Thank you very much. Well, a huge welcome all. It's great to be back with you, and I can say that I have loved my time again, temporary that it might be, as 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 Hick for our next quarterly, half-yearly annual results team. You won't hear that much of me, but all of you can contact me any time you like. I've loved this short period being able to speak with you like this. Look, it was only two weeks ago that we presented results, which included our highest ever half-year shipments of 96.9 million tons.
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 Securities Exchange over 20 years. We've consistently delivered returns to our shareholders, building on the almost $22 billion 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 fully franked interim dividend of AUD 0.75, 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 decarbonizing our operations profitably and becoming a global green energy, metals and products business. 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 Eliwana and all our other very successful projects, are match fit to go into arguably the highest growth period in this company's history, through consolidating our Pilbara and our African operations and delivering major construction projects around the world for green energy. Now, I have to say that with Iron Bridge 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, Iron Bridge 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 pilot plant. We are expecting great things when we start to fully commission and ramp up Iron Bridge. In Gabon, I don't wanna undercook Gabon. Gabon is a huge iron ore province, undeveloped. 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.
We're deeply honored that the Gabonese government invited Fortescue to develop the Belinga project, which will, I believe, 'cause this is how we roll, have a very positive impact both on the Australian hematite iron ore industry and through 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, maximizing the mineral content to our customers' satisfaction and extend and optimize the mine lives and efficiency of both our Pilbara and emerging Gabon metal complexes. 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 Fortescue right now. We're utilizing our residual crushing and screening plant, residual haul trucks, rail cars, and our own locomotives. 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 electrolyzer and expanding a major automation center and our green fleet tech hub in WA that has been responsible for breakthroughs that our company's 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 in a quite a unique inflection point for our business at the moment as 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. 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, it's 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 for this market, and they will produce green energy and green hydrogen locally for that market. The second market is Europe, and this week we saw a very positive science in 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. Again, 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 engage with the local markets there. In the United States, we're very much gonna 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 gonna be a focus. In Africa, we're looking at places like Namibia and Kenya.
In North Africa, Morocco is a target. The Middle East, we've made great progress in Egypt and Jordan. Of course, Australia is a big priority for us. 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. 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. With that, I'll pass over to Andy.
Thank you, Hutch. Good morning, all. 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. 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.
For those on the webcast, you can view the reconciliation to the first half of last year, to H1 FY23 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. On the 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. 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. 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. Our liquidity is further supported by an undrawn revolving credit facility and 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 tons, 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. 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, Ashleigh, 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 Rahul 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 color which one's coming up first and, you know, how is that progressing? A bit more color 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.
Yes.
I'll come back with the second. Thanks.
Look, thanks for the question. Look, I think we have a number of kind of horses in the race, and that's what I wanna see at this point of the year. We have a number of projects we're working on. America's gonna play a big part of this. As I mentioned, Norway. Australia's gonna be a big part of that as well, and we have another few projects around the world, including Africa. Look, at the moment, really wanna run, get the horses to run and see who gets to the finishing line there. I can you know, absolutely say, we have certainty that we'll see five by the end of the year.
Okay. Any further color 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?
Look, I think it really does depend on the markets. As I mentioned in the discussion just before, the United States is a very different market than the rest of the world. It's gonna be domestic, so it's gonna be probably more like a hydrogen play, just plain hydrogen, and because that's what the buyers want. Texas, there's a huge hydrogen market. They're gray, and our job will be to try and replace that with green. You will actually just produce hydrogen and replace that. Other places where we're gonna export green hydrogen, you're probably gonna turn those to ammonia. For example, Gibson Island, which is in Brisbane, will be an ammonia facility. Green hydrogen, green ammonia to export.
Perfect. Thank you for that. 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's going to allow the first shipment pretty quickly. I wanted to understand with that existing infrastructure, what type of run rates can you achieve? Then once you do get the environmental approvals, where do you envision this asset getting to in terms of, you know, size of production and, you know, 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 this, the existing surface infrastructure road and rail. We've been pretty conservative. said, "Look, let's take the initial operation to 2 million tons and just trial everything. Learn like crazy." We are completely comfortable with the operation being put together with ticker 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. You know, 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.
