Fortescue cuts 700 jobs, slows down green hydrogen plans

Fortescue (ASX: FMG) plans to cut about 700 jobs, or 4.5% of its global workforce, as part of a new restructuring push that will see the Australian iron ore miner scale back its ambitions to turn into a green hydrogen giant.

The fresh reorganization would ensure the Perth-based mining company remains “lean, impactful and agile,” it said a the statement. Fortescue said its acting chief financial officer, Apple Paget, will assume the role permanently to ensure the company’s balance sheet’s health.

Billionaire Andrew Forrest, Fortescue’s founder and executive chairman, has been working to transition the business away from iron ore, which stills generates most of the miner’s revenue. 

Fortescue has simultaneously experienced a number of senior staff members departures in the past few years, rising questions about Forrest’s strategy and leadership style.

While Forrest emphasized the company’s “resolute” commitment to its green technology vision, a spokesperson for Fortescue told Bloomberg that the goal of producing 15 million tonnes of green hydrogen annually by 2030 was being put on hold until electricity prices decrease. The measure would also lead to a slowdown in technology development across the board.

Forrest noted that the wars in Ukraine and the Middle East have driven up global energy prices, making large-scale green hydrogen production unviable, The Australian Financial Review reported. “In that environment you’re not going to bring in major sources of green hydrogen, which relies on cheap energy prices,”  he told the newspaper. 

Fortescue’s layoffs, although global, will addd to the thousands of job losses in Australia’s resources sector this year, impacting loss-making nickel operations, lithium mines, and Alcoa‘s (NYSE: AA) Kwinana alumina refinery.

Green expansion

Fortescue had been expanding its presence in the green energy market in recent months. Late last year, it approved investments of about US$750 million over the next three years for a green hydrogen hub in the U.S. and two other projects: the Gladstone 50-megawatt green hydrogen project in Queensland, Australia; and the Christmas Creek green iron trial commercial plant in Western Australia.

The miner has also announced its intention to build an advanced manufacturing facility in Michigan and it has opened an office in New York, called Fortescue Capital, to attract more investment into its green energy businesses.

In April, it formed a joint venture with OCP Group to supply green hydrogen, ammonia and fertilizers to Morocco, Europe and international markets.

As part of the strategy to scale up its green energy unit, Fortescue said last year it would no longer allocate 10% of its net profits to this business. Instead, projects and investments will compete for capital allocation, with additional funding coming from external investors.

Fortescue expects to maintain equity stakes ranging from 25% to 50% in these projects, where it will partner with outside investors.