Rio Tinto Group (RIO) Earnings Call Transcript & Summary

Good afternoon, and welcome, everybody, in beautiful Sydney, and thank you very much for joining us at the 2023 Rio Tinto Capital Markets Day. Also thank you to those joining us online, especially in Europe, where it's now very early. We think we have a very exciting program lined up in the next couple of hours, which you can see on Slide 5. There'll be plenty of time for questions at the end and even after the event for some drinks and burgers. And for those of you in the room, it's not very often that you have the whole ExCo here or nearly the whole ExCo as well as our Chief Scientist, Nigel; our Head of Exploration, Dave; and our Chief Economist, Vivek. So please, I invite you to stay with us for some time after we end. Can I please ask you to turn off your phones or put them at least to silent? There's no fire alarm planned for today. So if you hear the fire alarm, please leave the room through the fire doors. They're on the left and on the right there behind me, and follow the instructions of the Intercontinental fire wardens. We will start with a welcome to country, and I'd like to introduce our CEO of Australia, Kellie.

Thanks very much, Menno. And look, I just want to acknowledge that we are on the lands of the Gadigal people of the Eora Nation. And I'd like to introduce Brendan Kerin, who will give us welcome to his country.

Thank you. Good afternoon, ladies and gentlemen. My name is Brendan. I'm the cultural representative and cultural educator for Metropolitan Local Aboriginal Land Council. And just like most of -- all of our Aboriginal Land Councils, under our Land Rights Act, we are the cultural authority and the guardians and custodians of land within our boundaries. Our boundaries is one of the biggest in Sydney. And we basically are what we are because there are no Traditional Owners left within the Sydney Basin. And I'm here to welcome you to country, and there's 2 things I'm going to share about a Welcome to Country. One, it's not a welcome to Australia. And 2, a Welcome to Country is not a ceremony that we've come up with to cater for white people, even though it pays a bit more than it used to traditionally. Our Welcome to Country is a tradition that we've been doing since the beginning of time because that's how long we've been here for, beginning of time. You won't hear of stories in any of our tribes, of how we've traveled from somewhere else to come here. Those stories don't exist because that never happened. We only have stories that relate to the creation times. I always like to say we've been here for 250,000 years plus BC, and the BC stands for before Cook. So it's always an honor for me to perform this ceremony. If you know about our culture, you would understand with the Welcome to Country it's disrespectful for us to walk in each other's lands unless we're welcomed on each other's lands. The ripple effect of being welcomed, and it's still -- well, I'll give an example. My father's country, up in the desert country there, Tanami. There's a place called Emily Gap. I don't know if any of you know about this place. Alice Springs is surrounded by the Caterpillar. It's the mountains. And in the dreamtime, the warriors cut the caterpillar into half, and that created Emily Gap. That's the only way to drive through into Alice Springs. Traditionally, that's the entry point into Arrernte and Mparntwe country. You want to get welcomed on the country. Visitors would come to Emily Gap and light a fire. They'd sit there and wait to be welcomed on the country. Each clan is a custodian for their own land. So we know on our own lands what food is available. We know where the waterholes are, and we've got our sacred sites. So when I get welcomed onto my neighbor's country, I need to know where the food is. I need to know where the waterholes are. I need to know where their sacred sites are. This is part of our Welcome to Country. I'll share a very brief history of country. When I talk about country, I talk about the lands you're gathered on here today. I'll share a very brief history because, one, it's part of country. It's part of the land. And 2, my history is your history. You live here. I live here. And vice versa, your history is my history. I can tell you the history of every race in this country. And how many can say that about us? What I say, learn the history. Prior to white men coming here, our song lines, our dreaming stories, they were ours because we were the only ones here. Everyone's here now. It's everyone's responsibility to keep those stories of someone to life. They're not just ours. It's everyone's responsibility. The word Gadigal, Gadi, in our language means grass tree. Gal means people. These are the lands of the grass tree people. The grass tree People, the Gadigal, are the custodians for 2 song lines that run through this area, the Gadigal lands. One is the barra, the eel; and the other is the whale. The whale song line is a very strong dreaming, very strong song line. It unites all clans, right down the East Coast. It even unites our relations from other nations in the Pacific. The whale dreaming. Barra, the eel. Barra is part of the creation story. That eel created all the waterways from the harbor all the way up and the rivers to Parramatta, Burramattagal. That little eel swims all the way down from Parramatta into Sydney Harbor. There's an island there called Goat Island. That island is called Me-mel. That's actually the head of the eel. From Sydney Harbor, that eel swims all the way to Vanuatu. He turns round and he comes back, same journey. That's the song line. Hopefully, that gives you a little bit of insight into our connection, the country and land. We've known about this eel for thousands of years. It's the connection we have. So it's always an honor for me to perform a Welcome to Country on the lands today of the Gadigal, 1 of 29 tribes that make up the Eora Nation. The boundaries for the Eora Nation start at the ocean, surrounded by 3 of Australia's most beautiful rivers. We have the Hawkesbury River, the Nepean River and the Georges River. In between those 3 mighty and beautiful rivers, there are 29 tribes that make up the Eora. The name of the tribe you gathered on here today is Gadigal. So always, first and foremost, on behalf of those Gadigal ancestors, we believe their spirit is still in the lands and the waters. On behalf of Metropolitan Local Aboriginal Land Council, as the cultural authority on these lands, welcome. Welcome to Gadigal country. I've also brought in yidaki. Yidaki. Please get rid of the word didgeridoo. Didgeridoo is a white man's word. It's not an Aboriginal word. How that word came about is when the first white fella heard this instrument, he heard a song. Didgeridoo, didgeridoo, didgeridoo. And he went, oh, it's called a didgeridoo. He's a very smart man, that man, because he saw these playing. And he said, oh, they are called tapping sticks. He's very smart. I told you he's a very smart man. I'd like to say he's related to the same bloke that named Manly, Manly. Does anyone know how Manly got its name? Well, please let me enlighten you. Do you know? Captain Phillip saw it through the heads, pulled his telescope down. And he looked across at what's Manly Beach. He sung out to his offsider, and he said, I say, come hither. And his offsider totaled over, and he looked at his telescope at Manly Beach. And his comment was, oh, they're quite manly. Just looking at naked Aboriginal men on the beach. This is how Manly got its name. It may not have happened the way I said it happened, but I dare any one of yous in the room to prove me wrong. That's my story, and I'm sticking to it. Yidaki doesn't come from New South Wales. It's not a traditional instrument down here. It's a borrowed instrument. And it comes from the top parts of Australia, yidaki. So I'd just like to finish off by playing you a welcome song on yidaki, and I'd love the song -- I want to give my apologies because I'd love to stay. But unfortunately, I have to go and pay a white man by the name of Wilson for parking on my own land. [Presentation]

Thank you, and welcome.

Thanks very much, Brendan. I've learnt more again, and I always appreciate learning from the welcome of a country, and that was fabulous. Thank you. Thank you very much. I just want to completely switch gears now and talk about safety and talk a little bit about what's happening in the industry but also what's happening in our business. And globally, we are still in an industry that is killing people. It's still dangerous. Globally, the trends that we see that are killing people in our mining industry is contact with machinery that is entangling people, that's entrapping people. It's vehicles and driving. And this is heavy vehicles to light vehicles, which we are also seeing in our business. It's really significant. And one of -- ICMM partner operator companies, we had 33 fatalities in 2022, really significant for us to continue to learn. We are 5 years fatality-free in our managed operations, but we continue to have chronic unease. We continue to see potential fatalities. These are incidents that occur, that it's just luck that we aren't killing people. So we deeply learn. We record these incidents, and we learn from them. We bring that back into our business to say how do we check those critical controls to ensure that people remain safe, and they can make good decisions to keep them safe. And in our business, we certainly know from that data that we analyze, the highest risk of fatalities is in vehicles and driving. And that's in 2 areas. One is in heavy to light vehicle interaction, so you can have technology that supports you to keep people safe, but we are also seeing people tired and having incidents. And that's so important as we start to really check critical controls to keep people safe. The other thing in vehicles and driving that we do see, and as we have seen this in Australia, is that we think it's safer to put people on a bus to come home back to the camp or go back home after a long day. But have we checked the bus safety? Have we checked the bus driver's safety? Have we checked to see if that's okay? And tragically, we've lost people in Australia thinking they're doing the right thing, but bus driver hasn't been safe. So it's important that we learn these lessons, and we put them back in our business, and we continue to check our critical controls, which is what we call our critical risk management system. And what we also are seeing and what keeps us very -- with chronic unease is that we have fatalities in our nonmanaged operations. And we're seeing that in the same themes. We're seeing it in vehicles and driving. We're seeing people trapped and crushed. And we want to see a difference. And so why is this important? It's important because we're growing. We're going into different geographies. We're going into -- working with different partners. We're learning different things. So as we grow, we need to ensure that we understand the countries that we're going into, the languages that we need to work in, how can we ensure that critical risk management -- that people can test their critical controls to keep themselves safe, keep their workmates safe and how do we work with our partners. We're changing who we're working with. We're adding different partners into our JV partners suite to how to ensure that together, we can find alignment on how do we keep people safe. And you will hear some of that as the presentations come today around how do we ensure that we continue to push safety, continue to keep people safe and continue to be fatality-free. So with that, I'll hand to Jakob.

