力拓 (RIO) 2024 Q4 法說會逐字稿

Hello and thank you to everyone tuning in.

Before we begin, I acknowledge and pay my respect to all traditional owners and First Nations people that host our operations around the world.

I am today in the United States, so we are doing results a little differently this year.

But I hope the message comes through loud and clear.

Our culture is changing and is improving our performance.

We are again a leader in project development and have excellent growth momentum.

The diversification towards copper, aluminum, and lithium is happening at pace.

And we are delivering consistent shareholder value as we grow, build, and diversify our portfolio.

Now let's look at the evidence.

Our production has grown for the third year in a row.

Copper-equivalent production increased 1% in 2024, and our mid-range guidance indicates another 4% growth this year, led by the ramp-up of Oyu Tolgoi.

The 4% excludes Arcadium Lithium, so you can see we are already on our way organically.

The acquisition only brightens the outlook.

As we set out at our Investor Day in December, this puts us on course for a decade of 3% compound annual production growth.

And this is not growth for the sake of growth.

This is about investments that create more value from existing assets and diversifying our portfolio towards future areas of growth.

We have really good momentum, and the way we have built it is simple: a relentless focus on our four objectives.

First, best operator.

The safe production system is driving clear improvements that we will build on and accelerate.

It was very encouraging for me to speak to our iron ore colleagues in the Pilbara a couple of weeks ago and understand how the evolving culture and systems are empowering them to make continuous improvement.

We have more work to do on this objective to unlock value from all our assets this year, and that's a major opportunity.

Becoming best operator also means creating a safe environment and safe culture for our people.

We are determined to learn from the deeply tragic events we experienced in 2024 to improve upon our processes everywhere.

Second, impeccable ESG.

We have an action plan to decarbonize, and its value accretive.

Good for the climate, good for business.

I'll come back to that later.

Next, excellent development.

The tremendous progress at Simandou, Oyu Tolgoi, and Rincon showcases our project building expertise.

Peter will share the insights with you in a moment.

And finally, social license.

Having spent time on Country in Western Australia recently, I'm reminded of how fundamental this objective is to everything we do.

We must constantly earn the right to operate and grow, and we cannot take our license for granted.

Right now, I think we are in a good place.

When I talk to our stakeholders, I sense we are building the trust and deeper partnerships needed to unlock sustainable business opportunities.

Our four objectives are driving us forward in our ambition for a decade of growth and to deliver consistent returns to our shareholders.

Our strong operational and financial performance support this conviction.

We have increased production volumes and sales volumes, and we remain very profitable, even in a weaker iron ore price scenario.

This resilience is underpinned by an increasingly diversified portfolio.

Peter will go into more detail, but I want to bring to your attention the net operating cash flow.

This increased 3% last year, supported by a stronger performance from copper and aluminum.

Looking at the second half of the year, you can see how much momentum we are gaining from these assets and that our distinct commodity mix is now paying off.

Our strategic investments are adding value, and our balance sheet is in good health, putting us ahead of the curve.

This means no surprises.

We are paying ordinary dividends at the top end of the range for the ninth year running.

We have a resilient, highly valuable business today.

We have built a solid base for future value, and once again, we are paying back to our shareholders.

With that, I will hand over to Peter.

Thanks, Jakob.

I have a reasonably simple task today to summarize our strong financial performance for three reasons.

Firstly, the majority of our assets are performing well, and we're starting to see productivity breakthroughs as SPS matures.

As always, there are challenges, but the underlying trajectory is more operational consistency and continuous improvement.

Secondly, we are seeing good discipline on costs, working capital, and CapEx, resulting in strong cash flows.

The improvement in our cost performance in 2024 was particularly good to see, after several years of high inflation.

Thirdly, our projects are on track, underwriting the next phase of the group's growth plans and incremental cash flows.

So turning to the numbers, underlying EBITDA was down just 2% to $23.3 billion, despite an 11% lower iron ore price, with a rising contribution from our aluminum and copper divisions.

Operating cash flow was particularly resilient, rising 3%, with a 67% EBITDA cash conversion rate, up from 63% in 2023.

With our share of capital investment rising to $9.5 billion, we ended the year with net debt of $5.5 billion.

And as Jakob said, we have maintained our track record of a 60% payout for the ordinary dividend, equating to $6.5 billion.

These strong results have been achieved against a complex macroeconomic backdrop and a mixed demand picture for our products, dependent on end use.

Firstly, the property sector globally has been soft.

In China, it has been weak for a number of years, with steel demand down by as much as 30% from its peak in 2020.

Elsewhere in the world, construction has been dampened by higher interest rates.

Second, traditional consumer and industrial sectors have tended to be more stable and generally supportive for metals, and this picture is pretty consistent across major markets.

And third, demand from the energy transition, which has not only buoyed growth for copper and aluminum but also been a significant factor in holding up demand for finished steel due to investment in renewables and the grid.

Energy transition sectors accounted for around 20% of Chinese GDP growth in 2024.

The effects have been less pronounced elsewhere, but we expect it to remain the major driver of demand growth globally.

This is where we are spending most focused in terms of our growth program.

The significant inflationary pressures of the last few years have changed the shape of industry cost curves, resulting in higher prices for many products, given the correlation between prices and costs.

But it's important to have a very balanced view of the demand picture.

Our financial results are not the product of a global economy firing on all cylinders.

Turning now to EBITDA, in 2024, we really started to see the benefits of our diversified portfolio and operational improvement.

Higher prices for copper, bauxite, and aluminum, together with rising copper and bauxite volumes, helped to offset much of the impact of the iron ore price decline.

As we set out at our Capital Markets Day, over the next few years, we expect to see our financial results increasingly driven by the whole portfolio of assets, not just the Pilbara.

