Hi @ShelbyWrightThanks for your kind words, cheers. Sure, I'm...

Hi @ShelbyWright

Thanks for your kind words, cheers.

Sure, I'm happy to provide my thoughts on where I see Fortescue are strategically moving towards by the end of this decade which is just over 5 years away.

Here's what the company have highlighted about their decarbonisation strategy....

"Fortescue expects to generate attractive economic returns from its investment arising from the operating cost savings due to the elimination of diesel, natural gas, and carbon offset purchases from its supply chain. Fortescue is well positioned to capitalise on first-mover advantage and the ability to commercialise decarbonisation technologies."

Ok, what we know is that capital investment will be US$6.2bn.

Most of that expenditure will be between FY24-28.

What else have the company highlighted? That maximum annual expenditure will be US$1.5bn.

That expenditure has started already FY24.

FY25, FY26, and FY27 will be where the higher amounts will be spent (refer to reference below).

My thinking is that the company are already working towards offsetting that annual expenditure by increasing revenue and more importantly profitability. How so?

From what Fortescue highlighted below...

New revenue opportunities value creation:

• Creating significant value for our shareholders by:

− improving the integrity of our assets and operating model
− producing a carbon free iron ore product
− commercialising technology and intellectual property
− attracting the best talent as a result of world-leading decarbonisation approach

Of those four points, it's the "commercialisation of their technology and intellectual property" is where I think they can offset that expenditure short term.

They already have proof of concept with:

Haul truck
Excavator
Ship
And stationary equipment

Look at how fast these have come online.

Their biggest expenditure is going to go towards their green mining fleet (26%) followed by stationary power at (25%).

But they can do this in stages, that's the part of their strategy I really like.

In FY23, gas and diesel cost Fortescue over US$560 million, while voluntary offsets cost US$6.2 million.

Their goal:

Net operating cost saving of US$818m pa at prevailing market prices and OPEX Savings – US$3bn by 2030.

So by 2030 it's going to cost them US3bn....BUT what if other revenue streams open up for them? That's where things change.

Throw in the numerous initiatives in the pipeline and you can see how this might look over the next five or so years.

Now for your question....

Given all you've seen and read, do you have a feeling for the size and significance that Fortescue could grow to be over the next say 5 to 10 years, if a reasonable number of initiatives in the pipeline can be successfully executed?

I think that if the company can save $1bn per year in-house first and foremost and show others in the industry proof of that, those current and prospective pipeline of projects could potentially fund themselves as they won't be going in 100% themselves. Think of that for minute or more I'm not sure if that helps?

All the best!

Reference:

https://cdn.fortescue.com/docs/default-source/announcements-and-reports/2439388.pdf?sfvrsn=72c11d06_16

Tony