Could Fortescue be on the hunt for an ASX lithium acquisition?

Iron made Fortescue the giant it is, but could lithium charge it even higher?

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Key points

  • Fortescue Future Industries may soon be a major consumer of lithium
  • With lithium prices rocketing, Andrew Forrest is thinking about Fortescue mining the battery-making material itself
  • It may also need other commodities like cobalt, graphite and copper for future green hydrogen plans

Fortescue Metals Group Limited (ASX: FMG) is one of the largest miners in Australia with a market capitalisation of around $50 billion. But could it become even bigger if an ASX lithium bet is on the cards?

Fortescue became the giant that it is today by mining iron ore, creating efficient mining hubs and using technology such as huge, automated mining trucks when possible.

But, with the company now aiming to become a green energy giant with green hydrogen and green ammonia, it is focusing on additional areas.

Not only does Fortescue want to produce the green energy that customers could use for industrial purposes. It also wants to manufacture hydrogen electrolysers at its green energy manufacturing centre in Queensland, and the pieces needed to produce renewable energy (like wind or solar).

Fortescue Future Industries (FFI) – the company's green division – also owns an advanced battery business called Williams Advanced Engineering (WAE).

Most readers will be aware that the lithium price has soared recently and keeps climbing. In fact, the lithium price is expected to stay strong for years.

With Fortescue's plans involving a lot of 'green' commodities, how can it afford these high lithium prices?

ASX lithium plans in the works?

According to reporting by the Australian Financial Review, after delivering the company's FY23 first quarter update, executive Fortescue chair Andrew Forrest revealed that he wanted "the mining side of the business to supply the 'future facing' metals required by its clean energy division".

Not only will FFI need lithium, but there are also other commodities that may be required in large quantities such as cobalt, graphite and copper.

Iridium may also be another commodity that FFI needs for its plan to make hydrogen electrolysers, according to the AFR.

Exploring the options

The mining giant has been looking for lithium in Western Australia, South America and Portugal over the past several years, but it hasn't found a project of "material size" yet. Forrest said it would be ideal if Fortescue could supply the resources needed:

Fortescue Metals Group is a fantastic explorer and developer but also acquirer of assets and as you've heard us say in the past, we will be taking responsibility as a mining and exploration company without many peers in success to deliver the battery metals and the future facing metals which FFI needs.

The beauty of FFI is that it gives us a really clear view into the future of what [minerals] are going to be required by when.

However, Forrest isn't concerned by the high lithium price or the projected supply shortfall. The AFR quoted him:

I am just not seeing a shortage, there is so many lithium projects we get offered, so it is just one of those things that is just not keeping me awake at night at all.

Foolish takeaway

Fortescue Future Industries has major plans, but it needs to source the necessary commodities one way or another. If it can use its mining expertise to obtain lithium, then that would solve that particular problem.

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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