Good evening and good morning. It's great to be in Sydney this year, and thanks to everyone who's tuning in virtually. Thank you, Kellie, for the safety share. As you mentioned, our industry still has work to do and need to remain vigilant when it comes to safety. I'm proud of the hard work and commitment from our teams in this critical area. Put simply, we need to make sure everyone goes home safely, safely at the end of the day, not just our colleagues and our managed operations, but also those in our nonmanaged operations and partners. As a leadership team, this is our third annual investor seminar. Rio Tinto, today, I would argue, is a stronger company built on a proud 150 years' history. You may have seen when you came in our new history book. We'll share a copy to all of you who would like one. There are rich insights within those covers, which are -- which we are sharing with our employees and stakeholders. I believe that if you don't understand your history, you're actually impairing your future. We're proud to share our story with you, achievements and failures as part of our commitment to openness and to stimulate learnings. For this reason, we also hosted 2 investor trips to our operations this year. Those of you who joined us on our site visits to Mongolia and the Pilbara will hopefully have seen how we are demonstrating the path to become best operator and what it means in practice. At Oyu Tolgoi, you can see our 4 objectives in action at a world-class project. And in the Pilbara, you can see the operational improvement we are making and the options we are creating for our future. In just the last week, we have also reached major milestones that further -- that demonstrate further progress. On Friday, we finalized our Matalco joint venture with the Giampaolo Group, launching us into the North American market for recycled aluminum at scale. Look at how quickly we managed this despite the regulatory hurdles. We said we were going to do it in 1 year. We did it in half a year. Yesterday, we announced that we have approved a prefeasibility study to focus development of the Rhodes Ridge project, one of the world's best undeveloped iron ore deposits in Western Australia. And today, we updated you on our share of the CapEx for Simandou, another step to unlock this exceptional iron ore project. We are improving. We are profitable. We are growing, and even better, there's so much more to be done. I believe we have an exciting program today built around our purpose and our 4 objectives. First, we are opportunity rich, as you will hear more about from Vivek, our Chief Economist. Second, customers and governments are telling us that they want security of supply, low-carbon products and help with decarbonization. Alf will share with you what we are doing. Third, we are a tech company. We can only solve these challenges with technology. And our Chief Scientist, Nigel, will bring this to life today. Fourth, there are many countries that have opportunities that want to produce more critical minerals to take part of the opportunities ahead of us. We have leading-edge exploration expertise, and there is enormous demand for our exploration team. You'll hear more from Dave, our Head of Exploration, who leads this talented group. Fifth, we launched our own decarbonization program 2 years ago. This has now moved from target setting to a disciplined and detailed rollout program. You will hear from Mark about how we are executing both technically and economically in a disciplined manner. You will also hear strategy updates from our product groups and about how we are moving towards our objective of becoming best operator. And in closing, Peter will explain how living our purpose and our 4 objectives makes economic sense and actually creates value to our shareholders. Rio Tinto is at the heart of the energy transition and therefore facing an opportunity-rich world. We are still seeing powerful traditional drivers such as urbanization, and our core markets are growing. I recently spent time in China, Japan and South Korea meeting our customers. These conversations helped me understand their needs and the opportunities for win-win collaborations. We're deepening our relationships with our customers, and it's great to see progress. Through our partners, customers and investors, we are strengthening our ties to Asia, building a solid foundation of trust as its rapid economic development continues. Of course, the energy transition is also a central part of the global demand story. Getting to net 0 is a huge industrial undertaking and one which we are completely committed to. Emerging trends also create new opportunities for us. Decades of extraordinary globalization have left the world with a serious dislocation between geology, processing, manufacturing and consumption. Many governments want to reindustrialize and secure their supply chains. We can support them. And our end customers want increasingly sustainable, traceable and transparent materials with security of supply. We can provide that. How? We are both a mining company and a processing company with a truly global footprint. I've just returned from COP28 in Dubai. The conversations I've had there confirm to me that, yes, decarbonization is the biggest challenge of our time. It is really, really difficult, but we have to do it. As you will hear later, we are absolutely committed to our target to reduce Scope 1 and 2 emissions by 50% by 2030. And I believe we have found an economical pathway in cooperations with host governments. At the same time, we are continuing to work closely with our customers to help them accelerate and beat their own targets addressing our Scope 3 emissions. We're confident about what it will take for us to reach these targets, but we are exploring better ways to do so. In some cases, that means spending less on CapEx and leveraging our commercial partnership in a way that allows us to decarbonize faster. For example, purchasing renewable power. Our strategy is relevant, and we are still early in our ambition and delivery. But it's already proving itself in an opportunity-rich world. We need to get into better shape to capture the opportunities I've shared -- that I've shared, which is why we are investing in the health of our business. We're doing this through continuous improvement in the health of our people, our ore bodies and our assets. We are focused on embedding healthy mindsets and behaviors, enabling our people to improve operational performance by deepening the rollout of the safe production system. This is key to how we are institutionalizing high levels of productivity and strong engagement with our frontline teams. The transformative effects are obvious where the safe production system is most embedded, in parts of our iron ore operations in Pilbara. We are on track to deliver a 5 million tonne production uplift this year, and we plan to achieve another 5 million in 2024. Safe operations, ore bodies and assets, these are the essentials for us to achieve healthy operation -- operational and financial performance. Today, you will also hear how we are building and shaping our portfolio for the future. Our world-leading iron ore business will continue to be strengthened with key projects in the Pilbara, including the Rhodes Ridge joint venture. And today, we're giving a detailed update on the world-class Simandou project. In our aluminum business, we have announced an investment of $1.1 billion to expand our state-of-the-art AP60 aluminum smelter. And earlier this week, we completed the Matalco transaction that will increase our total aluminum volume by 30% immediately. Our new CEO of Aluminum, Jerome, will tell you more about this. Bold will also talk about his determination to reach 1 million tonnes of copper by the end of this decade. We are also making progress in minerals, but as Sinead is on leave, we will cover that in a future session. 3 years down the road since our team was formed, we are gradually changing the culture of our company. While there's still much work to do, this is leading to healthier workplaces where people feel safer, positive about the work they do and the environment they're in. We know this leads to stronger performance. And in parallel, we are developing our portfolio with an eye on the future. This year, I'm also delighted to see that Rio Tinto is back to profitable growth, and there's so much ahead of us. Let me now hand over to the team to go through our exciting journey in more detail. Isabelle, Dave and Nigel, it's -- over to you. Thank you.

Thank you, Jakob, and great to be here. And we'll have a bit of a panel session to show you and explore with you some opportunity for the future and some of the options that we're creating through exploration and technology. So we've got Dave with us, Head of Exploration; Nigel with us, Chief Scientist. And they probably have some of the most interesting jobs at Rio Tinto, apart from mine and Jakob. So let's explore a little bit more what they've been doing. So we'll start maybe with you, Dave. We've been quite consistent over the years in our greenfield exploration. We've had a budget of about $250 million for about 20 years, more or less, on an annual basis. Tell us a little bit more why do you -- how does it compare to our peers? Why is it creating a competitive advantage in your views?

