Shares in Fortescue metals Group fell nearly 3% in late trading after the company revealed the sudden departure of three senior executives associated with its Iron Bridge magnetite project in the Pilbara region of WA.
The inference from the surprise announcement made at 2.48 pm and a second made just after 5pm, is that the $US2.6 billion project is in trouble and could be put on hold.
CEO Elizabeth Gaines said she and Ian Wells, the company’s chief financial officer will be foregoing their bonuses for 20120-21 for whatever problems are reported at the Iron Bridge project.
That indicates there must be large losses or cost overruns in the project for Fortescue’s top two executives to feel a big financial pain, especially in a year that will see record revenues, record exports and record earnings.
The shares are likely to come under further pressure when trading resumes on the ASX.
There were reports of cost blowouts and delays in late January with the project 90% complete. But the CEO revealed at the same time a review of the project.
Tuesday’s two statements seem to be the result of that review and its results won’t be nice for shareholders.
The second statement contained the following opening paragraphs reaffirming support in the project:
“The Board of Fortescue Metals Group (Fortescue) considers Iron Bridge to be an excellent project, however before it advances further must benefit from a complete technical optimisation and instilling proven leadership, previously unavailable due to the execution of other successful Fortescue projects.
“The detailed review underway for the Iron Bridge Magnetite project is continuing and an update is expected to be provided with the release of Fortescue’s half year financial results on 18 February 2021.”
The review was announced revealed in the first statement at 2.48 pm and Fortescue said the details will be revealed with the company’s interim results on Friday which are expected to reveal net earnings around $US4.5 billion.
The first statement though’s big news was the immediate departure of two executives from its Leadership and Projects team:
They were named as Greg Lilleyman, Chief Operating Officer, Who “has resigned from his position, with immediate effect”; Don Hyma, Director Projects and Manie McDonald, Director Iron Bridge have also resigned from the business. Derek Brown, currently General Manager Solomon has been appointed as Acting Director Projects with the support of Fortescue’s senior Projects team.”
Fortescue CEO Elizabeth Gaines said in the statement that “At Fortescue, our commitment to our values and culture is our highest priority. What we’ve learned through our review of the Iron Bridge project to date, is that we have lost sight of that critical focus.
“As CEO I must also take accountability and learn from this. Both Ian Wells, Chief Financial Officer and I will forego all incentive payments this financial year,” she said.
Iron Bridge is supposed to produce 22 million tonnes of of high grade 67% Fe magnetite concentrate product for sale on global markets (read China).