Our improving operational stability and intense focus on cost discipline is starting to bear fruit.

Just to give you a few examples, we have already lowered headcount in iron ore as part of our recent streamlining program and have reduced group-wide functional costs by 3% year on year.

This is all about rightsizing for the future.

Meanwhile, copper unit costs on a gross basis, that is, to say before by-product credits, were down 4% on 2023 as we achieved greater cost efficiencies.

So overall, we really feel we've turned a corner.

The post-COVID inflationary environment was challenging, but costs are now under control and SPS is kicking in, which gives us good momentum going into 2025.

The EBITDA waterfall underlines this stability.

Commodity prices, as ever, were the biggest driver, netting out to $1.6 billion negative.

The net effect of lower energy and market-based import costs more than offset the impact of general inflation of around 3%.

In copper-equivalent terms, our production was up just over 1%, mostly driven by our rising copper volumes in line with the ramp-up at OT, higher grades at Escondida, and the restart of the Kennecott smelter.

This compensated for a modest decline in iron ore sales.

Expiration and evaluation was $300 million lower, mainly a function of Simandou costs being expensed for a good chunk of 2023, as we finalized agreements.

Our underlying spend levels are stable at around $1 billion a year.

Turning to cash unit costs, our performance was more positive in the second half, as expected, and broadly flat for the year.

We had lower unit costs in aluminum and copper, which were matched by adverse unit costs in our other businesses, mainly driven by lower volumes.

So all in all, this brings us to strong underlying EBITDA of $23.3 billion.

Onto the product groups, where we enjoyed a rising contribution from aluminum and copper, iron ore delivered more than $16 billion of EBITDA in 2024.

Realized pricing was strong at 99% of the index, and we saw good levels of productivity improvement and met our shipment's guidance.

This was all achieved despite the derailment earlier in the year and some adverse weather conditions in Q4 with unusually high rainfall.

Unit costs came in at $23 a tonne, and we are guiding to around 3% higher this year at the midpoint. 2025 is going to be demanding, as Simon highlighted in December, with depletion peaking at 19 million tonnes.

However, we are targeting another 5 million tonnes of productivity improvement from SPS, and Western Range is on plan to commence production in the first half.

We continue to advance our next four Pilbara Mine replacement projects.

These are progressing well, although timelines are of course subject to receiving environmental and heritage approvals.

The product strategy work is ongoing.

We are closely reviewing customer requirements and available ore grades.

Unfortunately, this year has started with some very challenging weather conditions in the Pilbara.

Tropical Cyclone Sean delivered more rain in one day than the wettest January on record and was followed by three more cyclones.

First-quarter production is impacted.

But importantly, our full-year shipments guidance is unchanged.

Our aluminum performance was impressive, in particular for smelting and bauxite.

We were able to take full advantage of stronger markets, leading to a 61% increase in product group EBITDA.

Copper was similarly strong, driven by higher prices and rising volumes across the three operations.

And lastly minerals, where TiO2 volumes reflected weak Western market conditions for pigment, while IOC has still not achieved the operational stability we're striving for.

On the plus side, we achieved Rincon first lithium from the starter plant and approval for full-scale operations.

Moving to the safe production system.

This is now being deployed at 31 or 80% of sites and we're deepening maturity at the initial locations.

Our Amrun mine in Queensland is a great example.

In 2024, it achieved record bauxite output and is now running above nameplate capacity and was a key driver of our overall 7% production uplift.

Let's now take a look at OT Underground, best operator excellence in action.

In 2024, we achieved all ramp-up milestones, including commissioning the converter surface.

As we steadily increase its capacity, output is set to rise by over 50%.

And the ramp up will continue over the next three years to 500,000 tonnes per year, on average, over the period 2028 to 2036, making OT the world's fourth largest copper mine by the end of the decade.

We believe that we can realize even more from our existing assets.

We're therefore addressing our most complex challenges head-on.

Kennecott's ore body is significant.

It remains a real opportunity to unlock value in an attractive jurisdiction.

Our job is to work through the geotechnical risks and maximize value from all open pit and underground options.

And it's vital we turn this asset round and set it up for the future.

Over the last few years, we have learned a lot about the complexity of IOC.

As I mentioned in December, we are systematically working through the bottlenecks in order to achieve operational stability.

Elsewhere, we are deepening partnerships, bringing Sumitomo into the Winu project and working closely alongside our Chinese partners at Simandou.

I was in Guinea last month and was struck by the tremendous progress over the last year.

We remain confident that we will achieve first production at SimFer mine gate later this year and ramp up over 30 months to 60 million tonnes per year.

Lastly, on decarbonization, we have signed renewable power contracts for around half of Boyne's needs and secured a more flexible energy supply for NZAS, as well as increasing our stake to 100%.

We continue to take a very disciplined approach to capital allocation.

Our CapEx guidance is unchanged, with growth of around $3 billion each year.

The major commitments in 2025 are completion of OT Underground, the ongoing delivery of Simandou, and the start of construction at Rincon.

Over the next few years, production from our projects will take off, particularly driven by OT and Simandou.

Our balance sheet strength is the key enabler here.

It allows us to run our business consistently and maintain investment through the cycle, offering resilience and creating optionality such as our acquisition of Arcadium.

We remain committed to maintaining a strong balance sheet.

And finally, the dividend.

In line with our usual practice, we have declared a 60% payout for the full-year ordinary.

Our commitment to consistent shareholder returns is unwavering, and we now have a nine-year track record of paying at the top of the range.

With that, let me pass back to Jakob.

Thank you, Peter.

We have made great progress executing our strategy and objectives in 2024.

As Peter showed, our momentum towards best operator is helping us get more from our existing assets.

