine life and opportunity to expand.

However, the project would not add to FMG’s overall output initially, instead replacing production from its depleting 30mtpa Firetail mine.

It would although increase FMG’s WPF production to 40mtpa.

Ahead of construction, FMG said it had a string of innovations in place to drive down costs throughout the build.

Interestingly, the railway line to Eliwana would be 12 per cent longer than the Solomon railway line, but lower cost.

The processing plant would also have a significantly smaller footprint, with less steel required, with further cost reductions to be achieved through the purchase of a 200-person fly construction camp from the Wheatstone oil and gas project.

A power station would also be relocated from Roy Hill to the Eliwana site.

And for the first five years of operation, Eliwana would have a low haulage distance from pit of less than 5km, which would significantly reduce costs.

The FMG leadership team said it was confident Eliwana remained on track for its December 2020 target despite it still being “early days”.

Construction tenders were currently being finalised, with NRW already named the preferred contractor to undertake earthworks for the new rail line.

However, with two other mega projects entering construction in the Pilbara this year – BHP’s South Flank and Rio Tinto’s Koodaideri project – access to a pool of skilled workers could pose a challenge in the recruitment stage.

Ms Gaines said it was fair to say there were some key skills and trades where it was becoming more challenging.

“We have to be very competitive in our offering for those key skills and trades,” she said.


“I do think that the Fortescue culture and the Fortescue brand is actually highly sought after and that there are people who actively seek positions at Fortescue, and there are some positions that we advertise and we get a significant number of applicants.



“But it is fair to say there are some key skills and trades where it is very competitive and we are mindful of that and we’ve put in place all the appropriate practices we need to make sure we’re attracting the best talent.”


Driving Automation


Meanwhile, the FMG team was also busy rolling out automation drives across its Chichester Hub operations; Christmas Creek and Cloudbreak.

Cat Command, part of Caterpillar’s MineStar technology, was first used on a commercial scale at its Solomon Hub back in 2013.

In a global first, the company would now utilise Cat Command for hauling across all its operations, which will be retrofitted on CAT and Komatsu trucks.

Ms Gaines said by the end of 2019, FMG will become the only iron ore operation in the world to have a fully autonomous haulage fleet, which to date had delivered a 32 per cent improvement in productivity.

However, the miner assured truck drivers and operators would not lose out, and instead be redeployed to other roles within the company.

FMG has also introduced a new innovative relocatable conveyor at Cloudbreak; a piece of infrastructure typically seen in coal and underground operations but never in iron ore.

The 5km conveyor replaced 12 manned trucks, increased accessibility to remote ore bodies, and reduced haulage costs.

It included a semi-mobile primary crusher station that fed directly into the Cloudbreak ore processing facility.

More importantly, when an ore body was depleted, the conveyor could be packed up and moved along to another deposit, delivering significant cost savings for future developments.

Autonomous drills introduced across its operations had also seen a 30 per cent improvement, removing safety risks, and enabling a 20 per cent reduction in drills deployed.



The Road Ahead


Beyond Eliwana, FMG was expected to make a decision on its Iron Bridge magnetite project soon, also in the Pilbara.

FMG had a 60 per cent interest in the project, and was currently progressing feasibility studies with its JV partners, Taiwan’s Formosa Group and China’s Baosteel Resources, a subsidiary of China’s Baowu Group.

“We have said in the past we hope to have a decision by the end of the 2018 calendar year, but this is something we are still working through,” Ms Gaines said.

“Yes, we did set a timetable, but really it is in the hands as well of our joint venture partners.”

FMG chief operating officer Greg Lilleyman said Iron Bridge would require less energy than CITIC Pacific’s Sino Iron Ore project.

He added a full size grinding plant had been built to complete processing trials, and if the project was approved, additional plants would be added.

Ms Gaines said FMG produced a 67 per cent iron magnetite concentrate product at Iron Bridge, and described the project as “very high-grade”, which would sell at a significant premium in the current market.

The project was strategically positioned 100km south of Port Hedland, and contained a 7.9 billion tonne magnetite resource.

In addition, FMG was also actively exploring other areas in the Pilbara, NSW, South Australia, Ecuador, Columbia and Argentina in not only iron ore but lithium, copper and gold.

“We’ve got a farm-in in NSW near Orange with a junior, and we’re putting money into the ground,” Ms Gaines said.

“There have been developments in exploration techniques, and certainly with the use of satellite imagery and other imagery, there have been ways where we can hone in and be a little bit more precise about where we target our drilling programs.

“We’ve got a team that are constantly looking at those opportunities and that’s how we’ve managed to get the position where we’re the largest tenement holder in the Pilbara.

“That’s been an ongoing process for us.”

FMG was also committed to reducing its carbon footprint through renewable energy initiatives.

The miner recently partnered with the CSIRO to develop and commercialise hydrogen.

The collaboration included a five-year agreement to fund and support select CSIRO technologies in the hydrogen space, including CSIRO’s metal membrane technology, which would make the transportation of hydrogen economically viable.

Ms Gaines said the agreement built on the company’s previous energy initiatives, including the conversion of the Solomon Power Station from diesel to gas generation and the development of the Fortescue River Gas Pipeline.

“Working with CSIRO to capitalise on the benefits of a low emission fuel such as hydrogen demonstrates Fortescue’s commitment to reduce our carbon footprint by ensuring security of supply of cost-effective energy for our operations,” Ms Gaines said.

FMG chairman Andrew Forrest said partnering with CSIRO would enable FMG to firmly establish its position in the global hydrogen industry.

“Importantly, we see potential for a significant export market in hydrogen and look forward to collaborating with third parties to ensure Australia’s leadership in the new energy economy,” Mr Forrest said.

“We are at the beginning of an energy revolution and Fortescue intends to be at the forefront of this once in a generation opportunity.”