Fortescue Ltd (FMG.AX) Earnings Call Transcript & Summary

Thank you, and welcome all. It's great to be back with you again. I'm here in London, and joining me is Mark Hutchinson and Apple Paget, CFO. Last month, we presented our quarterly production results, which included our highest ever first half shipments of 97.1 million tonnes. We did this while achieving an outstanding safety performance with a significant improvement across all our safety indicators, including a 44% improvement in TRIFR. We remain on track to deliver our FY '25 guidance despite recent weather events in the Pilbara, including Cyclone Zelia last week. The team was well prepared and did a phenomenal job in managing its impacts, working hard to resume normal activities as safely and quickly as possible. Apple will talk to the financials shortly. However, there are a few results I wanted to call out. We continue to keep our costs low, achieving a hematite C1 of $19.17 a tonne in the half, delivering a strong underlying EBITDA of AUD 3.6 billion and a net profit after tax of AUD 1.6 billion. Reflecting these results, the Board today declared a fully franked interim dividend of $0.50 per share, representing a 65% payout of net profit after tax and a return of AUD 1.5 billion to our shareholders. There are many highlights during the half. Our billing opportunities program has now awarded AUD 6.5 billion in contracts to First Nations businesses since 2011. We continue to ramp up Iron Bridge with more than 5 million tonnes of high-grade magnetite concentrate now shipped to our customers since operations began. We commenced construction on our green metal project at Christmas Creek with first production on track for later this year. And we continue to work closely with Chinese steel mills and renewable energy companies to further define and partner on developing an Australian China green metal supply chain. Our decarbonization plan also went from strength to strength with a $2.8 billion contract signed with Liebherr for zero emissions mining equipment. This will see more than $1 billion of revenue flow back to Fortescue Zero for providing the battery power systems. Our recent deal with XCMG to purchase over 100 pieces of zero emissions heavy mobile equipment marked another step in our journey to Real Zero. And we also commissioned a 100-megawatt solar farm, the first of around 1.5 gigawatts we'll build before the end of the decade. On Iron Bridge, we are continuing to learn every single day and the facility is improving month-on-month. In fact, December, we had our best month to date with concentrate production annualizing at around 9 million tonnes. The schedule for operating at nameplate capacity, though, by September 2025, as we announced today, is under review and assessment is underway to optimize the performance of the air classification circuit and downstream Aerobelt conveying system. This assessment is anticipated to be completed in Q4 this year. Before handing over to Hutch, I'd like to give a huge shout out to the entire Fortescue team and all of our partners for their huge effort this half. It's been a strong half with record production, outstanding safety performance, all while continuing to keep costs low. On that note, I'll hand over to Hutch.

Thanks, Nina, and hi, everybody. Our energy business continues to be agile, innovative and disciplined in the way we approach a very dynamic global energy market. Our view remains the same. The world needs abundant renewable energy. Recently, the Head of the International Energy Agency said electricity demand will increase 6x faster than total energy demand over the next 10 years. Where is this going to come from? It won't all come from gas, and our firm belief is it will predominantly come from renewables. We have been focused over the last 6 months on advancing and commercializing our portfolio of green technology. Technology is key to everything we are doing to decarbonize. To capitalize on that, Fortescue Zero is evolving from the engineering services company we acquired a few years ago to a customer-driven profitable product business. The $2.8 billion deal Fortescue signed with Liebherr has a big flow-on effect for our technology business with Fortescue Zero supplying the power systems for hundreds of zero-emission pieces of mining equipment. This does mean, as Dino said, that a significant amount of that value will come back to the company. Liebherr and Fortescue will also deploy an autonomous battery electric haulage solution for large-scale mining operations. There is a huge value in the IP we have created, and this presents a significant commercial opportunity for what we're doing at Fortescue Zero. So let me turn to green energy projects. We are continuing to progress and refine our green energy portfolio in a very disciplined manner and remain fully committed to green energy and large-scale industrial decarbonization. As you've heard me say before, our financial discipline always comes first, and we are only focused on developing projects that are economically viable. While we do remain confident in the long-term viability of green energy, we must be realistic about the current challenges the industry faces. Right now, the world is in an uncertain place. The Trump administration has instructed the federal agencies to pause grant payments under the Inflation Reduction Act. There is considerable uncertainty around RED II in Europe and how that will be implemented at the member state level, and we're waiting on the outcome of several elections globally. However, our firm belief is that the world needs an enormous amount of green energy, and so we will not be pulling back from our ambitions. That is why we continue to maintain a portfolio of projects and only execute on them when they make economic sense. This does include looking at the time lines on the FID projects we have previously announced. These changes are what happens when you have an unstable government policy, which creates uncertainty for investors. To be clear, our time lines may change, but our ambitions will not. We anticipate having more clarity on these external factors by the end of the financial year. As you heard Dino say earlier, we are still on track and progressing our Christmas Creek green metals plant, where we will use the green hydrogen we are already producing on site. Feasibility studies and planning approvals will continue to progress for our projects in Norway and Brazil, and there is still plenty to be excited about, and we know what we have done over the last few years in the energy space has set us up for long-term success. Right now, we are focused on making business decisions that make sense commercially and delivering the best value for our shareholders. So let's get out to Apple to deep dive in the financial results.

