Fortescue confirmed Greg Lilleyman’s resignation in a release to the share market at midday. Credit: IAIN GILLESPIE/The West Australian
Fortescue Metals Group chief operating officer Greg Lilleyman has parted ways with the company after being caught up in what is believed to be a multi-hundred-million-dollar blowout at the company’s Iron Bridge magnetite project in the Pilbara.
Fortescue confirmed his resignation, with immediate effect, in a release to the share market at midday.
Chief executive Elizabeth Gaines and chief financial officer Ian Wells will also lose annual bonuses amounting to millions of dollars because of the cost overruns at the $US2.6 billion ($3.35b) project south of Port Hedland.
The Andrew Forrest-controlled iron ore miner has until now remained tight-lipped about reports of a major cost overrun at the project.
After tracking higher in earlier trade, Fortescue shares dropped 1.6 per cent on the news to $24.035 at 12.15pm.
Mr Lilleyman’s departure has sparked leadership changes at the top of the company.
Current general manager of Fortescue’s Solomon iron ore hub, Derek Brown, has been appointed as acting director projects with the support of Fortescue’s senior projects team.
Ms Gaines said Fortescue’s “commitment to our values and culture is our highest priority”.
“What we’ve learned through our review of the Iron Bridge project to date, is that we have lost sight of that critical focus,” she said.
“Since Fortescue was established, our values, above all else, have driven our behaviours and our decisions.
Today, it is that culture and our values which have come to the fore as we announce these difficult changes.
“I would like to thank Greg Lilleyman for his enormous contribution since he joined Fortescue in January 2017. The success of our integrated marketing and operations strategy is a lasting legacy of Greg’s strategic focus and his commitment to our success over that period.”
Fortescue’s director of projects Don Hyma has already parted ways with the miner after only two years, along with the Iron Bridge project manager Manie McDonald.
Ms Gaines confirmed both she and Mr Wells would forego all incentive payments for this financial year.
“We take this opportunity to reset the company’s focus on our culture and values which defines us and makes Fortescue a truly great company,” she said.
Fortescue’s director of projects Don Hyma has already parted ways with the miner after only two years, along with the Iron Bridge project manager Manie McDonald.
It is reported Iron Bridge is facing cost overruns of nearly $1 billion.
Fortescue has confirmed costs and scheduling for the project are undergoing a detailed review.
Investors will be looking for some guidance on the status of the project when the company reports its first half result on Thursday, though the company could update the market before then.
It is understood Iron Bridge has been hit by rising steel costs, a firmer Australian dollar and a shortage of temporary skilled labour because of border restrictions amid the coronavirus pandemic.
Elizabeth Gaines will forego incentive payments for this financial year. Credit: Simon Santi/The West Australian
A joint venture between Fortescue, Taiwan’s Formosa and China’s Baosteel, Iron Bridge lies 145km south of Port Hedland and is due to enter production in mid-2022.
It is expected to deliver annual production of 22 million tonnes of low-impurity, 67 per cent iron concentrate.
Stage two works were approved in 2019 and were expected to create 3000 construction jobs and 900 full-time operations roles.
The works include an ore processing facility, airstrip and village, a 195km water pipeline, a 135km concentrate pipeline to Port Hedland and new port handling facilities.
Iron Bridge is Fortescue’s first magnetite project. FMG has historically focused on haematite direct shipping ore projects in the Pilbara.
The project is part of the company’s strategy to boost the average iron grade of its product above 60 per cent.
While magnetite operations deliver a higher-grade product, beneficiating the ore typically costs more and uses more energy intensive processing.
Magnetite projects have had a poor track record in WA with Ansteel’s Karara magnetite project in the Mid West and CITIC Pacific Mining’s Sino Iron project at Cape Preston also experiencing cost blowouts in development. Both have also struggled to operate profitably because of high operating costs and processing problems.
When Fortescue sanctioned the project in April 2019, Ms Gaines said Fortescue had effectively de-risked Iron Bridge by investing $US500 million since 2010 in developing a pilot plant that produced a concentrate product.
She said Iron Bridge would also benefit from Fortescue’s “unparalleled track record in successfully developing infrastructure and mining projects in the Pilbara”.
Mr Lilleyman said Fortescue had developed a process flowsheet specifically tailored to Iron Bridge’s low moisture ore, allowing for one of the most cost and energy-efficient magnetite operations globally.
Three executives have left Fortescue after huge costs in its Iron Bridge project.
Three high-ranking officials at Fortescue Metals have resigned over an undisclosed matter which was largely about people and behaviour, according to a tight-lipped boss Elizabeth Gaines.
Chief operating officer Greg Lilleyman, director projects Don Hyma and director Iron Bridge Manie McDonald all resigned, the mining giant said on Tuesday.
Mr Lilleyman's resignation was effective immediately.
The trio have all had oversight of Fortescue's Iron Bridge magnetite iron ore project, which has had huge costs and is being reviewed by management.
Yet Ms Gaines told media the announcement did not reflect the costs.
"This is largely about people and behaviour," she said.
"It wouldn't be appropriate to comment further on any specifics."
She said staff had to meet company values, and core to these values was meeting targets.
Asked whether the behaviour in question was that of one individual, Ms Gaines said: "It's about teams. It's not just about one individual".
Ms Gaines and chief financial officer Ian Wells will forego incentive payments this financial year.
The company is due to report first-half earnings on Thursday and Ms Gaines said an update on the Iron Bridge project will be provided.
Shares slumped in the wake of the news, and were lower by 4.28 per cent to $23.38 at 1530 AEDT.
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