力拓 (RIO) 2018 Q2 法說會逐字稿

Morning, everybody.

Welcome to our 2018 interim results.

If I could ask you to put your phones on to silent.

And just briefly, health and safety, the best fire exit is back through the door you came just to the right, and then you turn left on to Throckmorton Street for the muster point.

There is no alarm set -- no test alarm set for this morning.

But you'll be told if we need to evacuate.

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

Thank you.

Thank you, John.

Good morning, all, and welcome to our results presentation.

Our strategy is working, is delivering.

Rio Tinto has once again delivered strong results with superior shareholder returns.

We have real momentum, and I'm absolutely delighted to report that we continue to deliver on our promises.

We maximized cash generation through our value-over-volume approach, delivering $9.2 billion of EBITDA, with an EBITDA margin of 43%.

We strengthened our portfolio with $5 billion of announced divestment.

We invested $1.4 billion in high-return growth.

We generated around $300 million of free cash flow through our mine-to-market productivity.

And most importantly, we've announced superior cash returns of $7.2 billion, including an interim dividend of $2.2 billion, a $1 billion top-up to our current buyback programs and the return of $4 billion to our shareholders from disposals proceeds, the precise timing and form to be announced shortly.

We are proud of those results, but rest assured, we will not become complacent.

Our aim is simple: to continue to deliver superior returns over the short, medium and long-term.

Now, I will take you through the highlights.

In the first half, we continued to deliver robust financial performance to allocate capital with discipline and to position the company for the long-term.

Let me take each of these in turn.

We delivered net cash from operating activities of $5.2 billion and free cash flow of $2.9 billion.

The conditions were broadly positive.

Our cash generation is underpinned by strong operational performance and results, our new mine-to-market activities and divestments to strengthen our portfolio.

Our success in these areas drove a strong cash flow, which was a great effort during the period of increasing inflationary pressure.

Turning to capital allocation.

As I mentioned today, we announced a record interim dividend and a top-up to our existing buyback programs.

We also continue to improve our world-class portfolio, announcing divestments for a total of $5 billion in the first half of this year.

Overnight, we closed the sale of our remaining Queensland core assets for around $4 billion.

The post-tax proceeds from our divestment will be returned to our shareholders.

Our strong balance sheet with a net debt of $5 billion position us well for the future so we can deal with ongoing economic volatility, invest in high-value growth and retain the optionality around smart M&A.

In other words, we have the flexibility to maximize performance and take advantage of any new opportunities that may arise.

This year, we have also progressed our growth options.

The Silvergrass iron ore mine is ramping up successfully.

And 3 weeks ago, AutoHaul completed its first loaded run, unlocking capacity and flexibility in a world-class iron ore business.

Amrun is on track to ramp up in the first half of 2019, and Oyu Tolgoi underground is progressing well.

Now let me turn to safety.

Safety is our number one priority at Rio Tinto.

It has been a challenging start of the year.

A colleague died in April while working on the demolition of a furnace at Sorel-Tracy in Canada.

I joined the team underground after the tragedy, and we are doing all we can to support the family and our colleagues.

In July, a team member was fatally attacked while on security duty at our Richards Bay Minerals site in South Africa.

We are fully cooperating with the local police.

These are absolutely unacceptable and sad events, and we are working very hard to learn from them.

Our ambitions -- our ambition remains the same: we want all of our colleagues to return home safely at the end of each and every day.

Turning now to our product groups.

Overall, they performed well.

Our iron ore business achieved a strong first half performance with an EBITDA margin of 67%.

The pressure from inflation was felt most in our aluminum business so far.

Despite this, the product group achieved an EBITDA margin of 35%.

Copper & Diamonds achieved an EBITDA of $1.4 billion, up 77% on the same period last year.

They also increased EBITDA margin from 40% to 45%.

And despite operational challenges, Energy & Minerals achieved a 36% EBITDA margin.

During the first half, we continued to sell non-core assets, announcing $5 billion of divestments, achieving prices well above market expectations.

We also signed a Heads of Agreement for the sale of our entire Grasberg interest for $3.5 billion.

The parties are now working towards signing definitive agreements in the second half of this year.

Our long-term success depends on having a portfolio of high-quality assets which achieve higher returns.

When we think about shaping our portfolio, we focus on the best assets in commodities with sound long-term fundamental.

We will continue to optimize our portfolio and look to divest those assets that do not fit our strategy, further driving sector-leading return on capital employed.

Before I cover the outlook for the industry and Rio Tinto's future plan, let me hand over to Chris, who will take you through the detailed financials.

Chris?

Thanks, J-S.

These are another strong set of results, but let's have a look at the numbers in more detail starting with the commodities.

In Iron Ore, benchmark 62% prices declined by 9% versus last year.

This was driven by slightly lower demand, stronger than usual first-half seaborne supply and some de-stocking of inventory at the ports, mostly in the second quarter.

However, lower iron ore prices were offset by higher prices across the rest of the group.

We saw increased demand for our seaborne bauxite and reasonable pricing over the period.

The LME price for aluminum improved with an increase of 18%, reflecting strong demand and disruption in the sector, including the impact of tariffs in the U.S. We've also continued to increase the proportion of value-added products from 57% of our portfolio to 58%.

These carry an average premium of about $222 per tonne.

Copper prices in the first half of 2018 were 20% higher than the first half of 2017, primarily as a result of strong demand from both China and the rest of the world.

China's environmental policies also curtailed the importation of scrap, which created increased demand for concentrate and cathode.

Copper (inaudible) sold off in the last month or so as markets became concerned by the noise around potential trade wars.

For the first time, we're showing a waterfall slide for underlying EBITDA rather than underlying earnings.

We think that underlying EBITDA is the better proxy for the cash performance of the group, which is something that we prefer to focus on.

This metric has remained fairly flat compared to the same period last year despite some of the headwinds that J-S has already mentioned.

As I've just discussed, pricing has been broadly positive across the commodities with higher pricing in most of our products, more than offsetting slightly lower iron ore prices.

Overall, there was an improvement of $600 million compared to the first half of last year.

Price improvements during the period could have been about $200 million higher for the group but for the impact of legacy alumina contracts.

These contracts are for the supply of just over 2 million tonnes of alumina per year and are linked to the primary metal LME price [I] rendered into first [up] in 2003.

We're likely to see the same impact in the second half, should prices stay high.

The impact of unfavorable exchange rates, energy costs and measured inflation have had a combined negative $400 million impact in this period.

This brings us to flexed underlying EBITDA of $9.2 billion.