Of course, you'd like me to speculate, and that's fair, Raul, on scale. Look, you just gotta go on form, mate. I mean, we did Cloudbreak at 40 million tons, you know, with Christmas Creek at 50. We looked at Solomon at 60. Each one of these has overperformed. Eliwana is 30, overperformed. We have the ability, we believe, if we wanted to probably steadily show down at around 50 million tons and grow it from there. Look, it is speculation, Raul. We think we've got a minimum of 1.5 billion tons 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 selection as opposed to fighting 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 clean and efficient. It comes from, of course, decades of understanding the deposit, no development being encouraged. With Fortescue, 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.
Morning, Andrew and team. Just a couple from me. The first one just on the capital allocation, Andrew, on the dividend. I mean, your payout ratio is back down to 65%, but you do talk about $1 billion 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? Just, you know, and where should we think about that payout ratio, given you're moving into starting to spend some real money?
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 have 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." We broke the mold, 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.
We broke that mold, Hayden. 65%, I think it's really strong. Yes, it makes sure that we've got huge amount of headroom. I'm having no shareholder complain that 65 is not generous.
Okay, great. 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 'cause 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, 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 decarb plan this year?
Well, Hayden, I know Hutch and I'll answer a broader question, but yours specifically, but you do mention projects in the Pilbara. Iron Bridge is satisfactory completing. We've had excellent performance from all our projects. We're adding 600 million tons of iron ore a year and only using 200 million tons. I mean, our Pilbara operations have never looked stronger nor more exciting. 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. Hutch, give us a rundown.
Bring it on.
Bring it on.
So, really focused on the decarb, I mean, 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 decarbonizing this company, and we're off to the races. That's gonna, you know, it's solar, it's gonna be wind. We're gonna be feeding renewable resources down the veins of our transmission lines in the Pilbara. A lot of focus in on trucks, trains, and making sure everything else is pollution-free. I'm gonna throw to Christiaan Heyning, who's heads the decarb. Christiaan, you have any other comments?
Thank you, Hutch. Christiaan, 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 Pilbara for additional green energy infrastructure, but we haven't taken FID on those yet, but we will expect to do so in the next 12 months or so. Of course, there is the trucks, which we'll 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 de-develop the production version of that truck, which will then bring in big numbers later, this decade.
Thanks.
Thanks, Hayd en.
Yeah.
The next question comes from Kaan Peker with Royal Bank of Canada. Please go ahead.
Hi, Andrew, Mark, Fiona, and Andy. Two questions from me. Just firstly on Iron Bridge, can we get an update on that, given that concentrate's expected to be shipped at 2Q? Also assuming that we have sort of a 18-month ramp up, it sounds roughly like 10 million tons should be expected in FY24. We'll circle back with the second question. Thanks.
Thank you. Warren, did you hear that question clearly?
Yes, I did.
Yeah.
Yes, I did.
Warren Harris is our chief, instructor, deliverer, recoverer, of Iron Bridge. While I'd love to speak to this project 'cause I'm in love with it, I'm gonna ask Warren to, answer that, Kaan.
Okay. Thanks, Andrew. Yeah, look, Iron Bridge 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, we are on track to get first production out in March this year.
Sure. Thanks. Thanks. Just maybe on the Gladstone electrolyzer factory, Plug Power's CEO cited poor economics as a part of the key reason for withdrawing from the project. Since we don't have any metrics, I think, you know, most people take this at face value. Would it not be easier to dispel some of those concerns with giving some project estimates? Thanks.
Let me handle that. You know, I think with the Gladstone, our view is there's great e-economics in this. We are on track to have the facility ready in March and then our first electrolyzers this year. Our belief is a bit different than Plug. Look, we still have a great relationship with Plug. They'll be very much part of our journey for green hydrogen. We're gonna do, you know, make our own electrolyzers ourselves. We think there's a massive market globally, not just here in Australia, other parts of the world. You'll see us do, you know, other facilities in due course in in America, maybe some other places as well.
Yeah.
Mm-hmm.
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, Kaan. We're a technology company, like we'll soon be a manufacturing company. For green technology, I don't think we 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. It is unsurprising that we say, well, we can improve on these electrolyzers and improve on their performance. Andy, we think your electrolyzers are great. We're not knocking them.
We just would like to do our own, and still have Plug Power as a deliverer to our business of electrolyzers 'cause we just need so many and so much. I know Andy made that throwaway line, you know, 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. 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, you know, you can jump all over it. It just showed the EQ of a gnat, you know, Andy made a throwaway line as to which was basically saying that Fortescue's gonna go their own way, but they're still gonna be great friends, which is exactly what's happening.
