00:00Take a look at some of the names that we're watching in what is that broadly another downward session for
00:04Australian stocks.
00:05In fact, we're headed for a sixth straight day of declines.
00:07We've seen what eight out of the past nine sessions in the red for Australia,
00:11really failing to benefit from the broader AI and tech driven rally we're seeing in other parts of Asia.
00:17Broadly, of course, these Asian markets are just about one percent away from a record high.
00:21We are seeing some names sort of keeping their head above water.
00:25Whitehaven Coal, they're seeing some of the strongest gains.
00:28We're seeing a line of spread where Earth also up by over two percent there after saying that they do
00:33expect disruptions
00:34when it comes to specific supplies, sulfuric acid supplies by the war.
00:38Also watching some gains in Fortescue, one point seven percent higher.
00:43Let's get back to Bank of America's breakthrough technology dialogue getting underway in Singapore.
00:47Has Linda Amin is there with our next guest.
00:53And Heidi, we're speaking with Mark Barnabar, Deputy Chairman at Fortescue.
00:57Good to have you with us, Mark.
00:58I mean, we've been talking about the Iran war and the implications for companies.
01:02We have high diesel prices, high inflation.
01:05Is that impacting operations at Fortescue at all?
01:09Thank you, Hazlinda, and thank you for having me here today.
01:12Yes.
01:13So the Fortescue obviously is a mining,
01:18also a green energy technology company.
01:20We operate in the Pilbara in the northwest of Australia, very remote area.
01:26People forget the Pilbara is the size of a large European country.
01:31Remote, arid, difficult conditions.
01:35We import as Fortescue, and we have imported nearly a billion litres of diesel per year.
01:43So as fossil fuel prices change and move up, that affects our operating costs.
01:50So, yes.
01:51Can you quantify that?
01:53Sure.
01:54Our marginal cost of production for an additional tonne of iron ore is in US dollars, just under $20.
02:01We are the lowest cost operator out of the big four iron ore producers, Valet, BHP, Rio and ourselves.
02:11Diesel, you know, if it has gone up, say it goes up by 50 cents a litre on a billion
02:20litres, that's $500 million.
02:24So it has a fundamental impact, one of the reasons we are looking and are creating our own decarbonised green
02:35energy grid,
02:37which will mean that we completely displace diesel and gas.
02:42Fundamental impact, not just on Fortescue, but Australia as a whole.
02:46Inflation is surging.
02:47It is inevitable, isn't it, that the RBA will continue to raise rates?
02:52Yeah, Australia is in a difficult position as we sit here today.
02:58The RBA has a band of 2% to 3% for inflation with a target of 2.5%.
03:05Inflation is 3.7%.
03:07Wage inflation is 3.4% and wage inflation is the biggest thing that contributed to inflation.
03:15Worryingly, productivity is 1%.
03:17And we're at full employment, effectively.
03:19We're at 4.3%.
03:21So, even before the Middle East and imported additional inflation, we are materially above band.
03:32CPI data comes out tomorrow.
03:34The RBA meets next week.
03:38You expect a hike?
03:39I'd be surprised if it's not a hike.
03:41Policy rate is 4.1%.
03:43I'd be surprised if it's not a 25 basis point hike to 4.3%.
03:48And that won't be the last for the year, you think?
03:52Look, it's always difficult predicting, but inflation is sticky.
03:57We've had a rate rise already this year.
04:00If we have one next week, my expectation is we'll have another one later in the year.
04:05What are the plans for Fortescue?
04:07We know that you're in continuation of talks with CMRG of China.
04:12Where are you with that?
04:13And what concessions are they asking for?
04:15Because we also know you're not the only one talking to CMRG.
04:20We are not.
04:22We're in the fortunate position of having a very close relationship with China.
04:28We were the inaugural foundation supporter of the Baal Conference on Hainan Island.
