The best part of any journey.
Is knowing how far you've traveled?
Where you are going?
The people that join you along the way. Our journey is with Fortescue.
At Fortescue, we're helping build the world and ensuring it prospers for the future. We're committed to our customers' needs today and tomorrow. This is where you'll find us, the Pilbara in Western Australia, our home since 2003, and the prime location for iron ore across the globe. It all starts here. From world-leading assets and infrastructure owned and operated by us, shipping iron ore to global markets. Our continual focus is on being the safest, lowest cost, most profitable mining company. For us, safety comes first in everything we do. We value what matters, empowering our people, looking out for our mates. The best ideas come from a diverse workforce. It's why we invest in training and employment, creating economic opportunities, empowering generational change for Aboriginal Australians. We are committed to partnering with traditional custodians, safeguarding the environment and cultural heritage now and for the future.
We've set bold targets and achieved them. We never, ever give up. Embracing innovation and new ideas, creating value for our shareholders and key stakeholders. We are proud contributors to local and global economic development, supporting initiatives that address society's most complex issues. Exploring new opportunities for growth, we are building a stronger future both here in Australia and overseas.
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With our family.
Fortescue
We're a global force.
Good morning, ladies and gentlemen, and welcome to Fortescue's 2020 Investor and Media Day Briefing. My name is Elizabeth Gaines, and I'm the Chief Executive Officer of Fortescue Metals Group, and I'm very pleased to be taking you through our program today. I would like to acknowledge traditional custodians of this land on which we are meeting, the Whadjuk people of the Noongar nation, and pay our respects to elders past, present, and emerging. I'd also like to extend this respect to other Aboriginal people and Torres Strait Islanders who may be joining us today. Our Investor and Media Day is an important part of Fortescue's corporate calendar, and we're pleased to be able to provide this briefing virtually, given current travel restrictions across Australia and the globe. Today's program is split into two sessions.
In the first session, I will be providing an overview of Fortescue's vision and strategy and our approach to sustainability, followed by our Chief Operating Officer, Greg Lilleyman, and Director of Sales and Marketing, David Woodall, who will speak to our integrated operations and marketing strategy. There will be a short break before we proceed with the second session, where we'll have a presentation from Director of Projects, Don Hyma, on our key growth projects, and we'll end with our Chief Financial Officer, Ian Wells, to discuss capital allocation and returns. There will be an opportunity for you to participate in a Q&A session at the conclusion of the presentations. For our media representatives who are joining us today, there will also be an opportunity to ask questions after the investor Q&A session.
As many of you familiar with Fortescue would be aware, we are a values-based business with an unwavering focus on safety, family, empowerment, and stretch targets, which underpin everything we do. Our values are integral to our success and continue to be as fresh and relevant today as they were when Fortescue was established in 2003. Fortescue's unique culture has really shone through in 2020 as we banded together in the face of an unprecedented global health and economic crisis. By having our values of safety and family at the heart of every decision we made, we helped ensure the Fortescue family and our broader community stayed safe and well. We're pleased to confirm that we had no positive cases at any of our operational sites to date.
Despite this COVID-19 pandemic, Fortescue has delivered record performance through the year, and this all culminated yesterday when we celebrated the commissioning of the Eliwana mine site with first ore being processed through our innovative new ore processing facility. It's a remarkable effort when we reflect back to March when construction first ramped up at Eliwana, just as the COVID-19 pandemic was sweeping across the globe and restrictions in Western Australia were ramping up. We are incredibly proud of the entire team at Fortescue, who have safely achieved this stretch target in true Fortescue fashion. Our Director of Projects, Don Hyma, will provide an update on operations at Eliwana a little later.
Eliwana forms a critical component of our strategic focus of optimizing growth and returns through our core iron ore business, underpinned by our operational excellence and balance sheet strength. As we look to the future, this vision will evolve through diversification with a focus on commodities that support decarbonization and assessing renewable energy and green industry opportunities through our wholly-owned subsidiary, Fortescue Future Industries. It's on the back of this growth and development that we will continue to ensure all communities and stakeholders benefit from Fortescue's success. Our ongoing focus on product operations, marketing, as well as growth and balance sheet management, is driving strong results in our business and delivering significant benefits for our shareholders. Our business has generated an average EBITDA margin of 50% over the last decade and an average return on capital employed of 23%, demonstrating outstanding profitability and capital efficiency.
Fortescue has delivered a strong start to FY 2021 across all key measures of safety, production, and cost, and that's underpinned by the hard work and dedication of the entire Fortescue team. In terms of our operating performance, our first quarter was another quarter of records. Iron ore shipments of 44.3 million tonnes were 5% higher than Q1 FY 2020. C1 costs of $12.74 a wet metric tonne were 2% lower than the same quarter last year, and that includes costs associated with managing COVID-19. We achieved average revenue of $106 per dry metric tonne in the first quarter, and that's a realization of 89% of the average Platts 62% CFR Index. Cash on hand was $5.1 billion at 30 September. Our strong free cash flow generation in the quarter contributed to a net cash position of $1 billion.
Fortescue was privileged to continue to operate during the COVID-19 restrictions, and there was no impact to our shipping schedule. Notably, the iron ore price has held up strongly through this period due to the remarkable recovery in China's economy, as well as ongoing supply constraints, particularly in South America. We remain a core supplier of iron ore to China, and our relationships with our key stakeholders in China are underpinned by a multifaceted approach, spanning our key business pillars of iron ore supply, procurement, investment, and social engagement. Our second-largest shareholder is a Chinese state-owned steelmaker, and we have two Chinese directors on our board. Chinese steel industry continues to outperform expectations, with crude steel production reaching 874 million tonnes in the 10 months to the end of October, and that's an increase of 5.5% compared to the same period in 2019.
China accounts for 58% of global crude steel production this year to date. Our trading success is built on strong partnerships, and it's important that we maintain good relationships with existing trade markets such as China, which accounted for 87% of all iron ore exported from Australia in financial year 2020. It's strong trading relationships with established and new partners that underpin the Australian mining industry as a stable and reliable provider of jobs, taxes, and royalties as our economy grows over the next 20 years. Fortescue began as an exploration company, and today our iron ore tenements remain key to maintaining mine life and sustaining product quality in our core iron ore business. Exploration also forms a core component of our diversification strategy, which is focused on delivering opportunities in copper and other commodities that support decarbonization and the electrification of the transport sector.
Despite some impact as a result of COVID-19, we continue to assess domestic and global copper and gold opportunities. In Ecuador and Argentina, there's ongoing assessment of previous drilling results and various geological studies are continuing. We expect seasonal drilling activities in the San Juan region of Argentina will commence this quarter. Building on our established presence in South America, the team are assessing a range of opportunities in Colombia, Chile, and Peru. Earlier this year, we acquired a 20% stake in TSX-listed Candente Copper Corporation with a focus on advancing the Cañariaco project in Peru. In 2020, Fortescue signaled our intention to be an industry leader in addressing the global climate change challenge. The impacts of climate change are changing the way we live, our communities, and how we operate our business.
The United Nations has said that this is a critical decade within which year-on-year emissions reductions are required. Building on our proud history of setting stretch targets, we announced our boldest and most important target yet: to achieve net zero operational emissions by 2040. I'd like to play a short video of our plan to meet this ambitious industry-leading target. Our net zero target is supported by a pathway to decarbonization, including a 26% reduction of Scope 1 and 2 emissions from existing operations by 2030. Mining is among the most innovative industries in the world, and we're harnessing this advantage to work towards carbon neutrality with a sense of urgency.
Promoting a culture of ongoing collaboration will be critical, and we're pleased to join with businesses across our sector, and indeed Australia, to support the transition to zero emissions through initiatives like the Australian Industry Energy Transitions Initiative and the Climate Leaders Coalition. Our net zero ambition is strengthened by the introduction of practical initiatives that will help us deliver our goals in an economically sustainable manner. Together with our partners, we're investing AUD 800 million in energy transmission infrastructure and solar gas hybrid generation in the Pilbara. This kicked off last year with the Chichester Solar Gas Hybrid Project, a low-emission energy solution that incorporates large-scale solar. This project, owned and operated by Alinta Energy, is well progressed, with all the solar panels, transmission towers, and transmission line installed, progressing to commissioning in the new year.
Further to this project, we've announced an AUD 700 million investment in the Pilbara Energy Connect Project, which includes transmission infrastructure as well as solar and gas generation and large battery storage. Pilbara Energy Connect will integrate with the Chichester Solar Gas Hybrid Project, and once these two projects are fully operational, it's estimated that 25%-30% of stationary energy across our mining operations will be powered by solar. Further to our investment in energy infrastructure, we're investing AUD 32 million in hydrogen fuel cell passenger coaches and a refueling station at our Chichester Hub mining operations. Pilbara Energy Connect is a key contributor to our pathway to achieve our emissions reduction target, and the project's major benefit lies in its ability to support the incorporation of additional large-scale renewable energy at any point in the integrated network in the future.
The lack of an integrated transmission network in the Pilbara has long been identified by industry as the key barrier for large-scale renewables. We're well-positioned to support our clean energy transition while lowering the overall cost of electricity, with the potential to include the addition of wind and solar generation, as well as further extension of the transmission infrastructure. We're committed to supporting the world's transition to a clean energy future, which presents a major growth opportunity. Through our wholly owned subsidiary, Fortescue Future Industries, we're assessing a portfolio of renewable energy and green industry opportunities. We've recently entered into a number of agreements, both in Australia and overseas, to identify a portfolio of potential projects. These are early-stage opportunities similar to mineral exploration that we will progress through studies.
The intention is that individual projects will be developed by Fortescue Future Industries with ownership and project finance sources to be separately secured without recourse to Fortescue. This will complement our existing investment into new hydrogen technologies, positioning Fortescue to meet the future demand for green hydrogen and ammonia. This includes our landmark partnership with the CSIRO to develop the metal membrane technology, a critical link in the value chain for ammonia to become a carrier for hydrogen exports. We have a memorandum of understanding with Hyundai and the CSIRO to assess the potential to accelerate the renewable hydrogen production technology in South Korea, and we have a partnership with ATCO Australia to build and operate the first combined green hydrogen production and refueling facility in Western Australia.
Since the company was founded in 2003, Fortescue has established a successful track record of identifying, assessing, and developing large-scale resource and infrastructure opportunities. The financial rigor, project execution discipline, and history of adopting innovation and technology that we're renowned for will ensure our future green energy projects will be at the forefront of this emerging industry. As you know, we've been focused on hydrogen since 2018 when we announced our landmark partnership with the CSIRO. By leveraging our value chain, we have the capability to rapidly develop complex projects and pursue a range of commercial relationships with customers in key end markets. In line with our approach of setting stretch targets, we're planning to significantly reduce the capital intensity of our renewable energy and green industry projects to ensure we are the world's lowest cost producer of green hydrogen.