In the first half of the year, increased productivity across the system assisted by better weather allowed higher iron ore shipments.

And our Copper division saw our operations return to normal at Escondida at the same time as we mined higher grades at Kennecott and improved the plant performance at OT.

The strong performance of these divisions was offset by lower production in some of our aluminum operations.

Overall, volume and mix generated $900 million of additional underlying EBITDA.

During the period, we have seen input costs in both our aluminum and TiO2 businesses negatively impacted by about $300 million.

Other cash costs have had a negative impact of $200 million.

This includes additional exploration and evaluation activity, as well as spend in information systems and technology.

And further investment to support the group's mine-to-market productivity program.

These were partially offset by improvement in the iron ore cost base, further enhancing our productivity gains.

One-offs during the period have had a $400 million negative impact to underlying EBITDA.

Included in this number, the costs associated with the 2-month strike at IOC, disruptions at our titanium business and a power interruption at our Dunkerque smelter in France.

One-off costs were offset by the absence of the strike at Escondida last year and the inclusion of restructuring costs this year, which were previously taken below the line.

Overall, we have delivered underlying EBITDA of $9.2 billion, which represents a margin of 43% across the company.

The cost inflation that we are starting to see come through the industry makes our mine-to-market productivity program even more important in protecting our margins and maintaining our competitive position.

We started to see cost increases in 2017 initially in the Aluminium group.

As you can see here, the index price of caustic, coke and pitch remain well above the first half of 2017.

And as a bellwether for input costs, average oil prices rose approximately 28% to $68 a barrel during the first half.

We'll continue to fight against rising inflation across the business and I'll now discuss how our productivity program has assisted in offsetting some of these increases and allowed us to keep our EBITDA margin broadly in line with the first half of 2017.

By the end of 2017, we delivered $400 million of additional free cash flow from our productivity program.

To successfully deliver on our target of $5 billion of cumulative additional free cash flow by 2021, we must ensure that all these benefits are sustained and embedded.

In the first half of this year, we delivered total productivity improvements of $500 million, which included carrying forward the embedded savings made last year.

Cost headwinds in the first half reduced this year's achievement by $200 million.

This brings the total cumulative contribution for the past 18 months to $700 million.

The numbers shown on this slide are different from those in the variance waterfall as these are cumulative post-tax cash impacts.

We continue to target total productivity gains of $1.1 billion for 2017 and 2018 combined.

Across the business, we are focusing on maximizing cash by improving both our operational and commercial outcomes.

Since 2017 or the last 2 years, last 18 months, we've announced a total of $7.7 billion of divestments, including $5 billion pretax in 2018.

This includes the sale of our European aluminum smelters, ISAL and Dunkerque, along with our coking coal assets in Australia.

Additionally, we've also signed the Heads of Agreement for the sale of our interest in Grasberg to Inalum, Indonesia's state mining company.

This is an important step forward, but there's still a couple of -- a number of conditions required.

And at this stage, there's no certainty of a transaction.

The sale of Winchester South completed during the first half and cash of $150 million was received.

There's a further $50 million in about 12 months' time to come from that process.

And today, we've announced the completion of the Kestrel and Hail Creek transactions for $3.95 billion pretax.

We expect the remainder of these divestments to complete in the second half.

I'll talk more about the intended use of those proceeds a little bit later.

Disciplined capital allocation is at the core of everything we do.

Having spent sustaining CapEx to ensure the integrity of the business, our next call on cash is our dividends to shareholders.

We then have an iterative cycle of managing the balance sheet to showing value-accretive growth options, including M&A, and considering further returns.

Our aim is to ensure that we are able to invest in value-accretive growth through the cycle, maintain that strong balance sheet and continue to pay superior returns to our shareholders.

Let's have a quick look at how this has worked out over the last 12 months.

This is -- this data combines the second half of last year with the first 6 months of this year.

Over that period, we spent $2.3 billion on sustaining CapEx and $2.8 billion on our growth projects.

Over 50% of all cash received during the past 12 months was returned to shareholders.

This included dividends of $5.2 billion, comprising the then-record interim payment in September of 2017 and the record final dividend paid in April of 2018.

$3.3 billion of share buybacks were also completed over this period.

These cash returns represent just under half of all the combined returns from our entire peer group.

If I get back now to the data for this half, capital spend was $2.4 billion, 34% higher than the same period last year.

Of this, $1 billion related to sustaining our current operations and $1.4 billion was a spent on our compelling growth options.

The Amrun project in North Queensland is on track for commissioning in the first half of 2019.

During the first half of this year, we have transported the stacker and reclaimer to site and have almost completed the assembly of the ship loader.

At Oyu Tolgoi, contracted numbers have almost reached their peak and during the first half, the shaft 5 ventilation system was completed and that's now operational.

In iron ore, AutoHaul is progressing well with around 65% of all train kilometers now completed in autonomous mode.

Two key AutoHaul milestones were met in the first half with final regulatory approval received in May.

And a few weeks ago, we ran our first loaded fully autonomous journey.

We remain on track, pardon the pun, to have full implementation of AutoHaul by the end of this year.

There was a joke in there, but never mind.

We'll work back around to that.

Group CapEx guidance of $5.5 billion in 2018 and around $6 billion in 2019 remains unchanged.

For 2020, we're raising our guidance to around $6.5 billion.

This $0.5 billion increase partly reflects the timing of spending and additional capital required for some of the replacement production in the Pilbara and increased CapEx expected in that year on the Oyu Tolgoi power station.

In each of these years, the expectation is that sustaining capital will be between $2 billion and $2.5 billion.

In 2018 and 2019, we'll continue to spend CapEx at Amrun.

At OT, we're spending around $1 billion in each year to develop the underground mine.

And from 2019, we'll also start spending CapEx on the power station.

In the iron ore business, we'll need to spend around $3 billion on sustaining CapEx over the next 3 years.

We'll also spend about $2.7 billion on replacement mines over the same period.

And starting in 2019, we expect to see spend coming through for the Koodaideri mine.

The increase that we're seeing in the Pilbara replacement mine spend is due to a combination of increased capital costs from revised (inaudible) for some of the projects and the fact we're bringing forward some of our 2021 spend into 2020.

The feasibility study for Koodaideri is ongoing, and yesterday, the board approved $150 million of early works funding for this project.

One of the advantages of a strong balance sheet is the ability to invest in the business through the cycle and to drive future returns.

At the end of 2017, we reduced our net debt to $3.8 billion, a 60% reduction from the end of the previous year.

And in February, we flagged some cash outflows.

