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RIO TINTO PLC

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Delayed London Stock Exchange  -  05/20 11:35:58 am EDT
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Rio Tinto : Fourth Quarter Operations Review 2021

01/17/2022 | 04:35pm EDT

Notice to ASX/LSE

Rio Tinto releases fourth quarter production results

18 January 2022

Rio Tinto Chief Executive Jakob Stausholm, said: "In 2021 we continued to experience strong demand for our products while operating conditions remained challenging, including due to prolonged COVID-19 disruptions. Despite this, we progressed a number of our projects, including the Pilbara replacement mines, underlining the resilience of the business and the commitment and flexibility of our people, communities and host governments. We are seeing some initial positive results from the implementation of the Rio Tinto Safe Production System, which we will significantly ramp up in 2022, as we continue to work hard to improve our operational performance to become the best operator.

"In the fourth quarter we set a new direction for the company and announced a number of partnerships focused on decarbonising the value chain for our products, including green steel. We also entered into a binding agreement to acquire the Rincon lithium project in Argentina, which is strongly aligned with our strategy. These actions will ensure we continue to deliver attractive returns to shareholders, invest in sustaining and growing our portfolio, and progress our ambition to net-zero carbon emissions."

Q4

vs Q4

vs Q3

Full Year

vs Full Year

Production*

2021

2020

2021

2021

2020

Pilbara iron ore shipments (100% basis)

Mt

84.1

-5%

+1%

321.6

-3%

Pilbara iron ore production (100% basis)

Mt

84.1

-2%

+1%

319.7

-4%

Bauxite

Mt

13.1

-2%

-6%

54.3

-3%

Aluminium

kt

757

-7%

-2%

3,151

-1%

Mined copper

kt

132

0%

+6%

494

-7%

Titanium dioxide slag

kt

228

-16%

+9%

1,014

-9%

IOC iron ore pellets and concentrate

Mt

2.5

-9%

+15%

9.7

-6%

*Rio Tinto share unless otherwise stated

2021 operational highlights and other key announcements

  • The safety and well-being of our employees and contractors remains our priority. Fatigue, labour shortages and other pressures from COVID-19 have heightened the safety risk in day-to-day operations and remind us that there is no room for complacency. We experienced our third consecutive year with no fatalities at our managed operations. We are working hard with our partners to achieve the same results at our non-managed assets and marine operations.
  • Pilbara iron ore production of 319.7 million tonnes (100% basis) was 4% lower than 2020. This is due to above average rainfall in the first half of the year, cultural heritage management and delays in growth and brownfield mine replacement tie-in projects. Pilbara shipments in 2021 were 321.6 million tonnes (100% basis), 3% lower than 2020, and included elevated levels of SP10 product as a result of delays in growth and brownfield mine replacement tie-in projects.
  • Bauxite production of 54.3 million tonnes was 3% lower than 2020 due to severe wet weather in the first quarter impacting system stability throughout the year, equipment reliability issues and overruns on planned shutdowns at our Pacific operations.
  • Aluminium production of 3.2 million tonnes was 1% lower than 2020 due to reduced capacity at our Kitimat smelter in British Columbia following the strike which commenced in July 2021. The labour union and employees have reached an agreement with controlled restart in 2022.
  • Mined copper production of 494 thousand tonnes was 7% lower than 2020 due to lower recoveries and throughput at Escondida as a result of the prolonged impact of COVID-19, partly offset by higher recoveries and grades at Oyu Tolgoi in Mongolia and Kennecott in the US.

