The sixth biggest ASX-listed company, Fortescue Metals Group Limited (ASX: FMG), suffered a $3.1 billion reduction in market capitalisation today, following the announcement of leadership changes.
The Fortescue share price nosedived following the announcement of several resignations in the company's leadership team, leaving Fortescue shares down 3% at the closing bell.
Losing sight of values and culture
The details are sparse at the moment, with little being divulged to the market ahead of the company's half-year results expected on Thursday. What is clear is that the following members of the leadership and projects team have resigned:
- Greg Lilleyman – Chief Operating Officer
- Don Hyma – Director of Projects
- Manie McDonald – Director of the Iron Bridge project
In an interview conducted this evening by the Australian Financial Review, CEO Elizabeth Gaines reiterated that there are no suggestions of inappropriate behaviour, corruption, or the like. Rather, this is a result of cultural issues and communication failures.
Cost concerns were initially raised for the US$2.6 billion magnetite Iron Bridge project in January. Reportedly, Peter O'Connor of Shaw and Partners estimates these blowouts could range somewhere between $1.2 billion and $3.34 billion.
Taking into account this sudden hit to the Iron Bridge team, the project must now be in further doubt.
Where to from here for Fortescue?
Derek Brown, current General Manager Solomon, has been put in place as Acting Director of Projects. It's likely Brown will assume the role of attempting to piece together the tattered pieces left behind from the abrupt exits of his predecessors.
In an additional measure to take accountability for whatever events have transpired, Elizabeth Gaines and chief financial officer Ian Wells are forgoing all incentive payments during this financial year. Gaines commented on the events:
As CEO I must also take accountability and learn from this. Both Ian Wells, Chief Financial Officer and I will forego all incentive payments this financial year. We take this opportunity to reset the Company's focus on our culture and values which defines us and makes Fortescue a truly great company.
Lustre lost for Fortescue's earnings
What could have been a stellar earnings report will now have a dark cloud looming over its head. Many shareholders will be more transfixed on greater detail of the exacting events, than on any growth metric or dividend.
The Fortescue share price is currently sitting at $23.70, down 4.4% in 2021 but up a significant 117% on this time last year.
