力拓 (RIO) 2018 Q4 法說會逐字稿

Okay, welcome to our results presentation.

(inaudible).

If you could turn your phones down so that we can't hear them, that would be great.

And just in terms of safety, we don't expect -- there are no practice alarms this morning.

It's a voice-activated alarm.

It will tell you what -- any issues that there are.

The nearest fire exit is back through the door you've just come, which takes you out on the London Wall and the muster point is to the left of the Throgmorton Avenue, but obviously, we will be here if anything does happen.

With that, I will hand over to J-S.

Thank you, John.

Good morning all.

I am absolutely delighted to share our 2018 results with you today.

And a special welcome to you, Jakob, on your first Rio Tinto results day.

It's absolutely great to have you as part of Rio Tinto.

You made the right choice, I can tell you.

2018 was another very successful year for Rio Tinto and for our shareholders.

A year we significantly moved our strategy forward, a year we delivered strong financial results, a year we strengthened our balance sheet and a year we created significant value, delivering the biggest cash returns to our shareholders in Rio's history of $13.5 billion.

I'm absolutely proud of what the team has delivered.

In the year, we also invested in our future, in high-value growth, and in our operations and capabilities to drive even greater productivity.

In summary, we generated $18.1 billion of EBITDA with a strong margin of 42%, and we delivered cash of $11.8 billion from our operations.

We achieved $8.6 billion in asset sales, the divestment of coal in Grasberg, adding to our sustainability credentials.

Today, we are the only large mining company with no coal or oil and gas in our portfolio.

And we also invested $5.4 billion in our world-class portfolio.

We generated a capital -- return on capital employed of 19%.

AutoHaul is now running.

We have progressed Oyu Tolgoi and Amrun and we found a promising new mineralization, copper mineralization that we knew in Australia.

More on that later on.

So our value-over-volume strategy is working, especially in uncertain times, with trade wars, political tensions and market volatility an ongoing feature.

Despite this turmoil, in 2018, once again, we delivered on our promises.

Now let me turn to safety and sustainability.

But before I talk about Rio, I would like to acknowledge the sad loss of life at Minas Gerais in Brazil.

This is an absolute tragedy and also a dark moment for the entire industry.

It's the responsibility of everyone in this industry to do better.

At Rio Tinto, across 32 operations, we have 100 tailing facilities and 36 that are no longer active.

We take management of all of them very, very seriously.

Since 2015, we have had a global tailing standard, which is regularly reviewed.

These standards applies to every Rio Tinto site worldwide.

There are 3 levels of protection and assurance we apply to all of our tailings facilities.

All of them are subject to independent review at least once every 2 years.

The first level is at the asset itself, which includes the reviewing effective facility design and ensuring we have effective operational controls.

The second level of protection to the Rio Tinto standard is through business conformance audits and technical reviews, supported by our surface mining center of excellence.

And then the third level includes an external audit program.

If you like more detail, they are available on our website including our standards and our guidance notes.

But after a tragedy like this, we ask ourselves, is there more we can do?

We are reviewing our approach again and we are assessing ways to make our 3 levels of protection even stronger.

We will also play our part in any industry response, including supporting an independent review.

Now turning to Rio Tinto.

As I've said many times before, safety comes first.

There is nothing more important.

Sadly, we lost 3 colleagues last year which is a natural tragedy for their families and their friends.

Their loss is also our loss, and it's deeply felt by absolutely everyone in the Rio family.

So even though our AIFR is improving over time, as you can see in the chart, we must do better on safety.

There is nothing more important and the team is focused on it every day, every shift.

Sustainability is absolutely vital in the 21st Century, where we must be part of the solution.

In 2018, we progressed our sustainability agenda.

For example, today, we published our first climate change report, which outlined the risk and opportunities to our business in a transition to a low carbon future.

The materials we produce are essential to this transition from the aluminum in your phone, cars and in airplanes, to the iron ore in the buildings we see every day.

We continue to take steps to reduce emission from our own footprint as we innovate with customers to develop greener products, like what we are doing with our anode technology partnership for Aluminium, with Alcoa and supported by Apple.

And with a portfolio free of coal and gas, we are well positioned to thrive in the world that values sustainability more and more.

Before Jakob shares more details on the 2018 financials, let's reflect on our progress over the last 3 years.

There is absolutely no doubt, we have a stronger, more resilient high-value portfolio.

As you can see from the chart, we have delivered $12 billion in asset sales over the last 3 years.

Also in the last 3 years, we have grown the company by 1.4% per annum and we have improved our return on capital employed by 10 points.

Our 3-year story is not just one of strong financial and portfolio performance, it's also a story of consistent capital allocation.

We generated over $46 billion of cash over the 3-year period, 2/3 of it or $34 billion came from cash from operations.

On the back of this, we paid $20 billion and declared a further $9 billion to our shareholders.

That is equivalent to over 50%, 50% of our market cap at the beginning of 2016.

We have reduced our net debt by $14 billion.

Our balance sheet is strong, and our operational cash flows is strong, which means we are well positioned to: Number one, make further significant returns to you, our shareholders, with or without divestment; and number two, to continue to invest in the business.

So we have delivered on our promises, but we know there is more to do.

On this note, over to you Jakob, for more details on the financials, and I'll come back for the outlook.

Thank you, J-S.

Ladies and gentlemen, I'm truly excited of having joined Rio Tinto, a company with such a great history and so many achievements.

But I firmly believe that the best is yet to come, and I'm looking forward to be part of this next chapter of this terrific business.

I moved to London and joined Rio Tinto in September, and I decided to spend my first few months visiting our assets, meeting our people and customers.

This has given me a wonderful insight into both our strengths and our opportunities.

I've seen great people, great assets and deep operational and technical capabilities; a very powerful combination.

Now let me share with you how I see us performing, starting with our markets.

The world entered 2018 in good macroeconomic conditions.

However, the year turned out to be one of significant geopolitical turmoil.

We experienced price volatility, but in aggregate, actually, average prices were fairly stable compared to 2017.

The iron ore price was supported by robust demand from both inside and outside of China.

China's steel production reached a record level of 930 million tonnes last year, and we saw particularly strong demand in China for higher-quality iron ore such as ours, driven by environmental policy and steel sector reforms.

Global seaborne supply was essentially flat year-on-year as producers experienced higher levels of disruptions that we haven't seen for a number of years, in total around 40 million tonnes.

And still, we saw stable iron ore pricing 4% lower than in 2017.

Turning to Aluminium, the fundamentals for our business are strong.

We saw growth in demand of around 4% and supply was well below that.

And then the market was affected by significant amounts of uncertainty, partly from trade tariffs and partly from the impact of U.S. sanctions.

Overall, prices were 7% higher than in 2017.

In copper, we experienced good price conditions in the first half of the year, but a weakening price environment in the second half as supply outgrew demand.

This was mainly because the major copper-producing assets generated at better output than what we have seen for many years.

Unlike iron ore, there barely were any significant supply disruptions, 3% against the historical average of 5%.

Despite that second half, on average, copper prices were 6% higher in '18 than in '17.

So in summary, a quite benign pricing environment in 2018.

Now turning to our results.

