Fortescue: The Global Mining 'goliath' that's genuinely 'greening' a dirty business

31:06We blast first, so we blow things up on large scale. then a big digger comes in and then puts that material onto a truck and then it goes to a crusher which is a it's a large power hungry machine that crushes the rock and then from there you go to a processing plant to separate the rock from its good attributes and the waste material and then you often crush again and then in some of our plants you go into a hydro metallurgy processing plant and then you filter it to get the product that you want and then you put it on trains and transport or you slurry the material up and pump it some hundreds of kilometers to another processing plant right then you have these huge pieces of machines that look like something from outer space that that stack all these stockpiles and then you have another thing that reclaims them and puts it onto a shiploader and our ships.

32:11And, you know, mining is so interesting and so fascinating. I always have a bit of a plug for all of the different types of careers that you can do in mining. However, the challenge then is you have to electrify the whole lot because right now everything that I spoke to, whatever it plugs into or whatever it consumes or whatever it burns is all largely diesel or gas. We have diesel that burns in generators to make power for the processing plants or gas turbines that would first burn gas and they spin turbines and generators to make power. Or it's the diesel that each of these engines consume. So our plan was we actually changed all of that generation to solar, wind and batteries.

33:00We then have to distribute that and get all those electrons to all of our mines, which is nearly 800 kilometres of high voltage distribution lines. And then everything that plugs into it had to be changed. So you talk about the trucks, but there's excavators and water carts and graders and dozers. The list goes on. And for us, it's north of 700 pieces of machines that need to be changed. And we're doing that now over the next two years. Right. Because that's, yes, because I thought, oh, I'm really clever. I really know about this. I know about the dozers, the diggers and the trucks. That's not all of it.

33:39You know, I never even thought about the crushing. I love the idea of transporting what will eventually become iron in a sort of slurry form through a pipe. I didn't know that was even a thing. Wow, that's incredible. And that requires, when you do that, unless it's going down a sheer slope, that requires pumps, presumably, which use a lot of energy. These pumps are large piston pumps like the old steam engines you see. And they just pump like this and they can pump up to 10, 20, 100 kilometres. They are unbelievable feats of engineering themselves. They come from Europe, but consume megawatts of power.

34:18these are cities and small town type power consumption numbers yeah yeah one of the things i'd love to mention because for people who don't know about it is the your trains so i don't know quite what the situation is but the fact that you had two what i would call i don't know locomotive the big the front bit that pulls everything along two of those and if they're not the first they're certainly some of the first battery electric train so am i right in doing that so you've not got power in the rails you charge them as a free running thing is can you explain about the trade even gets cooler than that so we um we try a bunch of different technologies the the battery electric locomotives you you reference um come from progress rail uh so we procured them off the shelf they have a large electric motor that drives them and our trains are between two and three kilometers long.

35:16These are not small trains. So you can imagine the force and the intensity and the torque these things need and just the consumption of energy that they take. So they are now getting trialed on our circuit to work out where and when do you charge them. The other technology that we're really interested in is it's still a combustion engine, but using a green fuel. And the green fuel is derived from hydrogen, which again is just a derivative of a green electron. And when you're building the size and the scale of infrastructure that we're doing, that iterative cost of the electron comes down and down and down.

35:55And then that bridge to then use an electrolyzer and split water to have the hydrogen becomes very realistic economically. The technology already exists. And then you convert hydrogen to ammonia. And ammonia has got very, very similar combustion properties, if not better, than diesel. You can burn them in a two-stroke engine, which is what a rail locomotive is. And also a shipping engine is a two-stroke engine. So we're very, very close now to have the economics set up to have ammonia being produced en masse for shipping and also rail consumption. And shipping is one of the largest consumers globally of hydrocarbon and emissions.

36:42And there are now many organisations that are selling ammonia to compete with bunker fuel. And we saw with what's happening in the Strait of Hormuz, access actually to oil or bunker fuels becomes very, very difficult irrespective of the price and again all of these fuels are just derivatives of where you have the sun and the wind which strategically and sourcing wise has a much much lower entrance cost but also from a reliability of the source it's it is actually significantly better yeah and I mean one of the you know I've been the occasional critic critic of the argument for hydrogen fuel cell cars and it's clearly not really been a great success story but also i mean partly my criticism was you know yes if you run that hydrogen fuel cell car from the hydrogen you're talking about or the ammonia you're talking about i'm 100 percent behind it but if you're talking about using hydrogen that's split out of natural gas and the CO2 is released into the atmosphere.