Yes. Thanks, Isabelle. Well, firstly, $250 million is an awful lot of money. But the key piece of that is it's consistent, spread over many, many years. And it's that consistency that gives us a distinct competitive advantage. Firstly, $250 million, it's probably one of the world's biggest exploration budgets. I'd say we're definitely in the top 5, probably in the top 3. But one of the main differentiators between us and our major competitors is, firstly, we're not constrained to exploring for one commodity. We look for 8 commodities. We're looking at a range of commodities in a range of locations around the world. We're pursuing grassroots greenfield programs. Many of our competitors with big exploration budgets are tied to brownfields. They're tied to only exploring in areas, what they're used to exploring in. So they're not chasing new opportunities at a global level. So that's the key initial differentiator. Secondly, the size of the budget really is not that important. I think we've learned over the years that, hate to say it, but exploration geologists in the words of one ex Head of Exploration, "Can behave like a bunch of drunken sailors. The more you give them, the more they'll drink, and it doesn't mean you'll have a very good outcome." Well, the reality is, in exploration, the more you spend, our experience has been it's not the more you actually discover. It's how you spend that money wisely. And Jakob and Peter, being wise men, have put a limit on the amount of money I have to be able to spend globally on a yearly basis. Now you may say a limit is a bit of a problem. Well, actually, a limit drives prioritization. I use that money in a way that only focuses in on the best opportunities for discovery. We're not chasing all kinds of ideas all over the world, investing in multiple lots of different junior companies. We're only focusing on what's going to deliver best value for Rio Tinto. A firm budget over multiple years also allows us to build an excellent team of geoscientists. 65% of my team are geoscientists. Most of those people are actually in the field. They're not sat in offices in central business districts talking about exploration. We have boots on the ground, and we're working at delivering opportunities. 50% is our target of money in the ground per year. Actually, this year, we've achieved 62% of our budget in the ground. So again, we're actually delivering on our exploration commitment. The other side of that coin is if you're developing teams, we develop teams locally. People have experience of working in the 18 different countries that we're operating in and working with the multiple types of ore bodies that we're looking for. That allows us to build capability. If we can operate in a country, then we don't have to rely on third parties to be doing the work for us. Equally, the skill sets allow us to generate our own opportunities. There's no exploration strategy that's more likely to fail than sitting in an office hoping for someone to come along with the next great project. If you're not out there looking for it, if you're not generating it, then you're never going to find it. And exploration in Rio Tinto is very much about going local, getting boots on the ground and chasing those key opportunities. Then the consistent budget also allows us to bring together all of the data that we've collected over the last plus-70 years of activity in exploration. Just to give you a bit of an example, collecting internal data and external data. We have 487 million meters of drilling. We have the geological information and the assay data. 487 million meters is enough for you to go all the way to the moon and 1/3 of the way back. It would cost us $14 billion to redrill all of those holes. So that is a real high-value source of information that we have with our geologists at their fingertips, information that other companies don't have. And of course, with the work that Nigel and team are doing, opening up those options with AI so we can actually extract a lot more information out of that data than we've been able to do previously. No one can get their mind around 487 million meters of drilling. You do need technology to unlock a lot of that value. And then finally, one of the key parts is constant budget allows me to play cycles. I don't have to only invest when everybody is happy about exploration and the price for everything is at the highest level. We're there. We have the funding. When people turn sour on an opportunity or a commodity, we have the funding to be able to go pick things up. I have no problem with being a bottom feeder. I like to get things cheap because I like to see my money going in the ground, not into somebody else's pocket. So those are the kind of key areas that really drive the advantage of Rio Tinto exploration.

Right. Can you feel the passion of the geologist there? And it's difficult to stop you on this one, but actually...

I don't have a problem getting out of bed in the morning. I can tell you.

All right. Good. But can you take us a little bit more precisely into some of the priorities that you've got in terms of regions? Portfolio? What are you looking at now and a bit in the future as well?

Well, the biggest opportunity we have recently, hopefully, everybody has heard about the new joint venture with Codelco in Chile, Nuevo Cobre. It's a major area of 300 square kilometers of ground sitting right next to the El Salvador mine in Chile. And as most of you know, copper deposits in Chile generally come in clusters. Collahuasi, Escondida, Chuquicamata, all of those districts have grown considerably over the last 30, 40 years. Now the real interesting thing about Nuevo Cobre is it hasn't seen any modern day exploration for copper over the last 40 years. It's been tied up as gold joint ventures with Codelco and a number of external companies. There's 450 kilometers of drilling on that property. Only 7% of that drilling has actually been assayed for copper. There are multiple pits on the property that were mined for oxide gold. You know the reason why they stopped mining? Because there's copper oxide in the base of the pits. Copper oxide and cyanide don't go too well together. So we know there's copper on the property. I've seen core that actually has up to 2% copper grades in it, and those targets have simply not been followed up. So Nuevo Cobre, new copper opportunity. And it's a great opportunity for both Codelco and Rio Tinto. It brings together the world's biggest copper company, and combined, allows us to work together with Codelco, bring to the table all of our exploration skills. It's not new. It's probably been 20 years in the making. We've had several joint ventures since the early 2000s with Codelco, and that's allowed us to build a very strong relationship based on trust and respect that other parties just haven't been able to do with Codelco. So I would say, yes, if you're going to put your money anywhere, it's going to be Nuevo Cobre, and look forward to an exciting discovery in the not-too-distant future. There's confidence for you, right?

Yes. So you're often also making recommendations or getting into -- with your team, into new countries and sometimes not the easiest countries like you're going into Rwanda, you're going into Angola. How do you -- I know we're doing quite a lot of work together with our teams on assessing the risk of new countries. But how do you really assess the risk and weigh the benefits of entering versus the risks?

Well, we don't do high-risk countries just for the fun of it. And I think the biggest point for everybody to fully understand is ore bodies are where they are. It doesn't matter how much you wish or pray that you want an ore body to be found next to your existing smelter or whatever. Yes, brownfields is an attractive location, but we do find a lot of our competitors get very comfortable and exploring in only certain parts of the world, and those areas have been heavily explored. If they're going to find things, they're going to go much, much deeper. And we have a resolution, which is 1.5 kilometers to the top of the ore body. Well, that's all very well and good. But if you want to find ore bodies sticking out of the ground, then you have to go where those ore bodies are, which are generally locations that for some reason, over the last 40 or 50 years, have not been at the top of people's tourism list. So for example, parts of Colombia, Angola, Rwanda, they haven't seen modern-day exploration over the last 20, 30 years. So we have to go to those new jurisdictions. I have been in situations where people have suggested they might like to take my head off. So when it comes to new country entry and assessing risk, it's something that we do take seriously. And as you know, Isabelle, your team is very much a part of that process. So pre any new country entry, top priorities are health and safety of our people, without a doubt. Then we have a very serious look at tax regimes, mining law, regulation. How do we work with local communities? What are the opportunities we have to actually invest? Are there local operators? How do we work with them? And can we actually operate? As I say, we have to go to new frontiers. Exploration is the one that's going to take that challenge. Be the pioneers to go in and see if we can operate. We're only putting a couple of million or 2 at risk when we go into new areas. So it's easy for us to go in, see if we can operate, and if there's a challenge, we can get out without costing the company hundreds of millions of dollars. So very robust process. And to date, it's worked very well, and I still have my head, so that's even better.

Great to see that. So thank you for that. So maybe, Nigel, I'll bring you into the conversation here because Dave has spoken about the collaboration with the technology group and what you're doing in exploration. Can you explain what you're contributing to Dave's area and successes?

Well, we're working together on a lot of things.

Yes. So we work together on a lot of things, as Dave said. One of the things that's really exciting at the moment that we're working on is taking a technology that's actually used on the Mars Rover and bringing that to use on earth. And this is the technology that enables us to conduct very, very rapid chemical assays of our core samples. And to give you an idea just how rapidly it is, we get the results instantly. Normally, if you want chemical assays of core samples, you have to slice them up, you send them off for analysis and you'll get the results weeks if not months later. So it really, really slows down our rate of discovery. So with this technology, we really speed up. The other thing that we can do is we can combine the analysis of a core sample with optical images and associate the 2 together. So this provides an incredibly rich data that we can feed into our AI tools to better understand how to target new ore bodies. So it's really a game changer in terms of -- it's transformational in terms of our speed of discovery.

Just to put a few numbers around that for some of the audience, if you're not familiar with exploration. When you drill a hole, whether it's percussion drilling and you get rock chips or you get sticks of core, the geologists then sit down and log that core. A lot of work that gets done is somewhat monotonous and boring, and some of you know with geologists that everyone calls the same rock a different name. So sometimes it creates problems for ourselves. Using the LIBS system, the scanning system, it is looking and taking 2,000 readings a second and giving us data about every element on the periodic table. So that's a massive amount of data that aids the geologists on -- be able to collect. And secondly, it's impartial. It's just calling the rock what it is. They then give us the assay data. Now in a lot of parts of the world, it can take me up to 5 months, believe it or not, to get assay data back from a laboratory. Average is 75 days. As Nigel mentioned, the [ Lumine ] LIBS system can give us the data, all of the information that our geologists need within 2 hours of that rock coming out of the ground. Now that is a major game changer for the future of exploration. And that's something that we're actively deploying around the world now. Now equally, the amount of data it gives us about mineralogy, sulfides, assay grades, all of that can be fed into 3D geological models, which then assist study stages, processing, mine planning. Again, that stuff takes months, if not years, to be bringing together. So if we get this right, and it is a race, if we can be first, then this is really going to be a step change in terms of the time lines, a, to find something; and b, to bring it to production.

Well, and talking about the race, you're talking about the race, you're often talking about the race for technology. Can you explain a little bit what you're doing to accelerate our strategic agenda?