Working with our stakeholders, we're assessing a range of technology routes with an initial focus on green ammonia and liquid hydrogen. While there's been considerable focus on international projects, we aren't losing sight of the potential of domestic opportunities. As you would have seen in the previous slide, our state's northwest and coastal regions are home to world-class wind and solar resources, making Western Australia arguably the best address globally to establish large-scale renewable energy generation. We also recently announced a development study into a 250-megawatt green hydrogen plant in Tasmania, with the potential to produce around 250,000 tons of green ammonia per year for domestic use and international export. That will be powered entirely by existing renewable energy. As you would expect from Fortescue, an important component of the development study is to identify the project's feasibility at the lowest capital intensity and lowest cost.
Subject to the outcome of the study, we're targeting an investment decision in 2021, with the potential for this project to deliver one of the largest green hydrogen plants in the world. With Korea, Japan, Singapore, and Europe all identified as key prospective markets for green hydrogen and ammonia exports, we believe Fortescue can be at the forefront of the establishment of a bulk export market for Australian hydrogen. Fortescue's pursuit of clean energy opportunities is driven by our strong emphasis on sustainability across the business. This year, more than ever, corporate sustainability has become a focal point. As an industry, we've seen increasing interest from all of our stakeholders and the investment community on environmental, social, and governance considerations. Our approach to sustainability has always been and will continue to be driven by Fortescue's strong culture and values.
With oversight by our board of directors and led from the front by our senior leadership team, all of our team members are empowered to take responsibility for ensuring Fortescue operates in a sustainable manner. Driven by these values, we're committed to setting high standards, safeguarding the environment, and creating positive social change, which together form our three pillars of sustainability. This approach has been recognized by both national and international standards, including the Dow Jones Sustainability Indices, which listed Fortescue in its World Index for the second year, rated among the top 10% of the largest companies across the globe based on long-term economic and ESG factors. In addition to climate change, which I've already spoken about, I will address two other areas of our approach to sustainability, Aboriginal heritage and creating positive social change.
During the year, the mining sector's work with Aboriginal communities, particularly the industry's approach to protecting Aboriginal heritage, came into sharp focus. May I say from the outset that the destruction of Juukan Gorge has refocused our industry, the government, and our communities to ensure that an appropriate balance between protecting significant Aboriginal heritage and facilitating local jobs and economic growth is found. Aboriginal people have occupied the Pilbara for at least 50,000 years, and the land carries the evidence of this occupation, both tangible and intangible. We recognize that we're privileged to operate in this environment, and we take this responsibility very seriously. Last month, I had the opportunity to address the parliamentary inquiry into the destruction of Juukan Gorge, where I spoke about Fortescue's approach, which is led by the views of Aboriginal people in regard to the significance of Aboriginal cultural heritage.
Through our seven land access agreements and many dozens of Aboriginal heritage agreements, we've worked closely and transparently to protect and avoid almost 6,000 heritage places. As an example, two significant ethnographic places at Christmas Creek and Eliwana on the Yabali and PKKP country sit on iron ore resources combined of almost 55 million tons, and we've developed our mining plans to avoid and protect these places based on advice from Aboriginal people. What we've learned as we work with traditional custodians and advisors is that in some cases, there are no easy answers. There are aspects of mine development that simply cannot proceed without impact to the landscape. We fully understand expectations change and believe that by working together, we can continue to improve. The mining industry works with long lead times with multibillion-dollar investment decisions often taking several years.
This means that Section 18 applications may cover activity which occurs over many years. In recognition of this, we've amended our process to add an important additional step. In July, Fortescue wrote to its native title partners with whom we have agreements to advise that in future, Fortescue would notify the traditional custodians in writing prior to undertaking an activity that will impact a site on land that is a subject of a Section 18 consent. This allows for additional consultation with our native title partners in circumstances where there is new information we should consider. We support the modernization of Western Australia's Aboriginal heritage protection law, including legislating an increased voice for Aboriginal people and equitable rights of appeal for all parties. Our third pillar, which is key to our approach to sustainability, is creating positive social change.
We believe we're in a unique position to support remote Aboriginal communities and contribute to the vibrancy of regional centers by creating economic opportunity. Since Fortescue was founded by our chairman, Dr. Andrew Forrest AO, in 2003, we have consistently provided training, employment, and business development opportunities for Aboriginal people. Integral to this has been our Vocational Training and Employment Center program, or VTEC. VTEC has been providing training and employment for Aboriginal people since 2006, two years before our first shipment of iron ore left Port Hedland. To date, over 900 VTEC graduates have begun full-time work at Fortescue. Through our Billion Opportunities program, we've awarded around AUD 2.7 billion in contracts to Aboriginal businesses and joint ventures. In 2015, it became the blueprint for the Commonwealth Government's own indigenous procurement program.
We firmly believe that by keeping our values at the heart of our approach, we've developed constructive relationships with our communities, investors, and other key stakeholders. By working together, we can find even more ways of improving the sustainability of our company and our communities. Of course, our ability to ensure communities are able to continue benefiting from our success is driven by the strength of our business. Against the backdrop of strong market demand, as well as our continued investment in major projects, our guidance for FY 2020 remains unchanged at iron ore shipments of 175 million-180 million tons, C1 costs in the range of AUD 13-AUD 13.50 a wet metric ton at an average Aussie dollar exchange rate of AUD 0.70, and capital expenditure of AUD 3 billion-AUD 3.4 billion. Thank you, ladies and gentlemen.
I will now hand over to Chief Operating Officer Greg Lilleyman, who will provide an overview on how our integrated operations and marketing strategy and our focus on innovation is continuing to drive our operational excellence.
Thank you, Elizabeth. Good morning to everyone. It's a real pleasure to be with you to discuss our integrated operations, marketing, and project development strategy. This integration differentiates Fortescue and uniquely positions us to truly optimize value right across our business. As a reminder, we fully own and operate our integrated mine, rail, and port infrastructure in the Pilbara, now spanning across three mining hubs with the inclusion of Eliwana now in production, with over 620 km of the world's fastest, heaviest haul railway, and another 143 km operating by the end of this month. We operate five berths and three ship loaders at Herb Elliott Port, a towage fleet and eight ore carriers. Of course, we're also developing our new operation at Iron Bridge, together with 130-kilometer slurry pipeline to the port. This world-class infrastructure is underpinned by Fortescue's large resource base in the Pilbara.
Our combined hematite mineral resources total 13.9 billion tons, and the combined Chichester, Solomon, and Eliwana ore reserves total 2.2 billion tons. That's at an average Fe grade of 57.5%, and that's as at the 30th of June this year. The Iron Bridge project has total resources of 5.5 billion tons, and that's the largest publicly disclosed magnetite mineral resource. This large footprint, together with the benefits of opening additional mining areas like the Western Hub, underpin a long mine life and ensure that the business is well-positioned to continue to optimize the mine plan. That's not just about volume or product quality or C1 cost or capital, but it's an ongoing process of factoring all of the inputs and solving for the highest value outcome.
As Chief Operating Officer at Fortescue, I'm in the privileged position to be the only one amongst the major iron ore producers to have accountability for our entire value chain, from new mine development, construction, operations, shipping, and sales and marketing. It gives Fortescue a unique advantage to truly optimize this value chain through one team in one office. I can't overstate the value of having this truly integrated approach to ensuring customer needs are always front and center when operational and mine planning or product quality decisions are being made. The team's even closer together today with the expanded integrated operations center, the Fortescue Hive, which we opened in June this year. You'll hear from Director of Sales and Marketing, David Woodall, shortly, who sits two seats away from our head of operations.
It's this unique aspect of Fortescue that's been integral to the successful execution of our product strategy and underpins our successful investment in our growth projects. Our operational excellence is underpinned by our absolute focus on the health, safety, and wellbeing of the entire Fortescue family. Our total recordable injury frequency rate continues to improve. The rolling 12-month TRIFR is 2.1, achieved at 30th of September, which is a 13% improvement from the 30th of June. Everyone at Fortescue is encouraged and empowered to take control and look out for their mates. Our leaders are required to set their teams up for success by ensuring they have the time to plan their task and pause the job when something changes.
On our journey to zero harm, we're committed to improvement in safety performance through a number of areas, including our job hazard analysis planning tool, which is required for every maintenance task. We all know that a well-planned task is a safe one. Also identifying and implementing exposure and risk reduction activities, which are shared across the business and with our contracting partners. With our Eliwana mine transitioning to its operational phase and Iron Bridge construction ramping up, our projects teams have deeply embedded our safety culture as we successfully manage construction risk across multiple sites with multiple construction partners. Our Director of Projects, Don Hyma, will speak about this a little later this morning. Fortescue's established a track record of operating excellence. Production has grown significantly, and we pride ourselves on meeting or exceeding guidance, as we have done for the past six years.
This growth hasn't been simply driven by spending more money, but by an ability to maximize the output from an existing asset base. In fact, we've shipped at an average annual rate of over 170 million tons over the last six years from a system that was designed with an installed capacity of 155 million tons. As you know, we continue to pursue productivity gains, and the current focus of debottlenecking analysis is on our car dumper circuit and the rail system. Looking ahead, to account for the increase in tons relating to Iron Bridge magnetite project, we've been granted approval to increase the annual material handling capacity at our Herb Elliott Port facility from 175 million tons to 210 million tons on a staged basis.
As you heard from Elizabeth, our C1 cost of AUD 12.74 per wet metric ton in the first quarter continues to demonstrate our ability to drive improvements in cost performance and maintain our industry-leading cost position. Most of you would be familiar with our cost journey over the past nine years, from a high of about AUD 48 per ton in FY 2012 to around AUD 13 today, and guidance for FY 2021 of between AUD 13 to AUD 13.50. Innovation and productivity has played a significant role in our cost journey and remains critical in maintaining our low-cost status as we continue to mitigate against industry headwinds such as aging assets, longer haul distances, increasing strip ratios, and just natural inflation. We continue to identify opportunities to capture operational synergies and improve productivity.