37:54That's not so good. You know, I think there's legitimate criticism. But that's very interesting now that because the economics of that, in my understanding of it, say, in the last five years, maybe five years ago, it kind of hardly made sense. You're putting quite a lot of energy in, in terms of units coming out, it's less, you know, there are losses, which there always are. But what you're talking about now is that you're on a you're operating on a scale that is so enormous that those losses are kind of irrelevant. And also the technology, presumably, to split the water to produce the hydrogen in the first place has improved as well.

38:30I mean, this is a kind of technology I'm a little bit behind on. So yes to all of that. And AI is actually, again, fast tracking the next round of development in electrolyzer manufacturer design, for instance. However, as the cost of the the hydrogen production facilities come down in fact it's the solar panel and the wind turbine and the battery that also needs to come down to then reduce the cost of the hydrogen which then means that potentially the economics for the battery vehicle get even stronger so as you're solving one problem you're also improving the other scenario so i i love the fact that you're getting ammonia and hydrogen as consumption or combustion fuels competing with electrification because ultimately you'll get this kind of race to the bottom of the cost curve which for me is fantastic because then it liberates economics everywhere I do believe that there are there will be a point where so I started my career in combustion when the UK had the mad cow epidemic I was doing a study in Holland to turn them into electricity, believe it or not, and burn them because we didn't have a use for them in old power stations.

39:51So combustion is an extremely efficient physics process. It releases a lot of energy. However, you get the unfortunate benefit of the carbon emissions. However, if you can burn something else that doesn't have that, hydrogen or ammonia, for instance, you get the efficiency and the power and torque curves that combustion engines are known for. And some applications, particularly high torque, two-stroke type of applications like shipping or rail, may always require a combustion type fuel and also steel making. So steel making is a combustion process with metallurgical coal and iron ore. And that reaction is a chemical process to drive off the oxygen.

40:47And the combustion process is so efficient. Unfortunately, extremely carbon intensive. So the steel industry is one of the largest emitters, which is why what we're chasing is any form to drive down that hydrogen cost allows you to then drive down the battery and solar cost. They're enablers and you can use them as industries in itself directly into your truck or your processing plant. But once your electricity gets to that low point, derivatives like ammonia or hydrogen to then use as fuels or reduction processes to make steel start opening up. And only some, not even a month ago, we had our very first green metal being produced in the Pilbara.

41:37that was a derivative of hydrogen from our large solar panel installation combined with the combustion process on our iron ore in the Pilbara and we're able to create metal in the Pilbara all because of we had all this infrastructure built to electrify to make that economic and then all of a sudden you get these domino effect industries and that's really what's exciting us We have a vision of creating an industrial precinct in the Pilbara for all energy hungry applications. Yeah. I mean, that's because that's the one thing that my experience in Australia, you know, have spending a lot of time there and looking at how Australia operates effectively as an outsider.

42:22And it's sort of heartbreaking that you often have an incredible array of the raw materials that the world consumes, but you're just shipping them as raw materials to places like China, Korea, Japan, wherever. But, you know, it would, I'm sure, benefit the Australian economy very widely if you are actually exporting steel rather than iron ore. I mean, ore as well as iron ore, not rather than, but, you know, is that... And is that a kind of long-term potential aim is what you're talking about now? Look, downstream manufacturing for Australia, we had all these industries in the 50s and 60s, including automotive.

43:06And then slowly but surely, and it's a very similar trend. Happened here. The competition for capital drove to low labour cost jurisdictions. but actually what drove it to those jurisdictions was the electricity cost in the US and China is so low that these power consuming industries like steel making for instance were naturally gravitated there however what's happening now is that the same countries who have invested so much in manufacturing we are now taking the benefit of that manufacturing prowess to get the solar panels delivered back here. Yes. And applying the same thinking. And now because a lot of this is done autonomously, the other problem you have with Australia is it's got a very small population.