The underlying driver is our evolving, more psychologically safe work culture, creating a less hierarchical and more humane organization.

We are also capturing operational learnings as we develop major projects.

For example, Simandou is progressing at a breathtaking speed on schedule and on budget.

Of course, 2024 was the year of lithium as we sought to diversify our portfolio further.

And our deepening project expertise is giving us the tools we need to also build a world-class lithium business.

Rincon went from greenfield to first Lithium in only 32 months, and we are now scaling up the site with confidence.

Meanwhile, combining our Rincon learnings, technology, and balance sheet with Arcadium's expertise will allow us to realize the full potential of Arcadium's assets.

The acquisition is advancing at pace and set to close within the first quarter.

Enhancing our existing operations and evolving our portfolio in line with demand provides a strong base for us to succeed in the short, medium, and long term.

Yes, we can expect more global volatility in the year ahead, but our strategy enables us to be resilient in an uncertain world and capture new opportunities as they arise.

So let's look at the year ahead.

There are important milestones to come, including Oya Tolgoi's ramp up, first production at the mine gate from Simandou, and the rollout of technologies, including AP60.

And throughout our year, our priority is to intensify our focus on best operator to drive improvements everywhere.

The outlook gets even more exciting further down the line: 1 million tonnes of copper a year this decade, growing our leading aluminum business, expansion in high-grade iron ore, and a leading lithium business.

That's not all.

We have a rich pipeline of projects, exploration, and technologies in development that will support our growth and provide materials needed for the energy transition.

That brings me on to decarbonization.

It is worth highlighting that we made significant progress in 2024.

This was a record year for our emission reduction.

We have moved from strategy to action, cutting emissions by 14% between 2018 and 2024, bucking the trend at a time when they are on the rise globally, and we have done it without compromising our shareholder returns.

2024 was also a record year of project approvals to meet our future targets.

These recent commitments have significantly advanced our progress towards our 2030 target to cut emissions by 50%, which we are pursuing with a relentless focus on value.

In summary, our strong operational and financial results tells us Rio Tinto has momentum on its trajectory for a decade of growth.

We have also shown leadership in project development, and we are embedding those learnings throughout the organization.

Crucially, we are delivering consistent shareholder value as we diversify and decarbonize our portfolio and strengthen our business further.

No matter what comes our way, cyclones and all, I have confidence that it will be a very decent year ahead, because I have an excellent team and we have an excellent resource base.

Thank you.

Good morning, afternoon, and good evening, everyone.

Thank you for joining the call today.

My name is Rachel Arellano.

For those who have not yet met me, I'm really excited to be here, my first full-year results as Head of Investor Relations at Rio Tinto.

Jakob and Peter have taken you through their introductory remarks on our strong operational and financial results for the year 2024.

We will now follow with a question-and-answer session for 45 minutes.

Please limit yourself to one question and one follow up so that we can cover as many people as possible.

With that, I will now hand over to the operator.

Thank you.

(Operator Instructions) Rahul Anand, Morgan Stanley.

Hi, Peter, Jakob, and team.

Thanks for the call.

First question is for Peter, perhaps.

Peter, the dividend policy and the dividend today, obviously great consistency and predictability, having paid 60% of EPS over the past nine years.

If I look through the detail, however, obviously the dividend represents a payout greater than 100% of the free cash generation, or my number is about 120%.

And if you look into the future, you've obviously got higher CapEx, which implies your dividend at the 60% level is probably going to exceed the free cash flow in future periods as well.

So I guess my question is, are you comfortable adding debt to maintain that EPS payout level in future periods?

That's the first one.

Thanks.

Well, I think the key point is that we are investing in some pretty attractive growth through the OT Underground and through Simandou, which is going to add incremental cash flows into the system.

So the answer is yes.

I mean, right now, we had a small deficit of free cash flow to investment, but those incremental cash flows really give us the confidence going forward to pay the dividends at the level it is.

Got it, that's very clear.

And look, a quick second one for Jakob perhaps.

Congratulations, obviously, on the strong performance from the aluminum business for the period.

Just under a scenario, Jakob, where you do have tariffs on Canadian goods come in, I mean, how would the aluminum business be able to cope with that?

Just wanted to understand, under a scenario where you're perhaps shipping your product to Europe.

I mean, is there capacity in the trade routes available?

What incremental costs should we think about?

Obviously, there's a lot of volatility, but it would help us sort of square the circle on that.

Thanks.

Yes.

Thank you, Rahul.

I am in Washington, DC, and I'm trying to understand what the US wants to achieve.

Bear in mind that we produce a lot in the US, different products, and then A number of products are being imported for us into the US.

So first of all, the economic impact on tariffs to Rio Tinto might be both pluses and minuses, and we don't know whether the net will be positive or negative.

But it really depends on how the tariff hits.

If all countries are getting a tariff, the impact for us is zero.

The problem is if it's only one country and the country we are selling into.

But then, of course, we could redirect our aluminum to other markets and other producers will supply the US market.

So new balances will arise.

It's far too early to conclude anything on where tariffs will end.

And that's why my focus is to try to understand what is it the US wants to achieve.

At the end of the day, tariffs is only an instrument.

And allow me just to follow up on what Peter said.

I think it's so fundamental, your first dividend question.

I actually did the math here because you have seen that we, nine years in a row, have paid 60% of dividend, the maximum of our policy.

We've actually paid $72 billion of ordinary dividend over the last nine years.

In that period, we have reduced the debt to half the size and we have stepped up CapEx.

And we have gone from contracting our production volume to growing it, and now we have a clear decade of 3% production growth ahead of us.

And therefore, if you just look at that statistics, we feel really comfortable about meeting your dividend requirements for the future.