04:34Again, when it occurred last month, we are the largest percentage-wise of our total product exporter to China.
04:47Of our war, our founder, Andrew Forrest, has a wonderful relationship, a deep, respectful relationship in China.
04:56And probably the largest factor, has Linda, is that we buy a lot of supply from China.
05:09Batteries, solar panels, long-end BYD.
05:12So it is much more a two-way trade.
05:16But for CMRG, are they asking for concessions?
05:20Well, CMRG is acting on behalf of an industry.
05:23What is it asking for?
05:25They ask for better terms of trade.
05:30They would like...
05:30Such as?
05:31Well, you know, they would like, for example, that the iron ore miners utilise a China-based index, as opposed
05:42to, say, platts, which is the current index.
05:44They would like a lot of the trade to occur in renminbi, in their own currency.
05:50None of this is unexpected.
05:55It's not unreasonable.
05:58It's a respect-based, sensible discussion.
06:03It is going well.
06:04There are commercial confidentialities.
06:06They obviously can't be disclosed.
06:10But we're very comfortable where we're at.
06:11Is there a sense that this is just the beginning for China, as it seeks more metals, like copper, for
06:17instance?
06:18What's your reading on it?
06:21Yes.
06:22I mean, it is a process of industry consolidation and negotiating sophistication.
06:34You know, China is a large importer of not just iron ore, but many other products with their battery industry.
06:44They will keep doing that.
06:45So I probably would expect more.
06:48Do I think that's necessarily bad?
06:50No, I don't.
06:53Plenty of other countries operate in a similar fashion.
06:55You just need to accept it for what it is and do it in a sensible and respect-based fashion.
07:01Mark, we know that FortisQ is making a big push in renewables.
07:05Why is that?
07:06Some are suggesting perhaps it's because you don't see growth in metals.
07:09And you're putting in millions and millions of dollars into renewables.
07:14Might FortisQ become more than just an iron ore player, becomes an iron ore slash renewable slash wind, solar, and
07:23so on and so forth in five years' time?
07:25We already regard ourselves as a metals, green energy technology company, because we are.
07:34We are diversifying.
07:38We will establish and are establishing operations which will be completely decarbed.
07:47What does that mean?
07:48That means for scope one and scope two emissions, we will eliminate on that basis our need for fossil fuels.
07:57We won't have offsets.
07:59Our target is real zero, not net zero, not net because we've got offsets, real because it's absolute.
08:09How do we do that?
08:10We will do that with good economics, by the way, which I'm happy to step you through.
08:16But we're building our own renewable energy grid, which for an industrial company our size, I don't think there's another
08:25example that I can point to on the planet.
08:27But this is large scale, 24-7 baseload, renewable, a combination of multiple solar sites in our operations, multiple wind
08:38sites, multiple best battery energy storage systems spread on a high voltage 220 kV 600 kilometre transmission system with very
08:51sophisticated optimised AI.
08:54So it is all those factors, the solar, the wind, the battery, the transmission system, the AI that delivers for
09:06our operations a totally self-sufficient, green, renewable, profitable and commercial energy system.
09:16We're hearing that you're also building AI.
09:21I'm afraid we've run out of time, Mark.
09:23I mean, I wanted to ask you about AI and data centres in Western Australia, but we have to live
09:27with that.
09:27Mark Barnaba, Deputy Chairman at Fortescue.
09:30There you have it.
09:31Our conversation here from the event being held by Bank of America.
09:36Heidi.
09:38How's Linda Amin there in Singapore?
09:40We have plenty more when it comes to these conversations on Australia Ahead every Tuesday at 10.40am if you're
09:46watching in Sydney, 8.40am if you're catching us in Hong Kong.
09:50Plus, you can tune into the Bloomberg Australia podcast, delving into the biggest stories shaping the country's role in global
09:56business.
09:57You can find that on Apple, Spotify or Bloomberg.com.
10:00More ahead on the Asia trade.
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