We delivered, as J-S already has said, a strong EBITDA at the same high level as in 2017.

You can see we got some limited help from prices and exchange rates in '18, but the most significant contributor to our performance was our own effort.

We continued to grow our company.

The volumes and product mix added $0.9 billion.

Energy prices went up significantly last year and raw materials prices went up even higher, particularly for aluminum.

But because of our growth, we could absorb these cost headwinds to deliver strong and consistent earnings.

Excluding our coal assets, we generated EBITDA of $17.2 billion at a margin of 41%.

Strong EBITDA turns into strong underlying earnings of $8.8 billion after primarily deducting depreciation and tax.

Our IFRS net earnings was $13.6 billion, equivalent to a 30% return on capital employed.

That, of course, also includes profits from our divestments.

Our effective tax rate was -- on our underlying result was 29%, in line with our earlier guidance of 30%.

Now let me dive a little deeper into our business results, starting with iron ore.

This is, by any standard, an extraordinary business, truly world-class.

The business maintained stable higher profit levels during '18 with strong EBITDA margins.

Our high-quality product attracted even higher price premiums than before.

And despite the inflationary environment, we managed to keep unit costs flat during the year.

I want to do something we haven't done before, and that is to give you guidance for '19 not just for volumes but also of unit costs.

As we are doubling down on cost, I should remind you that we are obviously still focusing on optimizing the total EBITDA margin, which is already very strong at 68%.

Our improvements in productivity mean that we have the ability to increase production by up to 2% in '19 to the level between last year's production of 338 million tonnes and 350 million tonnes.

However, we will continue to exercise with rigor our value-over-volume strategy.

We expect a flat to a small increase in unit cost in 2019 due to the combination of, on one side, inflationary pressure and higher maintenance cost, offset by greater productivity.

But we are also continuing to face pressure from steeper holes and longer haul distances, so our guidance for unit cost is between $13 and $14 per tonne.

Also, for our world-class assets to continue to deliver at their full potential, we must invest in them.

This means investing both in sustaining CapEx and replacement projects such as the recently approved $2.6 billion Koodaideri project, which will add 43 million tonnes capacity in Phase 1 and open up a whole new prosperous area in the Pilbara.

Now to Aluminium.

Despite higher prices and stable operations, the performance of our Aluminium business was squeezed by inflation in raw materials and energy cost of $0.5 billion, and we also had the impact from our legacy contracts of another $0.45 billion.

External events such as China's environmental policy changes and restructuring of the aluminum industry resulted in a reduction in supply.

Also, the potential for trade tariffs and proposed sanctions created considerable uncertainty and unusual price movements.

Despite all of this, we have some of the best aluminum assets in the industry and the most integrated ones with bauxite mines, refineries and smelters.

This is reflected in our industry-leading EBITDA margin.

In 2018, we actually strengthened our Aluminium portfolio.

We made great progress at Amrun, project 6 weeks ahead of schedule and below budget.

We also divested Dunkerque and land at Kitimat at attractive prices.

Our focus in '19 will be on delivering additional free cash flow from improved productivity.

In Copper & Diamonds, I would say we are not only back on track, but in '18, we delivered a truly strong operational performance.

We have 3 world-class assets, and they're all producing well.

Escondida improved its performance, Kennecott made significant progress on productivity.

And productivity from our open pit production from Oyu Tolgoi is simply the pace setter in our whole portfolio.

The outlook for 2019 is production of 550,000 to 660,000 tonnes of mined copper.

The top of the range is similar to '18 when you exclude the divested Grasberg assets.

The reason for the lower guidance is because we do expect to see a lower grade at the open pit at Oyu Tolgoi and at Kennecott.

We also further strengthened our portfolio in Copper & Diamonds.

We completed the sale of Grasberg just before year-end, and I can say now that we are very satisfied with the outcome.

We believe we have captured the full value of that transaction.

During 2018, we made good progress on our underground project at Oyu Tolgoi, and we closed 2018 by meeting our commitment to agree a power solution for the mine which we are now progressing.

As we learn more about the rock mass around and under the ore body, we continue to encounter geotech challenges.

This is a complex project, and we have indicated a further delay to the main production shaft and we will continue to assess the mine plan and design.

So in general, copper is not just well performing, it also has got exciting growth opportunities such as Oyu Tolgoi, Resolution in Arizona and our exploration program.

Energy & Minerals had a disappointing production in 2018, partly due to the strike at IOC and production disruptions in our titanium business.

While 2018 was an operational challenging year for Energy & Minerals, we remain convinced about the potential of this business, which is reflected in our higher 2019 guidance.

Despite the disruption, we remain profitable.

Our E&M group went through significant changes in 2018.

We divested our remaining Australian coal assets for over $4 billion.

Let me just repeat what J-S said: for the first time in 60 years, we are not taking coal out of the ground.

We're the only major miner no longer involved in extracting fossil fuels.

We also agreed to sell our share of our uranium business in Namibia.

With these divestments, we will now have a more simplified business with really high-quality assets.

This year, we expect to be back on track with a strong focus on safety and operational performance at all our sites.

Hence, improving productivity and production, which leads me nicely to talk about our productivity across Rio Tinto.

It is an area of key focus for us in '19, and I will personally work closely with the business to drive our performance in this area.

We remain committed to generating $1.5 billion of additional free cash flow each year from 2021.

We've done a lot of work on setting up ourself for improved productivity performance.

But as we look back at our 2018 performance, it is clear that we did not progress as much as we wanted.

There were areas of success and we have made some improvements such as building stronger technical teams, but we still have too much variability in our business.

Plus, we experience cost headwinds, especially related to raw materials.

However, and I say this having visited many of our assets, we all remain convinced that our targets are achievable, and we already have plans underway to step up our productivity effort.

The guidance I can provide you with today is that we will increase the run rate by $600 million in 2019, bringing the total run rate to $1 billion.

Only safety is more important to us.

One of the things that has impressed me about Rio Tinto is the high degree of discipline in this capital allocation.

Our framework has served the company well and will continue to do so.

I'll keep this focus and enhance it wherever I can.

Rio has developed an impressive portfolio of world-class assets.

It is our prime responsibility to safely manage these assets and improve their performance through operational excellence and spending sufficient sustaining CapEx.

So the first thing to spend our cash from operation on is sustaining CapEx.

The next priority is our shareholders through our ordinary dividend.

Then, we carefully consider growth opportunities and balance sheet strengths before determining further return to our shareholders.

We are in a great position with a very strong balance sheet and a business with a strong cash generation.

However, our investment decisions are independent of this.

They're carried out with much rigor and discipline to ensure that value is created.

Due to strong cash flow and the $8.6 billion of cash received from divestments, primarily coal assets and Grasberg, our balance sheet moved to a net cash of $0.3 billion at the end of 2018.

However, we should acknowledge that some cash has already been allocated, and from the beginning of January '19, we recognized an additional $1.2 billion of net debt related to operating leases with the changes to IFRS 16.

Hence, the pro forma net debt is around $8 billion.

This is still a low level, and that has been recognized only 3 weeks ago when Moody's upgraded us to A2.

That complements our A-rating from Standard & Poor's.