Thanks, Hutch, and a big hello to everyone from London. It remains a privilege for me to step you through the financials. And you can see from our announcements today that we have reported another set of clean accounts. Turning to the results. First half revenue was $7.6 billion, which was 20% lower than the same time last year as the hematite realized price decreased by 21%. Our costs continue to be impacted by mine plan lead cost escalation and market inflationary pressures and the first half C1 for hematite was up 8% year-on-year. We remain very focused on cost discipline and are tracking well against our FY '25 guidance. EBITDA was $3.6 billion on an EBITDA margin of 48% with the Metals EBITDA margin of 54%. The Metals segment EBITDA was $4.1 billion or $47 a tonne, and the Energy segment EBITDA loss was $365 million, in line with the full year guidance of $700 million. EBITDA flows through to net profit after tax, which was $1.6 billion in the half. For those on the website, you can see webcast, you can see from this slide the reconciliation of year-on-year change in NPAT with all the moving parts, including the significant price impact on EBITDA. One item to call out here. And as we highlighted in the FY '24 full year results, the increase in depreciation and amortization relates to the lagged impacts of several years of higher sustaining CapEx, together with the commissioning of new assets and in particular, Iron Bridge. The slide shows the variance relative to H1 last year, but in fact, depreciation was flat half-on-half. Moving to cash flows. Net operating cash flow declined to $2.4 billion, and free cash flow was $0.7 billion, and that's after investing $1.8 billion in capital expenditure. The capital expenditure comprises $1.6 billion in Metals and $145 million in the Energy segment. The details are on this slide, and I note the $1.3 billion of sustaining and hub development capital includes $235 million of fleet deposits. Our FY '25 guidance for Metals capital expenditure has been revised to a narrow range of $3.5 billion to $3.8 billion previously $3.2 billion to $3.8 billion. The revisions include sustaining and hub development capital increase from timing of fleet deposits to $2.4 billion to $2.6 billion, also a revision down on decarbonization based on phasing of spend of USD 500 million. And finally, the inclusion of the Red Hawk Mining transaction, which will be approximately USD 160 million. Today, we reduced the FY '25 guidance for energy CapEx to $400 million from $500 million, and that is a result of lower spend on green energy projects, as you've just heard from Hutch. As reported last month, our balance sheet is in great shape. Cash on hand at 31 December was $3.4 billion and net debt was $2 billion. And you can see Fortescue's robust credit metrics on this slide with gross debt-to-EBITDA of 0.6x and gross gearing of 22%. These credit metrics show we clearly have balance sheet capacity within our threshold leverage metrics of no more than 2x gross debt to EBITDA and no more than 40% gross gearing through the cycle. A strong balance sheet is core to Fortescue's capital allocation framework as is our commitment to return capital to shareholders. And as you've already heard from Dino, the Board has declared an interim dividend of AUD 0.50 per share. This represents a payout of 65% of NPAT and is consistent with our dividend policy to pay out 50% to 80% of NPAT. In closing, we have achieved a strong financial result in the first half and are well positioned heading into the second half. I'll hand back to the operator, Rachel, to facilitate the Q&A session, where we will welcome your questions.

