Fortescue Metals Group Ltd said on Tuesday Chief Operating Officer Greg Lilleyman and two other executives have resigned as part of a review of its Iron Bridge Magnetite project in Western Australia.
The $2.6 billion high-grade ore project, which is key to Fortescue’s growth strategy, was on track to start exports in the first half of 2022, it said last month, after the Australian newspaper reported the project faced a cost blowout of as much as 25%.
Higher ore grades would mean Fortescue could blend the material with that of its lower grade products to get better prices and potentially win market share from peers BHP Group , Rio Tinto Ltd and Vale SA..
The project is expected to deliver 22 million tonnes when fully ramped up.
The world’s fourth-biggest iron ore miner said Lilleyman along with Don Hyma, director of projects, and Manie McDonald, director of Iron Bridge, have left the business.
“At Fortescue, our commitment to our values and culture is our highest priority. What we’ve learned through our review of the Iron Bridge project to date, is that we have lost sight of that critical focus,” Chief Executive Officer Elizabeth Gaines said.
“Core to our values is … doing what we say we are going to do,” she told media after the announcement, adding there had been some evidence of a breakdown in communication.
“This is about the culture of the team.”
Magnetite iron ore projects are notoriously difficult to develop, with China’s CITIC Pacific Sino Iron project in Western Australia arriving years late and billions of dollars over budget.
“The history of these kind of projects in Australia is pretty poor,” said Shaw and Partners mining analyst PeterO’Connor.
“The project will still likely go ahead,” he said, adding that Lilleyman was a very experienced operator.
Fortescue shares fell as much 6.3% before closing down 3%.
The miner said the review of the project was continuing and it would provide a further update along with its half-year results on Thursday.
Gaines and chief financial officer Ian Wells will also forgo their incentive payments this financial year, the company said.
(By Shashwat Awasthi and Melanie Burton; Editing by Krishna Chandra Eluri and Richard Pullin)