We are very comfortable with having such a strong balance sheet.

We don't have a specific target for our debt level.

Our strong balance sheet gives us resilience and flexibility, the optionality to invest and create opportunities for our business to help us through the cycle and ideally, to enable us to act in a countercyclical way.

Moving on to investments.

It's all about discipline.

We invested below depreciation in '16, particularly in iron ore where significant expansions were finished in '15.

We're now seeing investments rising above the depreciation and are developing an asset base for future shareholder returns.

Existing guidance is retained for 2019 and 2020, providing new guide -- and we are providing new guidance for 2021 at the level of $6.5 billion.

Each year includes sustained CapEx of around $2 billion to $2.5 billion, consistent with previous guidance.

Our investment program, combined with our productivity drive will enable us to deliver, on average, 2% annual growth over the medium term.

Taking a step back, both Rio Tinto and the whole industry have learned and adjusted.

In 2012, the industry and Rio Tinto were investing 3 to 4x the level of depreciation and have high levels of debt.

Over the past 3 years, investments have been disciplined at the same level as depreciation, and the industry has repaired their balance sheets.

Rio Tinto has led the way, and this has put us into a great shape to seize opportunity that we believe will add value.

Of course, we will only do so in a very disciplined manner, not forgetting the lessons from the past.

Finally, as the last part of my presentation today, let me cover shareholder returns, which I truly believe is a great story for Rio Tinto shareholders.

The board has decided to declare an all-time high $13.5 billion in cash return to shareholders for '18.

This was, of course, only possible due to the combination of 19% return on capital employed, successful divestments and a strong balance sheet.

Today, we're announcing a final dividend of $1.80 per share corresponding to a full year dividend of $3.07 per share.

The final dividend will be paid in April, fully franked for Australian shareholders.

The dividend, along with a $1 billion buyback we announced in August, brings total returns to shareholder from operational earnings of $6.3 billion or 72% of underlying earnings.

In December, we completed the sales of Dunkerque and Grasberg, and today, we announced the return of these $4 billion on net proceeds in form of special dividend of 243% per share.

This will also be paid in April, and it's, again, fully franked for Australian shareholders.

The board has decided on a special dividend for several reasons.

Given the size of the proceeds, it enables us to return the cash immediately to shareholders and will make good use of franking credits.

In addition, we have carried out significant share buybacks recently, which has resulted in further concentration to our share register.

In particular, Shining Prospect, our biggest shareholder and a subsidiary of Chinalco, has not sold any of its share in Rio Tinto and now has a holding of just over 14%, close to the 15% threshold agreed with the Australian government at the time of its original investment.

So a special dividend will enable a quick return of funds without creating any imbalances between the 2 lines of stock or further concentration in the register.

To sum up, 2018 has been a year of significant strategic progress.

A combination of growing profitable business and successful divestments led to the highest-ever cash return to shareholders.

There have been headwinds and operational challenges and, no doubt, we will face more challenges this year, but we have a world-class portfolio, great people, and we all remain focused on safety and productivity.

The discipline that has been a feature of Rio Tinto's recent performance is here to stay.

Now time to look ahead.

Over to you, J-S.

Thank you, Jakob.

Let's now focus on the year ahead.

Starting on some thoughts on the macro environment.

There are 2 key drivers of the mining industry: GDP growth and trade.

Global economic growth appears to be swinging across all geographies.

In China, our key market, as expected, growth is flowing.

But we're still around 6.6% in 2018.

The Chinese government has announced stimulus measures to maintain growth that should have a positive impact during the year.

On trade, the risk of a trade war is still there.

But as I've said before, I'm the optimist in the room, and I really believe that commonsense will prevail at some stage.

What this means for key products is the following: a positive outlook for iron ore on the back of some price disruptions and environmental policies in China; an ongoing price cost squeeze environment to remain across the aluminum industry; and volatility continuing in copper on the back of trade war concerns.

However, we went absolutely bullish about copper and aluminum in the medium and long term.

In such an environment, Rio will continue to focus on what we can control.

Safety is our #1 priority; the quality of our product and the relationship with our customers; the productivity of our operations; the disciplined allocation of capital to the best opportunities; and maintaining a strong balance sheet.

Turning to our value-over-volume strategy.

It's about portfolio, performance, people, partners.

Portfolio is about the world-class assets.

Here, we will focus on delivering an average of 2% growth per annum over the next 5 years.

Performance is about operating and commercial excellence.

We will focus, first and foremost, on safety.

We will drive greater productivity and exit 2019 with a $1 billion run rate from our productivity program.

This is an additional $600 million of free cash flow, and we will make sure the benefits of our commercial organization are fully realized.

People, it's about developing industry-leading capabilities with a focus on building our technical skills and engaging with our workforce.

And partners is about long-term relationships.

It's about sustainability with a strong focus on engaging host governments, communities and employees with our ESG agenda, including climate change.

Before I close, let me cover one of our priorities in more details: growth.

As you've heard, we have been investing in our existing business, and we have exciting growth projects already underway in iron ore, in copper and in bauxite.

We are progressing other options.

For example, on Resolution, our copper project in Arizona, we are spending $368 million on infrastructure as we progress the permitting process.

We are on track to complete the EIS in 2020.

In exploration, which is the upstream part of our pipeline, we have over 50 projects underway, with activity in over 8 communities and 16 countries.

We plan to spend around $250 million in exploration this year only.

Copper remains the bulk of our exploration spend, and we have a number of exciting opportunities.

One of them is Winu that I mentioned earlier.

It is early days, and we have more work to do.

But the initial results from the first phase of drilling are pretty encouraging.

We just disclosed the results of the first 24 drill holes that you can see on this slide.

As you can see, there is copper, there is gold, there is silver.

And I'm really looking forward to the second phase, and we will keep you updated.

So in closing.

We are in great shape after another strong year of performance by our teams around the world, but we have more to do.

In 2019, we will focus on improving safety.

This is our #1 priority.

We will deliver strong Tier 1 cash flows for our mine-to-market productivity program.

We will deliver smart growth.

We will continue to build the 21st century mining company that people want to work for and partners want to work with.

We will do all this and maintain our discipline and balance sheet strength.

Our recent track record speaks for itself.

With $29 billion, $29 billion return -- being returned to our shareholders over 3 years, including $13.5 billion declared for 2018 only.

We have a world-class portfolio, well positioned for our low-carbon future.

We have the strongest balance sheet in the sector, and we are progressing exciting growth options.

We will continue to deliver on our promises day in and day out.

And on this note, why don't we open the Q&A session.

So we'll start with a few questions.

Okay, Paul, you are in the back, you were first one, so go for it my friend.

No, no, wait for the mic, Paul.

I'm sorry, overly eager.

No, I can see that.

So a further elaboration on the OT rescheduling if you could.

What exactly do you sort of -- what exactly are you experiencing?

When do you think you'll be in a position to note what that sort of review, sort of, the conclusions of that review?

And then the second question was to Jakob's point about being able to act countercyclically and having the balance sheet.

Clearly, that depends on where you think you are in the cycle.

So perhaps, a bit of elaboration on where he thinks the industry is with respect to that.

