FMG Fortescue Ltd

By Rhiannon Hoyle

Australian iron-ore titan Fortescue Metals Group approved a $550 million green hydrogen project in Arizona, the centerpiece of an initial slate of projects aimed at recasting the company founded by billionaire Andrew Forrest as a clean energy giant.

The Phoenix Hydrogen Hub, in Buckeye, Ariz., was backed by directors in a $750 million, three-year investment plan announced Tuesday that also includes a green hydrogen project in Australia's Queensland state and a project aimed at producing iron using renewable energy in Western Australia, where Fortescue runs its giant iron-ore mining operations.

Three years ago, Fortescue outlined plans to branch out from iron ore and build a globally significant clean-energy business. The path hasn't been smooth. Fortescue has come under rising scrutiny from analysts and investors over limited detail on its energy plans and faced an exodus of executives, including both the chief executive and chief financial officer of its lucrative iron-ore business.

With the Phoenix project, Fortescue joins a cavalcade of foreign companies lured to the U.S. by the Biden administration's Inflation Reduction Act. Fortescue said it expects its Phoenix Hydrogen Hub to qualify for tax credits under last year's climate law.

The first phase comprises an 80-megawatt electrolyzer and liquefaction facility with an annual production capacity of up to 11,000 metric tons. Production is estimated to begin in mid-2026.

The company will provide the initial funding for the project--which has a budget of roughly $80 million for the year through June 2024--but intends to seek debt and equity funding, it said. There is ample space at the site for a further expansion in the future, Fortescue also said.

Fortescue previously set a target of taking five clean-energy projects to a final investment decision by the end of 2023. On Tuesday, the miner said it will seek to fast-track proposals for a green hydrogen and ammonia facility in Brazil, a green ammonia plant in Norway and a fertilizer facility in Kenya.

The initial slate of projects "reflects our disciplined approach to learning while we do, prior to large scale investments," Fortescue Energy Chief Executive Mark Hutchinson said in a statement.

In Australia, Fortescue approved the Gladstone PEM50 project, a two-stage, 50-megawatt green hydrogen project estimated to cost roughly $150 million. That site should produce its first green hydrogen in 2025, Fortescue said.

"This is the start of a pipeline of green energy projects we are dedicated to delivering," said Hutchinson.

The iron project at Fortescue's Christmas Creek mine in Western Australia will be an up to $50 million investment aimed at producing so-called green iron--made using renewable energy instead of fossil fuels--from 2025, the company said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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November 20, 2023 22:08 ET (03:08 GMT)

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