43:56So we don't have the number of resources to physically occupy all these jobs. So now what there's a perfect, largely the stars are lining up where you have lower jobs per outcome, lower electricity costs, more robotics, and you can then apply that directly on top of the resource. Right. So you then don't have to transport the hydrogen, which is one of the key constraints about hydrogen. You consume the hydrogen at the point of generation and create a liquid metal here. And then you can sell a much, much higher grade product, 90 % price metal, which still allows sovereign steel in places like the UK or Germany or China and Japan still to be produced onshore.

44:52However, they're offshoring the dirty part to a place like us, which eradicates the need for it to become dirty at all. Right. These new conversations and new relationships are starting to spring up everywhere because we took the perceived risk of developing an industrial ecosystem, which relies on the sun, the wind, and a supply chain now of batteries and wind turbines and electric networks and trucks that are consumable price points. That's what the beauty is of what we're doing. Yeah. Because, I mean, it's clearly in alignment with, you know, when I had my first Nissan Leaf. I had to look this up a while ago.

45:40But the cost per kilowatt hour to manufacture a battery, about$1 ,200. And the most recent figures I can see, it's all under$100 a kilowatt hour, but in some cases like$40. You know, so that price difference has made... So if you're buying a two kilowatt hour battery, you'll notice it's cheaper if you're buying a six megawatt hour battery you know if you were trying to do that in 2010 it would just make no economic sense that would have cost millions of pounds and or dollars and now it's i mean i think that's what we're seeing finally is the that price reduction is filtering through to enable things like you know having a massive truck with a battery as opposed to a diesel engine i mean it might make one really important point and for a lot of the technology stack that we have developing there's actually two factors one does the technology work and the second is do the economics work yeah and at Fortescue we decoupled the two so your example of your Nissan Leaf in 2005 or 2010 the Prius was there the Leaf was there the technology worked all we had to do then is wait for the cost profile to come to a point before it was mass produced and then consumerism takes over.

47:02It's really interesting, the industry that I'm in, people argue with me and criticize me that the technology doesn't even work, let alone the economics. And this is why it's a really interesting dynamic for me to be part. I literally sit in rooms where people would suggest what we're doing doesn't exist. Even when I take them and drive them in the machine, they still say, well, it doesn't work. So it's a really, really fascinating experience to be part of. And I'm at the point where I've actually just given up trying to back the fact that it does work. Here's the videos. You can have a look at me driving them.

47:43And you guys are just going to have to wait now. December is when this machine will turn up and it will work. And then you'll see the floodgates just open. because we would not do it if it's not economic. No. Right? So it all starts with the tech and then the cost of the manufacturing and supply process to the point where it's economic. And we believe we're right on the cusp. Right. And that, it just, you know, when you see it at scale. So last year I visited a big solar farm in the Hunter Valley in New South Wales. And, you know, it was what I expected. It was a million solar panels, 6 ,500 sheep.

48:25You know, I kind of had a vision of what that was. What I didn't have a vision was, one side of that, which was still a building site when I was there, it looked like a large housing development. It was huge. Massive white boxes in the sun, but with sort of roads between them and trucks driving, hundreds of people working on it. And that was the battery installation. And I don't know what scale it was. I can't remember, but it was big. and that to me was the key that had turned the whole thing the arguments that you would hear from your negative mining associates I'm struggling not to put on a Queensland accent to say it doesn't work it's been a long time there it's entered my DNA but you know I've come across even family relatives in Queensland who arrive in their enormous diesel pickup trucks with you know where they pop to the shop to get a litre of milk but that um you know that scale of shift you know that argument about oh well you what how do you run your minds when the sun isn't shining you know we've moved on i think is you know it's it's gone way past that or when the wind is you know all those sort of old arguments about the the reliability and i think you're right the shift has happened this year really where people go oh, hang on, the fossil fuel isn't that reliable.

