The Fortescue Metals Group Limited (ASX: FMG) share price is on watch after announcing a potential new project in WA.
Fortescue is already one of the largest iron ore miners in Australia and it’s considering another project.
Fortescue assesses Sinosteel magnetite and infrastructure project
The iron ore giant has signed a binding memorandum of understanding (MoU) with Sinosteel to complete a rapid project assessment of its Midwest magnetite (iron) project, with the assessment to include a rail and port development at Oakajee.
After a 12-month ‘rapid project assessment’, and assuming Fortescue likes the conclusion, Fortescue has the option to buy up to 50% of the Midwest Magnetite Project and up to 100% of the proposed port and rail infrastructure project.
Fortescue explained that for over three decades, Sinosteel has demonstrated its strong performance and ability to deliver mining projects in Australia, including the Channar Mine in the Pilbara region.
The iron ore miner revealed that future development, including a renewable, green hydrogen hub in the Midwest region at Oakajee would deliver a large-scale resources and renewables project for Western Australia, further underpinning its “enduring relationship with China.”
The Fortescue share price can be boosted by this project, if Fortescue decides to go ahead with it. More iron ore would hopefully mean higher profit.
Management comments
Fortescue CEO Elizabeth Gaines said: “The signing of this MoU demonstrates Fortescue’s commitment to our strategic pillars of investing in the long-term sustainability of iron ore business, expanding into new regions and continuing to deliver strong returns to our stakeholders.
“We look forward to working with Sinosteel on the next steps for this important project for Western Australia which, in addition to the magnetite and infrastructure development, offers the opportunity for a co-ordinated project combining Fortescue’s iron ore and infrastructure pedigree with Fortescue Future Industries‘ green energy objectives.”
The President of Sinosteel Group, Andong Liu, said:
“This world-class project is reflected not only in the scale of resources, ore processing characteristics and product quality, but also in the huge renewable energy potential.
“Today, we are pleased to welcome our new partner in this visionary path, Fortescue.
“Fortescue is not only a leading iron ore producer, but also a pioneer in green energy initiatives…We are confident that together with Fortescue we will make the Midwest a low-carbon, green, high-quality iron ore centre and lead a new era of magnetite development in the Midwest.”
My thoughts on the Fortescue share price
Diversifying its iron ore sources, improving the quality of the iron exposure and increasing its production are all benefits of this potential project. Remember, investors often talk about the lower grade of iron ore that the ASX miner currently produces compared to peers. Increasing the grade quality would be a good idea.
I am a fan of Fortescue’s green initiatives that will hopefully add a lot of value for shareholders (and the world). However, at the moment I think it makes sense to buy when the iron ore price is lower. So, I’d only start considering Fortescue shares if it were at least below $18. The big dividend is a handy bonus.