In the first quarter of FY 2021, we began the consolidation of the management of our Cloudbreak and Christmas Creek mines into a single integrated Chichester Hub operation. The synergies we're targeting include a single shut team and engineering support, reduced administrative costs, and optimizing the allocation of assets and resources across that hub. This focus on innovation and productivity improvements is truly embedded across our mobile fleet, where we're an industry leader in autonomy. We recently announced that we completed the Chichester Hub autonomous haulage project, and that project, which represents one of the largest fleet conversions in the industry, has expanded our autonomous haulage fleet to a total of 183 autonomous trucks operating across our Solomon and Chichester hubs.
Any operation can buy an autonomous fleet, but it's the management and the smart deployment of the fleet in terms of the pit layout, the road networks, the integration with other mobile assets, which drives the deep change in productivity. A poorly run mine that automates its fleets doesn't just automatically become a well-run mine. It just becomes a poorly run automated mine. Our autonomous haulage fleet, together with the introduction of various programs such as our predictive maintenance platform, which allows us to identify more potential breakdowns before they happen, have contributed to an increase in the weekly available truck time by over 20% in the past two years. Our fleet operates at greater availability, but it's also being put to work resulting in higher productivity, which reduces our fleet requirements and therefore capital costs. Of course, the mobile fleet's only one part of our system.
As you've heard me say before, our OPFs have historically been the constraint in our system capacity, but that's not the case today. Our focused effort on engineering and reliability improvement programs, including some incremental capital investment and the introduction of plant dynamic constraint modeling, has enabled significant debottlenecking. In the five years to FY 2020, the downtime at our OPFs decreased by 10%, and at the same time, the average production rate has increased by 10%. Simply put, we're operating our fixed plan assets more often and at a higher level of throughput. We've had record performance at our OPFs in recent quarters, and continued improvement keeps pushing that bar higher. Innovation is part of Fortescue's DNA, and we're in the process of implementing a downhole assay tool for grade control, which provides more information in real time at a lower cost.
The tool uses downhole radiation to measure the response from the surrounding rocks to provide a proxy assay, and it's been calibrated over the last two years at our mine sites and enables an optimized balance between gaining ore body knowledge and cost. Utilizing the tool in blast holes gives over 10 times more data compared to infill RC drilling and at a significantly lower cost. Those costs are comparable with traditional blast hole cone sampling. However, the downhole tool enables a significant improvement in safety, provides a superior quality sample, more data, and an enhanced schedule with almost immediate results. Adopting innovation and applying learnings is not just restricted to our operations. As you'll hear shortly from Don, the Eliwana OPF builds on our experience in constructing and operating ore processing facilities in the Pilbara with our design team delivering an optimized, highly efficient design.
Throughout my career, I've had the opportunity to oversee the development of eight major mining operations in the Pilbara, and I can unequivocally state that this is the most efficient plant design by far. I learned early on in my career that you want to buy the best quality process equipment and use the least amount of concrete and steel to put that equipment in, and that's exactly what we've done at Eliwana. As you can see from this video fly-through, we've got a significantly smaller footprint to comparable facilities, including the Firetail OPF at our Solomon Hub, which itself was an efficiently designed plant at the time. Eliwana has a low height. It's only 24 meters compared to 45 meters height at Firetail, with a structure designed to support that on-site construction.
It uses about half as much concrete at around 7,500 cubic meters compared to about 14,000 cubic meters at Firetail, and similarly, much less steel. Design efficiency is also reflected in the capital cost, with the Eliwana rail construction cost significantly lower than the Solomon rail, reflecting the in-house design, integrated delivery model, contracting strategy, and accelerated construction period. In fact, Eliwana has the lowest capital intensity for a mine plus rail amongst the current projects in the Pilbara at AUD 45 per ton, with the mine capital intensity at about AUD 23 per ton.
I'm particularly excited to be able to share our plans for the investment in the future of our mobile fleet. We're developing an in-house non-diesel powertrain that will offer a step-change opportunity to reduce our emissions by replacing the onboard diesel engines with either battery electric or hydrogen fuel cell electric drivetrains, powered by our integrated renewable energy network. With around a quarter of Fortescue's Scope 1 and 2 emissions attributed to our mobile haul fleet, this is a significant opportunity to drive our pathway to net zero operational emissions. The project involves the development of a 240-ton prototype haul truck to test and trial operating performance in the Pilbara's conditions. Phase 1 will focus on the battery electric powertrain with the ability to regenerate power from downhill haulage. Phase 2 will consider the future optionality to introduce hydrogen fuel cells.
In closing, I'm really pleased with how the operations and the projects portfolio are performing on the key metrics of safety, budget, production schedule, and cost. The strength of the current market is not lost on us, and the entire team is focused on the ongoing successful execution of our integrated operations and marketing strategy. On that note, I'm going to hand over now to our Director of Sales and Marketing, Danny Goeman, who will provide an overview of Fortescue's innovative approach to marketing and product strategy.
Thank you, Greg, and good morning all. I'm very grateful for the opportunity today to provide an update on our near to medium-term steel demand and share some detail on the evolution of our integrated operations and marketing strategy. A good place to start is to have a closer look at the developments in the global steel industry in 2020. This year can perhaps be best described as a tale of two markets, with China breaking a number of pig iron steel and crude steel production records, but with most of the steel industry outside of China struggling to recover to pre-COVID-19 production levels. China's crude steel production has grown strongly, reaching 874 million tons by the end of October, representing an increase of 5.5% year on year. China appears well on track to exceed 1 billion tons of crude steel production in 2020.
Looking ahead, we see positive signs from the property and infrastructure sectors, which represent more than half of overall steel demand in China. Investment in the property sector, which caused some concern earlier in the year, is now up by approximately 12% year on year due to easing monetary policy and improved consumer sentiment. Manufacturing investment has also been strong, and the post-coronavirus manufacturing recovery continues to gain momentum, supporting overall steel demand as construction activity in northern parts of China starts to slow due to the onset of colder weather over winter. A strong V-shaped recovery has occurred as a result of the government stimulus measures earlier in the year, and this momentum is expected to provide ongoing support for steel demand in 2021.
In fact, feedback from our customers and other industry observers in China in the last few days suggests that the ongoing strength in steel demand may lead to iron ore inventories in China ports being drawn down further, with some suggesting that port levels may approach 100 million tonnes during the first quarter of 2021, driven in part by increased iron ore demand outside of China and lower than expected supply from Brazil. As for rest of world, we are now seeing a gradual recovery in crude steel production levels in many countries. India, Japan, South Korea, and Southeast Asia have all seen improvements in crude steel production rates, and we anticipate further recovery in the near term. Indian production levels, in particular, have recovered quickly, assisted by increased steel exports to countries impacted by COVID-19.
Recent feedback from our customers in Japan and Korea also highlights the recovery in steel demand there, with both POSCO and Nippon Steel confirming they are restarting blast furnaces to meet increased demand. October production figures suggest that crude steel production has now almost fully recovered to pre-COVID-19 levels. With respect to the global steel production outlook, we expect steel demand to be well-supported beyond 2021. Between now and 2025, consensus analysts forecast global crude steel production to grow by approximately 170 million tonnes, which represents robust growth on a 1.8 billion ton base. Growth will be driven by long-run trends in population growth and urbanization, particularly in emerging markets such as Southeast Asia and India. Chinese crude steel production is expected to peak in the first half of this decade, but a range of views exist on how this may evolve, with China historically outperforming forecasts.
What does this mean for seaborne demand? We expect seaborne iron ore demand to be well-supported in the medium term. A number of industry observers have questioned the impact of growing obsolete scrap in China on future iron ore demand. The range of views varies. We continue to see limitations in the medium term on the availability of clean, obsolete scrap. We'd also note that the transition to increased scrap use has been slower than expected, in part due to the ongoing poor economics of using material amounts of scrap. Most of the recent strong crude steel production has been through the integrated steelmaking route, leading to strong, ongoing iron ore consumption. Plans by China to relax its import ban on scrap is unlikely to significantly lift scrap use in the next few years.
Until the industry develops significant low-cost integrated collection and processing capacity, we expect to see constrained availability of clean, obsolete scrap, and therefore ongoing robust pig iron production and associated iron ore demand. Let's now turn our attention to iron ore supply. The market consensus is that additional seaborne iron ore supply will enter the market in the medium term. Our view remains that considerable challenges and uncertainties persist in bringing on this additional supply. These include the speed and extent of the supply recovery in Brazil, the scale and pace of Australian mine depletions, and potential exits of high-cost supply from non-traditional and Chinese domestic sources. We envisage significant ongoing challenges associated with expansions of Brazilian supply, particularly given the number of projects requiring completion and the related project approvals. In Australia, numerous projects are forecast to be completed in the next five years.
Many of these projects, however, are sustaining existing production volumes. As such, we don't see material incremental supply emerging from Australia in this period. We may see additional supply from India, Russia, and Ukraine, much of this material will be higher cost. In circumstances where seaborne iron ore prices moderate, some of this material will become uneconomic and exit the market. Furthermore, as the Indian economy grows, we also expect the steel industry in India to utilize more domestic iron ore, thereby constraining future iron ore export volumes. With respect to Chinese domestic supply, we have witnessed a moderate resurgence recently, some of this production will likely come under pressure given resource depletion, increasing environmental constraints, and low investment in the industry. Irrespective of these supply dynamics, Fortescue, as a low-cost producer, continues to be well-placed to meet the global demand for iron ore.
Let's now have a closer look at Fortescue's integrated operations and marketing strategy. Our approach is focused on the current and future needs of our customers and the optimization of our supply chain and is really built around four key principles. Integrated operations and marketing, and a focus on direct customer engagement is what really differentiates us from our competitors. Integration here means the marketing, shipping, operations, and integrated planning teams being physically co-located in the recently inaugurated Hive. This setup allows us to respond to customer needs and prevailing and future market dynamics in a more coordinated manner. Direct customer engagement ensures that we have a deep understanding of our end users' needs. We are also actively investing in further developing our decision support systems and associated infrastructure to facilitate world-class real-time market analysis, allowing us to act on insights, monetize information flows, and optimize our portfolio.
Our focus on commercial excellence is delivering real, tangible business outcomes. We track a range of market indicators to better understand market dynamics and demand for our products in different segments and regions, both in and outside of China. The declining volumes of Fortescue products in China stockpiles is just one example of how our integrated marketing and operations approach has driven increased demand for our products through the market cycles. The development of our port-side sales channel is another example. Since June 2019, we have been selling in RMB from ports in China, and we have now sold over 10 million tons. Active and direct engagement with the port-side market provides us with real-time market insights and allows us to capitalize on arbitrage opportunities.
