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Rio Tinto : Q&A 2

10/21/2021 | 02:34pm EST

Rio Tinto 2021 Investor Seminar

20 October 2021

Q&A Session 2


My first question is just on the Pilbara and I guess we have covered a lot of ground today, but I was more concerned on going back to the basics of looking at your overall output potential.

It has been about 10 years or so since the Pilbara 360 project was first announced and I guess today we are still looking at a range below that in terms of the outlook, and that despite 133 Mt of new capacity being tied in. So I guess what I'm asking you, why can't Rio commit to 360 Mt capacity across its mine, port and rail and what's actually changed in last little while to sort of I guess create some doubt over that? That's the first question.

The second question is also on the Pilbara. We followed the money being spent on decarbonisation I'm wondering if you can commit to an opex saving because at the moment I guess from a modelling point of view we are putting in lower sales, we are putting in more capex and what I am really looking for is some sort of opex benefits? Thanks.

SIMON TROTT (Chief Executive, Iron Ore):

I'll do them in order, so maybe working through on capacity, 2021 shipment guidance we gave recently, 320- 325 Mt. Included in that number is some of the one-offs from this year, so things like the tie-in projects that we had. Our first focus has been on getting to 345 Mt, and so we have got the brownfield projects which will complete through the back end of this year; we will have Gudai-Darri which will come on in Q1 2022.

Now as we have talked about before, Gudai-Darri is a mixture of both incremental as well as some replacement capacity, so that will come on and we will ramp that up through 2022. To then go beyond that we need improvement, which I talked through in the presentation in terms of the areas that we are focusing on, to really drive our performance and we have to acknowledge that we need to improve our performance.

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

We also need a tranche of mines, 2025,26/27 that I talked to, to really reach and sustain that upper end of the guidance, so that's how we are looking at it. Certainly, I guess one of the things we are really focused on is being really clear about what we need to do to deliver the outcomes that we need.

On the decarbonisation, and I guess stepping back, for us decarbonisation is really in two blocks, about 70 per cent of emissions come from diesel, about 30 per cent of our emissions from our gas turbines, and so the things that Peter and Mark were talking to, really focused on that first chunk on our emissions from gas.

Pilbara is very advantaged for solar and wind and so we have got a programme in place to deliver the first gigawatt to really repower those gas turbines and, as you say, technology has improved for renewables and so they have got to a stage where we can really bring those in on a financial basis and use them to repower.

Now we will do it in a way that provides optionality, optionality then to do that next tranche of decarbonising which is HME and our other equipment and also look at the potential to go further than that, but we will build that option into that first phase.

JAKOB STAUSHOLM (Chief Executive):

If I may just add a little bit because this question of course we are getting a lot particularly in Australia. I just want to remind you, it is an amazing business that we have built over decades and just back to the beginning of Simon's answer, 345 Mt, that's the first step towards 360 Mt, we have never produced 345 Mt, it is going to be a new record.

We are this year the world's largest producer of iron ore. I hope you can see the challenges the team are facing. I think it makes eminent sense. I'm actually very, very impressed with what the team is able to lift right now and we can see a path forward, a path of growth, there is demand for our products and I am absolutely convinced that we this time around are getting there.

But it goes without saying we don't want to over-promise here. I am acutely aware that we have had to cut guidance in the past and we need to get out of that. So I think what you have got is a very precise deliverable path forward scene from Simon. Thank you.


Hi Jakob and team, a bit of a subjective question for Simon. I saw in one of the presentations that SP-10 will be around 9 per cent of the product mix. I just wanted to get an understanding of what's actually driving those higher values? Is it the mines or the kind of base? Will it take two years to resolve and is this a mixed tranche of the replacing mines in the Pilbara? Do you envisage an impact on the quality of the Pilbara Blend? Thanks.


So talking then first to the SP-10 question, we are seeing elevated levels of SP-10 through the back end of 2021 and that's really about those new mine developments, the brownfield mines and also Gudai-Darri which

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

we now expect to come in at Q1 2022. Whilst we are waiting for those new mines we are seeing elevated levels of SP-10 as we really protect the quality of Pilbara Blend.

SP-10 is a bleed product which we use to protect PB and the delay in those mines has certainly caused elevated levels. We will sell SP-10 going forward - SP-10 we have been selling since around about 2014/15 in varying quantities - and so the chart we've provided today showed around about a 6 per cent SP-10 [in 2024].

As we look more longer term, 2024 and beyond, once we have got those new mines up and ramped up, and longer term we have got the next tranche of new mines 2024/25/26 which really go to support the quality of Pilbara Blend. As we look forward, we have got a fairly deep resource base and so we are pretty comfortable we can continue to produce Pilbara Blend well into the future.


Sinead, you highlighted the significant potential that IOC has, particularly with regards to the low-carbon steel as well as obviously some of the challenges you have there, but I wonder if you go into any more detail on some of those bottlenecks and how confident are you that you'll get the asset to its theoretical capacity or would it take more significant investment to get there?