Absolutely.

No, that is definitely commendable, Jakob.

Thank you very much.

That's my questions.

Jason Fairclough, Bank of America.

Good morning, good evening, good afternoon, I guess all of the above to everybody on the call.

Thanks for the opportunity.

A couple for me, Jakob.

First one, I guess, again, on tariffs.

As an executive, given the volatility on the news flow around tariffs, are you more or less minded to make more investments in the US and Canada at the moment?

Right now, as I say, I'm sitting in the US.

We are very keen to invest in the US.

As you know, we have a potential copper mine resolution that could produce 25% of the copper needs for the US.

We also are one of only two who has a copper smelter, and it's been difficult to make money on copper smelting in the US.

And maybe there will be better conditions for that in the future, so I wouldn't mind seeing further investment into the US.

But I'm also very keen on investing in Canada, and we are investing a lot in Canada right now as you know.

And I'm very pleased to inform you that the project is on schedule and on the AP60, the first new smelter in the Western world for 16 years.

And I'm very comfortable about that one.

But of course, there's a little bit of uncertainty right now.

But I think the way to look at it right now is instead of just looking at the downside, when you have fairly seismic change, opportunities arise.

And it's really the opportunities I'm looking for right now.

So there's nothing about cutting down on investments in Canada right now.

Thank you.

This is a follow up, if I could.

And this might be for Peter.

And Peter, you're alluding to the fact, I think, that you're partway through a lot of these growth projects.

And I was just looking at your balance sheet.

I think it's $100 billion of assets.

It's just under $70 billion of property, plant, and equipment.

Off the top of your head, have you got a feel for how much of that PP&E is actually unproductive today that it would become productive in the next few years?

Jason, not off the top of my head, but fundamentally, on Simandou, we sent $2.4 billion of our share of the CapEx, so about 40% of the way through by the end of last year.

Clearly, that's not producing anything at this moment in time.

And on OT, we spent -- I think we're 95% there of the CapEx, but we're only just starting to go through the ramp-up process.

I mean, we talked in the presentation that we expect more than 50% uplifting copper output this year, 25% versus 24%.

So they are the two big components if you like.

But certainly, they're on the balance sheet and not yet translating into anything like the full cash flows.

Thanks a lot, Peter.

Paul Young, Goldman Sachs.

Good afternoon, Jakob and Peter.

I hope you're both well.

Jakob, a few questions on the Pilbara, please.

The first one is on just guidance and the fact that you have lost 13 million tonnes of production from the wet weather, which is effectively your guidance range or the spread.

You said you can make up around half of that, and I think you generally budget for seven to ten lost days from weather each year anyway, but you're holding your guidance.

I would have thought, though, that commentary would have been guiding to the lower to the midrange.

I'm just curious about, are you really just waiting for the complete review of the infrastructure impact?

Yes, thank you, Paul.

I do think we know quite well where we are.

But what we, of course, don't know is whether we get more cyclones in the months ahead.

And what I will say to you, we're only in February.

I just spent three weeks in Australia, and I spent time up in the mines.

Fortunately, there were no cyclones when I was there.

They are doing an amazing job at the moment.

The SPS is really working.

The culture is changing.

The maintenance is in a much better shape.

Our rail lines are working very well.

So I actually feel very comfortable.

And of course, we have talked to Simon Trott and his team, and they feel comfortable with the guidance as it is right now.

It's clear that it will have an impact on first quarter production and sales volume.

And it's a bit unlucky circumstances, the whole story from a lot of water in December into the three or four events we have just recently had.

But if we felt we should change the guidance, we would have changed the guidance.

But given where we are today, the guidance is the guidance.

And that is, of course, a vote of confidence in what they're doing.

But I really feel it's the best guidance we can give to the market.

Thank you.

Okay, thanks Jakob.

And then maybe just on the long run, and actually Rhodes Ridge, great to see Mitsui come in as a JV partner, seeing you have a long-standing relationship through Rhode River and also, more importantly, Cape Lambert port.

So I'm just curious, on your views.

It seems like a pretty big number they've paid, so I'm just curious about your views on that, and do you think they're assuming a larger operation?

And then secondly, the fact that they own a stake in Cape Lambert, just with the infrastructure charges, does this change any way, potentially, the effect of equity tonnes or free cash flow that you might get out of Rhodes Ridge?

Thank you.

No, absolutely no changes to that.

We have a very good relationship with the two families.

But particularly the one family, for strategic reasons, did not want to be participating.

So it's super good news that we are getting towards the end ownership of the joint venture so that we can really progressing at that.

And then you asked me about the valuation.

And unfortunately, Paul, I cannot do your job, but I think it's very, very transparent that we are dealing with an asset that is worth an enormous lot of money.

And don't forget, we are very happy with our 50% ownership because our economics is considerably more than the 50%, because we will get the full synergies from using the rail and the port.

So I think you actually have got -- all of you analysts have got some really important points to help you valuing our iron ore business.

Over to you, Paul.

Thank you.

Got it.

Good work today.

Thanks, Jakob.

Lyndon Fagan, JPMorgan.

Hi, everyone.

Jakob, thanks for the call.

Just wanted to touch on the Pilbara replacement mines.

Again, it feels like results keep rolling by and we're no closer to getting approvals; obviously, depletion really kicking in.

Can you comment maybe about the 345 to 360 shipment range and when you expect to achieve that now?

It really does feel like we're creeping up to some of that timeline flipping.

And then I've got a follow up as well.

Thanks.

Yes.

Let me start and hand over to Peter, but just a couple of things.

I mean, first of all, you have good news today about Rhodes Ridge.

We have just talked about that.

I know what you're saying.

You're talking about the interim between that and now.