The floor is yours.

It's your first day, Jakob.

So go for the second question.

I'll deal with the first one after.

Sure.

Excellent.

Thanks.

Look, I was trying to say it in a fairly humble way because obviously, you only know afterwards whether you are acting countercyclical.

I think it's fair to say that the last couple of years has been good years.

And in that period of time, we have not overspent on CapEx and we have divested assets at good values.

So at least in that perspective, we have actually acted countercyclical.

Time will tell whether we can continue to do so.

I don't dare to tell you where we are in the cycle, but the last 3 years has been pretty good, yes.

Okay.

So on the first question, Paul, on Oyu Tolgoi.

So where we are in the project today.

Remember, 5 years to build the infrastructure, 7 years to ramp it up.

We are mining in the ore body as we speak.

So the quantum of geotech data that we are accessing, we have access to is very significant.

And we need to go through a process of updating the model to make sure that the infrastructure is the right location on the back of the geotech data that we have.

This is, absolutely, a normal process.

It will take a few months to do so.

I mean, the good piece of news we know that the cave is going to cave, okay?

It's always a good starting point in a block cave to know that the cave is going to cave.

So it's going to cave, right?

So the question is not to cave too quickly, yes.

So it will take a few months, and we'll provide you an update by the time we are at the midyear and so on and so forth, right?

So that's where we are.

So we are updating the geotech now, but we thought it was important to inform the market accordingly.

Jason?

And then after, we take a couple of questions, David, from -- we've got the Aussies?

Jason Fairclough, Bank of America Merrill Lynch.

Just a couple of super quick ones.

First on the mine-to-market.

You talked about how you're achieving cost savings but then they're getting chewed up with inflation.

It does seem that you're now guiding towards higher costs.

So should we actually think about seeing that $1.5 billion on the bottom line, or is it now the case where we're kind of running to standstill when it comes to costs?

Yes.

Look, there are clearly -- we experienced inflationary pressure last year.

I think it's slightly different what we're going to experience this year.

Last year, we saw very significant increases in energy costs and in raw materials prices.

We hope to see less of that this year, but there are inflationary pressures, particularly in the areas where we operate in Western Australia and Quebec, et cetera.

But on the other hand, I think it's a fairly bold target we have set ourself on improving the run rate of the mine-to-market by 600 million this year.

So we will fight against the inflation and hopefully, do better than the cost pressure.

But time will tell where the inflation will end up.

So should we see $1.5 billion in the bottom line?

Yes.

Yes.

He says yes, okay.

A question from -- I'll come back with that.

Ask.

Your first question comes from the line of Paul Young of Goldman Sachs.

J-S and Jakob, great result and the strategy's working.

Two questions for me.

First of all, J-S, the Pilbara.

Looking at all supply sort of issues in Brazil at the moment, it appears that you're the only mining company that can really materially increase volumes over the next 5 years.

You've got 400 million tonnes of car dumping capacity and I think 450 million of port capacity.

You're creeping your shipments by 10 million tonnes possibly in 2019.

So while maintaining the value-over-volume approach and with the AutoHaul fully operational and Koodaideri coming online, what do you think you can creep your volumes to beyond the 350 million?

And the second question is probably more for Jakob on the CapEx profile.

Jakob, just noticing that there's a big step-up in development CapEx, the purple bar, in 2021.

Correct me if I'm wrong, but OT should only be about $1.5 billion of that purple component?

So just wondering how much is in there for [in Yadar] and Resolution?

Thank you, Paul.

So I'll take the first question that we've got -- we're pretty lucky today because we've got Simon Trott, our Chief Commercial Officer.

So what are you going to do to extract more value from the market?

And I know, Simon.

So the floor is yours.

Thanks for coming, by the way.

Thank you, J-S, and good morning to all.

Firstly, obviously, an incredible tragedy in Brazil, an incredible human tragedy.

Reminds us all of, I guess, the gravity of our roles and at an industry level.

Obviously, the market, you have seen a reaction to the events in Brazil.

The guidance we have given today, 338 million to 350 million.

We continue to work really closely with our customers to make sure they're supplied with the products that they need for their business and the quality of products that they need.

We'll continue to look for opportunities with our customers in partnership with our customers, but the guidance at the moment, 338 million to 350 million, and absolutely a focus on value over volume and that EBITDA margin.

Thank you, Simon.

The other question on CapEx?

There was a question on CapEx.

And yes, we are trying to focus Resolution and [Yadar] as fast as possible but that's not the reason.

I mean, we announced late last year the Koodaideri project, and that's one of the biggest reasons why you see an increase; that's a project that we can actually push forward very fast.

Jakob, yes, if you can still hear me, just to clarify that.

I thought Koodaideri was included in the sustaining component, so I'm just wondering about that big step-up in the purple component in 2021.

No, it's a replacement -- what you call, replacement growth CapEx.

Any other question for us?

Your next question comes from the line of James Gurry from Deutsche Bank.

Maybe just a follow-up on what Paul was saying there.

With OT, I think you've pushed out the time to steady-state by at least 6 months, so you're going to go away and review things now.

So what's the chance that the $5.3 billion CapEx really moved up significantly?

And I thought the process was probably to go from OT over to Resolution.

With things as they stand at the moment, is that probably still a sequence that you can do or would you look to do potentially both at the same time?

Yes.

Okay.

So the question about OT and then Resolution doesn't change whatsoever.

So in that sense, as you know, we have a pipeline of options around copper.

The primary focus is OT at this point in time, but you've got, as you mentioned, Resolution, and we are progressing the infrastructure and progressing the permitting process.

And we should have the EIS sometime next year.

But then in addition to that is including what we disclosed today about the potential options we have in WA called Winu, which is early days and so on and so forth.

So we will optimize the pipeline.

We are pretty bullish about copper as you know.

The question is more about delivering the right level of growth and meet the market requirement from that perspective.

On the Oyu Tolgoi is -- the team is doing the work.

Remember, there are 2 or 3 important components when you look at Oyu Tolgoi, which is really world-class.

One is the elements involved in the infrastructure and the bulk of it is being built and so on.

And most of the orders have been place and so on and so forth.

So there will be -- the final cost estimate will be prepared and most of the costs should be prepared this year, so we will have a better sense.

So let's see what comes out of it.

But the second element is really by building the mine, the infrastructure, the drill holes, the extraction drives and so on and so forth.

And that's clearly on the back of the information we have in terms of geotech that we need to look at where do we put the infrastructure?

So where do you put the extraction drives, depending on where the faults are?

Where do you put the air ventilation?

Where do you put the ore passes and so on and so forth in order to make sure that as and when you initiate the cave, then you have the right ground conditions and so on and so forth.

So the work is underway.

Anyone who's got any block cave technology or experience should know that it happens pretty often.

So when you have the geotech issue, you have to upgrade the model, and that's what the team is doing.

And what I said sometime during the year, we'll update the market accordingly.

But as I said, we have started this, the cave is going to cave.

So if I go back to the U.K.

Yes, can I just follow up with a question around IOC.

There's a lot of focus on the Pilbara with iron ore and creep capacity.