Yes. Well, I think the reason for the pace is the energy transition itself. That's placing huge amounts of demand on us for the new -- the new materials for the energy transition. And also, we have to deliver them with a 0 carbon footprint and also with a much improved ESG footprint. So this requires new technologies. These technologies don't exist today. So we have to do this, and we have to develop the technology, deploy them and move with pace. No one company can do this. This is our belief. And this is why we're partnering. So the key to moving with pace is actually partnering with people who can support us in our goals. We're partnering with universities, with government laboratories, in some cases, our competitors and also with start-ups. So we've created a VC fund, and we've been making investments in start-ups that are creating the technologies that we need. This year, we've invested in 3 that are particularly interesting. Now if you recall, last year at Capital Markets Day, we spoke about the fact that you could economically firm renewable power in the form of heat. So the first investment that we've made this year has been in Rondo. This is a company that has a heat battery, and we're going to use that heat battery to decarbonize our alumina refineries and also our Boron operations as well. The second investment that we've made is in a company called Aymium. Aymium makes a biochar. And we're using this biochar to decarbonize or partially decarbonize our iron and titanium business to replace anthracite. But we're also finding more and more that this can be used in green steelmaking as well and also possibly in our aluminum operations, too. The third investment that we've made is in a company called ClearFlame. ClearFlame is taking our diesel engines, and they're modifying those diesel engines so that they can burn biomethanol, bioethanol and the future net-0 e-fuels. So these are really interesting technologies that will help us in our goals.

Fantastic. And there -- this is all like the new -- behind the decarbonization. Can you tell us a little bit more about what you're doing on the more traditional part of our business?

Well, I think it's interesting to look back about what we've done and look at our history. If I think about high -- 3 things, the first one is our aluminum smelters. Our aluminum smelters today produce 50% more metal than their original design capacities. And this is all thanks to R&D and the amperage increase programs that we've put in place. Also, 12 years ago, we implemented the first autonomous haul trucks in the Pilbara. These gave us lifts in productivity and also reductions in cost. Last year, at Capital Markets Day, we talked about the production of tellurium and scandium from our wastes and our internal waste streams. They're now out in the marketplace. So I think these are 3 things that demonstrate the value that technology and R&D can deliver. What we're looking at going forward is, of course, ELYSIS. We're looking to move to the next phase of demonstration of that technology. We've also started up what we call the BlueSmelting process in our iron and titanium business. What this is? Today, we use anthracite to reduce ilmenite to make titanium concentrate -- titanium dioxide concentrate and steel. And what we're looking to do is to replace that anthracite and reduce ilmenite using hydrogen. Today, we have our pilot plant running. It's running using carbon monoxide. We're using this to get used to the technology, and we're partially reducing the titanium dioxide. Next year, we will switch to hydrogen. The third example is Nuton. Nuton is a heap leach -- a bioleach heap leach technology that we've developed over many years now. But this is an intriguing technology because it unlocks copper that's currently inaccessible to us. It unlocks copper from nonconventional and very rich copper sources and also from waste. We also have BioIron, but I'm going to be talking about that a little bit later with Alf.

And of course, through all that, you're creating quite a lot of proprietary IP for Rio Tinto. So that's actually wonderful, and I'm loving this. You talked about partnerships. Is this really the new way of working? Or how do you see this?

Well, I think partnerships are key for the reasons I spoke of earlier in terms of accelerating what we do. But I think partnerships are also very important in creating new opportunities that we don't see and challenging our thinking as well and bringing in new perspective. So there's 2 key things that we've done this year. The first is that we've created an innovation advisory committee. It's composed of very eminent scientists, people who have been former chief scientists or are chief scientists of states or countries, leading academics in their field. They're from all over the globe where we operate and where we sell our products. And we also have anthropologists as well on that committee, too. And they've been very, very good at sort of holding the mirror up to us and showing us where we can actually start to move with pace. They all believe in our purpose to create the materials for the energy transition, but they're really pushing us on the pace. The other thing that we've done this year is our 150th anniversary. And so we've decided to create a Rio Tinto Centre for Future Materials led by Imperial College in London. What we're setting with this team of people and this network of universities around the world that Imperial will lead is a series of grand challenges, to start to address the future technologies that will be needed for the energy transition as well.

Right. Thank you for that. So before we finish this panel, I'm going to ask each of you to tell me a little bit what excites you the most about, what you're seeing now and in the next year or so. Dave?

In the next year, no one in RTX has an excuse not to get out of bed next year, I can tell you. First thing is, obviously, health and safety of our employees, contractors and the communities with which we work. There's a lot of places we're actually operating in the world at the moment where we're seeing typhoid, malaria, dysentery, other issues. We're the first people in those areas. And we're having to provide support to those communities, which is the first step to building sustainable relationships. Nuevo Cobre, best copper opportunity in the world, I would say today, and look forward to delivering some exciting results there. We have a very large new heavy mineral sands project in Western South Africa. That should complete PFS before the end of next year. We're investing in a very large, if not the world's biggest, undeveloped rutile play in Malawi. It's also the second biggest graphite deposit in the world. That should complete feasibility study by the end of next year. We have a very large new discovery of potash in Southern Saskatchewan. So we'll be running seismic and drilling that in the new, coming year. And we also have a very large kimberlite, 75 hectares, in Eastern Angola that is full of diamonds. So we'll keep moving forward with that one. So a long list of exciting opportunities for exploration for sure.

Thank you, Dave. What about you, Nigel?

Well, for me, it's the start-up of the next-generation ELYSIS cell. It's seeing the start of our first demonstration for Nuton. It's watching that switch of the BlueSmelting process to hydrogen and also progressing BioIron and taking that to the continuous pilot plant.

Well, thank you for that. And I think, hopefully, we've given you an overview of some of the options we're creating for the future through these 2 lenses. Just a few things to remember. I think I love to see the consistency and the approach with courage that the team in explorations are having and adopting to new opportunities, and on the technology side, all the curiosity in developing again and unlocking the future for us. So thank you very much. And now I will pass on to Vivek and Alf to talk about markets and customers.

Thank you very much, Isabelle. We have a small adjust -- there was a height differential between first speaker and the second speaker. That's perfect. Thank you. Yes, that's really good. Thank you. Look, thanks very much, Isabelle, and of course, Nigel and Dave. I'm always really inspired hearing about -- hearing from them. And so thank you so much. At Rio Tinto, our purpose is to find better ways to provide the materials the world needs. And when I look ahead, I see 3 pivotal forces shaping those needs. And of course, Jakob outlined these as well. The first is economic development in India and ASEAN, which provides the backbone for increasing future commodity demand. Second, there's decarbonization, which will, and as you've heard, profoundly influence our industry. And third, amidst an increasingly complex geopolitical landscape, the imperative for supply chain security has just increased. Today, my colleagues and I will show you that Rio Tinto has a portfolio of assets that is primed to deliver to those needs. So let's start by looking at some of the macro detail. We anticipate robust growth in world demand for key commodities of around 4% a year to 2035 in copper equivalent terms. And this is in a scenario where global warming is capped below 2 degrees. Average annual steel growth is expected to be around 2%, 3% for aluminum, 4% for copper and high double-digit growth for battery minerals, which start today at a relatively low base. China will continue to underpin global demand, accounting for around 45% of the market by 2035. However, 2/3 of the projected growth will come from outside China. As I described at last year's Capital Markets Day, much of the demand growth will be related to the green energy transition. For example, China's renewable electrification and uptake of EVs will require 4 million tonnes in annual copper demand by 2035. And as other countries work toward their Glasgow pledges, another 10 million tonnes of annual copper demand could be added. Global flows of iron ore will be transformed as the steel industry decarbonizes. The Atlantic market is expected to focus on less -- on high-grade ores that are suitable for green iron and steel making, and there is potential for green iron hubs in the Middle East. The much larger Pacific market is expected to be a natural home for medium-grade ores as well as, of course, high grade. This will be supported by robust demand from Asian economies, which have longer-dated net-0 targets and a younger fleet of conventional iron and steel making facilities. Importantly, high-grade ores will carry increasing value in a decarbonizing world, and it involves finding a pathway to decarbonize our business and ensure we are well positioned for green steel. What makes me most excited is the cultural change that we're seeing that will make this sustainable. The work we're doing to build a values-based performance culture underpins our strategy and gives me great confidence in its delivery. Thanks for listening, and I'll now hand over to Mark and Bold.

