Fortescue files lawsuit over US$100M pipeline failure

• Fortescue and Formosa Steel filed a Supreme Court lawsuit alleging defective pipeline manufacturing at their Iron Bridge Project.
• The lawsuit aims to recoup pipeline replacement costs that Fortescue estimated could exceed US$100 million.
• Fortescue stated that production guidance for the Iron Bridge Project remains unchanged despite the ongoing legal dispute.

Fortescue (ASX:FMG) and its partner Formosa Steel launched legal action against subcontractors over alleged contract breaches on a 240-kilometre water pipeline.

The legal action follows early 2024 leaks in the high-pressure pipeline section that disrupted water supplies required for ore processing.

"We have operational controls and solutions in place to support safe and reliable operations, including our innovative water banking strategy, which continues to perform well," stated a Fortescue spokesperson.

Legal documents show the joint venture issued a demand on September 25 for indemnification against degradation and leaks before filing the suit.

The legal dispute emerges as the joint venture works to resolve ongoing water flow issues and maintain processing operations.

Following the announcement, the Fortescue share price was unchanged at $15.79.

The $6.2 billion Iron Bridge magnetite project previously experienced major cost overruns, engineering hurdles, and repeated production delays.

Fortescue recently wrote down the value of the Iron Bridge asset by $1.1 billion after lowering its 2028 production target to 16 million tonnes.