These included a final tax payment of $1.2 billion for the Australian tax group for the full year of 2017, which was paid in June of this year.

Adding the tax payment back creates adjusted net debt of about $5 billion at the end of last year.

So the net debt remains relatively unchanged at $5.2 billion, and this is after returning $4.7 billion of cash to shareholders during the first half.

That $4.7 billion includes the payment of the final 2017 dividend in April of $3.2 billion and ongoing share buybacks in Rio Tinto plc of $1.5 billion.

Gross debt has again been reduced, a reduction of $2.1 billion, and this included a repurchase of $1.9 billion of bonds.

There's a net interest paid of $100 million arising from the repurchase of these bonds.

From the 1st of January, 2019, there are changes to accounting standards, including the treatment of leasing arrangements.

These changes will require that the present value of operating leases are brought under the balance sheet and included in the net debt.

The exact outcome is still to be determined, but to give you a sense of quantum, undiscounted operating lease commitments disclosed in our annual report for the end of 2017 were $1.8 billion.

We'll further update our guidance on any impacts from these changes at the year-end presentation.

We believe that having a strong balance sheet is a major competitive advantage and is essential in a cyclical business.

It provides us with what I like to talk about as the 3 Rs, some of you may have heard this before, robustness, returns and readiness.

Robustness against volatility in the commodity markets in which we operate, but also in the global macro and geopolitical space.

Returns, our strong balance sheet provides an ability to make returns through the cycle.

And the third R is our readiness to take advantage of opportunities as and when they arise.

Our strong balance sheet has enabled us to continue to invest in value-accretive growth and to make sector-leading returns to our shareholders.

As I've already mentioned, during the first half of this year, we returned $4.7 billion to shareholders.

We've -- today announced a further $3.2 billion of interim returns.

This is made up of a record interim dividend of $1.27 per share or $2.2 billion, which will be paid in September.

In line with last year, the dividend represents 50% of year-to-date underlying earnings.

We've also allocated an additional $1 billion toward our existing share program -- share buyback program in Rio Tinto plc.

$1.5 billion of share buybacks were completed in the first half from our existing program of $2.9 billion.

Since the period end, we have completed a further $200 million.

This means that from today, we'll be buying back $2.2 billion between now and the end of February 2019, which is equal to just over $300 million per month.

During the first half, we've announced $5 billion of divestments from our coking coal assets in European aluminum smelters.

We've now received $4.1 billion pretax proceeds from the disposal of our coking coal assets, Hail Creek and Valeria, Kestrel and Winchester South.

The bulk of this was actually received overnight, a pretty close timing.

On these proceeds, we expect a tax liability of approximately $1 billion.

We expect to receive the remainder of the proceeds from the other sales later in the year.

Yesterday, the board's approved that the post-tax proceeds of $4 billion will be returned to shareholders, and the decision on the form and timing will be made in the coming months.

We have a strong track record demonstrating our clear commitment to delivering superior returns.

Whether running operations, committing capital expenditure, evaluating disposals or acquisitions, we've remained disciplined and focused on the value of every dollar.

And with that, I'll hand back to J-S.

Thank you, Chris.

Let me now share some thoughts on the macro environment.

The mining industry has 2 key drivers: GDP growth and global trade.

Overall, the GDP (inaudible) remains solid with positive growth indicators in most geographies.

However, global trade is potentially a concern.

Focusing on China a bit, the biggest market for the mining industry.

We remain optimistic about the medium to long-term.

As expected, growth is slowing, but only modestly, and we'll see that 6.7% in Q2.

Furthermore, the government is introducing measures to support domestic demand and increased liquidity, including fiscal stimulus, which should underpin growth.

In addition, China's policy changes have had a significant and enduring impact on several industries, including the mining sector.

Supply-side reforms and production controls have resulted in capacity reductions, which are unprecedented.

This is particularly the case in steelmaking, the outcome of which is higher capacity utilization and improved profitability.

The change in industry structure has also led to shifts in iron ore demand, which in turn has given rise to a significant premium for higher-quality product.

And that is absolutely good news for Rio Tinto.

In aluminum, the impact of new policy changes will take more time.

We do believe there would be a slowdown in capacity growth over the medium term and the rebalancing of supply over time where demand continues to be strong.

But it is not all plain selling.

We are concerned about the return of inflation, which is impacting the entire industry, putting margin pressure -- margins under pressure.

Resource nationalism is not a new feature of the mining industry, but there is no doubt that many stakeholders want a greater share of the wealth created by minerals development.

There is also an increasing emphasis on how we operate and our impact on the world around us.

This is why we believe our license to operate is a make or break for the industry.

Now turning to trade.

Ongoing threats to global trade is potentially a concern.

History shows fair trade and open market are the best driver of growth and prosperity.

We believe this will continue to be the case in the future.

In these uncertain times, resilience is absolutely key.

That's why we are so focused on 4 key drivers: one, driving performance.

Our productivity drive will generate $1.5 billion of additional free cash flow per annum from 2021.

Two, actively shaping our portfolio, highlighted by our announcement this morning.

Three, growing in a very focused way and our current organic pipeline will deliver an average of 2% per annum over the next 5 years.

And last but not least, item number four, maintaining a strong balance sheet.

This is how we will continue to deliver superior returns for our shareholders in the short, medium and long term.

Turning to growth.

Our current growth projects are progressing well.

On the broader growth outlook, we continue to evaluate exciting medium- to long-term opportunities across the entire portfolio.

These include Resolution Copper in the U.S., the Jadar lithium project in Serbia and potential expansions of our aluminum and bauxite businesses.

Our world-class assets in the Pilbara have significant potential for optimization and future capacity development.

Yesterday, the board approved around $150 million, $146 million, [it's actually], Chris?

For early works and studies at the Koodaideri mine.

This will be our first fully autonomous mine.

We also have an extensive pipeline of additional replacement and growth options in the Pilbara.

Oyu Tolgoi and Resolution are 2 of the largest copper projects in the industry.

Long life, low cost and close to our customers in China and in the U.S.A.

Our Canadian aluminum smelters are in the first quartile.

Long term, as demand grows, we will strengthen these assets through continued productivity gains and potentially brownfield expansions.

These smelters are already the greenest in the industry.

And the new technology joint venture between Rio Tinto, Alcoa and Apple to create carbon-free smelting will mean an even more attractive product for our consumers and a further reduction in operating cost.

Across all communities, all projects sit at the bottom of the cost curve, which means they are well placed to deliver Tier 1 free cash flows.

It will surprise you to hear these opportunities will be looked at through our value-over-volume lens and only move forward if they offer the most attractive returns.

