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Fortescue’s Lilleyman vows to slash production costs further




Fortescue Metals Group can take its production costs lower even in the face of growing headwinds, the miner’s new director of operations says.

Greg Lilleyman, who stepped into the role earlier this year after a long career within rival iron ore giant Rio Tinto, yesterday fronted media for the first time in his new capacity.

He has joined Fortescue at the end of a long transformation of the business, during which time the miner that was once seen as the marginal producer in the global iron ore industry moved dramatically down the cost curve to challenge Rio for the title of the world’s lowest-cost producer.

But there have been growing concerns about Fortescue’s ability to sustain that progress. The company has made no secret of the fact that its strip ratio — which represents the amount of waste rock that needs to be removed to access each tonne of ore — was set to rise in the years ahead.

The haulage distances at its mines are also due to start increasing as the mines continue to advance, while fuel and labour costs are also starting to rise.

Despite all that, Mr Lilleyman was adamant that the miner’s production costs could still go lower.

“We’re guiding $US12-$US13 per tonne this year and there’s no change in that, but over the coming years we will absolutely be driving our performance below that,” Mr Lilleyman told The Australian. “We don’t see yet the bottom of where we can get to.”

Fortescue on Tuesday announced plans to more than treble the size of its automated haul truck fleet with the aim of eventually completely phasing out its haul truck drivers. The initial 56 automated trucks in use across Fortescue’s operations have delivered a 20 per cent productivity improvement compared to their manned counterparts.

Mr Lilleyman himself is well versed in the finer points of automation, having worked in the uppermost ranks of Rio’s iron ore division as the time it introduced its automation program. He then also served as Rio’s head of innovation and technology before his resignation in May last year.

The dramatic scale-up of Fortescue’s automated fleet will see it overtake Rio as the biggest user of the vehicles, although Mr Lilleyman said the decision was based purely on the economic case.

“We’re not automating or putting in technology for the fun of it or to say ‘look at us’ or anything like that,” he said.

“There are tough, hard-nosed business metrics that get put around it and they have to pay back or we don’t do them.”

Beyond the automation rollout, Mr Lilleyman will also oversee Fortescue’s decision on how to replace its depleted Firetail mine.

The company has previously identified the Nyidinghu or Western Hub deposits to replace Firetail, which is due to run out of ore later this decade. “They are both projects that will happen one day, it’s just a matter of which one happens first,” he said.

Mr Lilleyman has already been touted as a potential successor to incumbent Fortescue chief executive Nev Power, who has been in the job since 2011.

“I’m only six months in, I’ve had a really good start in terms of the involvement and engagement of people right through the business,” he said.

“I can see heaps of opportunities ahead of us to drive great performance and deliver the Firetail replacement strategy and those sorts of things. That’s clearly my focus over the coming few years.”