Rio Tinto | Fourth quarter operations report

1

  • Titanium dioxide slag production of 1,014 thousand tonnes was 9% lower than 2020 as a result of community disruptions and subsequent curtailment of operations at Richards Bay Minerals (RBM) coupled with unplanned maintenance and equipment reliability issues at Rio Tinto Fer et Titane (RTFT) in Canada. On 24 August, RBM resumed operations following stabilisation of the security situation, supported by the national and provincial government, as well as substantive engagement with host communities and their traditional authorities.
  • Production of pellets and concentrate at Iron Ore Company of Canada (IOC) was 6% lower than 2020 due to prolonged labour and equipment availability issues impacting product feed and various other operational challenges throughout the year.
  • At the Jadar lithium-borate project in Serbia, as a result of delays in the approval of the Exploitation Field Licence (EFL), which is a prerequisite to publish the Environmental Impact Assessment (EIA) and commence the consultation process, we are revising development timelines. Based on current estimates and subject to receiving all relevant approvals, permits and licences, first saleable production is expected to be no earlier than 2027 (previously 2026).
  • In the fourth quarter, we entered into several partnerships to accelerate decarbonising our own business and the value chains we operate in. In November, we announced the ELYSIS joint venture successfully produced aluminium without any direct greenhouse gas emissions from commercial-size cells.
  • On 20 October, we outlinedthe actions being taken to strengthen the business and improve performance. We unveiled a longer-term strategy to ensure we thrive in a decarbonising world and continue to deliver attractive shareholder returns, in line with our policy.
  • This year, we initiated the Rio Tinto Safe Production System (RTSPS) at five pilot sites, focusing on sustainably unlocking capacity across the system. We are already seeing returns in the first year of rollout including a significant improvement at the Kennecott concentrator since the July deployment compared to the previous 12 months performance. A significantly larger programme is planned for 2022, subject to COVID-19 constraints, with the RTSPS rollout of up to 30 deployments at 15 sites as well as up to 80 rapid improvement projects which aim at improving targeted bottlenecks.
  • On 28 October, we issued$1.25 billion 30-year fixed rate SEC-registered bonds priced at 2.75%. The proceeds of the new issuance were used to fund the early redemption and extinguishment of the company's $1.20 billion 3.75% bonds due to mature in June 2025.
  • On 19 December, we announcedthe Board of Directors had selected Dominic Barton to succeed Simon Thompson as the new Chair. Dominic will join the Board with effect from 4 April 2022 and be appointed to the role of Chair at the conclusion of the Rio Tinto Limited annual general meeting on 5 May 2022.
  • On 21 December, we announcedwe had entered into a binding agreement to acquire the Rincon lithium project in Argentina from Rincon Mining for $825 million. Rincon is one of the largest undeveloped lithium brine projects in the world, located in the heart of the lithium triangle in Salta Province.
  • Our guidance assumes development of the pandemic does not lead to government-imposed restrictions and widespread protracted cases related to new highly contagious variants with high severity, which could result in a significant number of our production critical workforce and contractor base being unable to work due to illness and/or isolation requirements. This risk extends to prolonged interruption of service from a key partner or supplier which could lead to severely constrained operational activity of a key asset or project. This risk is exacerbated globally by tight labour markets and supply chain delays.
  • All figures in this report are unaudited. All currency figures in this report are US dollars, and comments refer to Rio Tinto's share of production, unless otherwise stated.

Rio Tinto | Fourth quarter operations report

2

2022 production guidance

Rio Tinto share, unless otherwise stated

2021 Actuals

2022

Pilbara iron ore1 (shipments, 100% basis) (Mt)

322

320 to 335

Bauxite (Mt)

54

54 to 57

Alumina (Mt)

7.9

8.0 to 8.4

Aluminium (Mt)

3.2

3.1 to 3.2

Mined copper (kt)

494

500 to 575

Refined copper (kt)

202

230 to 290

Diamonds2 (M carats)

3.8

5.0 to 6.0

Titanium dioxide slag (Mt)

1.0

1.1 to 1.4

IOC3 iron ore pellets and concentrate (Mt)

9.7

10.0 to 11.0

Boric oxide equivalent (Mt)

0.5

~0.5

1Pilbara shipments guidance remains subject to risks around commissioning and ramp-up of new mines and management of cultural heritage.

2Reflects 100% ownership of Diavik (previously 60%) from 1st November 2021.

3Iron Ore Company of Canada.

  • Iron ore shipments and bauxite production guidance remain subject to weather and market conditions.
  • Our guidance assumes development of the pandemic does not lead to government-imposed restrictions and widespread protracted cases related to new highly contagious variants with high severity, which could result in a significant number of our production critical workforce and contractor base being unable to work due to illness and/or isolation requirements. This risk extends to prolonged interruption of service from a key partner or supplier which could lead to severely constrained operational activity of a key asset or project. This risk is exacerbated globally by tight labour markets and supply chain delays.
  • Pilbara shipments guidance remains subject to commissioning and ramp-up of new mines and management of cultural heritage, including any impacts from the recent changes to the Aboriginal Heritage Act 1972 (WA). We support the strengthening of Aboriginal heritage protection in Western Australia and continue to engage with Traditional Owners regarding current and proposed plans for mining activities, adjusting mine plans where required. Given the quality of our resource, we retain a range of development options in the Pilbara, subject to heritage and environmental approvals.

Rio Tinto | Fourth quarter operations report

3

Investments, growth and development projects

  • We continue to proactively manage COVID-19 and prioritise work across critical projects, as challenges associated with interstate and international border access continue, impacting the availability and movement of people and goods, most notably in Australia and Mongolia. Mitigation plans are in place however there are some delays with the delivery of equipment to sites and access to key personnel.
  • Exploration and evaluation expense in 2021 was $726 million, $101 million (16%) higher than 2020, with ramp-up of activities in Australia, Europe and Western Africa.

Pilbara mine projects

  • Commissioning and ramp-up of Pilbara growth and brownfield mine replacement projects has been impacted by ongoing COVID-19 restrictions, including labour access and supply chain quality issues. The latter has been exacerbated by an inability to conduct pre-delivery quality assurance and control at international steel and equipment manufacturers due to limitations on travel.
  • Mining and operational readiness activities are progressing at the Gudai-Darri mine and the railway is operational. The first train was loaded from the mobile crushing and screening facilities in December. First production from the main plant is now expected in the second quarter of 2022, subject to the continuing impacts of COVID-19.
  • The Western Turner Syncline Phase 2 project achieved first ore in October, in line with previous guidance. At Robe Valley, the autonomous mining truck fleet has been commissioned. Since achieving first ore in August, ongoing wet plant construction and commissioning challenges are impacting production ramp-up.