And of course, we will keep a watching brief on M&A.

Just to remind everybody, our strategy is clear and simple.

We will maintain our strong performance by executing our 4-piece strategy with excellence, which has underpinned our recent outperformance in some key areas.

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

Portfolio is about world-class assets.

Performance is about operating and commercial excellence.

People is about developing industry-leading capabilities.

And partners is about long-term relationship with our customers, suppliers, investors, governments and communities.

Before I wrap up, let me say a few words about the man next to me.

Well, he's on the other side, but he's over there.

As you all know, this is Chris' last results presentation before he retires in September.

I could not let today pass without thanking Chris for his outstanding contribution to Rio Tinto, both as a board member since 2011 and as CFO since 2013.

He played a key role in strengthening the organization following a challenging period and has given me both great support and wise counsel as well as his sense of humor.

Capital allocation discipline has been his signature.

And I'm here to tell you it will remain his legacy.

Thank you, Chris, for your hard work, and we wish you all the best.

I would also like to welcome Jacob, our new CFO.

He's in the back of the room, last row.

You can't hide, Jacob.

He comes to us with extensive experience in senior financial roles across Europe, Latin America and Asia within and outside the resource sector.

Jacob is with us here in London today.

I look forward to sharing the platform with you at the end-of-year results in February.

In closing, every decision we make at Rio Tinto will prioritize value over volume.

We have real momentum and plans to keep pushing for even better performance.

We will continue to deliver on our promises as we have done in the first half.

With our strong EBITDA and cash performance, we have a strengthened portfolio with a strong balance sheet providing options for growth.

And most importantly, we have a strong commitment to deliver superior cash return to our shareholders.

We do face challenges, as any business in the 21st century does, but we have the right strategy, the right assets, the right team and a real focus on value.

For us, it is all about delivering on our promises, day in and day out.

And then on this note, I would open the Q&A session.

So where is David?

We start with the room here and then -- come on, Jason.

We need the mic, otherwise people will not hear.

Jason Fairclough, Bank of America Merrill Lynch.

J-S, you mentioned...

Mic is working or not?

You have a question for Chris, I think, yes?

No.

You mentioned the quality premiums being paid in iron ore right now.

Could you talk a little bit about how the organization thinks about the sustainability of those premiums?

And to what extent is that informing your view on bringing forward CapEx in iron ore to sustain that quality?

All right.

So you asked me the same question last year -- okay, well, one of your colleagues did.

So we believe that the shifts between high-grade and low-grade in iron ore in China is becoming more and more structural, all right?

We had the opportunity to meet again with Chairman (inaudible), the Chairman of (inaudible) a few months ago, and there is no doubt that the restructuring of the steel industry is here to stay.

That the push for environmental -- their performance is there, as well.

And therefore, they will continue to reduce capacity.

That doesn't mean they will reduce [pollution] and you saw the latest stats on the production steelmaking is still -- steel production, sorry, is still increasing in China and therefore, for them to continue to produce we will reduce capacity and you need higher grades.

So we believe that the spread, the difference, the discount, the premium, call it whatever you want, between high-grade and low-grade is here to stay.

That's the first point.

The second point is we are delivering to China the reference product, the Pilbara Blend, all right.

And today, we have -- despite everything you can hear about trade and so on and so forth today, we don't have an issue in placing our Pilbara Blend in the marketplace in China.

Quite the opposite, people would ask for more of it.

So we are -- and we do this optimization on an annual basis, what should be the right production, the type of production we should have in the Pilbara and so on and so forth.

So we go through the cycle, the next conversation will be in September to see how we position, but it takes -- remember the Pilbara is about 16 mines, 1,700 kilometers, 4 ports.

It's a big system.

And what we have been focusing for the last 2 years, we'll continue to work on it and we are working on it, is to continue to increase the flexibility of the system, and it takes a lot of time, all right?

AutoHaul and the announcement a few weeks ago is helping us in that domain.

But what we want, the vision which we are implementing, is we want to have a capable system that we can flex up and down to meet our customer in a better way.

So that's what we're doing.

We are progressing along this journey.

Now in terms of CapEx is the value over volume question, which is always the same question is to say if you bring CapEx forward, you need to make sure you have a return on your CapEx, keeping in mind that if you add too much volume in the marketplace at any point in time, you can have an impact on prices.

And the metrics has not changed.

$10 of price is worth $2 billion of free cash flow after tax for Rio Tinto.

So we do this optimization every year, and at this point in time, we are comfortable with the guidance of 330 to 340 for this year.

We provide a new guidance at the end of this year.

And then we have updated our guidance in terms of CapEx for the next 3 years, where you see some slightly higher replacement CapEx final.

So that's -- I can't tell you much more than that.

I can give you only the principles and how we look at it.

But at the end of the day, for us, it's really about value, it's really about how can we maximize the free cash flow yield of our system in the Pilbara.

Keep in mind for the medium to long term, we need to have a capable system, highly flexible and we want to be in control of the system.

And I believe that what we have achieved this year, what the team has achieved this year, is moving in the right direction.

That's okay, Jason?

It's Menno at Morgan Stanley.

Just 2 questions, one for Chris and then one for you.

Judging by the reaction of the shares this morning, considering that the company is returning $5 billion since it's clearly 5% of the market cap, it suggests that maybe some people are worried that Rio Tinto is losing out on some profitable growth options.

What would be your reaction to that statement?

Do you think that's right or do you think you're capturing everything that's out there?

And secondly, Chris, on the cost, slightly boring, but central costs stepped up quite significantly to $560 million this half.

Is that the run rate we need to think of going forward?

And if I turn that into your waterfall, the $200 million headwinds post-tax cash flow in the mine-to-market program, is that a run rate for the second half or is it going to accelerate, given the statements made on inflation?

I'll do the cost one first.

The -- okay.

So we've got -- addressing the mine-to-market.

The input headwinds, I think those -- they're persisting, but they're probably easing a little bit in terms of the second half.

I think they -- but where we've seen that most pronounced was in the aluminum business.

And I think if you look across to some of our competitors in aluminum, you'll see the same sort of story coming through there.

With regard to the central costs, there's a series of things going on that are sort of placing the company in position to go forward.

So we've been working on the operating model and there's commensurate spend with that.

We've had a program, what we call fix the basics, in the [ISNT] and some of the shared service areas, which are -- they're a limited timeframe spend.

So even the second half will be slower -- slightly slower than the first half was, but it's a within-this-year-type event.

So you got that.

