The iron men with a $3 billion plan to save the planet

Politics


The lofty ambitions of two former Fortescue executives, who want to build a $US2.1 billion ($3.2 billion) green iron ore processing plant in the Pilbara within five years, will require a gigantic infusion of cash.

Michael Masterman and Bart Kolodziejczyk formed Element Zero in late 2022, which aims to reduce the carbon footprint of iron ore, Australia's most lucrative export industry. This is a big step up from the $10 million the group raised earlier this year in seed funding, and there are plans to carry out another round of capital later this year, with the $50 million to $100 million target.

Iron is the key ingredient in the production of steel, which the world depends on for construction and manufacturing. However, iron and steel production emits a total of 3.4 billion tonnes of carbon annually, or 7% of global emissions, according to energy analysts Wood Mackenzie.

If international agreement to limit global warming is to be achieved, emissions must reach zero by 2050. To decarbonise the iron ore and steel industries, Wood Mackenzie has estimated that it would take a global investment of a mind-boggling $1.4 trillion. – almost equivalent to Australia's total annual gross domestic product.

Former Fortescue executives Bart Kolodziejczyk (left) and Michael Masterman want to build a $3.2 billion green iron ore processing plant in the Pilbara within five years. Credit: Eamon Gallagher

This makes Element Zero's capital needs seem less important.

“There is so much interest in what we do both in Australia and globally, particularly in the US, that we think we can pull it off,” said Kolodziejczyk, co-founder and CTO of Element Zero.

Element Zero, which employs about two dozen staff, has developed and patented a technology to reduce iron ore to pure iron using an electrochemical process.

An alkaline solution and an electric current are used to separate the pure iron from the silica, alumina and oxygen. The iron ore is dissolved in the solution and when electricity is passed through it, from a renewable source, the pure iron accumulates on a cathode.

The group said it had also made progress in decarbonizing silicon.

Element Zero has pitched itself to investors as a platform company, its technology aimed at turning metal ores into metals, not just iron ores, with zero carbon emissions.

About 560 million tonnes of iron ore are shipped through Port Hedland annually.

About 560 million tonnes of iron ore are shipped through Port Hedland annually.Credit: Ian Waldie

Element Zero is seeking approval from the Western Australian government for its green iron processing plant on 25 hectares at Boodarie Strategic Industrial Estate near Port Hedland. Kolodziejczyk said the group was also looking for a separate site to build a wind and solar farm to power the plant.

He said that in five years, the plant could process 5 million tonnes of iron ore feed into 2.7 million tonnes of pig iron per year. There are plans to increase processing by 50 million tons.

Element Zero's pilot plant in Perth is still a long way from industrial scale. It is processing 100 kg of iron ore per day, bought from major iron ore producers.

A process known as direct reduction uses natural gas, or methane, in a furnace to extract pure iron from iron ore. Some companies such as Fortescue have explored replacing methane with green hydrogen.

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Kolodziejczyk, once Fortescue's chief scientist, led a push to develop green hydrogen to decarbonize the company's mining operations and shipping fleet.

Masterman, the CEO of Element Zero, has had a long career in the energy industry, including in Europe and has also worked as CFO of Fortescue Future Industries. He was chairman of renewable energy group Squadron Energy, part of the Tattarang group of companies, which are linked to Fortescue founder Andrew Forrest.

“The whole industry has enormous commercial pressures, shareholder pressures and goodwill to find technological solutions that can reduce the carbon emissions from converting iron ore to iron,” Masterman said. “We can move the dial significantly.”

About 560 million tonnes of iron ore are shipped through Port Hedland annually.

“If we can move to convert the large and exceptional natural resources we have in Australia into metals, rather than exporting the raw ore, that will have two impacts. It will help significantly reduce carbon emissions and … strengthen Australia substantially” .

Element Zero faces strong competition from other companies that have or are developing technology to make green iron and steel, including Fortescue Future Industries, which last year said it had built a pilot plant that could convert ore from iron into green iron through a membrane.

Element Zero is exploring the conversion of other metallic minerals into zero-carbon metals such as lithium, nickel and silicon.

Kolodziejczyk acknowledges the challenges but remains confident, predicting that eventually some of the major iron ore producers, including BHP, Rio Tinto, Fortescue, Vale and Roy Hill, could become investors in Element Zero. “We think some of these majors will come to invest in us.”

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Companies such as BHP and Vale have invested in cleantech groups such as Boston Metal, which is working on decarbonising steelmaking. BHP also has a stake in Electra, a start-up focused on the decarbonisation of iron manufacturing.

In January, H2 Green Steel, which has technology it says will help decarbonize European steel, raised 4.2 billion euros ($6.9 billion) in debt financing. The start-up was founded in 2020.

Kolodziejczyk said Element Zero was also in talks with potential customers in Japan and South Korea for its green iron.

“Given how quickly we're moving forward with the scale-up of the technology, and also with the project in the Pilbara, we think it's a good time to get these initial agreements in place,” he said. “That's what we're going to do in the next few months. We think the first take will come from Japan. Obviously, having these deals in place will help us with the next fundraising.”

Masterman said Element Zero was providing potential customers with samples of its green iron so “they can test it to understand the adjustments they may need to make to their systems to be able to use it in their processing plants.”

Kolodziejczyk said Element Zero's next fundraising could reach $100 million. Masterman declined to provide a figure, saying the group was instead focused on demonstrating its technology in stages to secure funding.

Element Zero is also exploring possible grants from the United States through the Inflation Reduction Act (IRA). The IRA has committed hundreds of billions of dollars to clean energy projects, including electric vehicles, to accelerate the country's transition to net zero.

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The IRA has fueled a manufacturing boom in the US, but this rapid growth in cleantech manufacturing has come at a cost. It has led to a huge increase in demand for electricity, as well as the development of artificial intelligence and digital currencies, which threaten to slow down the path to net zero as renewable energy companies struggle to keep up. Rhythm.

The Future Made in Australia Act, the new industrial policy repealed last week, was immediately dubbed a mini-version of the IRA, although the details have yet to be released. It will target advanced manufacturing and clean energy projects with government-funded incentives.

The push to decarbonise the iron ore sector comes amid pressure on exports. Vivek Dhar, head of the Commonwealth Bank's energy and mining commodities research team, has forecast iron ore prices to average between $100 and $110 a tonne for the rest of the year, after reaching $140 in January.

He said there were risks the price could fall below those forecasts if growth slowed in China, as a result of a downturn in its property sector. China imports nearly 75 percent of the world's iron ore.

Element Zero is exploring the conversion of other minerals with zero carbon emissions, such as lithium, nickel and silicon.

Kolodziejczyk said the group had made good progress with silicon. “We are trying to perfect the process. The team is working on it and we think it could be our second offering.”

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Silicon is used in the manufacture of solar cells and microchips. The US has also introduced the CHIPS and Science Act which aims to boost investment, manufacturing and research and development in semiconductors.

“If we are able to literally take sand and turn it into silicon metal, with very little carbon emissions, that makes a huge difference to the source of supply of silicon metal and the carbon emissions that come from producing -lo,” Masterman said.

“Silicon is very exciting for us and where we could move faster. We could accelerate parts of the silicon plant in parallel with the work we're doing in iron ore. There are some significant opportunities in the States United we are considering.”

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