[Operator Instructions]. Your first question is from Rahul Anand from Morgan Stanley. Your next question is from Kaan Peker from RBC.

Just on Iron Bridge's 22 million tonne ramp-up. Is that referring to not being able to achieve that nameplate capacity or talking to a slower ramp-up? And would that air classification circuit really have to do with recoveries? And I'll circle back with a second.

Yes. Thanks, Kaan. You're right. It's timing at this stage, and we'll reissue guidance around timing of nameplate in Q4. I actually have Graham Howard on the call, who heads up the operations as well and can talk about the product splits around air classifications.

Yes. Thank you. It's Graham here. Sorry, coming in from Perth. The dry circuit or specifically the air classification circuit is ultimately the last circuit before we get to the wet plant, and it's purely just designed to remove some further silica from the product to gain that beneficiation that we require. The material sizing in that circuit is about 80 microns. So when the material is at that 80 micron, it becomes wet and goes into the wet plant. And if it's not at that size, we recirculate until it is. So that's what it's designed to do.

And the second one, the Red Hawk acquisition. Can I just ask what drove this, assuming it's replacing depleting [indiscernible] from Firetail? And does it change the expected phasing of the replacement hubs, Mindy South and also Nyidinghu?

Yes. Thanks. Good question. They ran a process towards the end of last year. We participated in that. We've been successful, reached the 90% compulsory acquisition trigger this week. And now we'll look at the impact on our long-term mine plan.

The next question is from Paul Young from Goldman Sachs.

First question is for Hutch. Hutch, just on, I guess, the pause at Phoenix, the Phoenix project in the U.S. maybe just tell us how much you actually spent on that project? And then secondly, just an update on Norway and Brazil. And does this really just turn the focus on trying to accelerate those projects? And I know you said previously that what sort of power price you require and also they require government subsidies as well. But just curious about the overall strategy on green money now.

Yes. Look, thanks so much, Paul, for the question. Look, I think the U.S. is in an interesting place with the Trump administration. We're really analyzing what that means for our projects in the U.S. at the moment, and it may impact the time line on the Arizona project. The Trump administration has been a flurry of executive actions. Some sections of the IRAs and the grants have come into question and including the hydrogen production tax credit. So until we really have a much clearer view on that, we are being quite cautious about what we're doing. We've spent about 1/5 of the CapEx on Arizona at the moment. I think originally, it was -- sorry, $550 million, my apologies, $550 million. So we're being very cautious, as I said, and very disciplined about the money we spend until we know exactly what happens to that market. On the rest of the globe, we're progressing with Holmenesed and Pesam. We're in the feasibility stage and getting for approvals. We have some very kind of favorable, I believe, power costs there from hydro, which is fully firm. That's why we're focused on those 2 projects. And we're now putting the rest of the pieces together. But we're not going to bring them to the Board until we really believe we've locked in the buyers as well. We're having discussions with offtakers. There's uncertainty globally for them, too. And until we have a project which is economically viable, we won't take those to the Board.

Okay. And then maybe a question for Apple, just on sustaining CapEx and those fleet deposits, I presume for the heavy haul trucks, et cetera. Can you just step through that and then why they came in a little bit earlier? And then any color you can provide on just total CapEx on fleet replacement over the near to medium term?

Thank you very much. Look, the fleet deposits show up in the cash flow statement for the H1, and you can see that, that's $235 million. But we've mentioned previously our transition of diesel mining fleet to zero emission fleet. And we've signed several partnerships with several manufacturers, including Liebherr and XCMG MacLean. And you're right, the agreements involve securing build slots and paying deposits, which is shown in that investing cash flows that I mentioned. And for simplicity and transparency, we have included these deposits in our capital expenditure breakdown for the FY '25 guidance. In terms of fleet replacement, we're looking at over 800 units over the total life -- well, up until FY '30. It's going to be lumpy over time, but you'll anticipate that it will come through with our guidance over the next few years.

