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    RIO   GB0007188757

RIO TINTO PLC

(RIO)
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Rio Tinto : Q&A 1

10/21/2021 | 07:14am EST

Rio Tinto 2021 Investor Seminar

20th October 2021

Q&A Session 1

QUESTION:

Good morning. It is nice to finally see everyone in person. Hopefully I'm not jumping ahead, but it's a question on downstream decarbonisation. You've outlined your plans on Scope 1 and 2 and some high level goals on Scope 3, so I guess my question is we've seen some very different plans from FMG and BHP, one is going downstream in a big way, the other not so much. Where do you see Rio's within that very wide range and when will we start to see more details in terms of those plans and what it could mean in terms of capital commitments? Thank you.

MARK DAVIES (Chief Technical Officer):

Firstly, we are very much at the early stage of some of those; some of that work is very much R&D, on that pathway, and we need to work through that R&D. I think the one probably closest to making a decision around is the HBI plant in Canada but that is still in study stage. Peter will talk about this a little bit later, but any investment that we make will still be subject to our key investment criteria.

We do need to make sure we incentivise that technology deployment, we want to make sure there are multiple pathways, because we don't know which pathway is going to win in that greenfield transition.

I think the other development of Scope 3, which Ivan will talk about a little bit later which is much nearer term is ELYSISTM and obviously we'd hope to scale that one up sooner.

QUESTION:

You seem to be really styling yourself here as 'the green and greening miner' and I'm just wondering is that the new pitch for Rio Tinto and do you expect this to drive a re-rating in the shares?

JAKOB STAUSHOLM (Chief Executive):

- 1 -

Rio Tinto 2021 Investor Seminar - Transcript of the Q&A Session 1

We are running a business and we are trying to be relevant to societies and we are trying to grab the opportunities as we see them coming along. We have an amazing business, amazing assets - look at our First Half Results.

We need to be sure that those great assets are also great assets 10 years and 20 years from now, plus we need to build new assets and we need to build assets where there is growth. What is happening in the world is an energy transition; that is what we are responding to.

QUESTION:

So just to follow up if I could, the capex seems to have gone up a lot and it's not really so clear that that's translating into dramatically increased volumes, so is this, if you like, enabling capex because you have to decarbonise the business or how should we think about that?

JAKOB STAUSHOLM:

Look, I suggest we take it a little bit later on because Peter will explain the capex and we will talk about what we concretely are doing. But the way you should think about it is, that the energy transition basically goes from a lot of energy you pay on a variable basis when it's oil and gas towards you getting energy for free but you have quite an investment upfront.

Of course, we are not going to make very stupid investment decisions, but we actually think there are certain things that can work for us, but let's take it later on.

Next question? We will take one more from the room here.

QUESTION:

On the three levers for decarbonisation you mentioned, on the one gigawatt of renewables in the Pilbara, would you be putting in the investment yourself or is it a build/leaseback kind of approach that you are thinking of to reduce your investment capital?

Then on the $75 carbon cost that you are putting into external projects, I'm sure you have done some back-testing on those. Can you give some examples of projects that could not have gone ahead which you have done in the last 10 years with the $75 carbon cost?

JAKOB STAUSHOLM:

Thank you. Let me answer the first. I think we'll come back on the other as Peter is covering the carbon tax later on. On the first gigawatt time will tell, but we are prepared to use our balance sheet and do it ourselves and that's what we are developing it towards right now.

Page 2 of 10

Rio Tinto 2021 Investor Seminar - Transcript of the Q&A Session 1

QUESTION:

Hi team, thanks for the opportunity. Look, on one of the slides you outlined the potential scope 3 emission savings you can make through better grade iron ore and I wanted to touch on that a bit if I can please. Have you thought about how much you can beneficiate your current iron ore products using conventional techniques, especially in light of the increasing mix of SP-10 going forward? Thanks.

MARK DAVIES:

Yes absolutely. We are looking at that. There are some challenges of the different ore types in the Pilbara but there are some ore types that are very amenable and we are absolutely looking at all of those options, including the novel research project that we talked about, that we announced last week. It is really about, or specifically designed for upgrading our Pilbara specific ores in a carbon-friendly way.

QUESTION:

And would I be correct in thinking that this is largely focused on wet processing and how much do you think you can achieve? Have you done any testing so far?

MARK DAVIES:

Yes, we have done a lot of testing and actually ironically I think our Bundoora facility in Melbourne was built in the nineties to do a lot of this work and we are using that now. To be honest with you, I think we are looking at a range of options, so the green project we announced last week is actually about using microwaves and biomass to create a reduced product that actually can go into a lot more low-carbon steel pathways.

QUESTION:

Hi Jakob and team. Can I start by saying this seems like a complete change of strategy for Rio Tinto, it is certainly a massive pivot, a focus on decarbonisation and green metal over real fundamental production growth as a mining company it seems. I'd say that maybe the whole of the industry must do the same, but that's another discussion.