For our customers, port-side sales mean they are able to purchase products in smaller lot sizes and from multiple regional ports, thus providing shorter procurement lead times and expedited delivery. The success of our overall approach is reflected in our performance metrics. For example, the Platts 62 index increased by around 8% quarter-on-quarter since FY 2019, whilst Fortescue's price realizations have improved by around 13% over the same period. Our ongoing focus on portfolio optimization is also supported by an increasingly diverse range of sales channels, now facilitating sales to more than 170 customers globally. We offer term contracts and spot contracts in USD, port sales in RMB, and provide access to some of our products through other channels. We sell to customers outside of China, including those in emerging growth markets such as Vietnam, Malaysia, and Indonesia, and in the more traditional markets such as South Korea and Japan.
We are gaining market share in Japan and Korea by building strong relationships and, most importantly, providing flexible and innovative supply solutions and logistic solutions. In addition to the usual regular commercial engagement, we are also focused on deep technical collaboration with customers and other stakeholders. This is critical to our long-term success in the industry. We aim to consistently deliver quality products to meet our customers' expectations and provide value in use in the iron-making process. Our low variability in Fe, silica, alumina, and phosphorus levels in our products has been recognized by our key customers, and the resultant product quality consistency is now viewed as truly industry-leading. We are also working with customers and research facilities on product developments to ensure that the performance of our current and future products is well understood.
We are engaging with customers, governments, and industry bodies on climate change, direct emissions reductions, Scope 3 emissions, as well as exploring innovative iron-making technologies. The most recent and pertinent example of the work conducted by our technical marketing team is a study undertaken with a leading Chinese mill, which demonstrates clearly the link between deep bed sintering and emissions reductions. We will continue our research in this area to demonstrate the ongoing value in use of our products in a carbon-constrained environment. We have also partnered with the CSIRO, combining the CSIRO's world-leading research and development with Fortescue's leading renewable energy and green hydrogen production projects and deep industry knowledge to develop and commercialize hydrogen technology. Our product strategy is responsive to changing industry dynamics, our product suite meets a variety of customer needs.
Our product offering has changed in recent years in response to market dynamics. This will continue. The physical and metallurgical properties of our products provide a range of important value and use benefits to our customers. Perhaps the most distinguishing attribute of Fortescue's products is its coarse sizing, which facilitates the increased use of complementary but finer high-grade ores. The coarse particles improve granulation and permeability in the sinter-making process, which in turn increases sinter productivity. In simple terms, this means a more efficient process which consumes less fuel. Our existing products also play a fundamental role in the market, offering value on a standalone basis. Also by complementing the use of other products. We can see on these charts that when assessing the chemistry of our product suite, they provide competitive advantages compared to alternatives, specifically in the area of alumina and phosphorus content.
The introduction of Iron Bridge will facilitate further product and market diversification, allowing Fortescue to pursue a range of value-accretive options. Iron Bridge is a premium magnetite product which will extend Fortescue's product suite into the high-grade Fe segment. As a discrete standalone product, Iron Bridge offers both superior palletizing and sintering characteristics with the added benefit of fuel and energy savings associated with the highly exothermic nature of magnetite oxidization compared to hematite. In simple terms, this means fewer emissions and lower costs. We also have the ability to respond to changing market conditions and blend our premium Iron Bridge magnetite product with some other hematite products out there. In summaryFortescue has a sophisticated and responsive approach founded on direct engagement with our customers and stakeholders and supported by real-time market insights. Our results highlight that our marketing approach delivers real value to the business and to our customers.
Our products are competitive and are a core and critical component in global steel making. Developments such as West Pilbara Iron and Iron Bridge position us well for the future, expanding our product suite and allowing us to offer an even broader product range to our customers. Thank you, ladies and gentlemen. We will now take a short break and reconvene at 9:30 A.M. Australian Western Standard Time. Thank you.
Welcome back to Fortescue's 2020 Investor and Media Day. As you would expect, with first ore at Eliwana, our Director of Projects, Don Hyma, is on site. Here's a video that we recently recorded providing an overview of our key growth projects.
Good afternoon, ladies and gentlemen. My name is Don Hyma, and I'm the Director of Projects here at Fortescue. First, I'd like to acknowledge the traditional custodians of this land on which we are meeting today, the Banjima, Guruma, and Binigura people, and we pay our respects to elders past, present, and emerging. I'm speaking to you today from Eliwana, our brand-new mine development, which we officially just opened yesterday. It's an exciting time for Fortescue, and I'm proud to be leading a very talented group of people who are building our world-class portfolio of projects. First, let me touch on safety. The health and safety of every member of the project portfolio is our number one priority. We truly believe that zero harm is possible, and we strive to embed a culture of family, looking out for our mates and encouraging leaders to be active in the field.
Our safety performance to date is measured by a TRIFR of 1.9 against a target of 2.6, and is represented by more than 8.5 Million hours of work and a construction workforce exceeding 4,000 in number. We also focus on mental health, working closely with Mates in Construction and Lifeline, and our industry-unique chaplaincy program provides on-site support to anyone in need. Of course, what an extraordinary year it has been as we continue to manage the impact of COVID-19. This global pandemic has caused immense disruption to our families and communities, but particularly our many interstate workers who decided to stay with us here in Western Australia and continue to spend extended periods of time away from their loved ones due to the hard border closure.
I'm proud to tell you that our values of safety and family have shone through, and from the outset, we came up with innovative ways to care for and support our teammates. In addition to the operational measures such as extended rosters, changes to our village facilities, and temperature and health screening, we work closely with our construction partners to deliver practical ways to support our interstate team. Some of these included providing accommodation and meals, networking events with our executive team, discounted activities in Perth to enjoy while on R&R, and family barbecues at our own homes. Now let's turn to Eliwana. This exciting new mine development will see us maintain Fortescue's low-cost status and provide greater product flexibility to capitalize on market dynamics. I'm currently standing in front of the innovative new processing facility, where just yesterday we celebrated processing first ore.
This was a significant milestone for the project team and our business after just 11 months of construction. We were joined by government officials, traditional custodians, and members of our board and executive team to recognize what has truly been a remarkable effort. The new 143 km rail line that links into the main line at Port Hedland is also in the final stages of construction, with the team working very hard to commission first ore on train towards the end of this month. This includes the construction of two major rail bridges, both of which are now complete. The steel girders for these bridges are the biggest and heaviest ever fabricated in WA. As you can see, the Silvergrass Bridge spans 228 m long with over 2,000 tons of fabricated steel.
Eliwana's rail line represents the first east-west railway through the Hamersley Ranges to be completed safely and within a record 10 months. The project certainly has faced some challenges, such as inclement weather, construction access delays, as well as the sheer complexity of building a rail line through difficult terrain and existing infrastructure. This is an outstanding achievement by the team and is a testament to their dedication and the never, ever give up spirit at Fortescue. Significantly, it's a solid demonstration of our ability to drive down capital costs through innovation and stretch targets with the project to be completed at a low capital intensity of approximately $45 per ton. Now for an update on Iron Bridge. Iron Bridge is a flagship exciting project that builds on our strategy to deliver the majority of our product over 60% iron.
The innovative design, including the use of a dry crushing and grinding circuit, will produce an industry-leading energy-efficient operation and underpin the future significant contribution of magnetite processing to our business and the Australian economy. The Iron Bridge project has been comprehensively studied since 2010 and de-risked through the operation of a large-scale pilot plant and a full-scale demonstration plant built in 2015. Through the investment of $500 million in stage 1, we were able to validate key equipment and magnetite production processes for the full-scale stage 2 ore processing facility currently in design. The pilot plant verified the wet magnetite processing flow sheet, and the demonstration plant proved the metallurgical and cost benefits of dry processing to reduce the demand for power and water.
Since the investment decision back in April 2019, the focus of the project team has been on engineering, procurement of key equipment, and early site construction. Engineering is now over 85% complete, which is an excellent result considering over 300 engineers have been diligently working around the globe from their homes due to COVID-19. Fabrication of key process equipment is well underway, with over 170 suppliers in more than 30 countries, including, for example, China, Germany, Italy, the Netherlands, U.S.A., South Korea, and of course, right here in Australia. With recent awards of major module fabrication and construction installation contracts, we have now committed approximately 80% of the AUD 2.6 billion project budget. We're also very proud to be working closely with our Nyamal traditional custodians as we seek to create generational change, economic opportunity, and thriving communities in the areas in which we work.
For example, we recently awarded a $12 million contract for our non-processed infrastructure buildings to Yurra, a joint venture between Nyamal Resource Enterprises and Icon Construction. Early construction activity is also well underway, with bulk earthworks at the process plant now 90% complete, the start of major concrete pouring, and the first arrival of the mining fleet in advance of mine development. A new expanded village is also taking shape by adding an additional 1,000 rooms, bringing the total to nearly 1,500 when complete. The village has a newly built gym and fitness center, a 25-meter pool, a sports oval, a retail store, and a cafe, and an outdoor inclusive area where people can enjoy events or just simply congregate after work. The facility is on schedule for completion early next year. We're also constructing a new aerodrome scheduled for operation this coming January.
This facility is perfectly timed as the construction workforce grows into its peak by mid-year. As we move closer to first ore on ship in the first half of 2022, the Iron Bridge project schedule and budget remain tight but achievable. We are confident that our early construction activity, the focus on innovation, and our unparalleled track record of safely constructing major iron ore projects in the Pilbara will drive the successful delivery of this low capital intensity magnetite project. In further demonstration of Fortescue's innovation and ability to adapt at rapid speed, we recently completed the conversion of our existing Christmas Creek OPF to Wet High Intensity Magnetic Separation to maintain the value of our products. Lastly, it's worth touching on energy. Last year, Fortescue announced the Chichester Solar Gas Hybrid Project, a low-emission energy solution that will incorporate large-scale solar owned and operated by Alinta Energy.
I'm pleased to say that the project is also progressing well with around 150,000 solar panels, 125 transmission lines, and more than 55 km of transmission line already installed. In addition, Fortescue's $700 million Pilbara Energy Connect Project will construct further transmission line infrastructure, solar and gas power generation, and a large battery energy solution. This project is progressing on plan and budget with 130 of 800 power poles already installed and transmission line being progressively installed. Once complete, Pilbara Energy Connect and the Chichester Solar Gas Hybrid Project will underpin Fortescue's carbon emissions reduction targets with an estimated 25%-30% of our stationary energy across the mining operations being powered by solar.
Finally, I'm really proud of the entire Fortescue Projects team as Eliwana progresses through commissioning, while Iron Bridge and Pilbara Energy Connect ramp up with an unrelenting focus on safety and delivering projects on schedule and within budget. Thank you.