Is there any potential given the IOC supplies into the U.S. market and so does Vale a lot and it's a pellet and concentrate producer.

Can you push that even further as you recover from the strike, or would you see this as a potential opportunity to perhaps exit that asset as you tried before?

Yes, I think that's very good question.

I mean, the demand for the IOC product is very strong as we speak for the reasons you just mentioned and we'll max out the production of IOC, and we should see an uplift year-on-year.

Because as you mentioned, we have the strike last year.

We have reached a multi-year agreement, and therefore, we should not have this issue at all this year, and we should see an uplift, which is one of the reasons back to your question, Jason, about the uplift in terms of mine-to-market for this year compared to last year is there are 2 elements that people should keep in mind.

One is the fact that last year, in the context of Energy & Minerals, we have a series of issues, the strike on IOC, for example.

And the second piece is 3 of our furnaces were down, and we're going to restart a couple of them this year.

So year-on-year, you have enough piece of the volume.

And the other element just to build on this point is that last year, we were highly impacted by the cost environment, price cost squeeze in Aluminium because of raw material.

And today, we don't see further increase in terms of raw materials.

So to your question, Jason, when you look on year-on-year, that gives us some confidence about the $600 million of uplift we should get this year.

So if we go back to London.

It's Menno, Morgan Stanley.

Just on the projects.

Again, if even Rio Tinto cannot deliver more than knowledge and skills on a project like this, and is it -- does it lead you to review, first of all, greenfield, brownfield projects and Rio Tinto's desire to do them firstly.

And secondly, does it lead you to review how much existing assets are worth that may or may not be out there to buy in corporate, specifically yours?

Our view has not changed.

I mean, ideally, if you have an option, if you have 2 options, one is brownfield and one is greenfield, you always go for the brownfield first.

There is no change whatsoever.

That's the first element.

The second element is our strategy has not changed in terms of M&A.

I mean, Jakob said it.

We will keep watching brief on it.

If there is a case to look at the transaction, we will look at the transaction.

But at the end of the day, it's about creating value for our shareholders and so on and so forth.

So today, when I look at the organic pipeline, we will deliver around 2% per annum growth in the next 5 years, which I think if you -- in the context of GDP, 2.5% to 3%, it's pretty okay.

At the macro level, if you step back, if you grow between 2%, 2.5% per year, you fundamentally maintain your market share in terms of copper equivalent.

So there is no change in strategy from that perspective.

Okay.

And secondly, on Aluminium.

Clearly, it looks as for a moment that things were going to improve.

It all ended in tears again.

They were back to where the disaster situation that we were in 2016.

And you've always have been skeptical about aluminum and you said this is going to be medium term.

But has this sudden turn for the worse change your view again about the optionality in that business?

You want to pick this one, Jakob?

So the Aluminium business is right now having a cost recess, there's no doubt about that.

We do go back to the basics in terms of [fell out] from production creep, improving the productivity and really managing the cost very hard.

You're absolutely right that the profitability was kind of declining in the second half of the year and has started off on a difficult setting.

But aluminum is the product of the future.

I mean, we really do believe in it longer term, and we have the best portfolio out there.

So it's a matter right now to take the opportunities and optimize the business we have while we are facing short-term difficult trade conditions.

We'll take another question.

Yes.

It's Myles Allsop, UBS.

Maybe sort of couple of questions.

One for J-S and one for the new J.S. So going back to iron ore.

Are you capped at 350 million this year because of AutoHaul?

So if markets are there, do you think there is potential to go beyond 350 million?

And also, what -- I mean, we've now had months or so since the tragedy.

I'm sure you've been running the numbers.

And what do you think the impact on Brazilian iron ore supply is going to be?

I mean, it's obviously it's still kind of moving piece, but what's was your initial sense?

And then maybe for the other J.S. sort of spot free cash flow.

Where do you think we're sitting at the moment?

So I'll take the iron ore one.

I think I'll answer it in a slightly different way, Myles.

I think it's important to look at the global iron ore market, and there will be an industry response.

I'll come back to Rio for 1 minute after.

One of the key question we are watching very carefully with Simon and his team in Shanghai is the risk from the domestic iron ore production in China, because remember the part of the system that was impacted because of this tragedy in Brazil is the low grade part, it's mainly the low grade and not the high grade, but there could be some substitution here.

If you go back in time, as you know, was it 4, 5 years ago?

There were around 400 million tonnes of production in China.

It did drop to 35 million to 25 million last year.

It's winter.

I know that.

It doesn't looks like it is in London, today, but it's winter in China, so the old question is going to be coming out of winter are some of the smaller mines in China are going to restart and so on and so forth.

So it will be -- I'm not saying it's the best case, but it's easy to see a scenario you have, if you start from a base run at 245 million last year, potentially increasing by 25 million tonnes this year and so on and so forth.

So that's one element.

So to answer your question here, it's a difficult one to say what's going to be the net-net impact in relation to volume, because there will be a response from the market and so on and so forth.

As far as Rio is concerned, it is -- and I think Simon said it, we will look at all kind of opportunities to make sure that we can meet the requirements of our customers and so on and so forth.

But what is important for us is to maintain the quality of our product, okay?

And remember, the Pilbara Blend, and we're talking mainly about China here because that's the bulk of the market for 1 minute.

The Pilbara Blend is the reference product in China, and it's a blend, all right, on the back of a system of 16 mines and so on and so forth.

So the question is not only about the railway, it's about how can you maintain the quality of the blend and so on and so forth because we extract a premium for this product and so on so forth.

So we just have to be careful about not downgrading the product and creating some issue further down the value chain.

So for sure, today, we said 338 million to 350 million, if we can be at the upper hand of the range, yes, we'll go for it, because I think in that context, producing the right product, the right quality, with the right grade and extracting the right premium creates value.

That's how we're going to do it.

And we ask our people to say look at your plan, look at your maintenance plan to see what you can do and so on and so forth.

But I'm very conscious that we run the Pilbara for the long term, and I don't want to do short-term decision that could cost us a lot, 5 million and so on and so.

It's a big system.

You know it.

You've been there.

16 mines, 1,700 kilometers, 4 ports, we moved 1 million tonnes of products every day, right?

So it's easy to feel good for 5 minutes, but you have a problem after.

So for sure, we look at all opportunities to extract more value from the market but at the same time, we'll have to look at it in a context of a multiyear plan and so on and so forth.

So that's where we are.

Sorry, I need to ask you, I heard you're saying something about spot free cash flow.

Yes.

If you look at your guidance for 2019, what would you estimate spot free cash flow to be at, using kind of prices from today or yesterday.

That's your job and your models.

But the guidance I can provide you.

I mean, you've got your production guidance and you can see right now, you look at last year, we have 19% return on capital employed.

We're coming in with a very strong business.

And yes, right now, we have seen a hike in the iron ore price, but who knows how long time that will carry through, and that's where you have to make some assumptions.

But obviously, looking at last year from a strong point, take away the divestments that we've kind of deal with them on more kind of at half-heart basis.

But the underlying business is strong.

We're coming strong into the year with the increase prices from iron ore, and then I think you will have to do the exact math yourself.

Let's take a couple of questions from the call and then I'll come back to London, if that's okay.

