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Rio Tinto : Transcript

05/20/2022 | 07:25am EDT

Bank of America Global Metals, Mining & Steel Conference - Q & A transcript 17 May 2022

JASON FAIRCLOUGH (Head of EMEA Metals & Mining, BofA Global Research):

We'll now move to the fireside chat part of our programme. Let me open up with a question here Jakob. When you started as CEO you inherited more than one tricky situation. There's a couple. Do you want to talk a little bit about those? And then how do you see your mandate; and what progress have you made in terms of solving those problems?

JAKOB STAUSHOLM (Chief Executive, Rio Tinto):

Jason, thanks. I actually look at it completely different. I think I was extremely lucky because I came into a job in a company, an incredible company with a very impressive history. Has got amazing people, amazing assets. And you know what? We could do a little bit better. And that's basically what we are trying to do.

I had the opportunity to set a new team and I think we have got an incredible leadership team in place. I got the full freedom to set that team up; and together we have started on a journey that is - yeah, it's challenging, but it's also quite exciting, quite frankly. Because if you look at it, there is very few companies who has this kind of opportunity set, can work with things like Oyu Tolgoi and starting a new iron ore mine in Western Australia the size of 43 million tonnes.

We're working on the Simandou development [in Guinea] and lithium in Argentina. It's amazing. We take it step by step and we are slowly but surely making progress. I find it fascinating that when you get into an opportunity set where you actually can do better.


Bank of America Global Metals, Mining & Steel Conference - Q & A transcript 17 May 2022

JAMES REDFERN (Australia Metals & Mining, BofA Global Research):

Thank you. Jakob, I wanted to ask you about the Oyu Tolgoi copper project in Mongolia that's also had a few issues with the government and technical issues. Can you please talk about the progress at OT and also the rationale for bidding for the minorities in Turquoise Hill?


Look, it was a quite tricky situation and we owe much thanks to our Global CEO of Copper, Bold Baatar who really went all in. And we figured out what was really the needs of the government of Mongolia and the people of Mongolia. And we suddenly realised how much of a win-win there was. And that reset we actually did hand in hand with TRQ for all shareholders. So we did it together with TRQ and we have both reaped the benefit from that reset and starting up the underground mine.

Now that is underway and there's still a lot of technical risks for the projects. But it's a very complex structure. And that's why we have suggested to take the company private. We believe we have made a very attractive offer to the shareholders; but we are also very respectful for the very clearly laid out process in Canada. So we'll have to await that process. And we'll see. We will be disciplined. We'll see whether we will take it private or not; but we thought we should give the shareholders a choice. We believe that it's the right thing to simplify the structure.


Jakob, I don't want to pre-empt our ESG panel later on too much. So that's later on this morning. But just as a teaser, can you tell us how you think about fixing ESG? So is it people; is it structure; is it something else? How long does it take?


Bank of America Global Metals, Mining & Steel Conference - Q & A transcript 17 May 2022


Look, it's all of it and there are certain things where we are doing outstandingly well. I mean we haven't had a fatality for three years. That's quite an achievement in such a big business. And obviously we should never have that, but it is the first three years in the company's history where we have been fatality free. So that's a good example.

Some of the other things are actually similar journeys that we have to go on, like the safety journey. We published a report about the work culture with some confronting information. It's the same thing. Get it out in the open. Talk about it, learn about it learn to intervene, etcetera. That's the journey all companies have been on safety for the last 25 years. That's a journey we are here. And I can't change the tragic events around Juukan Gorge, but I can learn from it. I think our company has learned tremendously from that and we are different company today.

And just as late as two weeks ago when I was at Gudai-Darri, we started off meeting with the elders of Banjima and we have a completely different dialogue than what we used to have. It's very rewarding and it does come down to values. And I can sense on the whole organisation they want this. And together we are also getting better business outcomes.


Jakob, let's talk about iron ore, which accounts for roughly 70% of EBITDA for Rio Tinto. There's a view rightly or wrongly in the market that the iron ore business might be undercapitalised over the years. Do you think that's a fair assessment? And then also maybe if you can please comment on the new mines that are going to be tied in: Gudai-Darri, for one. What that means for the iron ore business in terms of revenue, costs and quality.


Bank of America Global Metals, Mining & Steel Conference - Q & A transcript 17 May 2022


I think several mining executives today talked a bit about how difficult it is to balance supply and demand. Duncan mentioned it, Gary mentioned it. And the reality is, it's very, very difficult to predict. China's demand for iron ore has been surprisingly strong over the last couple of years. Had I known that, we might have sanctioned Gudai-Darri a year or two earlier. But you know, now it's there and when we have finalised commissioning, we will ramp it up and that will take pressure off and we will be able to produce more iron ore out of the Pilbara.


Let's just see if there's any questions in the room. Anybody want to ask a question? We've got lots. Okay, let me keep going. We'll talk a little bit about aluminium, something of a hidden gem in your portfolio. Actually, we're here, aluminium. So Rio Tinto is seen as having overpaid for the assets back in 2007. But now in a carbon- constrained world, is this investment finally coming good? How do you think about aluminium? Does it attract capital within Rio Tinto?


I think it is an amazing business, but it has been through some tough years. The competition from China has been relentless and the decarbonisation in the world hasn't happened that fast. Don't forget that what we have in aluminium is not just a full chain of aluminium. We've also got the hydro power associated with it. And I think that asset in itself is hugely valuable.


Bank of America Global Metals, Mining & Steel Conference - Q & A transcript 17 May 2022

And when you look at the demand for aluminium it's actually one of the commodities that faces the best growth prospect, perhaps even better than copper. Over the next 20 to 30 years there's an enormous need for aluminium. The only problem with aluminium is it's probably the most energy-intensive industrial process on Earth. And therefore it's so important to decarbonising. And the fact that we already have much, much lower carbon than any of our competitors is a huge advantage. And I think that you would increasingly see value from that in the future.


At the risk of sounding like an investment banker, do you think the value of the business is maximised inside Rio Tinto?


No, I don't think we will ever get there. There are so many opportunities. Look, I said it just a moment ago, we're still not firing on all cylinders. You go around and look in our operations, we can do better and we will do better with our Safe Production System that we're implementing all across [the business].

We also have to take up the challenge and make sure that when we develop new projects we do it as capital efficient as possible. Your question just before about aluminium, one of the tricky things is really how can we invest in aluminium in a capital efficient way? So we need to stretch ourselves in projects and we can do better in operations.


If your ELYSIS technology plays out it should be tremendously profitable. How do you realise the profit?


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Rio Tinto plc published this content on 20 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 May 2022 11:24:07 UTC.

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Sales 2022 59 675 M - -
Net income 2022 18 812 M - -
Net cash 2022 2 823 M - -
P/E ratio 2022 5,41x
Yield 2022 14,1%
Capitalization 103 B 103 B -
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EV / Sales 2023 1,90x
Nbr of Employees 49 000
Free-Float 65,4%
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Technical analysis trends RIO TINTO PLC
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Income Statement Evolution
Mean consensus OUTPERFORM
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Last Close Price 61,19 $
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Spread / Average Target 26,9%
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Managers and Directors
Jakob Stausholm Chief Executive Officer & Executive Director
Peter Lloyd Cunningham Chief Financial Officer & Executive Director
Dominic S. Barton Chairman
Mark Davies Chief Technical Officer
Arnaud Soirat Chief Operating Officer
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