Well, thanks, Don. That was a great update, good morning and good afternoon, everyone. It's really my pleasure to share some perspective as the CFO on how we manage the business, how we allocate capital, how we create value, and how we ultimately deliver returns to shareholders. It's our track record of consistent, predictable performance together with the laser-focused, disciplined cost and capital allocation, and that's underpinned by our values. Through our values, we pride ourselves on doing what we say we're going to do, and that's what we mean when we talk about integrity. Finance functions have traditionally been focused on statutory obligations, compliance, backward-looking management reports, and in that case, let's say 80% of the effort is backward-looking and only 20% of the effort goes into forward-looking activities through the, let's say, the budgeting and planning process.
At Fortescue, we're in the process of changing this mix and increasing our effort to be much more forward-focused. The slide shows to enable this strategy, the finance function needs to have integrated planning systems supported by data analytics. What we get is better, faster, more accurate planning, and that translates into improved execution and the opportunity to optimize returns. By integrating the insights from actual performance into a dynamic digital and data-driven planning process, this increases the business's ability to influence outcomes. While we might like to rewrite history from time to time, it is really only the future that we can influence, and it's the future, that's where the opportunities lie. In finance and right across the business, we're using automation, data-driven intelligent decision support, and connected planning and forecasting.
Our systems and processes are progressively linking the physicals to our assets, our people, and to our support areas. This will continue to speed up the planning process and the integrated finance functions ensure the right combination of empowerment, risk management, and governance to drive the absolute best commercial outcomes across the business. The profitability of our business through the commodity cycle is neatly summarized in one of my favorite charts. Let's face it, what's not to like about this chart? It gives great insights into Fortescue's realized price and EBITDA margin per tonne, and it also shows the Platts 62%. Over time, we have clearly demonstrated an ability to generate strong margins underpinned by an improving product mix and a focus on total costs. That's not just C1 costs.
Over the past decade, Fortescue's weighted average EBITDA margin is $36 per tonne from revenue of $71 per tonne. That represents a pretty healthy 50% margin. What this shows is the benefit of our integrated operations and marketing strategy, and that's had a combination of effects on both revenue and costs. Of note is the last two years, where average EBITDA margins have increased above that 10-year average. At the same period, our realized price has averaged around 85% of the Platts 62%. Worth noting that our growth projects, Eliwana and Iron Bridge, will continue to improve average product grades at a continued low cost of production. Importantly, those strong EBITDA margins and earnings convert into cash flow.
Fortescue's net profit after tax is closely aligned to free cash flow available for debt, dividends, and growth when CapEx is consistent with depreciation and relatively transparent working capital movements, including the tax payment cycle. The most material working capital movement for us has historically been prepayments, and those prepayments were fully amortized by 30 June 2020. The timing differences of tax payments arise from the Australian Taxation Office's PAYG installment system. What we see in our rising earnings environment, the final tax payment lags the end of the financial year. In fact, just last week, we paid the FY 2020 final tax payment of approximately $850 million or AUD 1.2 billion. That in itself was well-flagged to the market through our reporting cycle, and it reflects the contribution that we're making back to the Commonwealth Government, and ultimately the communities in which we work.
This alignment between net profit after tax and free cash flow is really reflected clearly in the past in both of these two charts, particularly post the investment cycle from FY 2014. If we focused on the last three years, the variance between net profit after tax and free cash flow amounts to just 5%. As I mentioned earlier, staying disciplined through the cycle is important to us. For us, this comes back to doing what we say we're going to do. Capital allocation discipline is embedded right across Fortescue, with a framework which considers allocation across four pillars of sustaining the business, maintaining a strong balance sheet, returning capital to shareholders, and funding value-accretive growth. This results in a fierce competition for capital across the business, and that's supported by a transparent, rigorous, and disciplined review process.
We constantly challenge ourselves and consistent with one of our values, frugality. That is not being stingy or simply saying no. It is the questioning, challenge, and judgment of spending the least amount of money on the right thing. This chart focuses on the period FY 2014 to FY 2020. As I mentioned earlier, FY 2014 is of course an important marker because that's the first year of free cash flow we had post the expansion. In that year, our production increased to over 100 million tons on its way to nameplate of 155 million tons per annum. In FY 2015, we actually delivered 165 million tons per annum. Over this period, Fortescue has generated AUD 33.7 billion of EBITDA at an average margin of 51% and reported AUD 14.9 billion of NPAT. It's our track record of disciplined capital allocation is clear.
Of the AUD 25.9 billion of net operating cash flow generated during the period, AUD 7.8 billion has been reinvested in capital expenditure, AUD 8.2 billion of debt has been repaid, and AUD 9.1 billion of dividends have been distributed to shareholders. That also includes the FY 2020 final dividend. Just breaking this down another level, the focus up until FY 2017 was very much on de-leveraging. FY 2018 was the first year where we allocated more capital to dividends than to debt repayment. In the last two years, all surplus capital has been returned to shareholders, including AUD 1.76 per share in the last 12 months, representing a fully franked dividend of a not too shabby 8%-9% based on current trading levels. Our forward-focused strategy positions the business to continue to capture and optimize return on invested capital.
A good measure of a company's profitability and capital efficiency is the level of profits it is generating from that capital. The chart shows this in terms of return on capital employed, or ROCE, and this is calculated as EBIT divided by average capital employed. Fortescue's annual return on capital has averaged 23% in the past decade. We compare this to the S&P/ASX 100 Resources Index, where the average ROCE is just 11%. We like to think by focusing on the fundamentals, the performance of the business, and how capital is allocated is reflected in that track record of maximizing return on investment. That discipline to allocate capital to de-leveraging means that Fortescue's balance sheet has dramatically changed since gross debt peaked at AUD 12.7 billion in FY 2013.
As at the last reporting date of 30 June 2020, we remain well inside our targeted investment-grade credit metrics of one to two times gross debt to EBITDA and 30%-40% gearing. Gearing represents the book value of debt to debt plus equity. We consider gearing on a gross basis because it's gross debt that has to be serviced and repaid, whilst net debt is the outcome of cash on hand at a given balance date. This is because any cash on hand, you can rest assured this is going to be put to work. That includes a minimum liquidity threshold, funding of the capital expenditure program, and any working capital requirements, such as the tax payments, as I mentioned earlier, in a rising earnings environment. Importantly, cash on hand is going to reflect dividends.
As our balance sheet's really now an asset, gross debt was $4.1 billion on 30 September 2020. It remains our intent to put in place a project facility to part-fund our share of the Iron Bridge project. We have the capacity to fund further growth opportunities. We have really simple terms and conditions across our debt facilities. There's no debt maturities until 2022. Our strategy is to proactively refinance that debt prior to maturity. As you heard from Elizabeth on Fortescue Future Industries, any individual projects will be developed by FFI with ownership and project finance sources to be separately secured without recourse to Fortescue. Sustaining our assets is one of our first uses of cash. Over the last three years, we've invested approximately AUD 1.8 billion in sustaining capital and AUD 700 million in operations development capital.
That includes, more recently, the Queens Valley development and also the WHIMS project. We'll obviously continue to invest in managing our assets, really to ensure high levels of availability, productivity, and efficiency across our integrated operation. With our CapEx guidance this year of AUD 3 billion-AUD 3.4 billion, we've guided for approximately AUD 1 billion of sustaining and operations development capital. The AUD 1 billion for sustaining capital is a reasonable midterm estimate, while appreciating there is some flex in the development capital spend, obviously in response to any price environment. This estimate includes small hub development, but it will not include major hubs, which we'll call out separately. The next major hub development decision for us is likely to be around the middle of this decade.
It's the strength of our balance sheet and operations means that we can continue to reinvest back in the business and invest in growth. You've heard that our growth project portfolio is performing well. FY 2021 represents the peak period of investment as Eliwana is completed and Iron Bridge then ramps up to full-scale production, along with that Pilbara Energy Connect project. Our FY 2021 guidance for major projects capital spend is AUD 1.9 billion-AUD 2.3 billion. This declines to AUD 900 million in FY 2022 and AUD 150 million in FY 2023, based on the midpoint of the guidance range for these major projects. Central to Fortescue's capital allocation strategy is a commitment to pay out 50%-80% of full-year net profit after tax to shareholders. We've recently been clear on our intention to target the top end of that range. That's supported by our consistent track record.
We've paid the midpoint of the range of 65% in each of the last two interim periods, and our full-year payout ratio was 78% and 77% in FY 2019 and FY 2020 respectively. Eligible Australian shareholders also received the value of the franking credits, and when paying out less than 100% of net profit after tax, it means that we maintain a healthy franking balance. Fortescue has generated market-leading returns in terms of both share price performance and capital returns. The share price performance alone is up fivefold over the last three years. This compares to annualized return of less than 10% for the benchmark S&P/ASX 200 Index. While the share price is an outcome of many factors at Fortescue, we continue to focus on the things that we can control. That's safety, production, in terms of both volume and product mix, together with costs and capital.
Our success through the cycle is a testament to our values, which underpin everything we do. Folks, that ends the formal part of the presentation, and I'll hand back to the operator to facilitate the Q&A session.
Welcome to Fortescue Metals Group investor and analyst question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We ask that you please keep to a limit of two questions per person. If you wish to ask further questions, you may rejoin the queue. Participants may also submit questions via the webcast using the question tab in the bottom right-hand corner of your screen. Your first question today comes from Hayden Bairstow with Macquarie. Please go ahead.
Yeah. Hi, guys. Just a couple from me. Firstly on, I think, sort of the focus around FFI and just sort of how to think about that. Obviously, there's an expectation of 80% of NPAT in dividends. Do we sort of look at the other 20% as going into Iron Bridge for the next two years, then after that, there's sort of leftover capital to invest in some of these green power projects? Or is it more of a minimum debt level and cash balance? I'm just trying to sort of work out where that sits. Just on the operations update, there's a lot of info put out today.
We're just keen to sort of get an understanding of where the thought process is at with blending and what do you think the real opportunities are going to be, particularly with Iron Bridge coming in, could you blend all of that? Has there sort of been more work done on whether that'll be a standalone product or you'll be changing the mix significantly from what you're doing now? Thanks.
Well, thanks, Hayden. I'll probably give a brief response to both questions and then maybe hand to Ian on FFI and Greg on blending. I think on FFI and how to think about that, there's no firm decisions yet in terms of how that might sort of play out in terms of phasing and capital allocation. What we've made clear is that any funding will be non-recourse to Fortescue.