The next question is from Robert Stein from Macquarie.

Just a technical one on contingent liabilities. The Yindjibarndi claim has gained a bit of press lately. When does that start to move from something that's been negotiated, settled into a contingent liability just from an accounting point of view?

Thanks, Rob. I'll start and then Apple can add around the liability provisions. Look, as the matters before the courts, our final submissions are due this week. I won't comment on specific details on the amounts that we're hearing about other than to say that we've never shied away from the right compensation outcome. Apple, over to you on the treatment.

Yes, thanks. And as you know, look, it is a contingent amount at the moment, but we won't be disclosing anything unless and until the compensation becomes a lot clearer.

Okay. And then just one on Iron Bridge. Obviously, TC Zelia sort of flowed through the region. Were there any impact to the operation? Obviously, water has been an issue at site due to lack of it. We've had a fair bit of it. How do you sort of think through the impacts of that on any type of water issues at site?

I love the silver lining on the cyclone cloud water banking strategy, that's right. So yes, you're right, we've got a lot of water on site. And that's probably the short story of what's happened last week in terms of the impact to the Iron Bridge operation. It didn't -- it wasn't on the direct line of the cyclone. But as you can imagine, there's significant water as all the iron ore players have reported recently.

The next question is from Lachlan Shaw from UBS.

Two from me. So just on the green energy piece, and I'm just interested, obviously, with the rephasing reemphasis. We've seen in terms of types of projects, we've seen a lot of progress recently around battery backed solar and wind globally, economics are improving there underpinned by ongoing deflation in battery costs. I'm just wondering when you sort of look at the variety of projects in front of you, Hutch, when do you sort of maybe tilt a little more towards battery-backed solar and wind and maybe a little away from these more distant green hydrogen, green ammonia type projects? I'll come back on the second.

I think great question. Thank you. Look, we are always looking for ways to decrease the cost of what we're doing, whether it's battery, solar, wind, green ammonia, and we continue to reassess how those costs continue to come down. So ultimately, where we want to get to with our green projects is to make them competitive with gray. That's the end goal here, and we're working very, very diligently on that. And when we look at solar batteries, wind, looking at the variable, we're doing that in the Pilbara as we speak with our decarbonization plan. So that's actually being rolled out. We're looking very carefully at how we bring those different elements in. And as we shift eventually to green metals, and that's going to play a big part in how we make that economically.

Okay. Got it. And my next one is just for maybe Apple. So just on the CapEx. And again, just to follow up on the sustaining and hub development increase. You've broken out the splits there in terms of the spend in the first half. Is it fair for us to kind of take those splits forward for the remainder of the capital guidance for FY '25 and maybe into FY '26 too?

Yes. Look, I'd say that in terms of the deposits, it's pretty similar in the second half as well. For the following year, look, good try. We don't guide until a few months later.

The next question is from Rahul Anand from Morgan Stanley. My apologies. The next question is from Lyndon Fagan from JPMorgan.

Look, the first one I had was just on that $1 billion revenue flow back to Fortescue. I just wanted to explore that a little further. Is that just simply Fortescue Energy paying Fortescue Metals? Or is there any third-party revenue coming in there? I'm just trying to see if that's just one pocket out of one pocket into the other. And I guess related to that, it would be really nice to see the $700 million OpEx in energy become EBITDA neutral. Just any update on when you foresee that might be the case?

Thank you, Lyndon. Look, the $1 billion revenue is third-party revenue. And of course, there will be cost of goods sold associated with the appropriate margin recognized in Fortescue Zero and of course, in our consolidated group because it's third party. Just bear in mind that, that is spread over the next few years. In terms of EBITDA, we are looking at a loss that we have reported at the moment, which is $365 million for the half. There's no change to guidance of about a $700 million net EBITDA loss. In terms of when we are hoping to change that into a positive situation, obviously, a lot quicker with things like our Liebherr contract, and it will be over the next few years.