Your next question comes from Lyndon Fagan with J.P. 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.
I'll hand over to my good friend, Christiaan Heyning. Shoot, mate.
Thanks. Christiaan here. Yes, as you know, most of our emissions are actually in downstream Scope 3 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. 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. The breakthrough that we've achieved this month is that we've now produced sizable volumes of green metallics
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.
No, that's fair enough.
Let me just say that to give a clue to all our competitors out there, it uses a membrane, and they're gonna have to come and talk to us if they wanna borrow the membrane.
Okay.
If you wanna-
No, thanks for that. I did have another one.
Yes, please.
Andrew, on the last call, you mentioned the replacement hub for Cloudbreak wasn't necessarily Nyidinghu. I'm wondering if you can maybe just elaborate a bit more about whether it's still FID in 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 Cloudbreak?
Oh, no, typically excellent question. Mate, you're damn right. We're pushing Nyidinghu back into the 2030s out of the 2020s. 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. Nyidinghu will be a huge project one day. As it's not required, given the exploration success we've had, don't let this go to your head, Nick Nistchke. The young lad who's only been with me for half his life, 17 years, is doing a really good job. If he doesn't miss niobium and rare earth deposits, he might even get a raise. 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 Nyidinghu 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. Wondering if you can provide some information as far as, you know, collective hydrogen production that those five projects are targeting and 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 as I said, we have a few projects in the race. You know, as we bring this to FID, this will become a lot clearer to you. You know, I think we wanna make sure we tell you know, the information that is correct and rather than speculate where it's gonna go.
Yeah. Can I just maybe add why? You know, there's been a couple of commentators saying Hutch has been a little vague. He did outline the five countries. 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 gonna down tools. That's what we're seeking to avoid. We want all projects working really hard. People love to compete within a family environment. That's the only reason why we're not specifically naming projects. By the way, if he did name projects right now, and then chose another one, you'd say, "Well, you know, you misled us, perhaps.
Yeah.
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.
Yeah.
Sorry, Andrew.
Sorry, just on the back of that also.
Oh, Mark, yeah, shoot.
You know, that we have. They are the first to come to FID. We do have others in the pipeline behind that. It's a matter of, you know, getting the right focus in the organization, getting the teams, you know, focused on getting, you know, we wanna make hydrogen as quickly as we can.
Yeah.
And-
Just to, maybe that. 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. You know, Gabon is probably the most protected pristine countries in Africa. It's French. Eramet'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. I guess the question I have for you is that doesn't Gabon just add a lot of jurisdiction, 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. Paul, 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 mined, but only because the country's a little richer. 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. 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, his first words were, "You know, I really expect you to build but protect my country." I've said, "I will do both, sir." We have a very good relationship with what is a very stable government. A popular presidency, a popular government. I'm not the only ecologist. When we get in the room, they're on the Gabon side, they've got a highly educated ministry, particularly on the conservation and environmental side, with very strong views. We respect those views because they're right. 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 to leading the industrial world away from pollution, which will eventually destroy us. 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. 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. Paul, thank you for that observation.
Your next question comes from Robert Stein with CLSA. Please go ahead.
Hi, team. Thanks for the opportunity. Just a question on Gabon to start with. How are you thinking about the market impact of additional volumes? This is the scaled up facility, the 50 million tons I'm talking about. Do you view it as an option if global steel picks up again, or if steel's peaking with supply coming no matter what, potentially impacting long-run prices? I've got a second one. Thank you.
We're not being, 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. I think we're gonna create a very, very interesting real and virtual product, and one which ensures the duration, maximizes the mine life, the efficiency and the performance of both countries' hematite industries. Where we take a highly complementary attitude between the Australian and the Gabonese iron ore industry, and make sure that they 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?
Look, we could, but we don't have to, Robert, because we're finding so much iron ore, mate. That option isn't available to us. No, we're gonna maintain grades in the Pilbara. We're just gonna enhance it in Gabon. There's metallurgical characteristics of our Pilbara 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. 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. Hi, 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 or 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. 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 pipe. I don't wanna speculate what is optimal. I wanna look at the iron ore industry, the iron ore price. We do not wanna hurt the Australian Pilbara operations of either BHP, Rio Tinto or ourselves. 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 ton.