We all work for iron ore. You may be wondering why is a copper guy talking about iron ore. I've been working on this project for 7 years, and Dave Andrews and the team had discovered this project more than 20 years ago. So I'm very happy to give you a Simandou project update and progress to date. Now I have been like a real estate developer. I've led the development of this project, and now I'm going to turn it over to Bob the Builder, and Mark Davies is going to come and build this amazing project. So here's our construction crew. I kind of secure the commercial agreements. So Mark, I'll turn it over to you shortly. Now Simandou is not only the largest multinational investment in Guinea's history. It is the largest greenfield project on -- of its kind on African soil. Now we're talking about a high-caliber Tier 1 resource, the largest known untapped iron ore deposit of its kind. Its high grade, low impurity formation makes this a rare opportunity to diversify and grow our iron ore portfolio, now particularly as we see demand growth in favor of multiple pathways to decarbonize steelmaking. Now in lockstep with our strategy to provide the materials the world needs, we need to decarbonize. I also want to emphasize the importance of partnership. We're partnering with the Republic of Guinea, the Guinean people, our employees, our local communities, whilst simultaneously partnering with our closest and most important Chinese investment partners and customers to make Simandou happen is groundbreaking. Now I truly believe Simandou is a testament to how Rio Tinto is finding better ways to deliver these immense projects and bring them to the market. I'd like to think of it as a new era of co-development. So where does Simandou fit in? A simple answer to that is you can be part of Simandou or you can stand on the sidelines and watch it happen. Having Simandou in Rio's portfolio can and will strengthen our global position by building an unrivaled portfolio across 4 continents, with portside blending options and strong connectivity to our customer base. Through IOC, actually, we have been supplying high-grade ore to the market since our first shipment from Canada in 1954, and Simandou adds another pillar that will provide the opportunity to expand our high-grade offering through blast furnace and DR products at a time when the world needs them to meet its decarbonization goals. With Simandou added to our product portfolio, our options get stronger and more resilient. And as Vivek mentioned, the value-in-use premium for 67% Fe product could be as high as $80 per tonne at $100 carbon price. Now I'm told the highest Fe grade you can ever achieve is 70%, so 67% is like -- somebody called it the caviar of iron ore. Now there are 3 dimensions that make up this massive undertaking. The CTG joint venture between the Republic of Guinea, Simfer and WCS will own and operate the codeveloped rail and port infrastructure. And Simfer, which is a joint venture between Rio Tinto and CIOH led by our partner, Chinalco, will develop Simandou blocks 3 and 4, and WCS will be developing blocks 1 and 2. Now both mines will be the foundation customers of the infrastructure, and through the investment, enter into long-term take-or-pay tariff commitments. This is a partnership that brings together some heavy hitters, each with their own complementary skills and expertise. Now in addition to its participation in Simfer through its participation in the CIOH holding, Baowu, the largest steel maker in the world, has joined forces with WCS in blocks 1 and 2, with a stated option to increase its ownership to 51% once it reaches commercial production. Baowu's participation is a significant leap forward in validating the case for Simandou and comes when we're also partnering with them our Western range joint venture in the Pilbara with Simon Trott. Now I'll hand it over to Mark -- sorry, Bob the Builder.

Thank you. Yes. Thanks very much, Bold. It's been a pleasure working with you on this one. So sort of keeping his promises, this is now my trick. So as Bold said at the beginning, Simandou is the world's largest integrated mine and infrastructure project. Now I've had the wonderful opportunity to visit Guinea with our project team about 3 times this year, and it's absolutely impressive to see the progress that has occurred over that time scale. The project scope includes not just the construction of the mines in Southeast Guinea, but also the rail and port infrastructure required to export the ore across Guinea to the coast. Each of Simfer and WCS will independently develop their own mines, and then the Republic of Guinea has brought us together as codevelopers to codevelop the rail and port infrastructure through a joint venture. Simfer is responsible for building a rail spur to connect blocks 3 and 4 to the mainline and for the second phase of the port at Morebeya, while WCS will connect the mainline rail in the spur to blocks 1 and 2 in the first phase of the port. The Simfer mine is expected to ramp up to produce 60 million tonnes per year of high-grade iron ore at an average grade of 65.5% and with low levels of impurities over the next 26 years of mine life. This is a truly world-class resource and provides Rio Tinto with another route to supply iron ore into the growing steel industry. The Simfer infrastructure scope includes a 70-kilometer rail spur capable of using cars with a 25-tonne axle load and includes the construction of 5 bridges and 1 tunnel. The Simfer port facility will have the capacity to export 6 million tonnes per annum of ore using transhipment vessels to carry the ore from the dock to an offshore mooring where it will offload onto large oceangoing vessels. Meanwhile, WCS has the responsibility for constructing the approximately 550-kilometer main rail line and the spur connecting to blocks 1 and 2. They're also responsible for the first phase of the port, which is -- which also has a capacity of 60 million tonnes per annum. We're obviously working very closely with WCS to ensure the alignment of our infrastructure schedules. First production at the Simfer mine is expected in 2025, with a ramp-up to full production of 60 million tonnes per annum due by 2028. I've got to say, the progress at Simandou is palpable and exciting. As you can see from these pictures, the enabling work on the mine and the infrastructure scope is already well underway and is actually meeting our schedule targets. At the Simfer mine, our bulk earthworks contracts are mobilized, and they're working on the cut and fill activities for the haul roads up the mountain. On the Simfer rail spur, the contractor has started work on the construction road alongside the railroad. The tunnel portals have been commenced, and clearance of the corridor is running ahead of plan. Construction camps have been built to support our rail construction, and we currently have capacity for over 2,600 people in the rail camps. At Phase 2 of the port, we've submitted an update to our existing environmental and social impact assessment and expect to commence work next year. The Simandou project is being constructed by a joint venture partnership, where as Bold said, we're going to bring the best practice from each party to help meet the challenge of building this world's largest combined mining and infrastructure project. The total CapEx for the Simfer scope is expected to be $11.6 billion, of which Rio Tinto's share is about $6.2 billion. The remainder will be funded by our long-term joint venture partners CIOH, and the CIOH Consortium, as Bold said, is led by Chinalco, which has considerable experience operating in Guinea through its existing bauxite business. And while Rio Tinto is the manager of the Simfer scope, Chinalco strengthens our joint venture by bringing its own expertise in Guinea as well as the broader Chinese infrastructure and engineering supplier base. We've already used, to great success, the Chinese design institutes to revise the project scope and are using Chinese rail construction firm CR18 and earthworks contractor COVEC. We're also developing a strong local content program where our ultimate objective is to build local capacity and capability that leaves a lasting legacy for Guinea. From Rio Tinto's perspective, we bring many strengths built up over 150 years of history, not the least our deep experience and our safety culture. Simandou is a complex and challenging project and is utilizing the talents of thousands of employees and contractors. Simfer expects to have a head count of over 7,000 by the end of this year, including over 6,000 contractors, and this will grow further as we ramp up construction activity next year. At present, Guinean nationals represent about 85% of our employees on site. Managing such a rapidly assembled and large workforce requires a strong anchor to be in place. And for this, we have developed our culture by design program, locally known as wontanara, which means we are together. And this is to provide a common sense of purpose and a way of working together for the entire Simfer team. And most importantly, this includes adapting how we communicate on safety to ensure that we engage our Guinean workforce. I think as Bold mentioned, Simandou is a real marriage of risk and opportunity due to its immense scale, its geography and the nation changing characteristics. And we have to recognize that Simandou is going to open up a whole new iron ore sector in a largely undeveloped part of Guinea. So critical to the responsible development of that and our infrastructure is the joint venture agreements, which reflect internationally recognized standards and expectations that Simfer and WCS have jointly committed to. These standards enable us to move forward by building on the strong foundations already in place, to -- not only at managing risk, but also to actively ensure that we are focused on the opportunities. Simandou will be a game-changing project for Guinea in so many respects in terms of fiscal revenue, of infrastructure, regional economic development as well as through skills development and employment across the footprint. I truly believe that Simandou's huge potential upside will bring positive long-term impact to Guinea and the Guinean people over the life of its operations, similar to our experience at Oyu Tolgoi, which many of you would have seen earlier in this year. I'm now going to hand over to Peter, who's going to discuss our capital allocation, financials and put all of this into context. Thanks, Peter.

