Rio Tinto : 2022 AGM - Transcript

Rio Tinto Limited Annual General Meeting

5 May 2022

Disclaimer: This transcript has been prepared by a third party on Rio Tinto's behalf. Rio Tinto cannot guarantee that it is accurate or complete nor that all or any errors it may contain have been corrected. You should not, therefore, rely on any of the information in this transcript. Anyone seeking to clarify content discussed in this transcript or the event to which it pertains should contact Rio Tinto's Investor Relations team.

[VIDEO]

Simon Thompson (00:04:17):

Good morning to everyone here in Melbourne, and to those of you joining us virtually. My name is Simon Thompson, and I'm the Chairman of Rio Tinto. It's my pleasure to welcome you to our 2022 annual general meeting. And it's a particular pleasure to see so many of our shareholders here in person. We start as always with safety, our top priority. So please take a moment to listen to this short safety announcement.

[Emergency evacuation briefing](00:04:44):

Simon Thompson (00:06:04):

In the same way that safety is critically important to us, so too is our respect for the communities that host our operations around the world. So it gives me great pleasure to introduce Auntie Di, who is a senior elder of the Wurundjeri People, the traditional owners of the land on which we meet today. Auntie Di is accompanied by Eric Edwards on the didgeridoo.

[Welcome to Country](00:08:35):

Simon Thompson (00:12:43):

Thank you. Thank you, Auntie Di for your very wise welcoming words, and to you and Eric for a wonderful opening to our AGM. We're holding this year's AGM as a hybrid meeting. Shareholders who are unable to attend in person can view the meeting live via the Lumi platform. They will be able to ask questions either orally or in writing and to cast their votes through the platform. In addition, a video recording of today's proceedings will be available on our website after the meeting.

Rio Tinto Limited

A quorum is present, and I now formally open the meeting. It's my pleasure to introduce my fellow members of the Rio Tinto Board, starting from my left, Tim Paine, our Australian Company Secretary, Simon McKeon, Senior Independent Director of Rio Tinto Limited, Megan Clark, Chair of our Sustainability Committee, Peter Cunningham, our Chief Financial Officer, Jakob Stausholm, our Chief Executive, Dominic Barton, my successor as Chair of the Board, Simon Henry, Chair of our Audit Committee, Jennifer Nason and Ngaire Woods.

Unfortunately, Ben Wyatt and Sam Laidlaw, Senior Independent Director of Rio Tinto PLC and Chair of our Remuneration Committee, they are in Melbourne, but they're unable to attend in person because both have tested positive for COVID. We also have with us Trevor Hart, our external auditor from KPMG. We've had a number of changes to the board over the past year. Michael L'Estrange retired at the conclusion of the Rio Tinto Limited AGM in May 2021, and last month, Hinda Gharbi retired from the board at the conclusion of the Rio Tinto PLC Annual General Meeting on the 8th of April. I'm very grateful to both Michael and Hinda for their contributions to Rio Tinto.

In June, we appointed Peter Cunningham as our Chief Financial Officer, and in September 2021, we welcomed Ben Wyatt to the board. Ben's knowledge of finance, public policy, trade and indigenous affairs has already proved to be invaluable. And it's a great pity he can't be here today. As previously announced, I will step down as chairman at the conclusion of this meeting. I'm delighted that the board has announced the appointment of Dominic Barton as my successor. Dominic has extensive business and international relations experience, as well as a deep understanding of the linkages between business, governments and society. And I wish him every success. Dominic, perhaps I could ask you to say a few words.

Dominic Barton(00:15:28):

Thank you, Simon. Let me first acknowledge the Wurundjeri People, the traditional owners of the land in which we meet today. Simon, I also want to just express my personal thanks to you for your leadership at Rio Tinto over the last eight years as a member of the board, but also the last four years as chair, and also, for your coaching and advice over the last several months. It's deeply appreciated.

I'm very excited to be joining Rio Tinto and be joining as the chair. I fundamentally believe that Rio Tinto has the opportunity to make a significant contribution to society by providing the materials that will enable the world to transition to a lower-carbon economy. I'm also very excited about the future specifically that lies ahead for us. And I think the strategic direction that was laid out in 2021 with the four key objectives will allow us to pursue growth and deliver attractive returns to shareholders, while also enabling a decarbonizing world. Further strengthening our relationships with customers, partners, and local communities, and incorporating a broad range of views in our decision-making is something I'm particularly passionate about.