The next question comes from the line of Hayden Bairstow from Macquarie.

Just a question on further asset sales.

When you had the climate change document you put up.

That was pretty interesting.

But with OT obviously being powered by coal, I mean do you feel that the portfolio needs further adjustment?

Does that comes on line with the coal-fired power station or you're sort of happy with the bulk of where you sit now, particularly on with those carbon emissions out of IOC and Pacific Aluminium?

Yes.

I think -- let's be clear.

I think the bulk of the divestments are behind us.

Now, am I ruling out any further optimization of the margin lever, because it's all about the value at the end of the day, but the bulk of the divestments are behind us, right?

But as I said today, a few things is we are in a good position.

We have a strong balance sheet.

We have a world-class asset portfolio.

We have increased fundamentally our return on capital employed by 10 points and so on and so forth.

So we don't need further divestment to deliver on our promises which is superior return to our shareholders in a short, medium and long term.

That is one of our key messages that we are conveying here.

Then on the question on OT and the power station.

Today, a couple of points.

Today, we're buying the electricity from China, Inner Mongolia, which is coal-fired per power, okay?

That's what it is about.

So that's the first element.

The second element is when the investment agreement was put in place in 2009 is one of the clause is about, and you can understand from the government standpoint is when you're sitting on massive coal field to have the fired power station in many country.

Remember, the last fired power station that was built in Mongolia was from memory 50 years ago, okay, by the Russians at that time.

So you can understand that if you're in this country and you really want to uplift 3 million people out of poverty at some point in time, you want to have a coal-fired power station in country.

However, what the team is looking at and the government is supportive is to have a ideally hybrid solution where we have an element of coal fire in order to deliver a very baseload, very low cost source of power.

Remember, the underground is -- we're going to put people 1,000 meter underground, right?

And I want to be able to extract those people without any issues whatsoever.

But we, as I said, we have a hybrid solution where there will be an element of coal fire and there will be an element of renewables that is being worked out.

The government is supportive on this one.

So in that context is, do I feel uncomfortable with where we are?

The answer is no.

Let's go to another question to the conf call and then come back.

Our next question comes from the line of Lyndon Fagan from JPMorgan.

I'll just try again on iron ore.

Are you -- is your system fully balanced at 360 by the end of this year in terms of mine, port and rail once AutoHaul is fully up and running and running efficiently?

I think that's what you said before.

Is that still the case and I think it'd be good to say whether you could concerned that.

And the second one is more on the market, if we have just lost 50 million tonnes out of the market, I think you said 245 million was domestic China production from last year.

Just wondering how you would see that gap being filled in terms of destocking of inventory potentially more scrap usage and whether you had a surplus in your base case supply-demand model for this year anyway.

All right.

So I think I'm going to have to repeat what I said before.

I can't make any comment about what the -- how the competitors are going to react okay.

It's clear that I mean, you know it as much as I do.

If you look at the current shipment of Vale, they have not dropped in any fashion, okay?

So they are going to run the stock price as an example.

I mean, they said in the past, I read the press, they actually do, that they have spread capacity as well.

So I think it's one question you should ask Vale.

That's one aspect.

The second aspect is there are lots of other players.

The one that you just highlighted is the Chinese because it's pretty easy for them to ship from 245 million back to, I don't know, 270 million, 280 million.

But we will know the answer only when winter is behind us in China, all right.

So that's the only thing I can say.

Now in terms of your question on iron ore is, we had a seminar last year in June, when we took some of you on site.

And we were very clear at that point in time that we should be balanced in terms of run rate at the end of this year around 260.

The position has not changed.

So we can only repeat so many times the same thing here.

So the guidance for this year is 238 million to 250 million.

For sure, we will look at all opportunities to meet the market requirements.

But as Simon said, I mean, it's important that we don't upgrade the quality of our product and so on and so forth.

So we explore all opportunities to help our customers, but we're not going to do anything stupid.

That's what I'm saying.

So if I go back to London.

Sergey Donskoy, SocGen.

If I may, one follow-up on PacAl, you have been selling assets or smelters in Europe.

PacAl is still not on this list.

Is there some sentimental value or you're just waiting for a better offer or better moment to disclose, because I think in the second half of last year, there is struggle to basically deliver any profit?

I don't know which list you are referring to because you know my policy has never been to comment on any asset for sale.

So if you have the list, I don't have it.

If you can give it to me, that would be great.

Yes.

So you know I don't comment on market speculation, you know that.

Okay?

Now if somebody wants to buy PacAl or any other assets, come and talk to Jakob, he can give you his business card, and if you ask the money, the cash, there are currency which are better than others.

At this point in time, we have a concession.

You know the answer to this one.

Let's move to the next question.

Dominic O'Kane, JPMorgan.

Question on internal returns rather than cap -- internal returns not capital returns.

So if we look at the divisions ex iron ore return on capital last year was sub-10%.

You very, helpfully given guidance out to 2023 for the growth and the-mine-to-market.

How should we think about return on capital evolving in those divisions?

Is a sub-10% return on capital acceptable for those divisions, and what is an appropriate hurdle rate?

Let me try to give guidance on the things that we can control.

And of course, a lot of the profitability will depend on the prices.

But if you look at it, I was talking about Aluminium just before.

You're right, it's just below double-digit return on capital employed last year.

But we have opportunities to further improve it, and we look longer term as having really good demand.

If you look at the Copper & Diamonds business, then return is actually quite attractive.

But right now, there are some projects that are under construction and doesn't produce anything yet, so it's less meaningful to look at that.

It actually looks pretty attractive for the picture there.

And the third area is outside iron ore, Energy & Minerals.

I think you have to recognize that it was not the best year last year.

We have guided for higher production this year.

And therefore, we also expect higher profitability this year.

So overall, I remain quite positive about the whole portfolio, not just the high profitability in iron ore.

What I would add to what Jakob said, which is the question on the other day is about portfolio.

So do we believe in the diversified portfolio?

The answer is yes.

So the company has been around for 137 years, all right?

So every -- I'm not saying every company all the time is under the sun but pretty close to it.

So in that context, Jakob is absolutely right.

I mean, some of the performance or some of the asset is not there.

And therefore, we are putting the management under significant pressure to turn them on.

However, safety remains priority #1, there will be no shortcut on this one.

But here's a question about long term and when we do the strategy review and the attractiveness of our portfolio, we look at long term fundamentals, we look at long-term returns and so on and so forth.

So our view on capital employed -- our expected capital employed in the long term has to be at the right level.

Do we believe that our Aluminium business, especially in Canada, which is not in the first quartile of the cost curve but the first decile of the cost curve.

And that's even before implementing the [geo] technology and so and so forth have the bright future and be able to create value for our shareholders for long term, absolutely.

Do we believe that copper, because of the shortfall in terms of supply in the next 10 years for all the reasons that we are even expressing ourselves, it is difficult.

The attractiveness of copper is because it's difficult to supply.

Do we believe that in the long term once we've done the investment, should we get the right return on capital?

And the answer is absolutely yes.

And that's important for us because at the end of the day, if we really want to create value for our shareholders, it's going to be about this positive spread of [EVA] and therefore the return of capital employed is the key driver for us and so on and so forth.