Sorry, just to clarify that $1 billion of revenue. Fortescue Metals is paying energy for the technology sales or Fortescue Zero. I can't keep up with all the terms, I guess. But can you split the Fortescue kind of component of that revenue versus what you're expecting to get from third parties?

Yes. Look, Mark here, I think the way to look at it is we sell the power systems to Liebherr and Liebherr sell the trucks to a third party or to Fortescue. And you can see by the percentage of the $1 billion that Xero gets of that contract as a percentage of the contract, how that relationship is going to be going forward to third parties as well.

Okay. I might take it offline. And then just back quickly on Iron Bridge, Dino, I guess you've been pretty confident in the process and product spec up until, I guess, this release where we're seeing a bit of a delay. What's changed since the quarterly sort of announced that?

Yes, Lyndon, still confident. And the ramp-up by any measure has gone actually exceedingly well. We have though announced, as you said, we're reviewing timing for nameplate. We are working through, as we stated, the -- a key part of the process plant in the dry circuit, which is the air classification area. It consists of 12 separate units. We -- as we mentioned last time on the call, we started the rectification of that work internally ourselves. And as we're bringing them online, it's taken a little bit longer to get them up to the production rates we want. So we just wanted to be transparent and open on the call today with where we're at.

The next question comes from James Redfern from Bank of America.

Just a quick question on the Blacksmith project that you're acquiring from Red Hawk Mining, probably one for you, Dino. Just the feasibility study, you talked about production of 5 million tonnes and 60.5% iron ore grade. Just wondering if we should be using that feasibility study just for modeling purposes or if you think that you can bring the cost down or increase production and so on?

James, thanks for the interest in Blacksmith. We haven't yet got our hands on the ground actually. So we're going to assess it. Obviously, when you look at the strategic ownership, we kind of placed well based on the proximity of our other deposits in the area. So we'll look at how we integrate that best and the timing of it most importantly for us.

The next question is from Rahul Anand from Morgan Stanley.

I'm going to try a third time guys. Hopefully, I'm through this time. I'm having some troubles with the desk phone. Apologies in advance if any of these is a repeat, but I wanted to -- I heard some of the questions, and I wanted to perhaps have a conversation around the underlying markets and how you're seeing them currently. Obviously, Chinese steel has come back to moderate profitability, and you've seen a bit of an expansion in your discount for the lower-grade products. I just wanted to touch upon how you're seeing the market in general, especially with a focus on how you see domestic production of both steel and iron ore in the Chinese domestic market. I see the total steel inventory is still tracking a bit below the last 5-year levels. And in terms of domestic production of iron ore, that also seems to be a bit weaker. Any sort of anecdotes that you're hearing from your customers as to what to expect in terms of both the demand of iron ore and how steel is progressing there?

Thanks, Rahul, and it's so great that you've made it through on the third time, lucky. Look, you've called it out exactly how we see it. It's relatively flat. There's some green shoots and some headwinds. All I can say is that our product suite is moving very, very well. I have Ben Kuchel, the Head of Marketing on. Ben, is there anything you wanted to add?

Thanks, Dino. Thanks for the question. Yes, look, I think the only thing I would add is that we're just still sort of in a period of time between Chinese New Year and the major political conferences that happened in March. The market, I think, broadly speaking, is moving a bit sideways, waiting on sort of those announcements that will come in March. But at this point in time, no major sort of movement either way.

Got it. Okay. And look, just a second one for me on Iron Bridge, please. I just wanted to perhaps test on some of the critical elements as we sort of progress through the ramp-up. Obviously, we had some initial hiccups, and we've gone and addressed them and expecting the ramp-up to go smoothly from here. But if I have to take the other approach and say, what are the key risks here that you see in terms of your ramp-up besides, I guess, water, which you have addressed, are there any key elements beyond that in terms of this project that you see as critical elements for you to get to that nameplate?