Over the next few months, I'm planning to meet with as many of our employees and partners as possible, as well as of course investors. One of my key priorities is to ensure that we create a safe, respectful and inclusive work environment. I think it's a credit to Jakob and the management team that they've commissioned and published the recent review into the company's culture. And I fully support them and the implementation of the recommendations and our new values. There's no doubt we have some work ahead; navigating complex geopolitics, a shifting competitive landscape and some other societal challenges, and we are also resetting and strengthening our partnerships, including with the traditional owners of the land in which we operate. And our people are working very hard to improve our operational performance, despite challenging operating conditions from prolonged COVID-19 disruptions. But I'm very encouraged by the company's resolveand direction. I know Jakob, Peter and my colleagues on the board recognise we're at a pivotal moment and we are all committed to building long-term sustainable growth for Rio Tinto, our shareholders and our wider stakeholders. Thank you.

Simon Thompson (00:18:14):

Thanks very much, Dominic. As I reach the end of my eight years on the board, it has been a privilege to be part of the leadership team of this great company. I'm proud of the direction that Rio Tinto is taking and of the talent, resilience and commitment of our employees and contractors around the world. I'll say more about this in a moment, but first, let's deal with some of the formalities for the meeting.

In order to make today's proceedings as efficient as possible, I declare that voting on all resolutions is now open. As usual, resolutions will be decided by poll. For those attending online, if you are eligible to vote at this meeting, a polling icon will appear on your screen. Selecting that icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There's no need to hit a submit or enter button as the vote is automatically recorded. For those shareholders here at the meeting itself, if you have already sent in your proxy forms, you do not need to vote again. But for proxy holders in the room and those shareholders who have not appointed a proxy and are eligible and wish to vote, you may complete your voting card at any time and they will be collected at the end of the meeting.

I will now make some introductory comments before handing over to Jakob for his review of the year. 2021 was a year of transition. We appointed a new CEO, a new CFO, and nine members of Exco took on new roles. Following this unprecedented period of management change, we focused on rebuilding relationships and strengthening our social licence, while setting out a new strategy that seeks to reestablish Rio Tinto as a leader in an industry that has a critical role to play in creating a sustainable and prosperous future for people and for the planet.

Following engagement with management and the board, the new senior management team led by Jakob has established four objectives. In the opening video, you saw some of the important work going on around the business globally in pursuit of these objectives, and Jakob will speak further about our progress shortly. In addition, we rolled out three new values; care, courage, and curiosity, and a new strategy with the energy transition at its heart. We're now focused on delivering the strategy in collaboration with our partners and other stakeholders.

In 2021, we achieved our third fatality-free year in a row. This achievement reflects the hard work and dedication of our employees and contractors worldwide. Sadly however, people are still getting injured at work, so we must remain vigilant and focused. While some countries adapted to life with COVID-19, the pandemic continued to exact a heavy toll during 2021, particularly in some of the developing countries where we operate. I'm very proud of the resilience and care shown by everyone in the business for each other and for their local communities.

Our responsibility for the wellbeing of our employees and contractors extends beyond the traditional areas of health and safety. In 2021, we launched the Everyday Respect Initiativeto help us create a safer, more respectful and more inclusive environment by preventing an improving how we respond to unacceptable behaviour in the workplace. I'm grateful to Liz Broderick, former Australian Sex Discrimination Commissioner for advising the Everyday Respect Taskforce that we set up to drive this initiative, and to the more than 10,000 employees and contractors worldwide, who participated in the listening sessions and surveys as part of our discovery phase. The findings in the report are deeply confronting and we are determined to implement all 26 recommendations set out in the report. It is clear both from the findings of the Everyday Respect Taskforce and the tragedy at Juukan Gorge that we must create a work environment where everyone feels safe and empowered to speak up if something is not right.

Our 2021 operating and project development performance was negatively impacted by COVID-related travel restrictions, labour shortages, supply chain disruptions, and the transition to improved communities and heritage management processes in the Pilbara and elsewhere. Nevertheless, we achieved record financial results on the back of high commodity prices, with earnings of US$21.4 billion and free cashflow of US$17.7 billion. The group's direct economic contribution to the countries where we operate, including payments to our employees, our suppliers, governments, local communities and our shareholders amounted to US$67 billion. We paid US$13.3 billionin taxes and royalties globally, including A$14.8 billionhere in Australia. In view of this strong financial performance, we have paid a final dividend of 417 US cents per share, and a special dividend of 62 US cents per share. This represents our highest ever total dividend of some US$16.8 billion or 14 Australian dollars and 23 cents per share.

