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RIO TINTO PLC

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Rio Tinto : Half Year Results 2021 - Q&A

07/29/2021 | 05:07am EDT

Rio Tinto 2021 Half Year Results - Q & A transcript 28 May 2021

QUESTION:

Thank you. Good morning, Jakob and Peter.

Jakob, a question on the Pilbara. The mines are clearly underperforming and sales in 2021 will be lower than 5 years ago. If I look out in two to three years' time, what will the total mine capacity be post the ramp-up of Gudai-Darri? Do you actually know what this number is?

JAKOB STAUSHOLM:

As you know, we are only giving production guidance within the year and you make some comparisons and some competitors are performing very strongly, but we were in the first half the world's largest producer of iron ore. I just want to remind you of t hat , and we have had a lot of project activities in the Pilbara here in t he first half and will have that in the second half in order to finalise all the projects, including the new hub of Gudai-Darri.

When all that has been completed by the end of the year and we st art ramping- up next year we have much more optionality in terms of product qualit y, in t erms of c ost s, in terms of volume, but I am not going to give you any guidance on future production. Thank you.

QUESTION:

Good morning, Jakob. Just a quick question for you on Jadar, so your new project. You've announced approval of the project, you committed $2.4 billion in capital, but you don't seem to have the environmental approvals you need nor do you have the exploitation license. Is this back-to-front? I am just wondering what's going on here.

JAKOB STAUSHOLM:

Look, I think it is all progressing extremely well and I think we are very close t o having our exploitation license, but we are trying to do this in a very transparent way and we want to engage with everyone and moving this forward. I spent some good time in

Rio Tinto 2021 Half Year Results - Q & A transcript 28 May 2021

Serbia and I feel very, very comfortable about having a projec t t hat is ac t ually in t he benefits of both communities and Serbia as a whole.

So I felt the project from a technical standpoint was ready t o t ake t o t he Board, t he Board likes it and approved the funding of it, and that's what we are announcing and I am looking forward to the next chapters.

QUESTION:

Okay. So just in terms of timeline to get these other approvals, how should w e t hink about that, sorry just to follow up?

JAKOB STAUSHOLM:

Well, what I am saying is we expect to commence construction in 2022, so t hat means it's pretty imminent on a number of things, but we do need to go through all the necessary consultation and will do so. But I think we are in advanced stages of most of the work.

QUESTION:

Hi Jakob and Peter. Good morning.

Look, another one on iron ore. From a production standpoint one of the reasons alongside the tie-in activity and ramp-up was management of cultural herit age. Could you please shed some light on this? When reserves were written down my understanding was that the near term risks to the mine plan had been taken care of.Has t he sit uation somewhat changed on the ground? I understand there is still medium term risk in terms of what happens with changing regulation, but in terms of the near term, as this was one of the cited reasons, is there any update there?

JAKOB STAUSHOLM:

Peter, do you want to comment?

PETER CUNNINGHAM (Chief Financial Officer):

Rio Tinto 2021 Half Year Results - Q & A transcript 28 May 2021

Very happy to, and thanks Jakob.

We absolutely have reviewed all the heritage sites in the Pilbara, about 1,900 sites have been reviewed, and those did result in those write-downs t o reserves t hat we t alked about at year-end. I think what we are doing over and above t hat is learning how t o manage with real care cultural heritage on an ongoing basis.

In the first half of the year we did have a couple of million tonnes that we lost because when we are going through now our mine plans all the time we are reassessing and thinking about cultural heritage, and one example is on our blast management plans, for about 11 per cent of our blasts now we have specific plans , so we are managing wit h care around heritage sites.

So I think we have really learnt an awful lot in the business, but this is going to be something ongoing that we will have to manage in that respect. I think we have built in for the longer term about 54Mt, but on an ongoing basis we did lose that 2Mt in the first half. Thank you.

QUESTION:

Thank you. Good morning, Jakob and Peter.

