Start with the massive and unprecedented rate of growth that the company has experienced. What started as little more than a handful of mining tenements in the remote but resource-rich Pilbara region just 10 years ago has quickly grown into an operation that moves more than 120 million tonnes of ore per year. And growth has not abated; Fortescue Metals Group (Fortescue) added around 50 million tonnes of new capacity last year and will accomplish the same feat again this year to reach a 155 million tonnes per annum run rate by year end.
“We oversaw a very rapid expansion that was designed to take advantage of the massive demand for iron ore coming out of China,” noted Neville Power, CEO of Fortescue. In just 10 short years, the company has successfully developed one of the most sophisticated private infrastructure networks in the world. Roads, rails, ports, airports, villages and power facilities were needed to mine and move the ore to customers in China, not to mention all of the core mining infrastructure that would be required on three distinct and separate locations.
“Since 2008 we’ve dramatically expanded both our discovered resource and our operational footprint,” added Mr. Power. “We’ve developed two new mine sites, expanded our rail service to those mines, added much-needed duplication to sections of our main rail line and expanded the Herb Elliott Port at Port Hedland by almost 120 million tonnes.”
What makes all of this rapid growth and infrastructure development so remarkable is that it was achieved in one of the world’s most remote locations. Sitting some 1,500 kilometers north of Perth and 300 kilometers south of the port facility at Port Hedland, the mine sites are extremely isolated. Supplies, hardware, mine equipment and even people must be brought in either by air or – in the case of more regular supply runs – via long-haul truck convoy.
“You start to think about all of the interdependencies of running a site in a remote location,” added Mr. Power. “Putting employees on the mine site meant building fully self-contained villages with all of their own infrastructure such as power and water; then we built three aerodromes capable of handling 737-800 size aircraft to move the people and cargo in and out.”
But it’s the rail line that operates as the life-line to and from the mines. Running more than 300 miles from pit to port, the lines were built to carry 40 ton axle loads at 80 kilometer-per-hour speeds. That feat of engineering secured Fortescue a place in the Guinness Book of World Records in 2011 for the fastest and heaviest haul rail system.
Managing the supply to the mines creates particular risk management and resilience considerations. “We have to make assessments about what is critical and manage our stocks in Perth, Port Hedland and the mine sites accordingly,” added Mr. Power. “But we also recognize that if we were aiming to get it right 100 percent of the time we’d be being too conservative, so we aim to get it 90 percent right and then recognize there is a chance that we may need to bring in a few things by air or courier truck if we get it wrong.”
If managing the risk of rapid development in a remote location wasn’t enough, Fortescue also faces threats from the environment. At the mine sites, rainfall can top 40 milliliters per day during the wet season, which is followed by ten months with absolutely no precipitation at all. More importantly, both the port and the mine sites can face disruptions during cyclone season.
“Mitigating and managing these climate risks can add a lot to the construction and development of the mines and rail infrastructure,” admitted Mr. Power. “For example, we’ve had to build a massive number of culverts and bridges which – in the dry season – look downright strange because of their scale, but when the rain comes it’s this fore-planning that allows us to keep operations running all year round.”
Besides incorporating duplication into the main haul line design and development, Fortescue has also taken extraordinary steps to ensure that the rail line sees as little impact as possible from flooding events. At the start of the cyclone season, for example, the company distributes rail and earth moving equipment down the line so that repairs can be done simultaneously at various points without waiting for equipment to make it down from the port or mine sites.
And while the organization relies heavily on engineers and designers with extensive experience operating under these difficult conditions, they also look to the local population and especially the pastoralists and traditional owners for tips on how to enhance the mine’s resilience.
“One of our key sources of information has been the long-term residents of the area and particularly the cattle property owners and the traditional owners who have shared their observations about how the flows operate in the wet season and where drainage can be an issue,” added Mr. Power. “That’s allowed us to take into account the longer-term resilience of the local environment as well as our assets; we’re protecting the Molka Acacia tree which plays a key role in reducing the impact of erosion in the area.”
Fortescue also recognizes that resilience is not just about hardening assets and reducing supply chain risk. The company is also keenly focused on enhancing the resilience of the local population as well. More than 12 percent of the company’s workforce is made up of indigenous people and the company has – to date – tendered more than AUS650 million worth of contracts to indigenous companies and joint ventures.
“We recognize that there is not a lot of employment opportunity in these areas and often the community is dealing with substance or alcohol issues, so we’ve focused on providing vocational training facilities and providing business opportunities,” said Mr. Power. “We’ve also guaranteed jobs to anyone that completes the training.”
Already, more than 2,000 people have been through the training program and today more than 450 program graduates work within the operations. “We want to help make the community more resilient by helping provide jobs and genuine opportunities for development.”
For Fortescue, it’s all part of the effort to create a more sustainable and resilient organization. “We operate in some of the harshest climates and environments in the world,” noted Mr. Power. “I believe that our attention to resilience planning has enabled us to grow and develop by providing us with the confidence that we can maintain our operations in the face of massive odds.”
By Duncan Calder, KPMG in Australia