There's about -- if I give you a bit of a breakdown on that though, it's like that operating model and restructuring stuff is about $80 million.

There's some work going into the establishment, further establishment of the commercial center in Singapore and the ISNT fixes combined and the majority of this is in the ISNT side, it's about $75 million.

And then we've got a higher charge going through Central for our insurance and pension costs.

The insurance is something that we're taking through the central rather than within the product groups at the moment.

So that's a change this year that's slightly different.

But that's about $40 million in there.

So that's the $200 million give or take in that central cost.

I think the run rate in the second half will be lower than that going forward.

So going back to the [reshare] question, I mean, shares have been trading for a few hours, just to be obvious.

I understand vis-à-vis off summer, there are very few volumes and so on and so forth.

And we've been around for 146 years.

I mean, we don't expect us to run the company just to optimize the share price for the next 5 minutes.

Do you agree with that?

Thank you very much, all right.

So I'm not sure I'm going to draw too many conclusions on the back of the share price.

What we have delivered today is exactly what we delivered against our commitment, which is to deliver superior value for our shareholders.

I hope you agree that $7.2 billion of returns is pretty good.

That comes on top of the nearly $10 billion of last year and so on and so forth.

So we're clear about our commitment with the regulatory shareholders, and I truly believe we're delivering against our commitments.

So am I going to read too much about the share price over a few hours?

No, I'm not going to read too much about this one (inaudible).

All right, shall we take one question from the phone, and then I'll come back to the floor?

(Operator Instructions) We will now take our first question from Paul Young from Goldman Sachs.

J-S, 2 questions for you, actually.

First one is on the bauxite market.

I noticed a statement in the results about there being significant uncertainties around the direction of the bauxite market.

That appears to be new.

You had a decent increase in realized price during the half, but based on what you're seeing in Guinea and Guinea supply, how's this change your view on long run fundamentals and pricing?

And second question, J-S, is on Oyu Tolgoi.

Underground development seems to progressing very well.

But I'm interested in the exact CapEx requirement for the power plant and the benefits of actually -- on the cost side.

And also your view on the current government study around this implementation on the investment agreement.

Okay, no, I'll share some of it with Chris.

On the bauxite, what we are highlighting is there are more and more bauxite moving from Guinea back to China.

And it's still early days.

And the old question, what we are highlighting here, there is a lot of volatility.

We don't know going forward if the bauxite market would be priced on the cost plus or on commercial terms between Guinea and China.

And that is the only thing we are highlighting now.

Let's be clear is we have no doubt that the investment in Amrun that should come onstream next year is a good investment, is a very good investment for us.

It will be a world-class asset.

So as I said, high level of uncertainty.

But -- and the statement I'm going to make is true across all communities of Rio Tinto.

All philosophies are following at the end of the day, all right, is there are things you can control, there are things you cannot control.

So let's focus on the controllable.

And today, what is important is to focus on having the right cost structure, the right quality of product, the right relationship with the customers.

So whatever market conditions we are in, whatever volatility in the marketplace, then we will continue to be profitable.

We will continue to generate a lot of cash, and we will be able to do 2 things.

One is to continue to invest for the long term, which is very important in the mining business; and the second point is to reward those shareholders with superior returns.

And I think what you -- what we have experienced or what we have disclosed today is a good example of it.

So that's where we are in the bauxite.

On Oyu Tolgoi is -- you want to pick up the power stuff, Chris?

Happy to.

(inaudible) after.

Okay, Paul, the OT power plant is in the pre-feasibility stage, which is -- and currently there's a range of cost between 1 point -- well, 1.0 and 1.5, basically.

And the -- there's a lot of conversation going on with the government as we speak about the various options available to us for that development.

And so if I give you a simple example, if the degree to which it meets European standards or local standards or other global standards can have a difference on the capital cost.

So that's something that's got to be negotiated on the way through here.

And then once we get down to a stage where we've got a permitted proven path forward, that's when we'll come back and revise any cost estimates.

But what we've got in our CapEx guidance and part of that increase in the 2020 year is actually an expectation that we previously had about $250 million in that year.

We think there will be slightly higher spending in that year of 2020.

That's part of that $0.5 billion of increase in that guidance we've given you this morning about CapEx.

So it's still very much a live conversation and it's really still quite fluid.

And once we've got something firmer than that, we'll come back.

Right, so the other question is around the agreements in Mongolia.

I mean, we have been very clear about the sanctity of this agreement.

And no matter what they are, the IEA, the [OSHA], the UDP and so on and so forth, discussions are underway with the government.

There are multiple work streams, some of it have been triggered by the cabinet, the government, some them have been initiated by the Parliament, so discussion is on the way.

There has been a slowdown in terms of discussion during the summer because it's Naadam, which is a big summer festival.

So they stop for a few weeks.

But the discussion will restart soon, they are restarting as we speak.

But we have been very clear about the sanctity of the agreement.

And I can tell you is -- remember, we are not alone on this one because we have on the back of the $4.4 billion of project finance that we put in place a few years ago, we got the World Bank, we've got all the main banks and all interest.

It doesn't matter if you see it on the government side or on the Rio Tinto side or the (inaudible) side.

Is all interests is to unlock the value of this absolutely world-class deposit that will be producing copper and gold for the next 100 years.

And the benefits we're already providing to Mongolia is significant.

14,000 people working on site, 9 out of 10 being Mongolian nationals.

If you look at the integrated supply chain that we have, around 40,000 people today, remember there are only 3 million people in Mongolia, just to put it in reference, 40,000 people across the supply chain.

We've placed $1.5 billion of local (inaudible) last year and so on and so forth.

So our interest, our joint interest is to unlock this value, and that's what we're working on it.

Now my personal experience over the last 5 years is lots of emotion, lots of drama, lots of things in the press.

But at the end of the day, it's common sense prevails.

And if I even step further, Rio has been around for 145 years, 146 years and that's what our job is about, is to operate in challenging jurisdiction, to find a way to do it and to unlock value for the short, medium and long term.

So all in all, Paul, discussion on the way.

I'm sure there will be further announcement, including potentially a power station, in the second half of this year.

If I could take another question from the phone and then I'll come back (inaudible).

David?

(inaudible)

We will now take our next question from Hayden Bairstow from Macquarie.

Just a couple for me, one probably for Chris, I guess.

On just the cash flow versus EBITDA, I mean, it seems to have been in a bit of a decline the last few years despite revenue EBITDA being pretty flat.

Just wondering if there's anything in that or is it tax payments and other sort of variability in the business?