I don't think it's as simple as 80% in dividends and 20% just to FFI in about three years' time. We'll be a bit more ambitious than that, but we do have obviously a very strong balance sheet. We do have other capacity, and we are looking at other sources of funding for FFI. I think on blending and Iron Bridge, again, we don't have to make a decision now. We're doing more work on that. We have the capacity through the port, the way we're developing our infrastructure, to be able to blend magnetite and hematite, but there's more work, there's more technical assessments. Some of that will be driven by customers' preference and demand at that point in time. We actually don't have to make a decision on that yet.
Maybe I'll just hand to Ian, if you want to add anything else on FFI, Ian.
Elizabeth, I think you did a great job in answering that question. I think that the key point being that when net profit after tax and free cash flow available for debt, dividends, and growth are aligned, it means that that capital is available for growth. As I said in my speech, there's a fierce competition for capital, things need to stack up. Also, important point, that our balance sheet is an asset now, we have excess capacity on the balance sheet really through the cycle, is the only other point I would make.
Yeah. Thank you. Greg, anything you want to add on?
I think, Elizabeth, you covered it. The important thing, I think, to think about with the blending and Iron Bridge is we actually have the flexibility, the capability to do so. There's a lot of factors to take into account. We equally don't want to necessarily flag our intentions into the market in advance of getting the thorough engagement with customers, doing the analysis, doing the assessments and technical work with customers and thinking it through very clearly. We'll be able to update in due course as well. At this point in time, no firm decisions, but the full range of blending none of Iron Bridge and selling it standalone right the way through to blending all of it are all still options on the table.
Okay, great. Just a quick follow-up on the investments into FFI. Do we have to assume that there's some sort of carbon pricing globally factored into all of these investment decisions, or do you see it more of a cost of business to just get to carbon net neutral by 2050?
I think it's a bit of both. Obviously, we've set a target to be net neutral emissions, but I do think we have to assume that over time there will be changes, and we take that into account, whether that's a carbon charge, whether it's removal of the diesel fuel rebate. There are a number of different levers that could actually change some of the economics. I think we're taking a very forward-looking view, and we're really being quite defensive in that. We also have that goal to achieve net zero operations emissions.
Okay, great. I'll leave it there. Thanks a lot.
Your next question comes from Paul Young with Goldman Sachs. Please go ahead.
Good morning, Elizabeth and team. Thanks for the presentation. I have a few questions on the renewable strategy. To begin with, looking at the Pilbara Energy Connect project, great project and great initiative, but your emissions will go up by 20%-25% post-Iron Bridge because it's an energy-intensive project and still running majority on gas. On that basis, to achieve your -26% reduction from existing operations, should we expect further investments in solar and batteries post, I guess, or a PEC phase two, in effect? Second question is on the green hydrogen strategy. Wondering if you can share any initial capital cost estimates attached to the Bell Bay project. I appreciate it's early days and it's still in study phase. Second part to that, maybe, Elizabeth, is that green hydrogen, a lot of discussion at the moment.
The barriers of entry, they could be large, they could be small, depending on your access to cheap hydro power. It seems that's the biggest barrier. But there will be a cost curve in green hydrogen. Where do you think you need to be in AUD a kilo on OPEX to actually be competitive in green hydrogen? Thanks.
Thanks, Paul. Look, I think starting with the Pilbara Energy Connect, our 26% from existing operations from 2020 levels, obviously, Iron Bridge isn't operating in 2020. We need to have a strategy for Iron Bridge as well. You're correct, it will increase emissions, but the processes we've already put in place to mitigate what could've otherwise been a diesel generation solution are actually quite substantial in terms of that mitigation of emissions increases as a result of Iron Bridge. By going down the path with the Pilbara Energy Connect of installing the large-scale solar, but also expanding the Solomon generation, the gas-fired generation, we've already made quite extensive decisions to mitigate what would otherwise be a bigger increase. You're correct.
Over time, we have the ability to add additional renewables. That's one of the benefits of building the transmission infrastructure because we own it, we control it, we can add further renewables. We all know the cost of solar is reducing nearly every day, particularly compared to 10 years ago. A range of options available to us. We are committed to our net zero by 2040. That will obviously incorporate the addition of other renewables. For now, our focus is on successfully delivering Pilbara Energy Connect, which we know will actually be a big contributor to mitigating what could've otherwise been a bigger increase. Look, on the Bell Bay project, it really is too early, Paul. I know you'd like to know about lots of different numbers and return profile. We're at an early stage. We're going to be doing the study.
We need to get to a low capital intensity. We need to get the right cost of energy. And as you say, hydro power, which is already installed in Tasmania, is the opportunity for low-cost renewable energy, and that will contribute to the overall return profile, but we're at the early stage of that. Look, I think in terms of green hydrogen and the cost, there's a range of analyst views out there, and I think if you took the midpoint of around $2.50 a kilo, clearly Fortescue, we would expect to be lower than that. So we'll be targeting lower than, I think, the midpoint of most analysts' forecasts. But again, that's the work that we need to do, and we need to determine both the capital intensity and ensure that we are a low-cost producer.
Great. Thank you, Elizabeth.
Your next question comes from Lyndon Fagan with JPMorgan. Please go ahead.
Thanks very much. Yeah, I guess with the business kicking goals in iron ore, my questions are all on the power strategy as well. Firstly, just wondering how the 235 gigawatt target was come up with. I guess, even developing the first 100 gigawatts, which is looking at your AGM slides, what timeline has Fortescue got on trying to do that? I'm also after a bit more information on how the FFI vehicle is going to work. I understand this is a separate vehicle, but how much equity would Fortescue look to invest into the vehicle versus introducing other funding? Is this something like a 20% equity holding eventually for Fortescue? Just after a bit more information on how all that works. Thanks.
Thanks, Lyndon. Look, I appreciate there's a great thirst for more information. It is fairly early stages. I think the team are doing a great job in putting together a portfolio of opportunities that we can then assess and look at timeframes, over what period of time, and you asked about the first 100 gigawatt. As you know, with Fortescue, we'll be pretty ambitious to move this along. Again, it's the same discipline we've applied to everything else. We've got to do the work, do the studies. A lot of focus on technology at the moment. Even access to electrolyzers, and the availability of electrolyzers. There's a whole range of activities. I do think what the team have done is put together a fantastic portfolio. We can't necessarily answer all those questions now in terms of specific timeframes. As always with Fortescue, we'll be ambitious.
We want to move this along. In terms of how the vehicle works, it is a wholly owned subsidiary of Fortescue. There will be opportunities for different sources of funding, and it could be quite project-specific. Rather than an overall view, there could be different projects with different funding and ownership structures, depending on where they are and what part of the world. I think we've got a track record with Iron Bridge at a joint venture, for example. One of the things that is key to us, though, obviously, is operating and having that control and marketing the product. Those are some of the key fundamentals for us, because we want to own and operate, construct, and market the product. Within that, there's opportunities for a range of different investment.
We will own Fortescue Future Industries, and I think you'll find that each project will be developed with its own sources of funding and ownership structures.
Maybe just to clarify, Elizabeth, when should we expect any sort of material spend into this? Obviously, the Tassie thing as an FID next year, assuming that's half a billion, maybe you pay for it in two weeks. At these iron ore prices. Beyond that, when should we be expecting material free cash flow to be redirected into this as opposed to, say, dividends?
Well, we're maintaining our dividend policy. Our dividend policy is unchanged, and that is to pay a range of 50%-80% of net profit after tax. We are targeting the upper end of the range. Let's just be very clear, there is no change to our dividend policy. Which is why, as we develop these projects, we'll need to look at the sources of funding and be innovative, as Fortescue has always been, in terms of identifying those sources of funding. I think the first material decision will be potentially Tasmania, depending on all the assessment that goes into that, and it will be sometime in 2021. That'll be the first significant decision. I don't think we're thinking about funding that from iron ore.
That will have the same rigor applied to it in terms of our aspirations for FFI in the context of looking at our sources of funding. There is absolutely no change to our dividend policy.
Okay, thanks.
Your next question comes from Paul McTaggart with Citigroup. Please go ahead.
Good morning, all. Just swinging back to iron ore for a minute. You expanded your available port capacity. I know you mentioned you were doing de-bottlenecking work around car dumps in the port. I want to get a sense of what needs to be done there to be able to shift up that historic range of guidance for exports or shipments, and what might be a possible timeframe. Following on from that really is, you mentioned the development of the next hub decision around mid this decade. Eliwana is great because it's dry processing. Do you expect that the development of the next big hub operation will be dry processing as well?
Greg, do you want to touch on those?
Yeah
starting with port capacity?
Yeah, sure. Good day, Paul. Port capacity. Remember, of course, Iron Bridge won't be going through our rail circuit and dumpers, Paul. It's 22 million tons a year that'll be going straight through the concentrate pipeline to a dewatering facility. As part of that investment, we have some further investment at the port with a further conveyor in the port, a stacker, and rehandling facilities as part of that. Whilst there will still be some de-bottlenecking and fine-tuning of some of the transfer chutes and bins and things like that, there's no major investment for us to be able to fulfill the ability to put 210 million tons through our assets at the port. There'll be some environmental mitigations, dust management, and other material handling.
There's no major investment for us to, over and above what's already announced as part of Iron Bridge and some minor debottlenecking here and there. The facilities are there and our environmental license is there, so we're well-placed to deliver on that. Next major development. Look, obviously the other area that's available to us outside of the three hubs that we now have developed would be the Nyidinghu area. Likely to be wet processing, Paul, although there may be a period of dry processing that we could conduct there before we get well and truly below water table. I would expect it to be wet processing. We've also got a lot of options that we're still thinking through about how do we develop Nyidinghu. It could be bringing that material over to the Cloudbreak operations and using that facility as a supplement.
Minor processing at Nyidinghu and then using existing facilities, depending upon whether we want it to be incremental or supplementary to our existing operations. It could be incremental and have its own processing plant there. They're all the options that we need to think through. Timing of that will depend on market conditions, of course, but we still have other abilities to increase output from our existing hubs on minor incremental numbers that could push that out.
Thank you.
Your next question comes from Glyn Lawcock with UBS. Please go ahead.
Good afternoon, Elizabeth. Just a couple of questions. Maybe just on from what Paul was asking. I'm just curious, as you ramp up Eliwana, obviously you're going to be ramping down Firetail. You've got a hematite allowance now of 188 through the system. Do you think there's capability to overlap and do a little bit better than the run rates, the 180 target? I guess what I'm trying to understand is, will the system, the rail system, getting it down to the port not allow some overlap and a slightly better performance as you ramp one down and one up? Then I just wanted to focus a little bit more on FFI. I guess when I look at it, I struggle a little bit. I understand you're going to have everything funded off the balance sheet, non-recourse to Fortescue.
