Fortescue Metals Group Limited (ASX: FMG) announced a new framework for its Solomon Hub.
What’s the Solomon Hub?
Fortescue is one of the world’s largest iron ore miners. It has several mines in Australia.
Fortescue says that Solomon Hub is in the Hamersley Ranges and is located 60km north of Tom Price and 120km to the west of the Chichester Hub. It comprises the Firetail, Kings Valley and Queens Valley mines which together have a production capacity of 75mt per year.
The idea behind it is that the expansion to Queens Valley will help maintain production of the Kings Fines product. Solomon represents a valuable source of production by blending higher iron grade, low cost Firetail ore with low phosphorous Chichester ore to create ‘Fortescue Blend’.
Fortescue’s new co-management framework
Fortescue announced that the miner and members of the Wintawari Guruma Aboriginal Corporation, the prescribed body corporate for the Eastern Guruma People, have established a co-management framework to oversee the development of new mines at Solomon.
Both parties will establish a culturally safe mining joint venture to mine the East and West Queens deposits on Eastern Guruma country. The 10-year mining services contract to be awarded to the new joint venture is estimated to be worth over $500 million, making the contract the largest ever awarded to an Aboriginal business by Fortescue.
The establishment of this framework will continue to guide Fortescue’s future discussions with its native title partners, and forms part of the company’s ongoing engagement with traditional custodians to deliver training, employment and business development opportunities for their communities.
Over 80% of the $429 million spent with Aboriginal businesses in FY21 were awarded to businesses owned by native title partners and their families.
Since its launch in 2018, over $31 million in financial support have been approved for 10 Aboriginal contractors, for the purchase of a variety of plant and equipment to support their operations.
Final thoughts on Fortescue and this agreement
It’s very important for the iron ore mining giant to do the right thing by the Aboriginal communities that it’s operating in. The business hasn’t had a perfect record.
In terms of the current Fortescue share price valuation, the situation has deteriorated rapidly in recent days, leading to the price of iron ore sinking. I do like Fortescue, but I’d want to wait to see if China takes any actions against Australia/iron ore in the coming weeks for the submarine agreement.