I'd actually like to start by just recognizing the work that Mark and Bold and their teams have done this year on Simandou. They have worked absolutely tirelessly to bring the project to the point of today's disclosures. I'm actually personally pretty pleased as well because I must say, with you, the investment community, I've had a lot of meetings, which, in general terms, I've talked about the progress we're making. We now have concrete numbers to actually talk to in the future, so it's great to be at that point. Today, we've outlined the really significant progress we've made over the last 12 months, and it's now time to really bring that all together. Starting with some operational highlights. Our copper equivalent production in 2023 is expected to be 4% higher than the prior year. We expect iron ore shipments to be in the upper half of our guidance range, as Simon said, and we're targeting a further 5 million tonnes uplift from SPS next year. And we've seen a solid rise in aluminum, up 9% year-on-year driven by Kitimat and Boeing. And finally, as Bold mentioned, we're ramping up production from Oyu Tolgoi underground, and it's set to be a first quartile producer by 2030, when it will be the world's fourth largest copper mine. Now this is a business, which delivers consistently strong cash flow. We expect this to continue over the long term driven by our operating performance and investments. Our strong operating cash flow means that we're able to invest in the long-term health of our business. We've increased our expenditure on decarbonization and R&D, communities and social investment and evaluation and exploration. The disciplined investment in the future, enabled by our strong cash flow, allows us to grow value through new options, future-proof our business through decarbonization and make those new discoveries. And let's just unpack that a bit more, starting with exploration. As Dave said earlier, we've maintained a really consistent budget for exploration, greenfield exploration, around $250 million a year, mainly focused on copper, but with a growing battery materials program. Spend on evaluation advances projects where we expect near-term investment decisions. We're also focused on the longer term, such as the Rhodes Ridge iron ore project, which Simon talked to. And we have a consistent R&D budget, which includes decarbonization studies of up to $400 million a year. And we believe it is a differentiator that gives us access to projects not available to others. Lastly, we have purposefully invested in the communities and social performance function to strengthen our social license. Critically, we will continue to allocate the capital generated by our operations with discipline and remain committed to attractive shareholder returns. We've consistently applied our financial framework, which has been in place for more than a decade. It's straightforward and serves us well, underpinned by 3 priorities. Essential CapEx remains the first priority, sustaining CapEx to ensure the integrity of our assets, high returning replacement projects and investment for decarbonization. Our annual spend on sustaining capital has increased, reflecting recent inflation to around $4 billion. Our replacement capital, which delivers very attractive returns, remains in the $2 billion to $3 billion range. This is followed by ordinary dividends within our well-established returns policy, where we have a 7-year track record of paying out at 60% of underlying earnings. We then test investment in compelling growth against debt management and further returns to shareholders. We believe that $3 billion remains the right amount for us to target for growth. Over the next 3 years, we're forecasting spend at this level. Our largest project, as you've just heard, is expected to be our equity share of Simandou, while CapEx at the Oyu Tolgoi underground will wind down as we complete the conveyor to surface and ventilation shafts in 2024. We expect the remainder to be mainly invested in copper and lithium projects, some of which are yet to be sanctioned. But as I've mentioned before, investment in growth is highly dependent on the timing of commitments as we prove up the value of opportunities. If we don't have those options, then we will follow our well-established capital allocation framework. Let's now take a look at commodity prices from a longer-term perspective, factoring some of the recent elevated inflation. Now I showed a version of this chart at the half year, and it shows rolling 12-month moving average prices for iron ore, aluminum and copper starting from May 2010 and rebased to 2023 real terms. And we have indexed those and showed the average of the 13 years as 100. The cycle has slowed as the supply bottlenecks and commodity intensive growth of the COVID year fades, with the service sector currently driving GDP growth. Prices have stabilized, having declined for over a year. In real terms, prices are trading close or just below their historic averages since 2010, and you might note the resilience of the iron ore price in particular. This slide underlines the importance of having a strong balance sheet in our sector. We've mapped our net debt going back to 2010 on to the chart to emphasize this. Our financial strength remains a key asset. It enables us to run the business consistently, maintain investment through the cycle, offering resilience and creating optionality. We've chosen not to have a net debt target, but have adopted a principles based approach to anchor the balance sheet around a single A credit rating. As Mark explained earlier, the 6+1 program is taking hold, with a well-defined pipeline of projects. Decarbonization decisions are made within an evaluation framework, which ensures disciplined allocation of capital. We also take into account the readiness for execution, the abatement potential, the competitiveness of the asset as well as the alternative pathways to net zero. Over the past 12 months, we've seen an increasing number of commercial partnerships, which allow us to decarbonize faster. Examples of this include renewable power purchase agreements of Richards Bay Minerals and Amrun, renewable energy certificates at OT and new renewable diesel contracts at Boron and most recently, Kennecott. We expect this trend to continue and contribute between 65% and 70% of our abatement to 2030. And due to the increased role of commercial partnerships and our expected time line of fleet electrification rollout post 2030, we now anticipate the total capital spend on decarbonization to be lower than previously forecast at $5 billion to $6 billion to 2030, including $1.5 billion over the next 3 years. Now this guidance is provided with the context that we're retaining absolutely our 50% emissions reduction target. The composition of the portfolio of decarbonization projects is complex. Renewables are already cost competitive compared with traditional fossil fuel sources and are expected to deliver cost savings. In other cases, such as our new renewable diesel contract at Kennecott, opportunities do come at an incremental cost. Our investment framework seeks to balance these economic drivers, recognizing that only focusing on cash positive projects will not get us to our 2030 target. For nearly a quarter of a century, we've had included a cost of carbon in our investment decisions. However, now we're seeing legislated long-term carbon penalties, and they're having a greater influence on our portfolio, such as the expansion of Australia's Safeguard Mechanism. Approximately half of our emissions are in scope for these mechanisms in Australia and Canada. Future carbon pricing remains unknown, but based on today's policies, we expect a long-term return across our portfolio to 3% to 5%. Now this is below our cost of capital. When modeled under our internal scenario for a 2-degree Celsius increase, we see returns increasing to 10% to 13%. And there's upside under other external scenarios. So decarbonization is good business. As well as providing returns, it reduces our exposure to fossil fuel energy prices, and this is highlighted by our operations in the Pilbara, where we expect 80% renewable energy by 2035. So let's wrap up. The long-term demand fundamentals are unchanged, with significant growth expected over the next 2 decades. The mining industry will continue to benefit from global industrialization and urbanization, with additional momentum from the energy transition. And that's why our strategy is all about growing the materials the world needs, a strategy that will ensure Rio Tinto remains strong in the short, medium and long term, with the ability to invest for the long term, while always paying attractive returns. And with that, let me pass back to Jakob.

Yes. Thank you, Peter, and thank you to all of you for hanging in here. Starts getting late in the day. You've been extremely patient, but it's over to you now in less than 2 minutes. We're getting to the Q&A session. The summary is super simple. Rio Tinto is on a good trajectory. We are opportunity rich, and we are strengthening the health of our people, our assets and our ore bodies, while we are investing and shaping our portfolio and decarbonizing our business. The outcome, as you see now and you heard from Peter, is that we are profitably growing. We are living our purpose and our 4 objectives, and it leads to value creation to you, our shareholders. Thank you for your attention, and let me hand over to Menno to run the Q&A session.

Thank you. Jakob. Thank you, everybody. We'll follow the usual schedule, so we'll take 2 in the room and then 2 online. It's about 7:30, I think in London or 7:00, so people should be woken up. Please state your name and your institution. Most people know you, but not everybody may. And one question and one follow-up, if that's okay. So that's -- Paul, you want to stay in the back there -- Paul McTaggart?

So we talked about renewables being affordable now in terms of the pricing that you can attract. But the problem, of course, is firming for the aluminum industry. And you mentioned roughly your [ tender in the ] East Coast electricity demand. Historically, that you're an important part of balancing the grid certainly here in New South Wales. You don't get paid for that. How do you get paid for that? And how can we make firming profitable? Or how can you get firming at a competitive price to make aluminum production here profitable?

Yes. No, thank you. It's a super good question because, fundamentally, for Australia, it's very -- it's so important. You cannot have industry longer term because decarbonization is about electrifying society and, therefore, having a competitively -- a competitive and effective grid is crucial, and we can actually contribute to that. Why don't I ask you, Jerome, to say a few words about that? You have an enormous amount of experience in renewables from your previous job.

Thanks. So I think your point is correct -- your 2 points are correct. The first one is our smelters have a big role to play in providing a number of service to the network in New South Wales, in Queensland, in New Zealand. Its demand response can also be seeing that frequency regulation and other matters. There are places where we get paid for that. New -- I will not put New South Wales in that category. So that's probably one issue for our Tomago smelter. It's clear that any negotiation we have today in Australia and New Zealand, it's a big point that we put forward. I mean how can we provide more service to the market? We have done some great works with our R&D teams. Our smelter are working better and better on flexibility unit. We can go down in production 20%, 30% for 2 to 3 hours, depending on the smelter. So it means our smelter are not only a problem to the system because they don't owe a big amount of power. They can be a big solution by acting as a big battery, and that will get more and more important as renewables grow in the system because that is for firming will get higher and higher. So it's a big asset we bring. It's an important part of the discussion we are having in many places. The second leg is, and we go through it with Jakob recently when we discussed Boeing, once we have secured a decent amount of renewable at a competitive cost, the issue becomes firming. How do we get competitive firming? We are working on self-firming alternative using battery storage capability that gets developed here in Australia. This storage can be either colocated with solar or they can be like standalone batteries. And we are also exploring the possibility of having batteries that we could locate on our site, and that will be the primary source for our self-firming. So again, the situation is different in New Zealand, in Queensland, in New South Wales, but that's -- what you touch upon is a really very centerpiece of what we are working on.

Paul Young from Goldman Sachs. A couple of questions for Bold and Mark, again, just on Simandou. Actually, before I start, I'll just say thanks for the update on exploration of -- and the clear focus on creating shareholder value through exploration and early-stage projects. I think it's fantastic. Just on a question for Bold and Mark about Simandou, and thanks for all the detail there as well. Just to clarify, if FID is achieved in all regulatory approvals, et cetera, in the first half of '24, just looking at the time frames, is first iron ore theoretically on both late '26, early '27?

We'll get a more ambitious plan for the first shipment in '25, actually. Now the ramp-up is going to take a few years. I think one of the things that we also have to remember is that critical enabling work has already started, and it's been going on, and it's not about the kind of mobilization. And especially the WCS scope, they've been progressing their work over the course of last year. So this is not a -- it is actually a project in flight from WCS scope already. And then the other part I would say is that we believe regulatory approvals are imminent. So we're actually working through a much more ambitious approval time line maybe in the first quarter. But I think -- so that's kind of plus/minus 3 months, and it could take longer, but that's kind of, at the moment, our assumption from discussions with our partners.