49:51I think that's been a really big mental shift around the world. I don't think it's just in any one place. I mean, do you think, I mean, in the long term, do you think, you know, in a sense, you know, tripling the impact? So one person on a street in suburban Sydney buys an electric car 10 years ago, and all the people there go, blokes are a bloody idiot. That's not going to work. And then a year later, he's still driving it. And five years later, he's still driving it. And someone else has got one. And someone else has got one. Do you think that will happen in the global mining industry? They'll see what you're doing and going, that's not going to work.

50:29That's stupid. That's so silly. It's not reliable. Oh, hang on. They're still doing it. And they're making money. And they're running a business that is profitable. Do you think it will spread? Do you think those critics that you've had dealings with will eventually go, oh, actually, it's starting to make sense? I mean, I have to say that there's zero doubt in our mind. But I look at the interesting examples now popping up all around the world. Right. And there's two that I always point to. And one's in the US and one's in China. So whatever political affixion you are, there are now mines in China.

51:09And this is the hypocrisy of this. They are thermal coal mines that are digging coal out to burn the coal to make electricity, which then feed back into a fully electric coal mine. Wow. And then you think the only reason they're doing that is because it's so much cheaper to do that than burn the diesel. because in that application there is absolutely no humanity around the decision to a have the thermal coal mine and b burn diesel in the coal mine so that's one case study the other case study i like to talk to is is texas and behind china they're installing more solar wind and batteries than anyone on the planet in the state where trump is propagating he has an eight billion fund to progress oil and gas development.

52:04And even that is not enough to stop the progress of solar, battery, and wind. So I sometimes, I kind of, I'm sympathetic to the patriotism of a, I have a V8 diesel Land Cruiser myself and I love it, right? I used to drive it every day and now I drive it 1 % of the year. Right. Right. Right? So I still think you can have both welds. You can still be the central Queenslander to drive their big truck, but maybe to go to the shops, you will have an EV. Yeah. Right? And then there's the patriot car people that talk about, ah, the feeling of an EV is not the same. Well, you're probably reminiscing about the days when there was a V8 1980s or 1990s car.

52:54Well, the realities of the new combustion engines, they're pretty lackluster and boring with all the emissions protocols you have on it anyway. So you might as well drive an EV. There's no difference. They look, every car looks the same. So I think once people appreciate the pragmatism and then what gets them every time is you don't have to fill the Bowser up. Yeah. Right. And you still have 50 quid in your pocket, where yesterday you don't. And we're seeing that even in Australia. The penetration of EVs is absolutely remarkable. Yeah. I think a really good, I'm just guessing, but I would love to know how your operators, drivers, operators of the machinery, what their reaction is after sort of spending some time, you know, if you're used to driving a huge diesel engine truck up out of a quarry, I can remember that very brief experience I had.

53:55It wasn't silent. It was quite noisy, very hot, a lot of vibration. I mean, do the drivers who are now driving electric trucks going, oh, I miss the old diesel. I used to love the rumble of a big diesel. I mean, Look, I mean, I've been in these excavators and trucks myself and spent most of my life on diesel engines. They are chalk and cheese. When you walk out of these machines, even the very latest with all the noise suppression, there's still a hum and a headache you get. These new machines are quiet. And the torque and the precision is so much better. And a lot of the incentive and cultural norms that are in the mining industry is about moving tons.

54:47It's a very parochial and it's the heart of the DNA of our industry is we need to perform and we need to move tons. So when you have a machine that can perform better. So the very first generation of our electrically tethered, so a big extension cable excavator was silent and outperformed its diesel. you get a natural tendency say, okay, we've got one of these on site. I'm going to compete with you to get that because I want my performance to be better. And by the way, it's silent and I'm feeling pretty good in the cap. Yeah. That is, it is such an exciting change. You know, I think on the scale of the global thing, and particularly the stuff about ammonia and shipping, because you can be all on your electrically powered bike and you're cycling through your eco town and I totally 100 % support that.

55:46But that bike is made of a metal that's been shipped around the world. No matter how minimal you go, we're all reliant on this industry. And the fact that we went to witness the building of a big battery ship and it's going to happen for very, very limited processes, a ferry. It's built in Tasmania. It's amazing. And it will transform the journey that it does. It will be much better. But anyone can work out that if you want to send a ship with iron ore from Australia to China to anywhere, the battery you'd have in that, it's going to be bigger than the ship to make that work. And so any alternative to burning bunker fuel, I just love the term bunker fuel because I think it's very clear.

