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AUSTRALIA’S Fortescue said on Thursday (Jul 25) it will increase spending on its energy division to advance several new green hydrogen projects next year, disappointing analysts who had expected a company restructure to lower its capital outlay.
The world’s fourth-largest iron ore miner has brought its metals and green energy businesses back together after it split them into separate divisions a year ago amid an exodus of senior management that cast doubt on whether the green unit was on track to deliver against stretch targets.
Last week, Fortescue announced it would shed 4.5 per cent of its global workforce and said it was unlikely to meet 2030 targets for green hydrogen production. The cuts also come as the price of iron ore, Fortescue’s main profit driver, is forecast to fall back below US$100 a tonne.
Analysts said that suggested Fortescue was slowing down the speed of its hydrogen development but on Thursday, it reaffirmed its commitment to the sector.
Its focus will initially be on four projects in Australia, the United States, Norway and Brazil with additional projects in Morocco, Oman, Egypt and Jordan to follow.
Fortescue still plans to boost capital expenditures at its energy division to US$500 million, up from initial plans to spend US$300 million, and its net operating expenditure to around US$700 million next year, up from as much as US$500 million anticipated in 2024.
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“Good operational performance but the market might be marginally disappointed by still high FMG Energy spend in FY25,” analysts at Citi said.
Analysts also flagged a jump in decarbonisation spending to US$700 million to US$900 million for fiscal 2025 from US$300 million to US$500 million this year as the miner seeks to meet aggressive net-zero targets by 2030.
Shares in Fortescue fell 2.7 per cent, outpacing smaller losses among other Australian miners.
Fortescue plans to raise its focus on producing green iron, or iron produced with a lower carbon footprint, CEO Dino Otranto said from China where he has been talking with potential partners for joint projects.
“Pivoting to producing green iron metal is the next step for us, and we see a massive potential in green iron industry out of Australia, supplying China,” he said.
Fortescue plans to produce green iron from its Christmas Creek operations before the end of next year.
The miner forecast higher iron ore shipments for the fiscal year ending in June 2025 and said for the fourth quarter of 2024 shipments of the steel-making material rose 24 per cent from the third quarter to a quarterly record of 53.7 million tonnes.
It now expects to ship between 190 million tonnes and 200 million tonnes of iron ore in fiscal year 2025, up from 191.6 million tonnes shipped in fiscal year 2024. REUTERS
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