Be a very meaningful player and important to all our, all our host customer countries. I've still yet to do with my team, I 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. Just to 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 be shipping sort of whole trucks and locos and processing equipment to Gabon to sort of facilitate that rapid startup?
Yeah. Yeah, it does, David. If you wanna ride, mate, it'll be a great voyage.
Visit. yeah.
Your next question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Good morning, 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?
I can say that everything is changing, but everything stays the same, Glyn. I'm gonna say how everything's staying the same, and then Hutch is gonna talk to you about change. What's gonna stay the same is the binary ferocious protection of our balance sheet. Hutch, over to you.
Look, I think what you have to understand are these projects. Let's start with the offtakes. The offtakes is going to be Germany, it's going to be Singapore, it's going to be Japan, Korea. From a, from a bankability perspective, I believe these projects will be very bankable. We will look at these in a traditional project finance manner, where we'll bring in non-recourse project finance for these projects against a very bankable offtake. That's, that's in train. Then on the equity side, we have the option to do it ourselves or bring in partners, and there's enormous amount of capital out there waiting for us to come with projects. I think the 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. 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. We share a bit of equity on the way through.
Yeah.
We'll certainly keep you posted. In the instant there's anything looking like a decision made, I'm gonna let you know. 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. You know, these are all making massive impacts and adjusting dramatically the entire non-recourse project finance ecosystem as it relates to not destroying the planet.
Yeah. Just, sorry, Andrew, if I just add on this. I mean, I think we've been talking to a number of investors. 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.
All its derivatives-
Yeah.
I mean...
So, so-
It's a miracle molecule, Glyn, which you can make so much else from.
Okay. Andrew, so therefore a potential FMG equity stake into one of these FFI projects this year is a distinct possibility in your mind?
Glyn, I mean, if we don't have an equity stake, Hutch has mine. Let's just put that straight out there. 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 gotta be made. We're gonna put our capital up against the enthusiastic equity capital we have seen, not only from Davos but around the world, but particularly US capital markets. You know, we get the regular statements from bankers and fund managers that they have trillions of dollars of capital available and no freaking projects, Glyn. When we have a pipeline of 100+ projects and as technology changes to match projects, we choose them.
Markets change to match projects, we choose them. We're gonna come back to you with financing details. Glyn, I'm not saying we're gonna repeat the Fortescue miracle where we project finance everything and wind up with 100% of all our projects. you know, I'm not as young and rash as I was, mate. 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. you know, we will have a reward for that, and that's called carried equity.
Your next question comes from Lachlan Shaw with UBS. Please go ahead.
Yeah, morning, Andrew. Just two questions. 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 Vivienne, 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 market?
We're seeing certainly a pickup in demand, post the Chinese New Year break. You know, particularly in the construction and real estate sectors, we're seeing some positive activity in that space. Steel margins are still low, we are seeing really good demand for low-grade products, and in particular for the Fortescue products. We see that across the inventory in our supply chain as well. All in all, really positive in terms of the sign we're seeing, and we expect that to continue. You know, the government has been quite vocal in terms of their support for the construction and real estate sectors. We expect to see that translate to real steel demand later on in the year.
Understood. Thank you. Then just a second question. Obviously just back to Gabon, and given the development here and the rapid deceleration 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 Iron Bridge, and you wanna really see what the commercial scale benefits are, once we enter ramp up and complete ramp up, you know, 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. I think, 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 Iron Bridge, and we'll input all that knowledge into it. I just wanna 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 Morgans Financial. Please go ahead.
Yeah. Thank you, guys. Just two questions from me. First, back on Gabon, and sorry for another one, it's just an interesting project. You can certainly see the potential scale of it. Just noting how far it is from the Trans- Gabon Railway and Libreville, just, yeah, I understand it's too early for feasibility type talk, but, you know, 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 Adrian, 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. Adrian, I'm very happy to take these questions. I'll be completely honest with you, and I and say to you that. Just give me one second. Adrian, sorry, mate. Just had to clear my throat. Let me just be absolutely clear. In terms of locality to existing infrastructure, it's really close, right? We have a road nearby which the government wants us to use that goes to a rail 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.
Will we do a pipeline? We've got showing real form in pipeline through Iron Bridge. 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 gonna work this out. You know, a pipeline's fantastic if you produce a slurry. What does that do for, say, lump iron? It means you crush it. Do you use a lump premium? Possibly. Is that set off against the operating cost efficiencies and speed of a pipeline? Possibly. Adrian, good question.