When I look at the renewables industry, it's highly competitive. Returns continue to get pushed down lower and lower. I guess the two questions from that is, you've got a 24% return on capital business, which based on what renewable projects generates, that is going to be diluted down. If you do have a problem with the project, while it's non-recourse, it's a subsidiary of Fortescue, so you're not going to let it just wither and struggle if it does get stuck for some reason. I guess, is there still a risk, even though it's non-recourse, you'll have to step in and help it out if there's a problem? If not, why do we have to own it inside Fortescue? I guess I'm trying to understand. Thanks.
Well, thanks, Glyn. Greg might want to talk about the Eliwana ramp up. Look, in terms of FFI, I think those questions are best asked when we actually have a project and we're looking at how we're funding it. We appreciate the return profile, as you would expect from Fortescue. With our disciplined approach, we will be doing a lot of work before we make those sorts of decisions in terms of what the return profile looks like, the market, the growing demand. The energy demand is changing, and we think hydrogen will be a major, or green ammonia will be a major export opportunity as well. That continues to evolve. The same discipline we've applied to all of our investment decisions. I think Iron Bridge is a good example. We took five years.
We built a pilot plant and demonstration plant, and we ensured that we were much more highly efficient and innovative. The returns will be much higher than other similar magnetite projects because we actually have used innovation through the process flow sheet. We've actually got the situation with the dry processing and the rejection of waste up front. We've been very energy efficient. That's part of the biggest cost. That sort of similar process and approach to making that decision you would expect us to apply to anything we do in FFI. We don't actually have those decisions in front of us right now. We've got a clear goal for the future, and we will look at those opportunities.
I think as and when we have an actual project that we are looking to make that decision on, then that's probably a better time where we can address those types of questions.
Okay.
Glyn, look, the questions you ask are the right questions. They tax us every day of the week about how do we think about optimizing our throughput, optimizing the new Eliwana operation as we bring off Firetail over a period of time. As I mentioned earlier, our OPFs are clearly no longer the bottleneck. They probably weren't even before we commissioned Eliwana, let alone now that we have Eliwana. Our mind has turned to how do we optimize the throughput through the dumpers and our rail network. Our port facilities will also be tight in terms of the management of the yard. Our guidance is our guidance for this year. It's 175 to 180. We're certainly not guiding anything beyond that for this year.
Clearly in this market, Glyn, any opportunity at the moment to put more tons through the system, we're absolutely looking at, and over the next year or two, that probably holds true for our hematite operations, and we seek to optimize and maximize the throughput. That's a clear focus for us.
All right. Elizabeth, could I just ask a follow-up to your response, please?
Sure.
Elizabeth, you said obviously it took five years before you made the decision on Iron Bridge. I think if we look back when you made the decision and you look at what was in your annual reports, you were using premiums for the 67% to the 65 index. Those premiums seem to have disappeared now. When I look at your peers that are currently selling magnetite out of W.A., they're basically just getting the 65 index today. Just wondering if you could share your thoughts. Is this like when you got large discounts, just a cyclical issue, or is this structural in nature to see the premium disappear for the high-grade product against the index? Thanks.
Well, I'll probably hand to-
With that goes to, I guess, the returns.
Yeah. Thanks, Glyn.
Yeah.
I'll probably hand to Danny to address that. I think, our view, as we saw in 2018 when the spread in prices were at their widest, our view then was that that was cyclical, and I think that view has been proven out. Danny, you might want to talk about the current magnetite.
Yeah, thanks, Elizabeth, and Glyn, thanks for that question. Look, I think it is cyclical, and if we go back and we look at the premiums for magnetite and concentrate, et cetera, you can see that there is a lot of variability there, and the market will continue to go through cycles, obviously. I guess, in our case, the magnetite and Iron Bridge in particular, one of the greatest attributes of Iron Bridge is that it creates significant optionality in our portfolio. There are many ways to look for value-accretive options going forward. I don't think we can just look at it in isolation.
Okay, that's great. Thanks, Elizabeth.
Your next question comes from Peter O'Connor, Shaw and Partners. Please go ahead.
Hi, Elizabeth. That was a seriously impressive presentation. Thank you very much. Look, I must say, I missed the first part because I was on an independence call, but two questions, and they're pretty vanilla. Port approval, Greg. You talked at the last call we had, I think September quarterly, that you had approvals. You've mentioned more clearly it's the EIS, so the environmental side. When do you get the definitive sign-off from the minister for the port uptick to 210?
We have-
Approval
210 million tons of approval today. There's nothing outstanding from a minister, to be able to ship 210 million. There's the detail and some conditions we have to meet on the way through that in terms of managing the environment and dust. There's the breakdown of hematite versus magnetite, within that. Otherwise, there is no further approvals we need. Port allocations in terms of the shipping channel and allocation on a daily basis of ship movements, et cetera, are a different matter, and there isn't an approval process for that. That is just the port authority working with each of us on managing the throughput and maximizing the throughput for the benefit of the state and each customer. There is no further approvals we need in order to be able to get to 210 million tons per annum.
The comments the minister made about the port, he must have been talking about the channel, was it more so than the port capacity?
Yes, that's right. That's exactly right. That's not an approvals process. There is allocations with different class allocations, if you like. This 12 months of this calendar year, we will ship very close to 180 million tons in the calendar year on the current basis of operations. Which is ahead of where we had been, in terms of our prior approvals of 175. No, there's nothing more from an approvals perspective, just allocations and how that works on a shipping channel basis.
Okay. Elizabeth, Iron Bridge, the comment made during the presentation was that the budget was tight. Is that just a classic Fortescue tight approach, or is it tight for other reasons? If so, what are they?
I think it's more the classic Fortescue tight, Peter. As you know, we do set ourselves stretched targets, and Iron Bridge is no outlier in terms of having some stretched targets. Look, there are some challenges we've encountered this year due to COVID. I think about the engineering, and Don mentioned in his presentation, we've had teams of engineers working around the world, most of them having to work from home. There have been some challenges. I think it would be unrealistic to expect that, A, we continue to operate, and B, all our projects continue without some implications, and we saw that actually on Eliwana with some of the acceleration efforts we had to put in place. It is tight, but the team are working very hard, as you would expect, to achieve our targets and our budget and, importantly, our schedule as well.
Thank you, Elizabeth. Thanks, Greg.
Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from David Coates with Bell Potter Securities. Please go ahead.
Thank you. Good morning, Elizabeth and team. Thanks very much for the presentation today. My first question, I think, is probably to Elizabeth on FMG's and Fortescue's Future Industries. Again, it might be a tough one to answer, but I just wonder if you can give us any sense of timing or the pipeline for the projects you might be considering, just so that we can sort of perhaps think about when we might be incorporating those projects into our modeling.
Second question is probably for Danny, just in terms of the market outlook. You've got China potentially diversifying its sort of supply base. I wonder if Fortescue is looking at, or what opportunities you guys have for diversifying your customer base. Thanks very much.
Thanks, David. Look, I think in terms of a sense of timing on Fortescue Future Industries, probably the best indicator is the Bell Bay project in Tasmania, where we've indicated we're going to undertake studies and feasibility analysis, with an investment decision anticipated in 2021. 2021 starts in a few weeks, so it'll be later in 2021. I think in terms of timing and modeling, we are at the very early stage. It is a bit akin to exploration. In the same way we're investing in exploration activities, we will invest some funding in Fortescue Future Industries, to undertake work and to build up that portfolio and look at timing and phasing and execution. At that point, when we have greater clarity, we'll be able to provide more information. The more immediate opportunity is the Tasmanian opportunity.
Danny, did you want to talk about diversification?
Yes. Thank you, David. I think you asked about the market outlook. Obviously, we continue to expect strong market dynamics. Obviously, supply continues to be constrained, as we've outlined in the presentation. On the demand side, in China and even outside of China, our customers keep telling us that there's obviously very strong steel demand. Going into the first half of next year, particularly given the level of stimulus that we've seen in China, we expect the market to be strong probably for the entire year. Even non-China, we're now seeing good recovery in those markets. I think overall, we're optimistic about the strength and the endurance of the iron ore market. With respect to diversification, look, we obviously continue to look for opportunities to diversify.
As I mentioned earlier, we are building very good relationships in some of the traditional markets, and we're actually capturing some market share there. We'll continue to focus, obviously, on non-China. The reality is that the majority of our volumes currently continue to flow into the China market. Diversification remains a focus for us.
Great. Thanks very much. Elizabeth, if I could just ask a quick follow-up on FFI and in considering it sort of, I guess, as an exploration sort of project. Should we be thinking about it in terms of an increased exploration budget? What sort of exploration budget, quote unquote, should we be perhaps allocating for FFI?
Well, our guidance for exploration activities, and that's mineral exploration this year, is around AUD 140 million. That's obviously covering both iron ore exploration in the Pilbara, as well as our activities largely in South America at this point in time, but some other domestic exploration programs in Australia. I think for FFI, we haven't actually got a firm view yet in terms of the allocation of funding. It's non-C1 costs. I don't think it'd be quite as much as the exploration budget. I think if you had somewhere between, I don't know, AUD 80 million and AUD 100 million as a sort of an exploration-style activity, that would probably, from a modeling perspective, I think that would probably be appropriate.
Great. Thanks so much. Really appreciate that.
Your next question comes from Lyndon Fagan with JPMorgan. Please go ahead.
Thanks. Couple of follow-ups. Firstly, I was pretty impressed with the OPF performance, getting 10% more production out over the last five years. I'm just wondering if you're able to share a bit more detail on sort of what sort of iron upgrade we're getting now. I'm just wondering if the OPFs are actually performing better as far as sort of beneficiating the product goes, and how that maybe fits into the broader target of getting to 60% Fe as a majority overall. The second question was just a follow-up on the comments around China scrap. Just with some of the import rules changing, but the economics not necessarily stacking up to do it, just wondering sort of what feedback you've got from customers or any broader comments on China's scrap consumption economics at the moment. Thanks.
Thanks, Lyndon. Greg, do you want to comment on the OPF performance?
Yeah. Lyndon, I wouldn't be factoring any major changes to upgrade numbers through the OPFs other than the fact we've invested, of course, in our WHIMS plant at Christmas Creek. That's aimed at targeting particular areas of the mine where there was a lot of iron units associated with some very fine materials that would otherwise have been lost to tailings at Christmas Creek, and we're now able to capture that material. That actually lifts both yield and grade through that Christmas Creek plant. More broadly, though, the OPFs at this point are not targeted as part of the uplift to a majority of our products greater than 60% Fe. That really comes through the development of Eliwana as a first stage, the smarter scheduling within our operations at the existing plants, and obviously the potential for blending out of Iron Bridge as a broader part of that strategy.