I will say to you as well, which is also good news, is that Western Range is on schedule, on budget, so that will be ramping up shortly, and we are making focus on those things.

But you're right, the beauty about the iron ore system is that we don't have constraints in the port and the rail.

And we are becoming more and more productive in the mine, so the constraining factor is really about getting access to land.

We are making progress at the moment, but that's the critical part.

There is absolutely no change to what Simon Trott told you at the Capital Markets Day.

But Peter, why don't you just elaborate on that?

Jakob, that was going to be my punchline, exactly that, that we are pretty much progressing as we thought.

So there's no change to the timelines we've talked for the four big replacement mines that are going to come through.

They're certainly moving through the system.

We can't be sure on timelines around approvals.

But at the moment, we feel that they're moving along the timelines that we expected.

Okay.

Well, I guess -- yes, the pressure's on for 2028, I guess.

But look, the next question I had was a market question.

I mean, we've observed Chinese iron ore imports ramping up over the last few years, just as steel production has been falling.

And I guess, through the Simandou project alone, most of the market is bearish on iron ore. and here we are seeing Chinese imports grow in a falling steel environment.

I'm wondering what your observations are around why Chinese iron ore imports continue to rise.

I know we've seen domestic depletion, et cetera.

Any commentary there?

And I guess as a related topic, your market impact assessment on bringing Simandou on and how disruptive that might be.

Lyndon, we effectively are still seeing Chinese production of steel around 1 billion tonnes, and that is clearly driving the iron ore demand.

We did see some increase in port stocks in 2024, about 30 million tonnes.

But fundamentally, it was that steel production rate that drove the demand for iron ore.

We would say that the prognosis we gave to the market over the last sort of two years is keeping going.

I mean, there is a chunk of supply of iron ore coming in from the majors, but there's still 600 or 700 million tonnes there that is coming into the market from Chinese domestic, from a whole variety of land-borne and seaborne suppliers around the world.

And you've seen a lot of inflation in the cost curve over the last few years, giving more support into the iron ore market.

And we've just seen that every time there's been sort of the prices come down, it's bounced back up because of that cost support around the supply curve.

So I think we just sort of have no change to our view on that.

It's just, I think, remains a very robust market.

And the fact that you have that sort of big, big swathe of sort of supply there, which is clearly striving to meet Chinese demand, is where Simandou fits in.

I mean, this is high-grade, low-cost iron ore, which we think there's an absolute place in the market balance because of that overall supply curve.

So no change really, Lyndon, to our view on what's happening there.

And I think I should probably add a little bit because sometimes you read things in the newspapers from various sources.

Yes, Simandou is going amazingly well.

It's really focusing at -- I call it breathtaking speed, because it does.

But it's only first ore at the end of this year, and it's going to take 30 months to ramp up.

And it's only 6% of the world's seaborne iron ore that will come out in aggregate from Simandou.

And we think there's space in the market for that.

Thanks.

Ephrem Ravi, Citigroup.

Thank you.

The first question, of the 2.5 billion for Rincon that you plan to spend over the next four years, how much would you expect to spend this year?

Or is the acceleration of the project also subject to formation of those super sites for lithium in Argentina as part of your plan after closing the Arcadium transaction?

Yes, I'll ask Peter to answer the exact number of this year of Rincon.

It's a fairly smaller part of it, but let's just start with the good news.

Arcadium, that transaction has gone extremely smoothly, and we thought it might take up to a year to close the deal.

But we announced it in October, and now we might actually be able to close it here. if not by March 1, then in the course of March.

And I'm planning to go to Argentina myself here in March and go and see the sites.

It goes without saying that certain things you can't do before you have closed the deal.

And from there on, we will very quickly develop a plan for exactly where investments will happen and how fast we can ramp them up.

So given the fact that we haven't closed the deal, it would be not very smart of us to share a plan.

We have a plan, but we're going to learn much more.

So far, everything looks very good.

And integration, I'm very comfortable on that as well.

I think there's a good match of cultures between the two companies.

I have hired Paul Graves to lead our Elysium business.

And I think, in general, we are on a path to retaining people and from there learn from each other and get more technical excellence and really drive the growth forward.

But Peter, how much are we going to spend on Rincon?

This year clearly is the first year of construction, and so you always have a slower buildup on that profile.

So we would expect it to be around $0.5 billion of spend this year.

Thank you.

And a follow up on the iron ore business.

So if I assume that 13 million tonnes is lost for the year, would it be also fair to assume that there would be a lower proportion of SP10 in 2025 compared to 2024?

The SP10 volumes last year was about 60 million tonnes.

So is there enough flex in the system to reduce proportionately the amount of SP10 and do more Pilbara blend?

I think the key point there is that the reason why losing the ports is important because we usually have excess capacity in the ports, and we can make it up during the year from the mines when we lose port capacity.

But we can't this year, because, effectively, the whole system is sort of stocked out in part.

So that's what's meaning that we can't move the tonnes, so it really doesn't change our view that we will continue to have elevated SB10 this year.

Thank you.

Rob Stein, Macquarie.

Hi, Jakob, and thank you for the opportunity.

A couple of -- well, two questions just on your CapEx guidance, so the $11 billion this year, excluding the one on closure and the one on exploration and development.

Just looking forward, when Arcadium does come in and you re-sequence the portfolio, are we expecting upside risk to that sort of $11 billion number?

Or is that $11 billion number being provided knowing that there are capital requirements with Arcadium?

And I've got to follow up.

So Robert, when you look at our capital guidance, we said $11 billion for 2025, and some of that was because we actually spent a bit less in 2024.

We were at 9.5, so we had a bit of flow over into 2025.