If I can take one question in London and then Debbie we'll go back to the conf call, if that's okay?

It's Grant Sporre from Macquarie.

Just in terms as a CEO, looking slightly longer term and filling up your options further down the line.

It looks as though you're sort of reverting more to the exploration to fill that?

Is -- and the reason I say that is it's the first time I've noted that Rio sort of draw results in their presentation, which is good by the way.

So is this the shape of things to come.

Are you -- is it really going back to grassroots as opposed to looking other means to fill your pipeline?

I think that's a very good question.

And maybe we didn't communicate enough about the expression in the past.

I think that for now, if you look back in the last 10 years, especially after the GFC, we were only large mining company not to cut -- or in a big way the exploration budget.

The challenge in the exploration, it takes 20 years, 30 years, it's a long-term investment and so on and so forth.

But are we looking at all options?

The answer is yes.

Organic and M&A.

But M&A, we have to watching brief.

The truth of the matter is if you look at the last 20 years, not only in the mining business, but in other industries, most of the M&A transaction destroy value, okay.

And the same time, in the context of the mining business, if you don't grow starting by the replacements offsetting the deflation, you have a problem.

I give you a very simple example, we're moving 1 million tonnes of iron ore every day.

In the next forever, if I put it this way, every 2 or 3 years, we have to build a new mine just to sustain steel and iron ore.

That is the reality of what we are facing here.

So we need to grow.

Do we have a preference for organic growth?

The answer is yes.

Maybe you're right, maybe we're going back to grassroots and so on and so forth.

I don't know per se.

What I'm just saying is today, when I look at the portfolio of options through organic growth options, we have -- we will deliver around 2% per annum in the next 5 years.

Do we want to improve to strengthen the quality of our portfolio?

The answer is yes.

And that's why we're going to spend around $250 million on exploration.

We need to have a healthy pipeline of options.

Because today, what we have said is that we are enjoying decision made by, not even my predecessor and not even the predecessor of my predecessor, decision made 20 years ago, 25 years ago.

And what we want to make sure is that whoever is running this company in 10 years, 20 years from now, have a healthy -- he or she has a healthy pipeline of options.

So I'm not ruling out M&A.

We will keep watching in brief, it but we need to push harder on the exploration.

Now having said that, in the short term, when we talk about growth, we talk about growth of cash flow per share.

The best source of cash flow that we have today in the short term is productivity.

We've got $50 billion of invested capital.

The productivity program, especially in the context of price cut squeeze environment that we mention is the best source of additional cash flow per share that we can have.

So here, it's a multi-leg approach, making sure that we generate the right cash yield for more existing assets, creating the pipeline of growth option -- organic growth options and last but not least, continue to have a watching brief on M&A.

If I go back to the conf call, Debbie.

If we can take a couple of those.

Next question comes from the line of Paul McTaggart from Citi.

Just a quick question on couple of your smaller assets.

So just on speaking of feedstocks, you've obviously got 3 furnaces offline down at the minute.

And feeding price -- feedstock prices have improved, what kind of level do you think -- do we need more improvement for users start to bring some of that production back?

And just maybe on Simandou, just where to now for that asset?

I'm not sure I've heard exactly the question.

My understanding of the question you said is about TiO2 and the condition in which we would resolve some of the furnaces.

That's my -- that's what I heard.

So the plan is to start 2 furnaces this year, and that's totally included in the guidance that Jakob delivered to you.

So that is the plan at this point in time.

And then on Simandou is as I said before, it's a topic for discussion between Chinalco as head of the Chinese consortium, the government of Guinea and Rio Tinto, and those are our project concession.

And this is a complicated topic for all kinds of reasons, which are pretty obvious.

And we will inform the market as and when we made progress about the way forward in relation to Simandou.

See if we can take another question, Debbie, from the call?

Next question comes from the line Kaan Peker from CLSA.

Just 2 for me, please.

Just wanted to delve a little further on OT.

Just given this large footprint on a cave and ongoing concerns around the ground conditions, should we expect that underground development asset to increase due to the delay?

And as you said, J-S, you know -- we know that OT caves but maybe it caved a little bit too well.

And on the CapEx estimate, which is sort of setback in 2011 of $5.3 billion, that was done I supposed at the peak of the CapEx cycle when you're stall was much weaker as well.

Just wondering how much headroom you had within that guidance.

And just finally, on the balance sheet.

Just a conceptual question.

Do you believe there's an opportunity cost attached to having too much conservatism built into the balance sheet?

It appears that there's much more flexibility in terms of funding future growth and maintaining that strong credit rating mix.

Jakob, you want to pick up the balance sheet?

Yes.

I think what you've heard today is us talking about a very profitable business, 19% return on capital employed.

In that light, trying to be too smart about the financial engineering and gearing up our balance sheet makes absolutely no sense.

Now the reality is we're very comfortable with the balance sheet we have.

But as I said, it gives us flexibility, optionality.

And we want to use that.

Use it as we talk about to weather cycles and ideally, at countercyclical.

And that basically means that we can make the rational investment decision at any moment in time because we have the balance sheet.

I think that has a lot of value for Rio Tinto as a company and the shareholders.

All right.

So I pick up the question on OT is the -- one of the questions that the team is looking at is on the back of the geotech model, where are we going to initiate the cave?

So I'll try not to make it too technical here.

The idea was we have several panels.

The idea was to start at the middle of panel 0 and to go north and south at the same time.

Because of the current ground conditions, we may not be able to do that.

So people are looking at other position on the panel 0 to see what is the best way to start the initiation of the cave.

We don't know if it's going to be north part or the south part of the cave, but that's the kind of the question that people have to look at.

Because as you know is what's really important in terms of profitability for Oyu Tolgoi is because it is a world-class resource.

It's not too much CapEx upfront, it's really the pace of ramp-up and so on and so forth.

That's the key source of cash flows.

And therefore, the cash -- the source of profitability.

So one of the key questions that people are looking at is where should we put the infrastructure, we know the extraction drive and where we should initiate the cave, and the pace at which we move in order to initiate the cave.

So work is underway.

By the way, the model will be updated on real-time basis, but we should have a pretty good view on where we are this year.

I mean it is normal process.

We are incorporating the geotech as we speak.

And we have a better answer in the coming months, and we'll come back to the market.

If I go back to one last question on the call, and then we'll go back to London.

Next question comes from the line of Glyn Lawcock from UBS.

Two questions.

Firstly, you called out in the presentation the Chinalco holding and it's creeping up towards the government limit.

How does that affect your capital decisions in the future business?

Does it going to become a hurdle?

Or do you initiate discussions with the government over that?

And then the second question was to -- my second question is just around your internal reviews on commodities and you've got Simon Trott there.

So I just thought, what's kind of the reviews in sort -- in certain markets market like the EV market and where you think you should be maybe positioning your portfolio for the future?

You want to speak our positioning [coal piece]?

Yes.

We can -- it doesn't affect our capital decisions at all, but I would just call it constant clear.

We have an agreement between our host government and our biggest shareholder.

