Fortescue Metals Group [ASX:FMG] finds itself embroiled in a heated legal battle with rival green-iron venture, Element Zero.
Element Zero, founded by former FMG employees, has faced allegations in court that it couldn’t possibly deliver an operational green-iron prototype without stealing Fortescue’s proprietary technology.
Meanwhile, the Andrew Forrest-led mining giant is facing allegations of ‘unclean hands’ after being accused of aggressive spying on these former staff members.
Fortescue’s share price has taken a hit recently, down -16.8% in the past month as the company sheds 700 workers and faces production setbacks in iron ore.
Yet despite all of this, the latest data from the Selfwealth platform shows Fortescue remains the most popular stock on the ASX for baby boomers.
It seems that many older investors continue to believe that FMG remains a good vehicle for their investments.
But what could the consequence of this legal drama be for the company’s share price, and is hydrogen a boon or burden on the company’s future?
Source: TradingView
Legal Battle Intensifies
Fortescue has accused former employees of intellectual property theft, including Element Zero CEO Michael Masterman and scientists Bart Kolodziejczyk and Bjorn Winther-Jensen.
The company argues that the defendants relied on its proprietary technology to advance Element Zero’s green-iron ambitions.
‘Green iron’ is a process where hydrogen is used instead of coal when smelting iron ore, resulting in a low carbon footprint.
While the process on paper looks exciting, the concept has been in development since 2004 without successfully reaching a commercial scale.
Despite these challenges, Fortescue had invested heavily in the idea and promised large-scale hydrogen production—but not before (they claim) Element Zero stole their technology.
Surveillance and Data Seizure
In a dramatic turn of events, Fortescue obtained secret court orders to raid the scientists’ homes and Element Zero’s office and factory.
Following a suppression order battle, the Federal Court recently released documents containing affidavits filed by Fortescue in preparation for these surprise raids.
One particularly explosive affidavit by a Fortescue lawyer claims Mr Kolodziejczyk, Fortescue’s former chief scientist, had misrepresented his qualifications when approached to lead Fortescue’s green business arm.
However, the extent of Fortescue’s surveillance has raised eyebrows. Reports detail spying that went to stalking extremes, such as watching Winther-Jensen water his garden and following a woman into a shopping centre.
Despite the search order granted by Justice Melissa Perry only permitting raids on Kolodziejczyk’s home, investigators also spied on properties owned by Michael Masterman — who wasn’t targeted by the search orders.
Approximately three terabytes of data were seized during the raids, with Element Zero’s lawyer complaining that much of it was confidential and unrelated to the case.
Meanwhile, another explosive affidavit from mining and engineering consultant Wayne McFaull asserted that Element Zero’s rapid progress could only be attributed to having access to Fortescue’s design documents.
McFaull claims that Element Zero’s $5 million research fund was not enough for the level of research and development they achieved, stating in the court:
‘Projects in the nature and complexity of the Fortescue project and the Element Zero project take a great deal of trial and error.’
Element Zero has denied Fortescue’s claims and is challenging the private search and seizure orders, with a full hearing scheduled for 18 August.
But what about the future of this technology?
Outlook: The Future of Green Hydrogen
While Fortescue battles in court over green-iron technology, the broader green hydrogen landscape faces its own challenges.
Despite Andrew Forrest’s declaration that he was ‘not walking away from hydrogen‘, Fortescue recently put its green hydrogen plans for the NSW Upper Hunter on the back burner.
Forrest’s ambitious target of 15 million tonnes of hydrogen fuel production by the end of the decade has been postponed, and up to 700 workers face job losses.
This move has sent ripples through the industry and raised concerns in Canberra, particularly given the Albanese government’s recent push to create a hydrogen hub in WA’s Pilbara region.
For now, the economics of green hydrogen production remain challenging.
As Forrest himself noted in a recent interview:
‘We need lower power prices, hydrogen is directly a function of the electricity cost. If the electricity cost is high, then we can’t make hydrogen cheaply enough to compete with fossil fuels.’
However, beyond just fossil fuel costs, several other dynamics work against hydrogen as a fuel.
Firstly, efficiency remains a major hurdle. Battery-driven vehicles are significantly more efficient than hydrogen fuel cell vehicles.
Batteries use about 70% of the original energy produced at the source, while hydrogen fuel cells only manage 25–30%, which is around the same as a combustion engine.
This makes it a real challenge for ‘round-trip’ efficiency — especially if you are going to produce it in one place, then transport and use it elsewhere.
Secondly, infrastructure costs pose a challenge. The pipes and tanks required to transport and store hydrogen are more expensive to build and maintain than electric charging infrastructure. While existing LNG pipelines would require upgrading to handle hydrogen.
Lastly, rapid advancements in battery technology are widening the gap with hydrogen fuel cells. As battery costs continue to drop while their efficiency grows, the math seems to be working against widespread hydrogen.
While heavy industries like smelting could prove the exception to this trend — a widespread hydrogen-based economy is far from certain.
Despite these challenges, Fortescue says it’s staying true to its decision to concentrate on producing hydrogen and green steel production in the future.
Source: FMG – Proposed Hydrogen System FHS P50
As this legal battle unfolds and green hydrogen remains in question, investors should monitor advances in other battery storage systems that could compete in this space if they want to invest in Fortescue.
Thermal batteries are one such technology that is seeing renewed interest in the US, while mining giants Rio Tinto and BHP are joining forces to focus on electric smelters that would rely on renewable energy sources.
However, energy costs will remain the big question moving forward.
Higher Energy Costs in the Future?
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Regards,
Charlie Ormond
For Fat Tail Daily
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