But post that, our guidance is 10 to 11, and we're hoping to maintain it more towards the 10 level.

And when you look at our sort of the overall growth aspect, which any Arcadian projects would fit into, we've got OT coming out of the system by the end of this year, the underground spend.

Big year for Simandou next year.

But the really big year is this year for spend.

By the end of this year, we'll spend something like two-thirds of the capital.

So the space really opens up in '26 and into '27 for project funding, and that's why we're pretty comfortable that what we'll need to spend on growing and building out the projects within the Orcadian portfolio can be accommodated within our current guidance.

Thank you.

And then I guess the linked question around Pilbara CapEx, kind of getting to Lyndon's point earlier.

When you think about the heritage profile, the risks to approvals, and the CapEx burden of trying to sustain that business, and then you're reviewing the Pilbara blend strategy, are we to think that there will be optimization with the Pilbara Blend strategy that will de-risk that production profile, i.e., we're taking the sustaining mines off the critical path?

So Robert, I think the key point is that those projects that we talked to, those four projects, it's not as though things are standing still and we've not got any sense of them moving forward.

We absolutely have.

And so they are moving forward, as we said, as we expect.

And those four projects are sort of absolutely foundational to the whole system going forward.

So we're seeing them move as we would expect to see them move towards their final approvals with the necessary heritage clearances in place as well.

I think that's the key point.

So we are absolutely reviewing the Pilbara product strategy as well.

That's work in progress, and we'll see where that takes us but fundamentally see the four projects as sort of foundational under any way forward.

Thank you.

Richard Hatch, Berenberg.

Thanks, team, and thanks for the call.

First question is just on iron ore costs.

So $23 to $24.5 a tonne seems a little bit above where the Street was looking for.

Can you just talk about whether '25 is perhaps the peak year for costs grinding higher in the Pilbara, and how do we think about that $20 a tonne medium-term target with that in mind?

That's the first one.

Thanks.

So Richard, I think the outcome, $23, is pretty good at the half-year.

We were at 23.2, so the second half was coming in lower.

I mean, the key point as well is that we had lower tonnes through the system, 1% lower, sort of 4 million tonnes of production that clearly has an effect on your unit costs.

It was about half of the delta on year on year.

I think what we're seeing is a lot of productivity start to be driven through the Pilbara system.

And I think it's really -- it's pretty impressive what they're doing.

And I sort of referred just to the changes being in employee productivity rates being experienced there.

I think the team's doing a great job, but there remains a lot of inflation in the Western Australian market that we have to offset as we move forward.

So that's where the guidance is up 3% year on year at the midpoint.

I think when it comes to the $20 a tonne, remember, that was set in '23 in real terms.

But as those projects come in, those four replacement mines and the system has additional flex to it, we will see that productivity really start to come through, and that's why we remain very comfortable with that as the mid-term target.

Thanks, Peter. and the second one's just on this impairment on the double digestion on the increased capital cost.

I'm just wondering how that impacts your decarbonization targets, progress, and such like.

Can you just -- or if not -- or if it doesn't at all, can you just explain a little bit about what's going on there?

Obviously, right into the back page of the report, so well done.

But no, absolutely, it's taken impairment on QAL because what we found is we've done more work around that double digestion project that the scope of it has increased and the CapEx is higher.

And so we've taken down the value of those assets by about half a billion dollars as a result.

I mean, we remain sort of very much committed to the program.

I mean, you've got to think of our business as an integrated business there of the bauxite mines in Weipa, the aluminum refineries supplying the rest of the smelting system.

And the system value is there, and we've got to decarbonize that system.

So the double digestion remains a sort of positive project.

Even if the capital we are now estimating is higher, it remains a positive sort of value project.

And so we're continuing the studies to try and make it happen.

Okay.

Thanks, Peter.

Chris LaFemina, Jefferies.

Thanks, Operator.

Hi, Jakob.

Hi, Peter.

Thanks for taking my questions.

So Jakob, being that you're in the United States right now, I wanted to ask about the 45X Critical Mineral Tax Credit that you could get, at the very least, at Kennecott and maybe even as a benefit at resolution.

I'm wondering, A, what you're hearing about that; and then B, if that does indeed become a reality, do you get the credit on only the operating costs for existing mines, or would it also help you on the CapEx resolution, assuming that gets green-lighted at some point?

Wow.

Just help me here.

The credit you're talking about is related to critical minerals, but that's related for comments from the previous government, isn't it?

No.

The Trump administration and Congress are considering declaring copper a critical mineral.

And if it becomes a critical mineral, as per Congress, copper producers in the US will get a 10% direct credit from the US government.

So Freeport said it would be $500 million a year for Freeport from its US operations, and that's just 10% of their operating costs, which they effectively get reimbursed for.

So I'd assume, at Kennecott, you'd be eligible for that in that resolution as well.

No, but you're right.

I just don't think we know all the equations yet, because it is one common from the new government, but it's based upon a system from the previous government.

But what I was trying to say earlier in the call is that there will be pluses and minuses, and all the production we have in the US are unlikely to be worse off and likely to be better off.

But I really think it's too early to conclude anything.

But I would say, today, I'm quite happy of having a smelter -- a copper smelter in the US, even though it hasn't been very profitable for quite a long time.

Thanks for that.

And secondly, just on the comment you made earlier about how tariffs on aluminum are kind of raised across the board globally.

It would be a net neutral for you.

But isn't it the case that the aluminum production in Canada that you're exporting to the US now is excluded from prior tariffs, whereas in this case you might be on a 25% tariff just like everybody else?

So some of the advantage that you have in Canada will go away and your margins might be compressed a little bit, or am I thinking about that wrong?

No, no, that's a very fair point.

Now it's only 10%, but we have the Section 232 exemption that was negotiated under the first Trump government.