It's just been really good reliability engineering, focused effort by our teams across the sites, driven in part by our central asset management group, who've really done a great job of improving reliability, and throughput through those plants has been the key focus there.
Danny, did you want to talk about scrap?
Thanks, Elizabeth. Lyndon, on scrap, I think if we look at the broad dynamics, China between 2013 and 2017, if you believe the official numbers, has imported anywhere between 3 million-5 million tons of quality scrap. They're now obviously looking at opening up the borders to import more scrap, and some of the numbers we've seen in the public domain suggest that that might well rise to 10 million-15 million tons. The feedback from our customers is that scrap continues to be expensive, and if you look at the differential between what's currently paid in China for quality scrap versus Turkey or seaborne spot scrap, it's almost AUD 100 per ton more expensive. Some of our customers are saying that, particularly in the last 20 months, making steel with scrap is now more expensive than making pig iron.
In some cases, they're paying AUD 25-AUD 30 per ton more to make steel with scrap versus with pig iron. The historical average has been that the scrap price is sort of AUD 15-AUD 20 below pig iron. It's clearly still uneconomic, and obviously the view is that as the borders open up, that the differential or the arbitrage opportunity between China scrap and spot scrap will evaporate pretty quickly. Prices will therefore go up for seaborne scrap into China, and we'll very quickly see the overall cost of scrap going up again. It's sort of hard to see in the magnitude of things.
China collects 220 million tons of scrap a year, so 10 or 15 million tons here or there, in our view, is not going to have a material impact on how China uses scrap, and more importantly, it's certainly not going to change the hot metal dynamics in a big way. That's our view.
Thanks very much.
Your next question comes from Peter O'Connor with Shaw and Partners. Please go ahead.
Thanks, Elizabeth. Just to follow up, thinking about the November exports of iron ore out of Port Hedland, and thinking perhaps more holistically or just specifically about your exports, the numbers were lower period on period, month on month. Did that reflect your producer view of the world, or was that customer order driven?
Greg can comment as well, that really is just part of our plan. There will be some shutdown maintenance activity, it's not a view on customers or market. That is actually, we delivered in line with our plan for November. We have our planning teams working through the integrated operations and marketing network. We continue to deliver to our customers. We haven't amended our schedules as a result of some different view on the world or on the market. No, Peter, it was well and truly in line with our plan.
Yeah. Nothing market driven in it at all, Peter. Yeah, normal cycles of maintenance activities and the likes, and nothing else operationally or market driven there.
Okay, great. Thanks very much.
Your next question comes from Paul Young with Goldman Sachs. Please go ahead.
Hi again, Elizabeth. A question on heritage. It's a big day today, Elizabeth, because we get to hear the outcomes of the federal inquiry into Juukan Gorge. That aside, do you have any further thoughts on how the approval process of heritage process might change from the perspective of the time frames of actually getting approval for a project leading up to the new Heritage Act and post the Heritage Act? Do you think we will see delays in approvals as a result of Juukan Gorge and the repercussions thereafter? The second question is actually a little bit left field, one on Iron Bridge. With Baosteel's 12% ownership, are they committed to this project or do you have the option of actually increasing your ownership in this project? Thank you.
Thanks, Paul. Look, just on heritage, obviously the existing legislation remains in place until there is new legislation. We do support the modernization of the Aboriginal Heritage Act, that now seems as though that won't occur until 2021. The current process is operating as intended, and you've got to remember that the biggest user of Section 18 applications is actually for public infrastructure. It's important that this process continues. We're operating under the existing legislation and expect that those approvals processes will occur as anticipated, as they have done in the past. I do think, obviously, there will be a period of time where the intent is to introduce new legislation. There'll need to be transition periods from the existing legislation to new legislation. We don't know what that looks like yet.
We don't know what's going to come out of this report today on the federal inquiry and what recommendations might come from that. All in all, I think we've got to plan with longer lead times so that we can go through approvals process and make sure that we allow enough time, whether that's through the transition arrangements in the Western Australian legislation, whether it's through an amended federal regime. We don't know yet, I think the message that we've all taken away from this is that we need to ensure that we plan and we do our studies, and we continue to work with traditional custodians, apply the same process we've historically applied working with our knowledge holders, traditional custodians, and have a policy of avoidance, which is our prime focus, is on avoiding sites of significant heritage. We need to allow for longer lead times.
I think it's a bit early to say what these changes might mean in terms of the process. For now, the process continues as per the existing legislation.
Yeah, thanks, Elizabeth.
Oh, Baosteel.
Baosteel ownership in Iron Bridge space.
Ian, did you want to comment on that?
Yep. The short answer, Paul, is that Baosteel are absolutely committed to Iron Bridge, so they're an offtaker and have been supported. In terms of their contribution into the project, I guess ultimately that'll be a matter for their capital allocation, but it does allow Fortescue to increase our stake, and ultimately, I suppose once we've finished the project, raise the debt capital that we've spoken to about. Also there'll be a portion of equity, and we'll know then what the wash-up and the equity percentages are. We do have the ability to increase our stake, if Baosteel should choose not to allocate capital to the project. Your first question on are they supportive? Absolutely.
Just following up on that, Ian, are they actually committing capital at the moment, or have there been no payables or contracts paid yet?
Yeah. Where we are in the process is that the equity contributions and so forth. The admin at the back end of this hasn't been done yet. It's largely been funded through shareholder loans. We're not at that stage yet.
Okay. Thanks for that, Ian.
Yeah, no worries.
Thank you. I will now hand the conference over to Andrew Driscoll, Group Manager, Investor Relations, to facilitate the webcast Q&A.
Thank you, Ashley. There's a couple of questions to address. This one from a shareholder curious on Iron Bridge. Could you provide some further detail regarding the timing and execution of the Iron Bridge project facility and how that will impact cash flows for the business?
I might. Thank you, Andy, and I might start with that, and Ian might want to comment on the CapEx guidance that we've already provided. The Iron Bridge project is a $2.6 billion project. Fortescue's share of that is $2.1 billion. The project is well advanced, as you saw from Don Hyma's presentation, and first ore on ship is due in the first half of calendar year 2022. We're sort of about 18 months away. We've got the approvals we talked about for our port allocation to increase our throughput to accommodate the Iron Bridge Magnetite project. We've given clear guidance in terms of the timeframe for investment, but I might ask Ian to just comment on that.
The main impact of the Iron Bridge financing facility being put in place is obviously it frees up capital, so using the balance sheet rather than free cash flow. Therefore, on a standard calculation of free cash flow available for debt, dividends, and growth, we're adding back in the extent to which we free up that capital. It's a positive cash inflow, so that will free up capital to be allocated elsewhere or to support dividends.
I would add as well that Iron Bridge is included in our guidance for our capital expenditure this year, which is a range of AUD 3 billion-AUD 3.4 billion.
Thank you. Second question. The Australian dollar has strengthened since the company's provided its C1 cost guidance. Can you walk us through the implications of that, and make any other observations on current cost trends in the Pilbara?
In terms of our C1 cost guidance, we've guided a range of AUD 13-AUD 13.50. We have assumed an average exchange rate of AUD 0.70. Roughly for every one AUD 0.01 movement, plus or minus the AUD 0.70 assumed, it's about a AUD 0.13 C1 cost impact. Depending on your own view of the Aussie dollar, it's about that AUD 0.13. In terms of what we're seeing in the Pilbara more broadly, I think during this year with COVID-19, there has been very tight demand for skilled resources. We know that there are some people who would ordinarily reside on the East Coast, and because of border restrictions this year, some have relocated to Western Australia, either temporarily or permanently, but there have been others that have elected to remain on the East Coast.
What that means is there are some key skills where we have actually seen quite a demand, and that has had some impact on labor rates, but only in those skilled labor. I think more broadly across the Pilbara, it is a busy time in the context of activity, whether that's through our projects or through our operations. We're very mindful of any cost inflation, and we work very hard to mitigate that through the increased use of innovation. We've just completed the autonomous haulage at our Chichester operation. We continue to put in place those innovations that enable us to maintain our low-cost status. Ian, anything you wanted to add on costs?
I think just on capital expenditure, around 70%-80% of our capital expenditure is Aussie dollar denominated. That's obviously a function of the, as opposed to a AUD 0.12-AUD 0.13 on the C1, that's impacting as well. As Elizabeth said, our average FX assumed for this financial year was AUD 0.70. Obviously, it hasn't been at AUD 0.70 for the current trading range until most recently. That's the only other point I'd make on capital expenditure.
Just the final question online. Given the strength of the iron ore price, is it likely that the board will consider a special dividend this year?
Well, look, I think any declaration of dividends is a matter for the board. We've got a clear policy, and that's to pay between 50% and 80% of net profit after tax, and we've been targeting the upper end of that range. When we talked about the last couple of years, even in our FY 2020 year, there was some special in terms of timing, but that was included in our overall payout ratio of 78% of net profit after tax. I think the focus should be on our statement that we have maintained our policy, and importantly, that we're targeting the upper end of our range. Any declaration of dividends is a matter for the board.
Elizabeth, perhaps I'd just add as well the point made in the presentation of the consistency between NPAT and free cash flow. And for this year, our depreciation is AUD 1.4 billion. We're reinvesting back in at a greater level than that, at AUD 3 billion-AUD 3.4 billion. So as earnings are going up, cash flow is going up, and therefore, dividends as a percentage of free cash flow are also going up. So those things go together, therefore reducing the requirement for a special dividend because you're paying dividends as a function of free cash flow.
Thank you, Ian. I think we're coming to the end of our allocated time for the investor Q&A, so I'll hand back to Elizabeth for closing remarks, please.
Thank you, Andy. Ladies and gentlemen, Fortescue's clear strategic focus on product, operations, marketing, as well as growth and balance sheet management continues to drive strong results and deliver significant benefits for our shareholders. Our growth agenda is well established through investment in Eliwana and Iron Bridge. We're making a significant investment in energy infrastructure, which is consistent with our commitment to reduce emissions. We have our eye on the future, pursuing exciting new opportunities in renewable energy and green industries. As we enter this exciting phase of growth in Fortescue's journey, our work will continue to be underpinned by our unique culture and values. Our team's commitment to meeting key safety, production, and cost targets, their willingness to challenge the status quo to deliver operational excellence will be fundamental to the achievement of our stretch targets and our future success.
Thank you for joining us today for Fortescue's 2020 Investor and Media Day.