And J-S, just a question on the tariffs out of Canada and into the U.S. Just how that's impacting the business.

Are the premiums adjusting enough to cover that or is it becoming a bigger issue for you?

Yes, I'll pick up the question on the tariff and aluminum.

Just to set the scene, is the bulk of the aluminum, or should I say aluminum produced in Canada, is sold in the U.S. And we are supplying 1/3 of all the aluminum consumed in the U.S., all right?

So we're clearly watching this whole trade situation, potentially trade situation, between the U.S. and Canada very, very carefully.

Hence -- how many?

Four trips, 5 trips to the U.S. and Canada this year.

Today, we don't have any problem whatsoever.

Remember, you need to look at it through the lens of a consumer in the U.S. If you're a consumer in the U.S., you want to have access to a low cost, reliable source of aluminum.

You could argue some of them wants to have a green access to source -- to have access to a green aluminum as well.

And the best aluminum we can think of is coming from most smelters in Canada.

I mean, they are not in the first quarter of the cost curve.

They are in the first decile of the cost curve.

They are hydro-based.

And then on top of it, when you think of the joint venture we signed with Alcoa and Apple to develop the (inaudible) technology, we are a few years away from having a purely green product there.

So at the end of the day, from the consumers' standpoint in the U.S., I've got no doubt -- because the supply chain is so integrated between the U.S. and Canada that there will be -- that common sense will prevail.

Now back to your question about the premium and the duties and so on and so forth, the way the pricing formula works is we don't have any material impact for us at this point in time.

And you saw it in the margins that we have presented in the presentation today.

The impact that we had in aluminum which started last year and increased (inaudible) a few times in the speech is about inflation, which has nothing to do.

So from the purely trade standpoint, today, the old situation rushing to NAFTA, between the U.S. and Canada had no material impact on our business at all.

You want to pick up the other one?

Yes, on the cash flow, I think probably -- it's always a bit hard to sort of talk about where people are versus their expectations because we can't get inside the head of everybody's expectation.

But what we have observed I guess is slightly higher CapEx.

There's increasing working capital (inaudible) working capital.

And about half of that is good but it's because it's higher prices (inaudible) receivables and the like.

But probably the biggest single difference that some people have fully understood what we're saying at the full year and some haven't is the timing of that tax payment of $1.2 billion to the Australian jurisdiction that actually pertained to 2017.

It's a good outcome for us because we had hung onto the cash for an extra 6 months in our own balance sheet.

So the net debt at the end of last year, if you recall the presentation, we talked about $3.8 billion and we pro-forma-ed it for that tax payment was in the numbers.

That would've taken us to $5 billion at the end of last year.

And if you go to this year, we're $5.2 billion.

So there's -- I think all out, we've got a strong bias on cash generation.

I think we've got still -- need some more detailed attention on the working capital, make sure our guys don't relax on that.

Some of it's good because it's price-related in our favor.

But our number of average working days has gone up a couple of days.

So that's work that we've got to get the businesses focused on.

So we go back to the room.

One in the front and then I come back to you, Paul, after.

Dominic O'Kane, JPMorgan.

Just 3 quick questions.

On aluminum costs, just maybe push a bit further on to H1 versus H1 '17 performance, just saw a roughly 30% increase in unit costs driven by raw materials.

How should we think about second half this year?

Do you think there's capacity to keep that flat at best?

Or do you think we should be thinking about further raw material cost increases in primary metal?

Then on Grasberg, obviously, reported $3.5 billion potential exit.

Should we expect any tax payable on that amount and the CGT?

And then final question, diamonds.

So did about $100 million of EBITDA in diamonds in H1, roughly $50 million of free cash flow.

Does that remain a core division?

All right, so I'll give you the Grasberg one.

So we signed the head of agreement, as you know.

And I think I said in the speech is the 3 teams because our 3 parties are working very hard to come to a conclusion, the documentation and the target's still to sign before and give the cash before the end of this year.

But as you know transaction, until you can sign and until you get the cash on the balance sheet, you don't have a deal, okay?

So let's be absolutely clear.

And back to what happened during the night, I know there are a few people in the back row here who were slightly concerned that we wouldn't get the cash on time.

So we're working hard to get it.

On the tax is discussion under way.

Seen from today, we don't see material tax payment on the back of it, but those discussion are taking place with the relevant tax authority.

So we'll clarify the situation closer to the closing transaction.

Diamonds is -- so today, we have 2 mines.

Do we like the diamond as an industry?

The answer is yes.

You know, Dominic, what I'm going to say is if people think that copper is difficult, we always use copper as a baseline.

Between the time you have a nice rock and the time you've got cash flows is only 25 years in average.

In diamonds, only 30 years.

So it is a very attractive industry but it is very difficult to find world-class asset in that space, right?

So are we spending money or resources in the context of exploration of diamonds?

The answer is yes, and you see it in the QRRs and so on and so forth.

We have an extensive program of exploration in that space.

So in that sense, to answer your question in a very direct way, is diamond is important for us.

Now we need to acknowledge we only have only 2 mines today and they are on their last leg.

I mean, we can see the closure coming.

And the work, a big chunk of work is taking place as we speak to make sure that when the time is right and when we have to close those mine, we will do it the right way.

So yes, we like diamonds.

Yes, we're spending money on resources in the exploration space.

We're going to have to be patient, but trust me, I'm putting your [friend] from exploration under massive pressure to move fast in that space and I will continue to do it.

And as we say, I would love, absolutely love to find a new pink diamonds mine, to be honest.

But I may have to wait for 30 years.

So (inaudible) is standing here.

In 29 years, we may have a good piece of news, but not for me to tell, right?

[Lynchie], I think you can (inaudible)

Yes, well, the [key], the year-on-year increase is about $200 million, but that -- and your question was really about -- going forward, I really can't give you any better guidance than probably maintain the same sort of basis into the second half.

They seem like they're stabilizing and leveling off, but time will tell.

It's primarily the inputs of caustic, pitch and coke.

They're the main inputs into that mix.

And you'll see that across our peer group areas as well with those same items coming through.

And the carbon material is also a factor for us in the TiO2 business, the [RTF2] business so, with the (inaudible) activity there.

So I don't think I can give you much better than that really.

I'm going to build on what Chris said.

I mean, let's be clear, inflation is going to hit -- is hitting all communities and all players across the industry.

And I'm going to use one metrics.

So we did check, it was a week ago, 10 days ago, in Australia today, if you go to sites where you look for jobs and so on and so forth, you got 40% more posting, 40% more posting for jobs in the mining business than 1 year ago.