I'm now going to focus on climate change, which is the defining issue of our age and is at the heart of our new strategy. Rio Tinto has a critical role to play in the energy transition, supplying essential materials, including copper, lithium, high grade iron ore and aluminium, all of which are vital for the transition to a low-carbon economy. Our new strategy sets out our plans to grow production in each of these metals. And we've made significant progress in this area with the acquisition of Rincon Lithium Project in Argentina and the commencement of underground mining at Oyu Tolgoi in Mongolia.

Most recently, the board has given in principle approval of the path forward for the development of the Simandou Iron Ore Project in Guinea, in line with international ESG and compliance standards. We also have a responsibility to reduce the Scope 1 and Scope 2 carbon emissions from our operations. The materials we produce already have a much lower carbon intensity than most of our competitors. And we have set ambitious new targets for a 15% reduction by 2025 and a 50% reduction by 2030. To thrive in the long term, we also need to be part of net-zero value chains, particularly for steel and aluminium. Our fourth TCFD-aligned climate change report published in February this year sets out our goals, working in collaboration with our customers and suppliers to reduce our indirect Scope 3 emissions. In recognition of the urgent need for action on climate change by business, governments, consumers and investors. We are for the first time this year putting our climate action plan to our shareholders for an advisory vote in resolution 17.

We continue to implement the recommendations arising from the Juukan Gorge tragedy in May 2020. In September last year, we published our interim report on our communities andsocial performance commitments. And there is a huge amount of work going on to improve our processes and build mutually-beneficial and respectful partnerships with traditional owners and other First Nations People around the world. It is a multi-year journey, but we are making good progress, such as the agreement with the Yinhawangka Aboriginal Corporation. The first of our new generation of agreements with Australian traditional owners, which sets out our approach to the co-management of culture and heritage and offers a template for future agreements in the Pilbara.

We have emerged from the challenges of the past few years with a firm commitment to become a more inclusive, respectful and caring company that creates value for all stakeholders. We have set out a new strategy that will reestablish Rio Tinto as a leader in an industry that has a uniquely important and challenging role to play in creating a sustainable and prosperous future for people and the planet. With the new senior management team and the new strategy in place, 2022 is all about delivering our strategy in collaboration with our partners and other stakeholders.

Let me finish by thanking my colleagues on the board, and especially Jakob, for their hard work and commitment and dedication to Rio Tinto the past year, and for their insights, advice and support during my time as chairman. I'll now ask Jakob, our Chief Executive to give us an update on the business.

Jakob Stausholm (00:28:17):

Thank you, Simon. Well, first, I'd like to acknowledge and pay my respect to the Wurundjeri People, the traditional owners of the land on which we meet today, and all traditional owners and First Nations People that host our operations around the world. 2021 was a defining year. When I became chief executive, it was clear that we needed a reset. We needed a clear sense of purpose, putting respect for people, communities and land at the heart of our contribution. And we needed to listen. We produce materials vital for the energy transition, but that's not enough. The way we produce these essential materials is what will make the difference to our customers, to host communities and governments, and to you, our shareholders. We must align our business priorities with society's expectations and ensure all of our stakeholders benefit from our success. We have a lot of work to do, but we are on the right path. We implemented the biggest management change in our history and set four objectives essential to our success. Being the best operator, achieving impeccable ESG credentials, excel in development, and strengthening our social licence. We launched our new strategy, including ambitious climate change targets, setting a new direction for us to contribute to and thrive in a decarbonizing world. And we set simple new values that connect us all as human beings: care, courage and curiosity.

Let me now talk for a moment about the humanitarian crisis in Ukraine, which has caused enormous suffering for innocent people. I join the world in condemning the violence and hoping for a peaceful and rapid end to this conflict. We have no operational assets or employees located in Russia and Ukraine. However, we are taking actions in a few areas. Firstly, overall, we are in the process of terminating all commercial relationships we have with Russian businesses. Most recently, we have now the hundred percent capacity of the Queensland Alumina Limited, which was previously operated through a joint venture with Rusal. We remain committed to ensuring the continued safe operation of QAL as a