This is the delightful environment which Fortescue's in, which this world of opportunity between green energy and green resources gives us. The instant after that, it's a world of challenges. We will continue to tiptoe through the minefield of optimizing how we meet those challenges to produce for you, our stakeholders, the best possible result.
That's very helpful. Thanks, Andrew. Just one more back on the Pilbara. You know, it's good news to hear that, you know, through exploration success, Nightingale won't have to be developed until 2030s. You know, just thinking of it from a CapEx profile around the Pilbara iron ore business, then should we essentially wipe out any, you know, associated infrastructure spend? With the exploration success, will that bring with it some need for additional infrastructure so we still keep some CapEx in there?
Adrian, it's a great question. Unfortunately, you can't get anything for free, so you keep some CapEx in there, but take out your really big CapEx.
Your next question comes from Peter Ker with the Australian Financial Review. Please go ahead.
Hello, everybody. Thank you for your time. Mark Hutchinson, 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 gonna rise or fall this year? Could you also, help with that question in terms of Australian headcount? Do you expect that to rise or fall this year?
Look, I, you know, I've been in the job for six months.
Loving it.
Thanks, Peter. Loving it. He reminds me every day. Look, you know, we have a dynamic business here. What we'll do is as we kind of focus in on projects, you know, the headcount's gonna ebb and flow just like the, you know, business as normal. Will headcount increase over time? Absolutely. As we build our projects around the world, 'cause we're gonna need, you know, a lot of people to build projects, in all the places I've mentioned, and that includes Australia. 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. Look, if I could add to that, Peter, we didn't go from two people to 20,000 people in a straight line, mate. It's such a nonsense to call out when we consolidate to when we grow. This is the typical pattern of Fortescue. We grow, steady the ship, consolidate, grow again. Now that's just what we do every day we come to work, mate.
Andrew, just in politics, we've seen the Greens here in Australia in the last 24 hours say that they will potentially block the Safeguard Mechanism legislation unless there is a ban on new coal and gas mines in Australia. Could I get your view on that? I mean, do you think that is a good idea worth holding up the Safeguard Mechanism for, or do you think it's more a case of we shouldn't let the perfect stand in the way of good?
Peter, thank you for that excellent smack in the middle of a landmine field question. I'm just being brought up to speed. I'm looking at the 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, 2.5 times the size of Australia, which is frozen for now. 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.
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. I just say this, people who do not understand the grave risk of climate change, should not be in any position of influence. 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, 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, right?
They should be nowhere near having any responsibility whatsoever. 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 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 Burton with Thomson Reuters. 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 CMRG buying group. Have you guys made any deals? Are they looking at volume and brand type as well? Any color on how this negotiation is going would be great. Thank you.
Look, excellent question, Melanie. I'm gonna ask Vivienne. You've asked for color. Let's have Vivienne give you the color.
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. That approach underpins our marketing strategy and how we get the value of the Fortescue's products in line with market fundamentals.
Your next question comes from Sue Lannin with ABC News. Please go ahead.
Hi, Andrew. Thanks for your time. Look, I just wanted to ask you about the pending Yindjibarndi 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?
Yeah. The question, Sue, it's Warren Fish here. I think, you know, the matter's before the courts, we certainly can't comment at all on quantum at this stage.
Sure. Okay.
Sue, I'd just say that, we've treated all claimants, all our traditional custodians fairly and equally, and where we're asked to treat one like with the receipts of the government, we're gonna say we don't think that's fair on everyone else. So, with deep respect to the indigenous people who I grew up with, who I still call auntie and uncle, we will resist doing anything out of the ordinary, and that's as far as I possibly can comment, Sue, when a case is before the courts. We operate through the lens of fairness all the time, and we're not 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 wonder what you mean by that because the Yindjibarndi won their case twice, first in the original federal court, then in the full court. You were refused leave to appeal. It's actually the law that you need to negotiate compensation. All the other big miners, even Gina Rinehart, have royalty agreements with the traditional owners. Why is it that Fortescue has not yet come to an agreement?
Okay, Sue, thank you. I don't recall. I have to look around my colleagues if I've ever used the term Native Title welfare. 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. I believe in real practical action to end the savage disparity, which has grown and grown, over the period that I have been alive. 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 obvious, typical, predictable results with communities all over the world. Don't think it's confined to our vulnerable population.