We actually are not part of that, but we just take it into recognition when the board reviews the instrument in which to payback to shareholders.

And right now the answer was a special dividend.

But bear in mind, we have an ongoing share buyback program running for the next 12 months.

Simon will do the EV.

Thanks, J-S.

And then maybe I'll just answer in 2 parts.

So commercial, we established during 2018 really to make sure that we're fully leveraging and looking into the market around our unique insights across the supply chain.

And so through 2018, we've been putting that in place.

Some examples or sorts of activities, that commercial has been up to, a lot more active book management, we saw some disruptions in the market last year such as (inaudible) and Section 232 and really making sure that we were creating options through that environment, adding optionality to our books and replacing some of the intermediaries using some of the sales books like in our copper business, use of third-party tonnes.

So in our logistics business, using third-party tonnes to reduce the cost of procurement and some of that inbound freight.

And in procurement, really focusing on partnerships with suppliers, extending conveyor life so we can push out maintenance shuts.

And so as a commercial group, that's really our focus, ultimately commercial is about people and data and how we work with our customers to deploy those assets.

In terms of the -- your specific, Glyn, we work with other areas within Rio, BD and ventures, and we have inputs into that process, and we're obviously very focused on looking for opportunities to continue to take the business forward.

Thank you, Simon.

If I go back to London.

Sam Catalona from Credit Suisse.

Two questions probably both for Jakob.

Firstly, the pace of the existing buyback daily in January and February after share price rise was consistently flat.

I've mentioned it was outsourced during your close period, would you expect that to change going forward?

Second question is you talked about during the assets and seeing the strengths and very carefully where are the opportunities for Rio.

Could you please be more specific on some of those opportunities, please?

On the opportunities?

Yes, you talked about during the assets and observing opportunities in Rio Tinto.

Thank you very much.

Look, the way we look at this is -- on the buyback programs is just carrying them through.

I'm not being too smart about the share buyback programs.

You're right, the pace is taking off somewhat now.

We have $1.1 billion to buy back over the next 12 months, so it's a very, very doable program.

Look, in terms of the opportunities across Rio Tinto.

I mean, if you -- when you starts with that you really do see some true excellence in a number of places.

But I would say the cultural inherence of the company, we are coming from a kind of -- many years back from a kind of more holding structure where you have kind very separate assets, and the model that I very much bought in to when I was interviewing and talking today is a much more industrial model, where we run a global organization with Technical Centers of Excellence across the path.

And when you then look at the variances that you have in performance, you realize that you have really have good opportunities.

I don't think I would stand here and mention individual assets for not being effective enough.

But what is really good is to go around, meet people on the ground, and they can see that exactly the same operation done somewhere else is done at a much higher level and they can find out what would it take to get there.

So actually, I do think it's entirely doable to get to the improved $1.5 billion of improved productivity.

It goes across, it is in our mobile assets.

What is the effective utilization of our mobile assets?

It is about the effective utilization of our processing plants, and it is also other factors in the mine.

So it -- our productivity improvement program is actually wide and deep and has got a lot of potential.

We've have time for a couple of questions.

So if I take [4] like the old times.

So...

Richard Hatch from Berenberg.

The question on diamonds, the Argyle mine.

Can you talk around the financial performance of Argyle given the weakness of the small-scale market and how that's impacting your thoughts on time frame for closure for that asset, please?

I think it's -- we've been very clear.

We are on the last leg of Argyle.

I mean, that has been absolutely a fantastic mine for us.

I mean the pink diamonds are there.

It will be truly (inaudible) forever if you can say.

Arnaud Soirat, the head of Copper & Diamonds, who was there 10 days ago, and he knows that we are -- I don't want to say exactly when we are going to close, but it's getting closer and closer, and we have started to engage very closely with all employees, all communities and the government in WA to make sure that everybody understand.

I can't tell you if it's 3 months, 6 months, 12 months, because that's not relevant, but it's clearly the next 2 years max that's seen from today.

When we look at the economics, then we will have to take a decision to close Argyle.

That has been a very good mine for Rio Tinto for a long time.

I will continue back to your question about exploration.

I'll continue to put our friends from exploration under massive pressure.

If they could find me a nice open pit, shallow in Australia, there's an internal message here all right, so don't worry for the people in the room.

Shallow, world-class with lots of pink diamonds, I will be absolutely delighted.

I mean, there seem that they find some nice copper, gold and silver somewhere else.

But if they could find some of that.

The mine is going to close, but we will do it in a respectful way.

We're not far away.

But at this point in time, the mine is safe and the mine is producing cash and therefore, we carry on.

That's where we are.

One last question.

(inaudible) from Exane BNP Paribas.

Good to see that iron ore and the copper cost guidance.

Any particular reason that's beholding Aluminium business cost guidance, is that the lack of visibility or the range is too wide given your long and [gold] raw materials and you've mentioned that the cost pressures are not there.

So I'm just wondering why is it missing?

On copper, your volumes are down about 10% in 2019 excluding Grasberg.

The cost uplift is not that meaningful.

Where is the offsetting factor because the guidance looks quite healthy versus last year?

Jakob.

Yes, so, the guidance you were lacking was not very helpful?

Aluminium and bauxite guidance.

Any reason for missing that out given that it's an important business and it's been a focus for 2018?

Yes, I mean, we were trying to find relevant unit cost guidance.

And the unit cost guidance we are providing you basically covers around 90% of our EBITDA, and it was actually one on the edge we decided not to give guidance for bauxite.

I'm not sure I understand what you said around Copper?

The year-on-year guidance on copper.

Year-on-year, so I'm not 100% sure what your...

Volume guidance is about 10% lower excluding Grasberg, but the cost guidance is not rising that meaningfully versus 2018 reported copper business cost, so I'm just wondering what is the offsetting factor to lower grades that will be facing this year.

Yes, now you're kind of confusing me little bit on this one here.

I'll use to run copper, so I think I see that.

Some variation (inaudible).

There is a series of element on the copper, including the byproduct.

So it's difficult to make -- that's why we give you a C1 cash cost on this one.

It's not really the byproduct and therefore you need to go back to each of the mine, not to look at only copper, but the gold, the molybdenum and so on and so forth, right?

So it is slightly more complicated model.

But we give you for the first time some indication on the direction of [trouble].

But the byproduct is a key element of the answer that you just asked.

Thank you very much.

I think the picture is pretty clear.

As I said, we are in good shape, strong balance sheet, fantastic asset portfolio, but we're not going to become complacent.

But I hope you have a better sense of what we are focusing.

The first element is really on safety.

The second element is really about cost and productivity, making sure we have the right product for our customers.

It's a very volatile environment.

There are level of uncertainty, but we are in good shape, and I hope you heard from Jakob, himself, the strength of our balance sheet is absolutely essential in a capital-intensive business and in a context -- the market context which is volatile and uncertain.

So that's where we are for today.

Thanks a lot.

Remember, the one key number, $13.5 billion.

$13.5 billion is a good number.

Remember, $13.5 billion, highest in 137 years and it comes on the back of last year at $9.7 billion.

So just to help you with the numbers and the notes here.

On this note, thanks a lot and we'll talk soon.

Bye for now.

Thank you.