Thanks. Yes, we said technically, in terms of the process flow big tick, we're really, really comfortable with that. Then it was executing the actual project completion, which we're now into. And then the third, which we're right in the middle of. It's a big complex plant, as everybody knows, proud of the capital intensity that we've deployed on the plant, but it's now Graham and the team is just head down, bum up, working through the challenges that you'd normally expect for this big complex operation. So it's really difficult to call out one particular thing as the team works through the current challenge, which is the air classification. It's -- I would say it's one of the larger pieces of work that we need to work through. And what we then do in parallel is work through the sequence of other bottlenecks as we ramp up to nameplate.

The next question is from Glyn Lawcock from Barrenjoey.

A few clarification questions. Sorry. So Dino, can we just confirm that the Iron Bridge, the nameplate is not in question at the moment. It's just purely the ramp-up schedule?

Good to hear from you, Glyn. Yes, exactly right. So it's timing.

Okay. Cool. And then one for Hutch. Hutch, I think I heard you say on the call that you won't go ahead now with the Norway project unless you've got the offtake. You had previously indicated that you might lost lead with $1 billion. Is it the customer that's moved further away now from where you needed the price to be? Or is it you've become a lot more conservative with the balance sheet and being more prudent with what you spend?

Yes, thanks. We've never actually said, I think, Glyn, that we take that just on balance sheet. That project by itself unhedged and with no offtake. There's always been part of being very disciplined on the bigger projects. And [indiscernible] are bigger than the original ones we went to FID on. So I would say we continue to be very disciplined and we'll not take projects that are -- don't stack up to the Board. So we continue to do that.

The next question is from Jon Bishop from Jarden.

You announced in 2022 a $6.2 billion budget towards renewable power infrastructure. I'm just wondering where that physically is at today in terms of permitting, construction, rollout, et cetera.

Yes. Thanks, Jon. We're basically 1/3 -- just a bit over 1/3 of the way through now. You did highlight the one area that we're putting a lot of attention on is approvals, particularly on the solar farms that we need to build. But the equipment side, the generation side, the distribution side is all absolutely well on track. We announced 2 key contracts this quarter with Liebherr and XCMG, and that really rounded out the design of our entire fleet. And we're about to roll out the distribution and charging networks over the ensuing couple of years. So all on track, actually, and hope to report a lot more detail soon on the progress.

Excellent. That's a great segue because my second question was in terms of the HME and support equipment that you've ordered, what's being taken at site at the moment? And I guess probably more interestingly, how are you seeing the relative performance of those pieces of kit on that basis relative to the incumbents?

Fantastic question. So the first point I'd make is we've actually already started to take delivery of a diesel electric fleet from Liebherr, and we have a number of those machines already running. And you can imagine that half the technology that we need for a full battery electric truck is now already operating in the Pilbara. We've deployed our software solution, which is a real key part of this. So we actually have launched our own fleet management system, which will all have autonomy enabled as well. We have 4 fully electric excavators running and the performance that we're getting is actually a lot better than expected with the excavators. So we're learning a lot in terms of power consumption. We have 2 prototype 240-tonne trucks running around. One is a hydrogen fuel cell and one is a full battery electric and that is going into the modeling of the entire system. It's great to be here in London. We visited the Oxford Banbury site where we're manufacturing our power systems, and we sent our very first power system to Liebherr, which will go into the very first fully battery electric haul truck that will come later this year, I believe, into the operations. So -- that's on the equipment side. The other exciting announcement we made is the partnership with MacLean, which is an underground mining equipment supplier. We're bringing them to the surface mining operations, and they'll have a fully electric 24 m sized grader that we're working on together, which is -- I saw the prototype just recently, and it looks plenty fantastic. So we're really encouraged by it. And lastly, the charging infrastructure and the charger, the high-speed charger that we've been developing ourselves is ready. We're proud to say that it will have a 6-megawatt charging capacity, which is a revolutionary design and technology in the market. So well positioned, Jon.

The next question is from David Coates from Bell Potter.

Quick ones. Firstly, on CapEx and dividends. Just notionally speaking, with the reduction in CapEx on the energy and decarbonization projects put less pressure on free cash flow and enable perhaps higher dividend payout ratios to be maintained for longer?

Thank you, David. Look, our dividend policy and payout is a matter for the Board, and we'll pay within the 50% to 80% range. If you've got less CapEx, you've got more free cash flow, but it will still be within that range.