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. 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. That is because she escaped this era of cash for nothing. You know, I believe, like Noel Pearson and others, that you have responsibility with opportunity. I always do that. We integrate as a company.
I don't have to integrate, I'm already there, with our indigenous brothers and sisters 'cause that's how we see them. We treat them all fairly, and we give them the most opportunity we possibly can within our philosophy that we're not gonna 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 Native Title agreements with other Native Title parties that seem to be working fine.
Which worked perfectly, and that's the exact fairness, Warren. Thanks for pointing that out. I think Sue may have known 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. They cross-fertilize like crazy, and we're just not gonna 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. 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, a great question, mate. You're overdue to shout 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 us a little. You know, we have really two great chief executive, 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. Once that settles, then, 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. 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. I'm delighted by that. The company which emerges from it will be a much bigger, much stronger, and much more contributing to society company. 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.
Secondly, this week the board will have met to sign off on the financial report. At that board meeting, did the board approve any major cost-saving measures or sort of a job loss program? 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 'cause it's in board in confidence, that continues the march of this company to grow steady the ship, consolidate, grow again. You know, are there one-time job cuts coming? Absolutely not. Are we continuing to constantly improve and evolve? Absolutely, we are, Nick. This is just business as usual.
Your next question comes from Peter Milne with WAtoday. Please go ahead.
Yeah, thanks very much. Look, question for you, Andrew. Major resource company, obviously maintaining a social license is always a huge issue. Indigenous 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. One, why did you do that? Two, are you concerned that that's gonna damage Fortescue's placement 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 gonna be able to bring pollution-free trucks into the mining stream 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. Of course, there was no way they could see I could do that, so they just called my bluff. 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. That's all local content, mate. We're not just shipping in from North America or where Caterpillar does the whole thing. Actually gonna manufacture it, maintain it here. I think we're actually gonna 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. What we've got to do, Peter, is see the opportunity, not try and fight it because you're really standing in the ride of the tide. Everyone loves the fact that there's major change in technology, major change in efficiency and 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 Le Messurier with The West Australian. Please go ahead.
Good morning, Andrew and Mark. I was just hoping to ask about OpEx and investments at FFI. I saw the report showed OpEx were up pretty significantly to $283 million, while investments fell to $49 million. I was just wondering what the cause of that was. Just a second question. I see Fortescue's 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, they're great questions. I would really think carefully about not cooperating 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've been barrage with support from all over our state and Perth. I'm particularly sensitive about answering questions from the West. We'd normally not cooperate, but these are excellent questions. Hutch, I'd...
Yeah. No, Andy. No, yeah.
I'd like you or 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 Le Messurier, we're one of the highest, if not the highest performing value-creating companies which Australia or this state has ever seen. We're not having any investors complaining when they're making fortunes, mate. Over to you, Andy.
Yeah. Thanks, Andrew. Danielle, FFI's OpEx in H1 was $283 million. That included some expenditure incurred on behalf of Fortescue related to decarb. If we strip that out, it was a little bit below the midpoint of guidance for this year, which is OpEx of $500-$600. Well on track and on plan with relation to that. Look, in terms of the segment re-reporting, absolutely not in terms of responding to investors. That's just, you know, best-in-class transparency and good corporate governance.
Thank you, Andy.
Thanks.
That is all the time we have for questions today. I'll now hand back to Dr. Forrest for closing remarks.
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, and Nick, just picking up. I don't intend to stand down anytime soon, but I do intend to do whatever it takes to provide maximum support to Fiona and Mark. You know, 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.
You know, 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, in the world, to Iron Bridge, to everything which FFI is doing, the potential that pipeline of over 100 projects in FFI. Mark's got the unenviable responsibility of choosing at least five, but minimum five, but out of 100. That's a very difficult choice. That could potentially lead to a green energy company which could rival the success of the Iron Ore Company. 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 Viviennne. Just fabulous to have you on board. 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 tons. Hematite cost of around $18-$18.75. CapEx of $2.7 billion-$3.1 billion. Fortescue may well do what it does, which is perform. I wanna thank everyone for your excellent questions. It's been a really top-quality call, really appreciate all of your interest in Fortescue. We love this company. We'd love to have you on the journey with us.