56:32Probably not the nicest stuff. It's the stuff you find at the bottom of the barrel, isn't it? It pretty much is. And the reason why the two-stroke engine was invented was because they wanted to monetize this gunk that was left behind. This gunk that they had, yeah. And if you burn it really slowly in the right conditions, it is actually quite an impressive fuel. And the engine is very reliable. And this is why sometimes I think I'm supposed to be the electric guy for everything. Yeah. But when I'm talking about physics and chemistry, combustion systems are very hard to beat. And for ever, anything that can burn can be used in a combustion system, like hydrogen, like ammonia, like a cow, anything with carbon.

57:22Combustion is, I mean, that's how humans evolved with fire. That's how we got here, yeah. I think that will continue. Yeah. Yeah. And I mean, is one of the advantages, and this is my lack of understanding of sort of chemistry and physics, but if you produce hydrogen, you know, and I've seen this in some detail, you know, it's a gas that really is easy. It can leak easily and it's under high pressure and it's in tanks and that involves pumps and all that, you know, blah, blah, blah, that can go on. But ammonia, I'm assuming, is a liquid. So in a sense, the same as a liquid fuel. Am I wrong in that or is that how can you transport ammonia as a liquid and put it in a tank as a liquid and burn it in a combustion engine?

58:05Yes, and it has been done for nearly 100 years. Yes. The ammonia and a lot of people talk about the hazards of ammonia and it's a new industry. And I sometimes point them to the same port in Singapore in Port Hedland. I said, you know that that's an ammonia vessel unloading now to make fertilizer and explosives. and that's an ammonia tank that you've been looking at for 40 years and it's been in your town for 40 years and there's never been a problem. Yeah, yeah. Oh, right. And sometimes this is a lot of myth and cynicism on technology that is not new. Yes. Right. And also, I mean. Sometimes people who have a lot to lose that create that myth.

58:49Yes. Oh, God, yes. Big time. And also that, you know, when the first, you know, the scare stories have kind of diminished now, but I wouldn't have an electric car because they're always bursting into flames, says someone who's driving along with a tank full of the most incredibly, you know, impressively flammable liquid. You know, that's its whole point of existing is that it can burn very, very fast. And you know what? We've actually got a solution to that. It came out of our oxygen facility. It's called Elysia. It's a specific algorithm that can go right down to the individual cell and predict thermal runaway.

59:28Right. And if you can control it at a cell level, you don't have the fire. And, yes, some of the initial batteries, which had arcing and containment issues, did have some fire. Still probably one in 100 from a per capita that a diesel engine would burn out of oil leaks. However, the scare tactics would suggest, and they are a clear safety violation. However, we're talking about a performance characteristics at the most immature part of the curve. And any curve will demonstrate that exponentially the performance will improve. And I'd suggest we're still at the very infancy of safe handling of battery systems.

1:00:13Yes, yeah. This has been amazing. I just can't tell. I could easily, you know, I know you wouldn't want to, but I could easily listen to you for another two hours. But, you know, we must wind it up there. It's been really... Well, I suggest why don't we do round two? Let's do it here. I think we should. And let's do it real because I think the thing we're facing the most of is criticism that this doesn't exist. Yeah. I still fundamentally believe humans need to see and touch things. So I'd invite you to sit in one of our trucks. They'll be here soon. And let's do a podcast from in the cab in the Cobra.

1:00:51To be unusually impolite as a British man, try and stop me. I love it. Thanks for your time.

1:01:06Well, I really hope you enjoyed that. I'm not going to make any promises yet, but it is looking extraordinarily likely that at some point soon we'll be able to make an episode about the machinery they're using at the Pilbara. It's just an extraordinary, colossal shift. And I think it's going to spread, clearly is spreading. And I just love the fact that in China, they dig up thermal coal using really efficient electric machinery, and then ship it to a coal burning power plant, burn it to make electricity to power the machinery, I think is just one of the beautiful ironies of the insane world we live in.

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