So I slightly smile when people say, "Oh, inflation is not going to impact us," and so on and so forth.

If you got 40% more requirements for job in Australia, guess what will happen?

All right?

So our position is very simple on this one, is we acknowledge your point.

We did highlight this concern, this risk around inflation November, December last year.

And we have taken actions.

Our approach is to say to acknowledge a challenge and try to take as many action as we can in order to mitigate the potential issue.

And I think what you saw in the result this morning, the fact that we were able to deliver 43% EBITDA margin on the back of our mine-to-market productivity program is a good example of it.

So we acknowledge a challenge and we get on with it.

Mine-to-market, it will be absolutely essential in the coming years because inflation is coming back.

If you look on the CapEx front, all majors in Australia have announced in the last few weeks major capital program in WA.

Once again, what's going to happen?

Inflation is coming, and therefore, it's even more important for us not only to put mine-to-market to our existing asset, which are probably mine-to-market approach to the capital space as well, and that is exactly what we're doing.

If I go to the back.

Come on, Paul, yes.

Paul Gait, Bernstein.

A couple of quick questions, if I could.

You alluded to supply-side performance in China in terms of steel capacity, but we've also seen that, in terms of the iron ore, domestic iron ore production in China, has come down quite markedly year-on-year.

Just wondering if you could give us some thoughts about what you're seeing there?

Second of all, in terms of the Pilbara Blend and of course Koodaideri feeding into that, but how long can you actually maintain the quality of the Pilbara Blend in sort of roughly today's specifications given the reserve base that we've got, or rather you've got?

And then finally, in terms of Grasberg, Heads of Agreement at the minute, are you still involved in that discussion process or does this essentially now represent Rio Tinto sort of taking a step back from those discussions?

On the Grasberg piece, it's pretty simple.

We're still involved in the discussion because -- at the end of the day Rio works to sign the SPA with the government of [Indonesia] and only Rio Tinto will sign it, okay?

[You will no be able to] get anybody to sign it on our behalf.

You agree with that?

Good.

So we are involved on this one and as I said, the 3 teams are working hard and the sooner we can sign, the better it is.

On the iron ore in China, we have 200 people in Shanghai and we have a big team in China, and part of their job is to find out about it.

The -- if you go back a few years ago, our understanding was the local domestic production of iron ore was around 400 million tonne.

They dropped to at some stage 225 million.

We believe in the first 6 months of this year, plus winter cut, we will be back -- there is some uncertainty, but if I had to pick a range between 235 million and 245 million, maybe slightly below 250 million if you want to on the top-ish side.

Interesting enough, our understanding is primarily -- a lot of it is underground and not open pit because of pollution, environment concerns and so on and so forth.

So there is, compared to the question asked 1 year ago, 2 years ago, we have full confidence that the iron ore production, domestic iron ore production will continue to reduce because it's high cost.

But more importantly, the environmental concerns are very significant, hence my comments about open pit versus underground.

So that's the best view that we have today.

Now once again, it's -- we have to -- we acknowledge that there is a risk around this one, and therefore, back to my previous point is we need to work on what we can control.

And today, what is important in the iron ore business or the aluminum business or the copper business, making sure we've got the right cost structure and you saw the cost structure in iron ore, which is pretty good.

I know some people had some concern and you saw the hard work to get to this point.

I think the right (inaudible) product, and I will come back to your second question, and having the right relationship with the customers and so on and so forth.

Because all in all, if you got those parameters right, then you will have a strong market share, you'll generate a lot of cash and as I said earlier, be able to continue to invest in the long term and be able to reward your shareholders as per our commitment.

On the question of the Pilbara and the ability for us to maintain the Pilbara Blend, if you think about in the next 5 to 10 years because we have a long-term plan for obvious reason.

I mean, you got a resource of more than 100 years.

If you look at the short term, 5 to 10 years, I know people smile when I say that, do we have a concern about the ability to maintain the Pilbara Blend?

The answer is no, okay?

Now on the regular basis, we do this long-term mining plan that we're doing for this process at this point in time, but for the next 10 years, we don't have a concern whatsoever.

But as we said many time and you know better than anybody else is 10 years in mining business is pretty short term, all right?

Should I go back to the front?

Front row.

We will now take our next question from (inaudible).

Just (inaudible) internally and from shareholders to deliver more than just 2% sort of volume growth over the next 5 years and are you seeing kind of related to that more opportunities on the M&A side of the right assets sort of at the right price or is it still effectively a no go?

And then secondly, maybe with Pilbara iron ore kind of unit costs.

I mean, doing a good job first half of this year.

As we look forward with AutoHaul, with the volume increase, can we kind of -- is the potential for unit costs to go down on a 2-year view despite inflation or is best case stay where we are?

All right.

You pick up the iron ore and I'll pick up -- so the growth -- well, we're going to start the roadshow in a few hours for obvious reasons.

But on the back of the concession, last round of concession was at the time of the Bank of America and Merrill Lynch -- I should get a discount for that next year, Jason -- conference in Miami and the subsequent industry roadshows that we had in New York and so on.

No, we are not under pressure in terms of growth today.

Yes, there are some question about where you're going to go in the long term and so on and so forth because we fully acknowledge that in the mining business, you need to grow because depletion is a reality.

And therefore, if you don't grow, you're going to have a problem.

But today, we are not under pressure from that perspective, okay?

Now what is important for us is to develop a pipeline of attractive growth options, right.

But today, when I look at what we are delivering, we deliver Silvergrass; we are talking about Koodaideri now; we have Amrun around the corner, which should come in line pretty soon; we've got Oyu Tolgoi, We never stop investing, including at the bottom of the cycle.

For us, it's about delivering high-quality growth.

Some people have the mantra of being big.

The mantra of Rio is to be focused and to be profitable and to deliver returns for our shareholders, right?

So it's better to be very focused, making sure they deliver the project on time with the right quality, the right safety performance and so on and so forth than just growing for the sake of it and then not having your A-team working on it and ending up with lots of overruns and so on and so forth, which if you look over the last 10, 15 years, the industry has been a (inaudible) industry.

So I would rather grow below GDP, if I'm honest, but it has to be high-quality growth and making sure we delivered on time and as I said, on budget.

So that's where we are.

M&A, you know what I'm going to say.

Everybody knows which asset I would love to have in the portfolio, but we are not going to do anything stupid.

Absolutely not.

We'll keep the watching brief.

If there are -- if there were to be what we described as smart M&A, where you have synergies because you've got the logistic advantage or you've got technology advantage or whatever, yes, we will look at it.