And just circling back on marketing. Just wondering if there's any work going on to sort of diversify the customer base further away from China at all.

Yes. Thanks, David. We've been attempting to diversify our book for the last few years. In fact, Ben and the team have done some great work into Europe. The reality, though, is China still supplies circa 80%, 90% of the world's total steel. So it's -- our key customer still is in China.

The next question is from Baden Moore from CLSA.

I was wondering just following on from your comments around, I guess, U.S. policy support for your projects. Are you seeing any opportunities as well potentially emerging around critical minerals or anything that might fit within your portfolio? And I guess the second one to follow up would be just it looks like there's new commentary or I think it's new commentary around inclusion of share buyback commentary in your report. Just wondering if that was signaling anything that you're actively thinking about.

So the commentary on share buyback is not, it's not new commentary. Just on the critical minerals strategy, interesting point. So we are exploring in that Latin American region for a couple of the rare earths. So certainly, we see a feeder into the U.S. market there being pretty important to support the macro market for critical minerals. And at this stage, we don't have a large presence in the U.S., but we do have a presence in Canada looking for exactly these minerals.

The next question is from John Tumazos from John Tumazos Very Independent Research.

I'm trying to peruse the Red Hawk website and understand the project that we're taking over. I see there's a 49-page pre-feas. The last pre-feas I read was 701 pages. This looks a little skippy, and they were going to have contract mining, contract crushing, contract trucking, public roads, public ports. In rough terms, under the auspices of Fortescue, would you expect that the operating costs would be 1/4 less or 1/2 less since you have rail and port and pretty good trucks and things like that?

Yes. Good question, John. We haven't done that detailed work. But you can imagine if you're a stranded asset, you're going to have to have all that infrastructure. It would feed into our Western hub system, most likely at Eliwana -- sorry, Solomon and Firetail area. And we're just going to have to assess whether or not that's a hauling solution or a conveyor extension for Firetail. But you're right, our interests peaked because of clearly the invested capital we already have in that region.

The next question is from Giles Parkinson from Renew Economy.

A couple of clarifying questions probably for Mark. One, you mentioned that the targets will remain the same and the time lines might shift. Can you just specify exactly what you're referring to there? And is that the sort of the broader green sort of energy, green hydrogen deal, which might be affected by sort of political uncertainty overseas? Or does that reflect sort of 2030 targets for Real Zero at Fortescue? If you can just clarify that. And second one, while I'm on the line, can you just clarify also the battery electric truck that's actually in trial at the moment? You said that the first battery electric -- fully battery electric truck will come later on this year. As you sent the first power system away from the U.K. to Liebherr. So is the one that's been trialed at the moment fully battery electric? Or is it just a referral to the fact that this one will be the first one with the Fortescue power system? If you can clarify those 2, that would be great.

Thanks, Joe. [ Ita ] here. I'll take the first one on the truck and then hand over to Hutch. Just to clarify, the Roadrunner truck was our prototype fully battery electric that will form the basis of the production unit. And that's what I was referencing to the power system that goes to the Liebherr factory to then make the first production unit.

Yes. Thanks so much, John. Look, I think on the -- our plans, our goals on the decarbonization of the company has not changed 2030, 100%. So what we're looking at is not delaying anything. We're just going to reassess some of the time lines of some of the projects we went to FID on. And Arizona is a good example given what's happening with the Inflation Reduction Act. So it's really reassessing those time lines and our ambitions on the decarb is different, and that has not changed.

The next question is from Tom Meyer from Business News.

I guess a question around water, particularly Iron Bridge. I mean you've got a few past stuff that way barely missed the amount of water you've been allocated from Walal. We've got a lot of PO groups around the Pilbara really starting to rattle the cage about resources industries use of groundwater and abstraction of groundwater. I wonder if there's much work going on in Fortescue around, I guess, how to reduce that water use of Iron Bridge and how to reinject more of the water you are using back into the aquifers.

