HIGHLIGHTS: Andrew Forrest - CEO of Fortescue

0:00Hi everybody, tune in to this short version of the podcast which we do every Friday for the long version. Tune in on Wednesdays. Hi everybody, I'm Nicolai Tangen, the CEO of the Norwegian Swan Wealth Fund and today I'm in particularly good company because I'm here with Andrew Forrest, who is visiting us in Oslo. And Andrew, he is the chairman and CEO of Fortescue, one of the incredible companies in Australia, a mining company. You started it in 2003, against all odds. It's done extremely well, taking on the incumbents. And now you are making an even bigger bet, running this as a zero fossil fuel company by 2030 with no offsets.

0:39And then you've given away billions. So, warm welcome to Oslo. You are the type of guy we like. Thank you, Dikai. Great to be here. Now, then you started Fordisq in 2003. Yes. Tell me about it. Fortisque in 2003 kicked off with a, well, it was like Anaconda, a concept stock. I announced that I was going to take on the iron ore industry, but not adversarially, but through building a railway and port system, which they could all share. Now, BHP, Rio Tinto, even Vale, they all own their own port and rail systems, and they don't share them with anyone. and, of course, they were underutilised, fully underutilised, but instead of being infrastructure we all share, they were used as a barrier to entry.

1:31Now, I didn't really get that. So I said I'll build a point rail system and we can all share it and we can all do well and I'll just be an infrastructure provider. And they really said, well, how does get stuff done? So this is how they tried to keep you out. Yeah. Did you have any money when you started up FortisQ? I think I had a mortgage. That's about it. How do you go from having nothing to building up one of the most successful companies in Australia? Look, I think grit and determination. I mean, you have your eye focused on a goal. So we had our eye totally focused on building a port and rath system.

2:09And when the incumbent players said, well, we're never going to use it. So, OK, we'll then extend that target. will lift, instead of going backwards, will increase the danger, increase the level of difficulty and also become an iron ore producer. We thought through being port and rail to transport other peoples. When they said get nicked, I said, okay, well, we'll go find our own ore bodies and explore them and try and get into the business ourselves, which was several times harder than just providing infrastructure. Yeah, yeah. But BHP and Rio Tinto had controlled the iron ore industry in Australia for 60 years.

2:5160 years. Okay, and then you just decided to take them on. I decided to take them on and everyone, Nikolai, thought it was impossible. Something happened in 2016. You had a personal accident. Woof, you've done your research. What happened? It was late 2015. It was a kind of life-changing event. I was hiking through canyons up in one of the most remotest regions of the world. It was absolutely wild. We took a weapon with us because there were crocodiles, which were around all the time. But we knew if we climbed higher and higher and higher, then the crocodiles would only stay in the salt water, not in the freshwater.

3:38water. So we climbed a long way as a result to make sure that when we stopped and met a helicopter with the family, that would be right out of danger. Part of this climb involved going around a ledge over a large pool of water and the ledge gave way and I slipped into the water and my leg got caught on a tree root, like which came out of the bank of the river into a loop and back into the bank of the river and it snapped my leg like you'd snap a matchstick. But the wrong way, like it did that. It went the opposite way to how knees normally bend. And I think I might have passed out but I remember when I first realised where I was and I was looking up at the surface of the water and it had gone still it had gone still like a mirror so I realised that A I was on my own and B I was drowning and C I'd been there for a little while because there was no ripples in the water I'd fallen and it was flat and I then had to get back to the bank with my leg facing away from the bank but I had to bring my body to face towards the bank to climb out and so I had to, this is not a pretty story, but I had to break my leg even further to twist it to get back to the bank to pull my head above water.

5:13And anyway, I got flown out. It was a wonderful helicopter pilot and I had surgery and I came out of that in a wheelchair. Why did you want to study the ocean? Because it's the most important part of the planet by a mile. It's in this very thin veneer of atmosphere we have above terrestrial earth, above land. That's one or two percent of the world's livable space. The other 98 plus percent is all ocean. From top to bottom, it's full of life. It doesn't matter if it's in the bottom of the Mariana Trench or on the coast of Norway. It's full of life. But most people don't care so much about the ocean.

5:57But why do you care so much too about the ocean? Because of that. Because, you know, I grew up, I actually grew up in the middle of Australia, right? So I mentioned that huge sheep and cattle, they'd call it a ranch or farm over here, but it was massive. And whenever I could get to the ocean, which was a long way away, I used to just love it. I'd just marvel at it and get in it and try and put goggles on and see what else was underneath it. So, yeah, I've really loved it. So having studied it, how did you change your business? Ah, that's a big question. So what the study of marine... In relative short.

6:33Okay, I'll be quick. The study of marine ecology taught me the four major threats are plastic, pollution, overfishing and climate change. And I was able to do papers in my thesis on the first two, but climate change was such a huge area I was allowed to study it. But if I tried to publish on it, then they said it's going to delay your PHP by up to two years. So, but the most impactful part of that PhD was learning the massive impact which global warming is making on the oceans, on the marine environments. And I thought, I've got to do everything I can personally to stop that. Now, I had this very successful company called Fortescue.

7:16By that stage, it was already Australia's most successful company by a margin in shareholder returns in stock exchange history. I thought, I've got to do more with this company than just sit on it. A bit of a tacky question in here. How much money did you have then? A tacky question. Yeah, I had a third of the company, say$20 billion. That was a$60 billion company. So you've got$20 billion. you do a PhD in marine ecology and decide to focus in on the climate. Yes. How will you take this going forward? What's the plan? I think that... No other miner have, no other mining company has followed your direction here.

7:59No, no. We have, I mean, look, no other miner followed me into I &O. No other miner said you can break the cartel between BHP and Rio and Vale. They're the biggest mining companies in the world. they'll crush you like an ant. So I accept no other mining companies following us now either. But when we save a billion dollars a year because we eliminate a billion litres of diesel, diesel equivalent from our supply chains, then they will all follow. But they will watch until that happens. And that is happening. We're already starting to save operating cost. And that's a massive competitive advantage.

8:39We consider we're the most efficient mining company on earth because we have the lowest cost already per tonne. But when we go fully green, our costs will go completely out of reach of any competition until they turn green. And that's my message to the world. If you don't believe in climate change, well, you're an idiot. But if you don't, fine. But believe in a better life. Believe in a lower cost of living. Believe in a lower cost of energy. That's green. Let's move on to leadership and culture. You've written a book about your 10 values. And in good Australian style, they involve some crocodiles and these kind of things.

9:20And here we have it. It's being brought to the table by, you know. Yeah, I just... I love it. It's a very small book. I cannot wait to read it. It's, you know, like Mao Tse Tung's, you know. Yes, thank you, thank you. What are the most important values in your company? Look, it's really just saying who's your favourite child in your family. I mean, you really can't single one out. I think the one which protects us most, I think you're a perfect example, is humility. Knowing you're no greater than anyone else, you've got gifts which are different to other people, but you might get great bricklayers or great singers or whatever.

10:05I mean, they're incredibly gifted people but they're not worse or better than you. So it gives you an understanding of that urgency of great teamwork. Are the values your personal values as well? Is this how you run your life? They are, as you ask. It's funny that, isn't it? How personal values define company values. Yeah, they are. I haven't been asked that question, but you've put it on the table. They actually are.