SINEAD KAUFMAN (Chief Executive, Minerals):

From an asset perspective what we have seen particularly in the last while is an opportunity and we have doing that this year to improve the mine production productivity. So there is still work to do but we have seen some good outcomes from that, and hence with the Safe Production System we have identified the concentrator now as the next opportunity to de-bottleneck the concentrator and make sure that we can operate that with full capacity.

Once we have done that we know we have, as I said latent capacity in the rail system. We will be investing some money next year in the car dumper and rail off-loading system so that we can also maximise throughput there.

So really it's around that continuous de-bottlenecking and expecting that to move and change over time, but really in the next 12 months it's about now it's the mine and the concentrator, work that is starting now then I'd expect next year we'll start to see some improvements in the rail downstream as well as we bring on that additional capital.


Jakob, it looks like 2022 is shaping up to be a big year for project announcements and also project approvals. Can I ask the first question maybe to Ivan about aluminium capacity additions? It been probably 3 or 4 years now since we did talk about the potential expansions of Alma and Arvida, but you have said in the past you need $2500 a tonne aluminium sustainably and also a lower capital intensity before you look at

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

the expansions in Canada. If ELYSISTM is commercial in 2024 does that change that thinking around potentially adding capacity?

I actually have a second question on Simandou, which I will come back to.

IVAN VELLA (Chief Executive, Aluminium):

Okay, thanks Paul, a good question. Look ELYSISTM is a big part of the puzzle as we look forward, the conditions are very favourable in the Saguenay, the hydro-facilities that we've got gives us a low-cost base, put that together with ELYSISTM and that gives us the kind of pieces that we need for that next step of growth.

But, we haven't finished the work on ELYSISTM yet, so it is really one step at a time. There is that extra half a line there at Alma ready to go and that's where we are starting to put those first commercial scale pots in for ELYSISTM to see how it operates in that environment.


Ivan, thanks a lot. It does sound like you'll get pretty big productivity gains as well and opex reductions from


A question now on Simandou, maybe for Mark or Bold, whoever wants to take it, but two things on this project: One is, can Rio Tinto actually commit to this project before democratic elections take place in Guinea? And secondly, have been able get Winning logistics or Winning to the table on a joint venture, on discussions?

BOLD BAATAR (Chief Executive, Copper):

Good questions. I think, first of all, we do have to find a way to engage with this government and of course we would be keen to understand when the elections will take place, but we have a long-term commitment to Guinea as a country so obviously we are going to be patient and work through it in stages.

As far as Winning is concerned, we have had or I have had myself two meetings with them and a number of my colleagues have, so we are continuing the dialogue. It is about the question around what does that future sharing of infrastructure look like and I think that is going to take some time to shape up.

So, unfortunately, I can't exactly give you the time and precision on the capital, but all I would say is that we are actively engaging.


A very good day to you Jakob and team. I'm happy to see that you have strengthened and accelerated your decarbonisation plan with your capex guidance. We hope to see some more other commitments on Scope 3 soon, however, we acknowledge that you need your clients for this as well.

Page 4 of 10

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

I have two questions. First of all, to what extent will you connect your performance targets to the [UN] sustainable development goals, that means mapping, connecting and delivering impacts on the sustainable development goals? And my second question is, are you considering installing long-term incentive plans for ESG tied to your remuneration in the coming year and by that I mean your strength and decarbonisation ambitions. Thank you very much.


Thank you. Let me start with the second question. Absolutely so, and we have an upcoming Board meeting where it is not us but it is the Board that determines remuneration. But clearly the scorecard should reflect where our focus is and climate change is clearly increasingly important. My sense is that the Board wants to hold this team accountable for us delivering on that, so that goes with saying.

I would say it goes in two ways: short-term you can look at some very tangible impacts but long-term we are tied to shareholder return and, quite frankly, I believe it's good business to be in tune with what the society needs.

What we are talking about here today is about future-proofing our business. I firmly believe that this is in the interests of the shareholders what we are suggesting, so you should see that measurement coming across in both the short-term and the long-term.

Look, we are definitely using the UN sustainable goals in terms of how we communicate out, how we insure ourselves. I laid out four objectives; one of them is about impeccable ESG credentials and actually is a very holistic thing to achieve. It is quite a big value statement and it is very helpful to check the boxes of the sustainability goals.

It goes without saying, our previous question came around Simandou and, yes, there is a little bit about how do we make that have as little climate change impact as possible but there are much bigger things around biodiversity, in migration etc.

Mining is a very holistic discipline and are tapping into a lot of the UN sustainability goals and we are using that methodology, and you'll see that in our reporting out there at year-end. Thank you very much for the question.


My first question is for Simon on the iron ore costs. Clearly you have articulated on slide 40 that there are quite significant structural drivers lifting your cost base and probably accelerating inflation from here. Is 2021 a good starting point for these costs or are there any elements in 2021 that are transitory in nature and will eventually fall away?

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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 18:33:02 UTC.

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