But you need to have the right level of synergy to justify any kind of premium.

Do we have teams looking at all kind of options?

The answer is yes, and we've been very transparent with this one.

We have a wishing brief on M&A, but today, at this point in time, there's nothing that really excite us.

We have to be patient.

You know mines better than anybody else, I guess, that sometimes in the mining business you have to wait for 20 years for the right asset to come at the right price and so on and so forth.

So having said that, I repeat what I said last year, the last trough was not deep enough, long enough for the premium asset to be released.

We had the whole -- all of a sudden, lots of expectation that it was coming, but unfortunately, or fortunately, depending on how you want to look at it, the market recovered.

Some people had some near-death experience, let's put it this way, and the assets were not released to the market.

So we'll be very patient, we'll be very patient.

History shows that the bulk of the M&A don't create value anyway.

And so you need to be very safe, be very focused.

And industry shows that the best growth option at the end of the day are your organic growth options.

So we're pushing hard on the organic growth option and we keep a wishing brief on the M&A.

[Should] you pick up the iron ore and the inflation management, Chris?

Yes, so iron ore is not immune from the threat of inflation.

What our challenge is, is to offset that.

So that's where we will be targeting with the productivity agenda.

Obviously, things like the oil price, showing pretty healthy sort of increases over the course of last year.

And we'll have -- we will be entering more below water table type mining as well.

We're going to have longer haul distances.

So we do have some challenges coming our way, which -- it's important that we get the productivity agenda in full run there.

Where we need to attack our costs is on the first line of entry into the business.

So the volume absorption is one thing, but the first spend is really where you want to attack it.

The guys have done a great job over the last 6 to 12 months in easing that rail bottleneck, so we've now got a position where the rails more tuned to the port capacity.

So we've got a bit of flexibility in the system there that wasn't there up until about, well, early in this half.

So I think we don't give you guidance about the cost, as you well know, but I think there are a series of factors there.

There's a good challenge there, and the team -- Chris and the team are more than up for the challenge.

But it's -- that thread of inflation is there and it will be there and it's going to be a constant.

And then once we get the early works on Koodaideri is sort of an encouraging thing.

But once we get that in play, assuming that comes through the normal approval processes and the like, that's going to be a very exciting mine.

I'd love to be around when it's (inaudible).

You can come back, Chris.

Yes, well, I hope I'm still around.

We will come (inaudible) .

It's pretty much going to be a fully automated mine and you'll have on display on one side quite a lot of the functionality that we've been working on for the last decade.

John is telling me we have time for 2 questions.

So we'll take one from the call and then we'll come back to the room.

So one from the conference call, David?

We will now take our next question from Mr. Clarke Wilkins from Citi.

Just a question on bauxite and also on iron ore.

Just on your comments earlier about the -- sort of the uncertainty around that market.

When you look at your volumes, your increasing volume coming from Amrun as well as from [Guinea], is it primarily a price risk or is it also a volume risk?

Like is there any sort of off-type volumes for those projects or it's very much sort of shorter-term sales contracts, so depending on what happens in the market, is there a volume risk there?

And also, just in regards to iron ore, like the comments around the sort of grade discounts being more structural, we've obviously seen recently in purity penalties rising quite significantly and given your comment around China domestic supply continuing to fall, is there a chance or is there a potential that the impurity penalties in the market are going to be more structural and is bringing forward the sort of CapEx to Koodaideri a potential way to sort of adjust the quality of that Pilbara Blend?

Two very good questions.

So on the bauxite is -- the key question for us is mainly about Amrun.

Remember that after the additional capacity of Amrun is replacement capacity, and the other half is really growth.

Do we have any concern today in our ability to place the growth of Amrun when it comes on line?

The answer is absolutely no.

Absolutely no.

So we don't have concern from that perspective.

On the iron ore pricing is, without getting to the detail too much, the impurity is already priced.

So if you look at the pricing formula, it's not only about the (inaudible) content.

There are adjustments for alumina, for us so on and so forth.

So the pricing exists already there to adjust for those impurities.

But your question is absolutely spot on, is -- it is our experience is because of the pressure from SASAC and the government in China in relation to environment, the management of the burner and of the blast furnaces is becoming more and more important.

And the last time I went there and I met with some of the engineers or some of the people at our customer site, I can tell you I've never seen -- and I've been traveling to China for many, many years in the context of steel.

Remember, I used to work in the steel business before joining Rio Tinto.

I've never seen our customer knowing how well to manage their burner, how well to run the performance of the blast furnaces and so on and so forth.

So it is absolutely clear that all customers in China are becoming closer to the customer we have in Japan.

Very aware of how you optimize your blast furnaces and I'm sure that the question about impurities, the first for example, in the alumina will become something which is -- can be a feature.

But the point is the pricing already account for those adjustments and so on and so forth.

So that's where we are at.

One last question in the room, and we have to take the other question during the coffee break.

So go for it.

Liam Fitzpatrick from Deutsche Bank.

I'll keep it to one.

Just on the Canadian.

One for Chris, come on.

That's his last set of results.

I don't know what the question is going to be, Chris, but you're going to have to pick it up.

On the Canadian aluminum expansion, you've been flagging them for a while.

So if the market does tighten, can you give us a sense on timing?

I mean, could we see these approved early next year or are these much more long-dated options?

We are a few years -- I'll pick it up, this one because you won't be there, that's for sure.

Maybe as a shareholder, you will be there.

But we are a few years away, okay?

For us, to take a decision to build a new smelter in Canada, okay.

We need to be absolutely convinced that the structural change in China are there, okay?

I've got no doubt that aluminum in long-term China is moving in the right direction and that China will become more and more balanced.

But until we get to this point, we do the work, we do the study, we're ready, we will become option ready, option rich, option ready but we have still a few years away before taking a decision to add capacity in the aluminum space.

So that's one aspect.

Having said that, we are looking at option that [we've done] forever to expand the capacity of aluminum smelter on the back of brownfield, on the back of [creeping] because that is productivity and so on and so forth.

But before we take a decision to build a brand-new 0.5 million tonne smelter in Canada, we're still a few years away.

And I invite you to open this matter, Chris, when it happens.

That will be good.

On this note, we're going to have to stop.

Thanks for coming.

If you have only one number to -- I know you have -- you love your numbers and so on and so forth.

There are only 2 numbers you should remember, is $7.2 billion of return to shareholders and $2.2 billion of dividend, which is the highest in the 146 years -- oh, that's 3 numbers -- in the history of the group.

Thanks a lot and we'll talk soon.

Thank you very much.