Yes. Thanks, Tom. Yes, good technical questions around Iron Bridge. And you highlighted one of the key issues we need to manage there is the water balance. Good news is we received the second abstraction license from the aquifers that take us to the full 20 gigaliters a year that we require. Yes, you've got a view on a pastoralist perspective. We work extremely well with our pastoralists around the Canning Basin up there. So that focus is exactly what you're talking about. It's about recycling the water and water conservation. And with what the team are doing on this water banking strategy, we're utilizing a lot more of the water that we have around the sites. And clearly, events like the last week do help out.

Yes. And just a second question on the Green Iron plant. I wonder if you can give an update as to how construction is progressing there and if the time line you indicated when you were first out there last year is still in place?

Yes, Tom, it's still in place calendar year this year for 1,500 tonne per annum plant. It will be located at Christmas Creek in our Green Energy Hub.

The next question is from Brad Thompson from the Australian.

Hutch, I just wanted to ask you about jobs in the green energy. Last year, when the 700 job cuts were announced, it wasn't made clear how many exactly were in green energy. Just wondering how many of the job cuts were in green energy? How many staff you're carrying at the moment? And is there a prospect of job losses now that there's these new delays on the horizon at Arizona and Gladstone?

Brad, thanks for the question. We didn't disclose the job cuts last year. I mean we've moved to a one Fortescue approach to the business. And so our business is extremely integrated now. So I think that's important to understand. We always look for efficiencies in the business and how to use the workforce the best possible way we can. We -- there is no delay of the projects. We're just reassessing the time line at the moment, and we'll let you know later in the year.

Okay. And one for you, perhaps Dino, if you don't mind. The Red Hawk acquisition, should -- is there any concern about permitting delays with some of your other projects on your books like Mindy South and also permitting for your -- for the wind farms that you -- and solar farms that you'll need to build to hit your real zero targets? How is that progressing? And how are your relationships with traditional owners? And are they perhaps being impacted by what's going on with the Yindjibarndi case?

Two questions, Brad. There's about 5 in there. So let me try and remember them all. In terms of Red Hawk, the Blacksmith project had all approvals already done. So that fits well within the portfolio and allows the mine planning team to work out the best sequencing. We're working exceptionally well with our traditional custodian partners, and we have for over 20 years. So the conversations now are including energy potential, not only just mining. Obviously, clearly, it's a different type of infrastructure that we need to build and also with the state government. We're working really, really close hand in glove with everybody in Roger Cook's Ministry.

The next question is from Mark Wembridge from AFR.

Brad's actually touched upon most of what I wanted to ask there, well Brad. But just I want to get a little bit more clarity from you guys on the reduced CapEx and what it means for the green energy. Is this a real pullback from hydrogen?

Thanks, Mark. No, absolutely not. We're still fully committed to hydrogen. What it does mean we're being very careful and disciplined about the way we spend our CapEx, given that the environment globally is kind of uncertain. And Arizona, as I said, is a good example of that where there is uncertainty with what the Trump administration is going to do around the hydrogen production tax credit. And so we will slow the spend down as we become more and understand how that's going to impact that project.

Okay. Just got one more potentially for Dino on the latest Mitsui deal that happened over in WA. I just wanted to get your thoughts on what you thought of the valuation for Rhodes Ridge?

I mean we're not going to comment on the Rhodes Ridge acquisition. It's quite a large number, which reinforces the value of the entire Pilbara region, right? It's great to see you've got the Japanese taking long-term positions in the Pilbara region to sustain steel demand for the next generation. I think it's fantastic to see.

The next question is from Lachlan Shaw from UBS.

I just wanted to confirm something from the slide pack. So if I look at Pages 12 and 19 together, am I right to infer that the Pilbara solar wind and [ PES ] configuration is now approximately 1.5 gigawatts of solar, about 1 gigawatt of wind and 4 to 5 gigawatt hours of battery. Is that sort of the current configuration you're going forward with?

There's no change here.

There are no further questions at this time. I'll now hand back to Dino for closing remarks.

I think we can take the man's question if we want to. It has dropped off already. If not, well, thank you very much. Thanks, everyone, for joining us today. Again, thank you for everyone that's been involved in the success of the half so far. So we'll see you next one.