But everything is up in the air.

We don't know where it will land, but you're right.

At that stage, that gave a favorable position to our Canadian smelters.

Thank you.

Good luck.

Cheers.

Thank you.

Liam Fitzpatrick, Deutsche Bank.

Hi Jakob and Peter.

I've got one question and then one follow up.

So firstly, just on the Chinalco stake, Jakob, you said in December at the C&D that resolving this constraint on potential PLC buyback is a priority of yours.

Are you hopeful of making any progress this year?

Yes, but I don't have any progress to tell you about today.

It's not a lot of time since December, so please be a bit patient, but I'm completely committed to what I said.

I cannot promise it, but I'll do my best.

Okay, thank you.

And then the follow-up is on a question on strategy and portfolio.

As you've outlined, a big part of the strategy is to rebalance the portfolio.

As the Mitsui transaction has shown us, there are some companies out there that are going to put a much higher value on your on your Pilbara business than the market will.

So have you and the management team ever considered monetizing part of the Pilbara through minority stakes sell-downs or something similar as a way of accelerating the shift in the portfolio?

Yes, that's something I would find very, very difficult to do.

We are the world's largest producer of iron ore.

We have optionality second to none with IOC, Simandou kicking in, and a system that actually can make choices in the Pilbara on its product strategy that other producers might find difficult.

So selling down would be a really bad strategy.

Then, otherwise, you should just sell the whole stuff, in my view.

I was sending your comment because Paul Young made the same comment back to you guys.

I think it's you guys who has to look at what is the real value of our iron ore business.

You got a very clear signal today from Mitsui.

Okay, thank you.

Thanks.

Lachlan Shaw, UBS.

Hi, Peter and team.

Thanks very much for your time.

Two questions from me.

Maybe to start off and just to sort of circle back on the iron ore cost curve and costs in general, maybe stepping back a little bit, what's the view at the moment in terms of how the cost curve more generally for the industry might be expected to trend in the next sort of one, two, three years?

And I'll come back with my second question in a second.

Lachlan, I think we saw a major period of inflation come through the system.

I think that is clearly coming off now.

I think some are dealing with that better than others, and I think we talked to what we're doing in our system.

But I wouldn't expect the same sort of change to the overall cost structure of the industry over the next two years.

I mean, clearly that's dependent on exactly how demand evolves.

But as we looked at the last many years, you can see China being very stable and incremental growth elsewhere for steel and thus iron ore.

So we're not posting any major change to the structure for the next few years.

Understood.

That's helpful.

Thank you.

And then my second question is just on I guess organic versus inorganic growth.

And I had observed that you've got a fairly full program of organic growth underway over the coming years.

You're soon to complete on Arcadium and what will come there.

How do you think about the capacity in the business for the potential inorganic growth?

Thank you.

Yes, thank you.

The answer is, always, it depends.

And some deals make sense and some deals make no sense.

What I feel passionate about, and this is why I'm so pleased that we have been able over the last few years to go from having a Rio Tinto that had a declining production towards growth is that we got so many great technical people.

I think it's my job for the benefit of the shareholders to make sure they are being kept as busy as possible, but not to break over.

You guys talk a lot about CapEx and -- sorry, capital and capital allocation.

And as you know, I've been a CFO for many years.

That's very important.

But actually, the most important constraining factors is what are your technical competences?

And I think we have now shown that we are able to to deliver projects on time, on budget.

We have improved significantly after we created our global project organization.

And when you have those capabilities, you want to use them at max.

And I think that's what we're doing right now.

That's why I'm so happy about our growth journey.

And we are capable to take over Arcadium and help them execute projects as well.

But we are running at, I wouldn't say, full capacity, but close to.

And that means that I don't have much desire to add more things into it.

But I mean, at the end of the day, you can never say never because it's not that taking over Arcadium is just us who has to deliver.

We're actually getting a lot of capabilities in Arcadium.

So you could say the combined entity of Rio Tinto and Arcadium will be having more execution capabilities than before.

So that's the kind of constraining factor.

But the most important point I want to make between organic and inorganic is that we are just really lucky as a management team here in Rio Tinto.

We have received from our predecessors many, many years back a cupboard full of opportunities.

We just talked about maybe we could at some stage focus something like resolution.

And it goes without saying it's our responsibility to first look at the options that we have for free before we go out and spend an awful lot of money to get something else.

Thank you.

Alain Gabriel, Morgan Stanley.

Thank you for taking my question.

I have one question and a follow up.

The first question, since we were talking about resolution, how do you see the roadmap for the project from here under the new US administration?

That's my first question.

Thanks.

Yes.

Look, right now, we are waiting on the Supreme Court that hopefully will not take the case.

We have won the case in four courtrooms now.

Every time it has been in the courtroom, we have won the case.

And if they're deciding not to take the case, then it's back to the administration.

And now there's a new administration, and the previous Trump administration did approve the land swap.

The next step is to get the land swap to happen because then we can do the final drilling, we can learn the full size of the ore body, and from there design the best possible project while we, in parallel, are making consultations with all the tribes that have connections to the land.

And I would say that area is actually progressing very well.

So I'm optimistic, but it's still a long journey.

And first copper is not the next couple of years.

It's somewhat further out.

But don't forget, it's a copper mine that can produce 500,000 tonnes for a long period of time.

Thanks, and the follow up is on -- can you give us an update on your discussions with Entrée Resources with respect to their JV with OT?

What are the next milestones from here and your discussions with them, and what are the implications, or are there any implications or any delays in reaching an agreement?

What are the implications for the mine plan?

Thank you.

Yes, so far there is not -- but it would be nice to get that part solved in the not-too-distant future.