Let me just build on that because what Bold doesn't say is, actually, as part of developing the haul roads and the mining, we end up with more than 10 million tonnes of ore that we sort of -- it's just part of the development process that is really waiting for the infrastructure to be ready. And then actually, that ramp-up is really driven by the ramp-up of the infrastructure. So that ramp-up from initial production to the 60 million tonnes is as we bring on, obviously, the WCS port, they've already started on. They're working on that. That first 60 million tonnes will be where the initial shipments go out of. And then obviously, we build the second 60 million tonnes that allows capacity to ramp to 120 million tonnes for the system.

Maybe I should say, it's only 4 weeks ago I was down there and went around with helicopter seeing the mines, the harbor, the rail lines. It is an amazing focus that we are having, and we're not going to lose the dry seasons right now. The reason why we cannot put the word sanction on right now is that it just requires the final approval, the final Chinese approval. That's, of course, critical. But the reality is there is a lot of execution happening.

And then a second question on copper. Great to see the JV with Codelco, and I hope that leads to other joint ventures maybe on a couple of other commodities in Chile in due course. But just on resolution, specifically, I mean, a big gap in your other potential growth CapEx in sort of '26. We're getting to that point where you can potentially roll the OT team on the resolution. It's stuck in the Ninth Circuit court at the moment, pending decision. It's been that for a while. But Bold, where do you see resolution and the approvals to get this project construction started?

Yes. Look, as you can see from our strategy, social license circles everything we do and is absolutely important to have the support of the communities around us. And we are working with the Native American tribes. Of the 11, we have secured 4 agreements in one shape or the other to find a way to support. We're continuing to actively looking to engage with the San Carlos. We have employed a number of them. We're in discussions with them and the council around how we can be helpful in the community. Now look, I think the Environmental Impact Assessment is obviously -- we're waiting for it to be printed. And one thing I would say is that in Australia, we're talking about co-management. Actually, resolution was co-designed with the input a lot of the Native American tribes, with the location of the tailings, with the contribution of sacred sites, with cultural heritage program, doing social surrounds, understanding heritage sites. So it's been a 10-year journey. This has not been a quick kind of permitting process by any stretch. And so obviously, we're optimistic. We're hopeful. It's dependent, obviously, currently on the U.S. Forest Service and the Ninth Circuit decision. I think the other thing I would say is that, look, we respect all voices, but I also think that we actually contributed more into protection of the Oak Flat area in the form of Apache Leap. And Oak Flat is a bit like -- think about the Central Park of New York, and the area that we're talking about called the Oak Flat camp ground is like a parking lot of Central Park. So we contributed massive, big mountain valleys into protecting the total Oak Flat areas and 2 creeks to it. So I think there's a bit of a clarification that's probably required as we talk about that permitting process.

Let's go to the line for next question, please.

[Operator Instructions] And your first question comes from the line of Richard Hatch from Berenberg.

Yes. Thanks very much for the presentation. I've just got a question on your lithium strategy. You haven't really talked about it today. We've seen lithium prices down 80% year-to-date. Your iron ore price has had a very good year. It's up sort of 20% or so. Is now the point to be a bit more bold in a lithium M&A strategy, and that's a bit more countercyclically, and perhaps go for some of these de-rated majors, perhaps not in Australia, but elsewhere?

Yes. It's -- well, it's a good question, Richard. But first of all, I said in my introduction we are not covering it today simply because Sinead is not here. She's on leave, so we will cover that at a future event. We are quite opportunity rich. We are building a lithium mine in Argentina. We want to build an amazing mine and processing plant in Serbia. We are exploring for lithium in Canada, in Latin America and in Africa. So I think, actually, we are pretty full on. And I have so far taken the view, we have taken the view, that a number of lithium companies are very, very expensive. But you're right, it's a very cyclical business. It will go up and down. I still don't think that anyone at least have been able to convince me that we should go out and do M&A in this space at this point in time, but we do want to build a lithium business. The trick is to build it as cheap and as competitive as possible, so that we can not just build a business, but we can actually create a lot of value from building that business. Thank you.

Perhaps can I just ask one on the rail line in Simandou? I've asked this one before, but perhaps you could just give us your updated thinking. 600-kilometer rail lines obviously going to pave a lot of safety issues for local communities and people wandering around. I mean, what's your view on that? And how are you sort of mitigating that risk?

Yes. Bold. You're absolutely right. It's not easy.

No, you're absolutely right. And I think Mark and I, we are actively engaging with WCS around safety standards. We actually seconded 6 of our health and safety trainers into the joint venture already. They've been working on it close for 11 months, and it's not an easy process. I think one thing I would say, though, is we've been in Guinea with CBG for over 50 years, which operates a rail line, and we've been part of that journey. So we try to bring our CRM methods and everything we can to our joint venture partners and work with them. And they're very, very receptive to learning. And so I think that's at least kind of our experience. Mark, do you want...

No, Bold, I think you've covered it. I think not only have we had 50 years of experience running rail lines, but WCS also runs a rail line in Guinea and has experience. And look, I would say, we're using China Rail 18 as our construction contractor on the rail. And they've been very receptive, very responsive when we've actually raised concerns and have -- it is still a very difficult environment, and it does require a huge amount of effort.

Great. Next question from the line, please?

Your next question comes from the line of Lyndon Fagan from JPMorgan.

Just back to Simandou, I'm wondering if you can tell us what percentage of the railway is actually done. I'm sure we've all seen photos of the tunneling starting and some clearing. I'm just wondering what sort of head start that's -- given you -- particularly in light of what looks like a very ambitious time line.

Yes. I mean, Bold -- I mean, we can't really say that, but what we can say is that the whole road, the 650-kilometer road that supports the construction is done, that has been cleared up for rail lines. But how would you say that? I mean, I have seen it visually as well.

No, look, I think the guess is anywhere between 20 to 30 some kind of percent. And the reason why I say such a wide range is, of course, there's a way we measure it, and then there's a way that, obviously, our partners measure it. But the one thing I would say is that a lot of the dry season work from last year has been well built in terms of bridge pillars and tunnel work, and that's why this dry season that's currently underway is very important for continuing construction. So it's kind of in that range. It could be higher, but -- Mark?

No. Look, Bold, I think probably the key point is actually I think the big tunnels are the critical part for the WCS mainline, and I think they may -- they've been working on that for a couple of years, and they've made pretty good progress. So I wouldn't like to give an exact number because of the challenges in measuring, but they were well developed on those main tunnels.

And I think, Mark, the other thing we remember is that they've split the scope across 9 packages. So 9 simultaneous packages of work by 9 Chinese railway construction [indiscernible] all taking place at the same time. So it's not a sequential construction of a railway.

Right. And I guess in light of what could be 30% of the railway and infrastructure done, how do we kind of reconcile that without an EIS and environmental assessment? I guess I'm just wondering how this fits with the impeccable ESG credentials mantra.

Well, actually, the EIS has been completed in 2022. So the government has already accepted that rail corridor EIS. Because remember, we actually had that same rail corridor before, and so they benefited a bit of -- synergy-wise from that work we have done. We also -- the port has also had an approved EIS. What we're working on is the expansion of the port wharf under the EIS, which is already underway. What's been completed has been submitted to the regulators. So we are working within the EIS standards, absolutely.

Okay. Come back to the room here.

It's Glyn Lawcock of Barrenjoey. Look, I'm sorry to keep focusing on Simandou, but I guess it's the big announcement today. A couple of things. Firstly, it's not -- it doesn't go unnoticed, I guess, $230 a tonne of capital intensity. We're talking 4 to 5x what you're spending in WA and maybe 1 -- probably a couple of times what you're spending on Rhodes Ridge, and you're getting 11% to 13% return at some probably some reasonable decent iron ore prices. Just -- I don't want to put the cart in front of the horse, but you're only getting 27 million tonnes for all the money you're spending. I don't -- it feels like an LNG project where my returns probably need to come in the next phase of development. So can you help me think beyond what you've got? Or is that the limit? And I can't help but notice you're carrying the government on the mine and your partners, the other consortium, are not carrying the government. So I'm curious why they're not -- the government is not involved in their mine, but they're involved in Rio's as well. I know there's a few questions, but just there's some loss signal...

That's 3 already. Let me start off because you actually said a few triggering words that was very helpful. I happened to have spent 20 years in my career in Shell. So you refer to LNG plants, and any greenfield LNG plant always had a low IRR. And by the way, any greenfield LNG plant always outperformed, and it created this long, long stream of cash flows. And actually, a lot of Shell's wells was built around daring to take those greenfield investment decisions. Now we're not talking about what is the price -- what price assumptions do we have. So the only thing we are doing with the IRR is we are taking an external benchmark and going forward. But I hope you can see from the presentations today how it fits in, how we see the positioning of this ore in a decarbonizing world. And we are quite convinced that this can deliver a lot of value. But it's near impossible to get a very high IRR when you don't have the infrastructure. The reason why you have very high IRR on projects in the Pilbara is that you already got the infrastructure.

