Fortescue’s Bold Decarbonisation Push Raises Questions on Future Costs

Robust Operational Performance

Fortescue Ltd has delivered a standout performance in the first half of fiscal year 2026, setting a new record with iron ore shipments reaching 100.2 million tonnes. This milestone underscores the company’s operational strength and its ability to meet global demand amid fluctuating market conditions. The company’s Hematite production cost remains impressively low at US$18.64 per wet metric tonne, reinforcing Fortescue’s position as a cost leader in the iron ore sector.

Financially, Fortescue reported a net profit after tax of US$1.9 billion, supported by a strong underlying EBITDA of US$4.5 billion and a healthy EBITDA margin of 53%. These results reflect disciplined cost management and robust pricing, with the Hematite realised price averaging US$91 per dry metric tonne, approximately 87% of the Platts 62% CFR Index.

Shareholder Returns and Balance Sheet Strength

In line with its dividend policy, Fortescue declared a fully franked interim dividend of A$0.62 per share, representing a 65% payout ratio of underlying net profit. The company’s balance sheet remains solid, with net debt at US$1.0 billion and gross debt to EBITDA comfortably below 1x, reflecting prudent financial management and a diversified debt maturity profile.

Free cash flow generation was strong at US$1.5 billion, enabling continued investment in growth projects and shareholder returns without compromising financial flexibility.

Strategic Growth and Sustainability Initiatives

Fortescue’s FY26 guidance anticipates total iron ore shipments between 195 and 205 million tonnes, with capital expenditure forecasted between US$3.6 billion and US$4.3 billion. This investment is focused on sustaining operations, hub development, exploration, and decarbonisation projects.

The company is advancing its ambitious decarbonisation agenda, targeting the elimination of Scope 1 and 2 emissions from its Australian terrestrial iron ore operations by 2030. Key initiatives include the deployment of electric mining equipment, large-scale renewable energy projects such as a 1GW solar pipeline and a 133MW wind project under construction, and significant battery storage capacity.

Diversity, Inclusion, and Global Expansion

Fortescue continues to prioritise diversity and inclusion, with 39% female representation in senior leadership and 15% First Nations employment across its Pilbara workforce. The company has awarded over $6.8 billion in contracts to Australian First Nations businesses since 2011, supported by financing programs from ANZ and NAB.

On the exploration front, Fortescue is progressing its global footprint with ongoing drilling at the Belinga Project in Gabon and the full acquisition of Alta Copper, expanding its portfolio beyond iron ore into copper and other critical minerals. These moves align with Fortescue’s strategy to diversify its product mix and support the transition to green metals.

Outlook

Fortescue’s first half results demonstrate a company that is not only delivering operational excellence and shareholder value but also positioning itself for a sustainable future. The integration of technology, renewable energy, and a clear decarbonisation pathway signals a forward-thinking approach that could set new standards in the mining industry.