Just a question on Simandou, there isn't a lot of incremental information in t he release today, so when could you have to make a big decision or commit capital on this project - should we be thinking later this year or into next year? And what are your latest thoughts on the ESG risks surrounding this project? Thank you.

JAKOB STAUSHOLM:

Yes, thank you. We have worked on Simandou for many, many years and we have knowledge about the ESG risks second to none I would argue. But you are right , t here is not a lot of news today because what is key is to get all stakeholders aligned - of course the Government of Guinea together with a number of primarily Chinese stakeholders and ourselves - and we are pursuing those discussions.

Rio Tinto 2021 Half Year Results - Q & A transcript 28 May 2021

I cannot set you a timeline because I can't control others' timelines of c ourse, but we want to pursue this, we would love to participate, we have a lot to add to this project but we need to find common ground on how to progress it. In the meantime, we have people on the ground, keep on working on the ESG risks etc. We still believe that this is an attractive project for Guinea, for Rio and for all stakeholders. Thank you.

QUESTION:

Thanks very much. I was just wanting to probe a bit more on the iron ore business and specifically the tie-ins. 133 Mt run rate is an extraordinary amount of capacity t o t ie in one year, and I'm just wondering whether you can reflect on the timing of all t hat and why it is all landing in this year and what that does in terms of creating risks to 2022? I am just wondering if some of that actually does flow into next year and whether you can talk through some of the risks for 2022? Thanks.

PETER CUNNINGHAM:

Thanks very much. We always have talked about 2020 and particularly 2021 as being challenging years for the Pilbara because we have been constrained on mine c apacity and also because we are bringing in a lot of replacement capacity this year, plus at t he end Gudai-Darri, so that was always in the plan if you like.

Bringing in those tie-ins I think we will be doing that progressively through. Clearly that means that we do have planned shuts as we have to undert ake t hose t ie -ins. We do have to synchronise all that very carefully. I think for the first half of the year we have moved forward those projects, slightly behind where we wanted to but not well behind.

  1. think we feel we are now well placed for the second half of t he year t o finalise t hat work and tie-in those 90 millions of capacity.

Very different clearly from Gudai-Darri which is a whole new hub and there we haven't got the same degree of tie-in risks that we have when we are looking at t he 90 million tonnes.

And clearly the other overlay here has been COVID. It has been a constraint on us getting the right labour and support there to do some of that work, but again in the first

Rio Tinto 2021 Half Year Results - Q & A transcript 28 May 2021

half we have learnt how to manage that much more effectively and will take that experience into the second half.

So, I think in summary this is really predominantly a 2021 issue. As we go into 2022 we are really just looking at the ramp-up of Gudai-Darri as the major piec e, which will be progressive throughout 2022. Thanks for the question.

JAKOB STAUSHOLM:

Look, if I may just add on top of that. I think your question about why all these activities this year? Well, these capital decisions were all taken before we knew about a pandemic that would hit the world; before we had the issues in the wake of Juukan Gorge and renegotiations with the Traditional Owners etc.

So I feel for the iron ore team, it's a lot of workload on them, but I ac tually t hink t hey are coping with it very well. We are by and large moving things forward t o sc hedule. It's pretty impressive and for sure the iron ore business will be a stronger business when we have completed those. Thank you.

QUESTION:

And just a follow-up on the second half production, so I guess we have just seen is a June quarter that was below the March quarter, which is fairly unusual and I guess it doesn't set up the business well to hit the top end of guidance certainly. I am just wondering how confident you are around the 2021 production guidance being met and if you can maybe shed some colour on how run rates are looking even through the mont h of July, just to give us a bit of comfort?

PETER CUNNINGHAM:

Thanks. I mean the second quarter was very unusual in that we were still seeing rain in the Pilbara well into May, a very green period when that shouldn't have been t he c ase, and a lot of that was also in the mines that really did have an ongoing effect.

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Disclaimer

Rio Tinto plc published this content on 29 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2021 09:06:07 UTC.


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