The question I have is very high level, how do you create value for shareholders with this strategy? How do we value these decarbonisations investments? Is it through setting the cost of carbon; is it through capturing green premiums; is it through generating a lower cost of capital or attracting green funds into your stock? I am just trying to level, trying to actually just grapple with this, what I see as quite a big change of strategy, Jakob.

Page 3 of 10

Rio Tinto 2021 Investor Seminar - Transcript of the Q&A Session 1

JAKOB STAUSHOLM:

Thank you very much. On the one hand, I would say "yes"; on the other hand, I would disagree. But we haven't still covered that, we are having the first Q&A session and we will talk about growth in the business in the second panel, so maybe please wait with your judgment.

But your question about green investments, it is about future-proofing our business and a number of those things actually makes eminent economic sense. Just as an example, and I know it is a small example, but what we did in Madagascar - I think we announced it about a month or two ago - it was actually very economically attractive to go to renewable energy.

We have done that in a number of places, Kennecott, and BHP are doing it with our share at Escondida, so it's a natural extension of what we are doing on the West Coast in the Pilbara.

I just think this is not going to happen tomorrow, but a decade down the road we cannot continue using coal-fired power for aluminium smelters. We think that there are economically viable paths to follow for the future for the PACAL smelters and that's what we are working very hard on.

Then actually I disagree with you. I think actually we have an amazing opportunity ahead of us to start growing as a company. We haven't grown for many years as Rio Tinto, but we will talk about that in the second part of the seminar. Thank you.

QUESTION:

A year ago Rio Tinto was in a bit of a hole with society, especially in Australia. How do you think you are now and what would you point to, to kind of encourage us that you've made good progress there?

KELLIE PARKER (Chief Executive Australia):

Thanks for the question. I've certainly done a lot of listening and heard some very confronting feedback about how we had become and we have been very focused on our business processes, and whilst we have been engaging we hadn't really been listening. So as we now start to really deeply listen part of that is ensuring that we get feedback.

So I regularly go back round to multiple stakeholders and ensure that they are seeing progress and asking what else are they wanting from us, and that includes the Traditional Owners, Indigenous Australians, includes our Governments both State and Federal, includes influential stakeholders particularly in Australia.

What they are overwhelmingly saying is that we are listening, that we are taking a different approach, we want to work together but actions are always louder than words.

Page 4 of 10

Rio Tinto 2021 Investor Seminar - Transcript of the Q&A Session 1

So I think the work that we have done with the Governments in different States and Federally has significantly changed and commitments that we are making into the different States has changed, most recently a Statement of Co-operation with the Queensland Government. Very, very pleased with the work that we are doing in Gladstone and the future commitments that we want to make into the regional area of Gladstone.

But we will always have a long way to go with Indigenous Australians and rebuilding the trust with Traditional Owners. We most recently published the CSP Report, which has feedback from the Traditional Owners, which we are pleased that they took the time to let us know what they are thinking, and we are going to continue to report on that feedback.

QUESTION:

Just a question, the gigawatt of renewables in the Pilbara, can we put a hard number on that, how much is that going to cost and then what's the cost for electrification? Then just on the Scope 3 goals, why not come out and set a hard Scope 3 target like, say, Vale has? Thanks.

JAKOB STAUSHOLM:

Mark, you can answer the first part of the question. The second part of the question, we will. But you know today we are actually telling you a lot about what we are doing to help on Scope 3 but we also need to assess what the industry is doing and that's the work we are undertaking now.

So, I expect we can be much firmer at the Annual Report talking about where do we see Scope 3, because we cannot just from our own actions determine our Scope 3 goals, we need to understand what the industry is doing.

MARK DAVIES:

Look, I think the best guidance we have at the minute is $1.5 billion over the next three years and $7.5 billion until the end of decade is what we think we need to spend to move our projects forward.

QUESTION:

[Thank you folks. You are looking to invest $7.5 billion of capex to decarbonise, plus the additional $200 million-odd per annum opex. I guess I am struggling to understand here why markets shouldn't immediately despite all this value off Rio Tinto's share price here. What's the value accretion associated with and what's are the advantages of moving this earlier without there being any kind of value accretion or additional green premium price point actually in place yet?

Page 5 of 10

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Disclaimer

Rio Tinto plc published this content on 21 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 October 2021 11:13:19 UTC.


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Sales 2021 62 427 M - -
Net income 2021 21 760 M - -
Net cash 2021 2 887 M - -
P/E ratio 2021 4,55x
Yield 2021 17,0%
Capitalization 101 B 101 B -
EV / Sales 2021 1,57x
EV / Sales 2022 2,01x
Nbr of Employees 47 500
Free-Float 65,3%
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Peter Lloyd Cunningham Chief Financial Officer & Executive Director
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