My focus is, and we are working closely with the Mongolian government, to solve the tax dispute we have there.

I mean, that would be my first priority.

If you solve that, it's much easier to solve the entry as well.

But we have really good progress, and I feel that we are working in good lockstep with the government on a project that now is focusing so successfully.

When things are going well, it's always easier to solve issues.

So that's my philosophy.

I would, of course, rather like today than tomorrow, but I think we're getting closer to solve those two issues.

Thank you.

Thank you.

Dominic O'Kane, JPMorgan.

Hi, guys.

Actually, my questions have all been asked, so thank you.

Thanks for the time.

Excellent, an analyst who runs out of questions.

That's fantastic, Dominic.

Thanks.

Kaan Peker, RBC.

Good morning, Jakob and Peter.

Thanks for the update.

Two questions for me.

Firstly, can I ask about the future of TI2 in Canada?

I appreciate that you mentioned tariffs will impact the economics of the Canadian assets, and there are a number of furnaces at RTIT that are on care and maintenance.

And I'll circle back in a second.

Yes, it's an excellent question.

What I see that the team is doing is great focus on improving its cost position.

It's probably the place in Rio Tinto where we have most focus on the cost efficiency.

But there has been a lot of shifts in the market, and we need to adjust towards where the customers are and to the market.

And right now there is some uncertainty with regards to tariffs.

But don't forget, Sorel is not only producing titanium slag, it's producing scandium.

We are trying to start producing titanium metals as well, all very, very critical minerals that has great interest by the US.

So I think these things need to be seen in totality.

But it's clear that the tariffs brings more uncertainty to our titanium business than our aluminum business in relatively speaking terms.

So let the dust settle a little bit on the tariff side, and then I can give you a better answer on the utilization of the Sorel plant, which I guess is the core of your question, but it does depend on where we land on tariffs.

Thank you.

I understand guidance was maintained, but do you have an update on East Intercourse Island remediation work and the time for the port to get back to name plate?

I think the initial assessment was three to four weeks.

Has there been any changes to that?

Thanks.

No, it's still the same.

It's actually heroic work.

Just so we're clear, we understand the things with the number.

It's not a problem that a number is getting flooded.

But this number was put in place around 1970, and we have never had so much rainfall in one hour.

And the sad thing in this case was that the flooding was so high up that it took the whole electrical installation.

And that actually have kept our suppliers on working overtime to give us new electrification kits in place.

And so it's all about getting that stuff to the Pilbara and quickly installing it.

It's actually quite impressive that it was possible to do within that timeframe.

But obviously, it's disappointing that we have to have them down for such a long time.

It is the impact of climate change, I'm afraid to say.

It's a good learning for us, and it's a good test for us to go around and look at things.

Flooding is one thing, but destroying your electrical installation is something else.

Thank you.

Amos Fletcher, Barclays.

Good afternoon, guys.

Just a couple of questions.

I wanted to ask, in light of the story about the approach from Glencore, which appeared to have been taken quite seriously by the Rio Board, what should we read into that in terms of strategy and whether you're prepared to go back into coal, for example?

I don't know where you have this thing about the Board.

I cannot comment on rumors.

It's entirely a rumor, so I'm afraid I can't comment on that.

But you're right.

We left coal just before I joined the company in '18, and we have had no plans for going into coal again.

Okay.

And then just, I guess, a follow up on that is, I don't know, just to ask the question on the DLC structure.

As you look at large-scale consolidation options in the industry, does it make you think more positively about the merits of dissolving or unifying the DLC?

Not really.

We can certainly use script with the DLC.

And funnily enough, Peter reminded me we actually have done that, but I think it's back to year 2000 where we have used script when we took when we took Comalco private.

So that's really not an argument.

We will, in a couple of hours, announce our invitation to the AGM.

And there will be a resolution there that is requested by Palliser.

And there will be the Board's response to their resolution.

So if you don't mind, I'd like to refer to that.

You will have it in, I think, one or two hours.

Okay, great.

Thank you.

Myles Allsop, UBS.

Great, thank you.

Quickly on Simandou, you talk about this 30-month ramp up.

Could you give us a bit more clarity on the shape of that?

So if we're thinking about both Blocks 1, 2, and 3 for the system as a whole, should we take a straight line in this 40, 80, 120 broadly over the three-year period, or will it be more clunky?

Time will tell, but it goes without saying that the two consortia share the infrastructure.

For example, we tend to be in Block 3 and 4, and we wouldn't mind -- we wouldn't like to see Block 1 and 2 take the capacity in front of us.

I think we will all try to note from that side, but we do need to get a reliable system, and that takes time to load up.

I'm not able to offer you anything better than a straight line at this point in time without promising you that it is a straight line.

Okay, thanks.

So maybe just a very last question back on the DLC, and maybe this is in the Board's response.

It seems like the big difference is in the cost, and you've been quite clear that you see it at about $5 billion of cost.

And obviously, Palliser has a very different view.

Could you just give us a sense of how you build up to that $5 billion or probably the audit that was done quite recently, I think?

No, I don't think it's in the interest of the shareholders that we go into what kind of tax exposure there could be from that.

That is crystal clear, not in the interest of the shareholders.

But that's only one side of the equation.

You have to sit yourself and think, how on earth can you do this and never get your Australian shareholders to pay a premium for taking out the PLC shareholders?

So it's quite an undoable transaction.

Okay, thanks, and safe traveling.

Thank you.

Thank you.

I will now hand the call back to Rachel for closing remarks.

Thank you so much for joining us today.

If you do have further questions, please don't hesitate to reach out to the IR team.

So we wish you a good rest of the day wherever you are dialing in from today.

Thank you very much and goodbye.

Thank you.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.