Oyu Tolgoi underground project1

Technical progress

  • The project is technically and operationally ready for undercut commencement, despite continued COVID-19 constraints in Mongolia. Site accommodation and staffing levels improved in the quarter to between 60% and 70% of planned requirements. The impact on project costs of the additional restrictions related to COVID-19 to the end of December 2021 is estimated to be $175 million. The project has achieved the conveyor to surface decline breakthrough and completed construction of Materials Handling System 1 with commissioning expected to be completed in the coming weeks.
  • Shaft 4 sinking activities recommenced in October, with advancement now at 148 metres below ground level. Shaft 3 readiness works continue, with sinking commencement expected by the end of the first quarter of 2022, despite some disruptions following an unplanned failure on one of the sinking brake systems. The delay to the commissioning of shafts 3 and 4 is still expected to be approximately nine months per prior guidance based on known COVID-19 impacts to date. Panel 1 and 2 studies will be ongoing throughout 2022.

Other updates

  • Negotiations with the Government of Mongolia are constructive and making positive progress. All key stakeholders have stated that they remain committed to moving the project forward and reaching a long-term solution to the items under discussion.
  • In December, the updated Resources and Reserves were registered in Mongolia in accordance with Mongolian regulations and approval from Mongolian authorities of the 2022 Annual Mine Plan was received. The updated Feasibility Study (OTFS20) has been submitted to the relevant governmental agencies of Mongolia.
  • As a result of COVID-19 impacts and outstanding non-technical undercut criteria, first sustainable production will be no earlier than January 2023, subject to the timing of commencement of the undercut. The full impact on the cost of the integrated project is subject to further analysis once we have clarity on the timeline around the completion of the undercut criteria and ongoing COVID-19 restrictions.
  • Other milestones that need to be met in order to ensure that the project can commence caving operations (undercut) include: approval of the project investment uplift to $6.75 billion, approval of the funding plan and extension of the current power supply arrangements until an agreed long term stable and reliable power solution can be fully implemented.

Rio Tinto | Fourth quarter operations report

4

Other key projects and exploration and evaluation

  • The Zulti South project in South Africa remains on full suspension.
  • At the Kemano hydropower tunnel project in British Columbia, Canada, the tunnel boring machine is being dismantled and removed following breakthrough in October. Although COVID-19 continues to affect the workforce, project completion remains on schedule for the second half of 2022.
  • At the Resolution Copper project in Arizona, we continue to work with the US Forest Service to secure approval of the Final Environmental Impact Statement (EIS). In parallel, mine studies and engagement with the Native American tribes and local communities continue to progress.
  • At the Winu project in Western Australia, there has been progress towards securing consent from the Traditional Owners to the Project Agreement in advance of submitting the necessary environmental and regulatory approvals. Drilling, fieldwork and study activities continue to progress to schedule.
  • At the Simandou iron ore project in Guinea, we continue to engage with key stakeholders in-country including the Government of Guinea. We remain committed to an inclusive partnership, seeking mutual and sustainable benefits by developing our project in line with international social and environmental standards. A new drilling programme has commenced, and expressions of interest are being sourced for construction and early development works expected to be carried out in 2022.
  • At the Jadar lithium-borate project in Serbia, as a result of delays in the approval of the Exploitation Field Licence (EFL), which is a prerequisite to publish the Environmental Impact Assessment (EIA) and commence the consultation process, we are revising development timelines. Based on current estimates and subject to receiving all relevant approvals, permits and licences, first saleable production is expected to be no earlier than 2027 (previously 2026). The Feasibility Study and the EIA Studies are progressing. We fully understand the concerns amongst some Serbian stakeholders about environmental impacts and we will continue to engage to demonstrate the project has developed mitigation solutions in the project plan.
  • Energy Resources of Australia (ERA) has previously indicated to the market that it has identified cost and schedule overruns in executing the mine closure plan that is expected to be significant relative to the findings of the Ranger Project Area closure feasibility study.

1Project baseline reporting has been updated following endorsement of the definitive estimate by Rio Tinto Board and Turquoise Hill Resources (pending Oyu Tolgoi board approval).

The definitive estimate assumed COVID-19 restrictions in 2021 that were no more stringent than those experienced in September 2020 and noted that should COVID-19 constraints continue beyond 2021 or should the COVID-19 situation escalate further in 2021 leading to tougher restrictions, additional costs and schedule impacts would arise. Since the definitive estimate, at the end of 2020, Mongolia implemented additional restrictions in response to community transmission cases, and in March 2021 the first cases of COVID-19 were identified at Oyu Tolgoi resulting in temporary site shutdown, quarantine measures and further travel and movement restrictions. The impact of these additional restrictions, which have continued throughout this period and are beyond those experienced in September 2020, is ongoing. To date, the impact on projects costs of the additional restrictions experienced to the end of December 2021 is estimated to be $175 million. Additional costs and schedule impacts continue to be incurred and the final impact is still to be determined.

Rio Tinto | Fourth quarter operations report

5

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Rio Tinto plc published this content on 17 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 January 2022 21:34:10 UTC.


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