Yes. Look, I think we made a mistake. So for the -- on that chart, there is a 15% in blocks 1 and 2 by the government. So on that page, we need to make a change, and so we'll fix that. So the 15% is actually across 3 and 4 and 1 and 2. So there's no asymmetry on that. I think in terms of the greenfield CapEx intensity, I have looked at it because I had to go through intense IC approval processes. And actually, they're very competitive resilient greenfields with full rail and port integrated options. And most of the, of course, Pilbara brownfields are about just the mine replacement, so they come in, obviously, at a very different capital intensity. Now I think looking forward, consensus actually is very different than what the current price is today in terms of long-term price forecasts. So we're not relying on any current strength of the iron ore price to actually make this calculation of the decision. And then the other part that's a big question is what will be the DR premium going forward for decarbonization and electric arc. Because I think key question for this is that in order to build these DR plants [indiscernible] electric arc furnaces, they need low impurity iron ore, which all of our deposit has. And so we just need to think about how to bring it to the market, and if there is indeed a premium, it kind of puts them at very attractive rates of return. So at the moment, we're quite taking a conservative view around the premiums. And obviously, we're using long-term Wood Mackenzie kind of prices for iron ore.

Yes. Sorry, I just -- I guess, maybe I just ask my question a little bit clearer. Beyond the current 60 of transhipping, can you do more than that to [ us so ] we can get the LNG-type returns on Stage 2 and Stage 3? Or is 63 transhipping the upper limit, and then you've got to spend more capital for [ Perth ]?

Yes. Look, I think once Mark builds it, we can optimize it, but we don't know at the moment. At the moment, we're tapping at around 120. There could be a deep seaport option, but it will be capital intensive. The rail line has a capacity of up to 160. So -- but also there's a third-party use agreement with the government, so this can absorb some of that capacity. So I think that's kind of the range that we're talking about.

There's really no plans in terms of capacity optionality, but the optionality in terms of the grade between the Pilbara between IOC and Simandou is pretty amazing.

Lachlan?

Lachlan Shaw, UBS. So 2, for me, just hopefully, an easy one on Simandou. So just on timing, so just to clarify, the mine, you're talking to a 30-month ramp-up. CTG is talking to a 30- to 42-month ramp-up from signing. So is the interpretation here that the infrastructure is sort of the bottleneck that comes a little later? How should we think about that?

Actually, Mark?

Yes, I think the rate of ramp-up is driven by how fast we bring infrastructure on. And so the -- we're actually going to start shipping from the mine using temporary crushing facilities and temporary loading facilities where we actually build the main crushing and downhill conveyor, but we will start with that. And then the ramp-up is really the ramp-up of the port and the rail capacity.

But I think the key, though, is the port. So the key -- I think the mine, as Mark said, there's real limited stripping. So we're almost -- as we're clearing that, we're putting a lot of iron ore stockpile to the side. The rail, I think it's reasonable shape. It's the first 60 million tones and then the next 60 million tonnes. So that next 60 million tonne is that schedule kind of what you would be referring to in that 42-month.

Okay. Great. And then changing gears to aluminum. So just on the outlook, the 45 million tonnes per annum cap in China, how's the thinking evolving there? We saw Xi Jinping at COP28 talking to building 450 gigawatts of renewables and storage. Is there a scenario here that potentially China continues to add primary capacity if they can power it with low carbon power?

Yes. Look, you can only be impressed with what China is achieving on building renewable energy right now. Last year, they did 125 gigawatt. This year, they have already done 160 in the first 10 months. They will probably reach 200 gigawatt this year. It's mightily impressive. But a couple of things. There is a long way until China has full cover of renewable energy, and they're very ambitious on addressing climate change. So if you want to achieve something on climate change and you're building as fast as you can on renewable, the last thing you probably want to do is to have much more of the most energy-intensive industry on the planet. So I actually think quite -- I think they are quite serious about this ban, and that's the indications we are getting from industry players in China. Plus you actually need 2 conditions. It's not enough to have the renewable. You also need to have the transmission lines in place. So it looks like there could be a good period of time where there certainly is not too much capacity in the market.

[Operator Instructions] The question comes from the line of Alain Gabriel from Morgan Stanley.

I just have one question from my side. Given your clear commitment to develop Simandou over the next 3 years with the bulk of your spending occurring in '24 and '25, would it be fair to infer from that, that your capacity and appetite to pursue additional growth, whether organic or inorganic, will be limited in the next 2 years?

Well, I mean, I was looking at Peter when you said that, but then I suddenly realized I shouldn't be looking at Peter because it's not -- I mean, let's just be honest about it. We -- it's kind of self-imposed, this thing about CapEx numbers, because it's not that we can't afford to spend $1 billion more. The reality is I'm trying to keep Mark's teams very busy, but I don't want to break their neck. So it's really a capability limitations. We have a lot on our plate at the moment, but we are executing. And we are, actually, for the first time in the 3 years I've been in the seat, suddenly having projects that are ahead of schedule and below budget, et cetera, and we were structuring a little bit on that earlier on. So I feel quite good about the program that we all and Peter have expressed today, but I would say there's not a lot more we can do -- well, I think we can, but Mark is telling me that we can't.

And Alain, the one thing I'd add is that spend is spread across '24, '25 and '26.

And your next question comes from the line of Myles Allsop from UBS.

Great. Just a couple of questions, one on Simandou and one on the copper assets. But with Nuton and Oyu Tolgoi, Bold, you were saying that you're ahead of schedule. But could you just give us a sense as to what that means in terms of numbers for Oyu Tolgoi and with Nuton as well? I mean you're sort of saying that OpEx, the higher volumes. Could you give us some numbers around that, so we can try and kind of evaluate what the opportunity really is from Nuton and, obviously, from Oyu Tolgoi? And then just a very quick question on Simandou. What contingency do you have in the $11.6 billion?

So I'll let Mark ask and answer the question on contingencies. On the first one, I would be violating gun jumping rules because I haven't been to the investment committee with any of those numbers. Unfortunately, I cannot tell you exactly what it's going to look like. All I can say is that all of those options are less capital intensive. There would be -- especially in the case of OT, would be brownfield like expansion options. And when talking about the projects under study at the moment are oxide leaching, and I'm trying to get the team to look at, while Mark is finishing one concentrated expansion, to already think about the other SAG mill line. Now we have to finish this ball mill, but this -- we're not orebody bound, so to speak, because I think if we can get that concentrator expansion, we'll be very attractive. But at the moment, it's too premature to talk. And then on Nuton, which is not Nutrien, we're not acquiring Nutrien. No fertilizer business. But Nuton is an interesting one because this year, we have commercial scale-up opportunities with 2. And look, if the scale-up is successful, we're going to have ability to market those tonnes. And -- but at the moment, we have to still go through a proof of the commercial scale. Mark, do you want to...

Yes. And look, I'd say that -- yes, there is no one contingency number that makes sense in the context of Simandou because probably I think between 70% and 80% of our spend is actually either under fixed price contracts or is already a tendered price. So there's obviously -- the fixed price contracts, the risk sits with our counterparty, and they're big Chinese engineering and construction firms. On that 10% or 15% that's left, the contingency varies based on whether it was got from a firm market price or whether it was a historical or estimated price.

Back to the room. Anybody?

Kaan Peker from RBC. Maybe just building on Glyn's question. With rail capacity at 160 million tonnes, being able to push the bottleneck to the most capital-intensive part of that day chain, would that not mean transhipping would be the limit? So the question is how -- what is the actual limit of transhipping? And what's the hurdle that needs to get past to maybe grow beyond the 120?

The river, the river width. It's very difficult to maneuver beyond 120. That's really what it comes down to. They're using barges. We're using transhipment vessels that are both going both ways and also self-offloading at 40,000 tonnes. I think we have started securing those contracts in terms of construction and build. So it's just a lot of traffic in that river.

And the reason we went to transhipment vessels was because actually if everyone went to barges, you couldn't get to 120. You have to do transhipment to get to 120.

And don't forget, the rail line is multi-uses. So you cannot just say we're going all-in on iron ore here. We will have to figure out what other uses that will be in the country.

Yes. But I think one -- just one correction I just want to make, Jakob, which is under our investment convention, we do have an obligation to study a deep sea water port, but it has to be economical. And that -- we have to find the right location, do a proper study, environmental assessment. So that work is still ahead of us.

And the second one for Dave. I mean, recently -- well, over the last couple of years, you've been focused on growing with lithium. Recently, there's been some JVs or firming JVs in Canadian spodumene. I mean, what's changed with the thinking? And why Canada?

Yes, good question. We're trying to get a balance of self-generated opportunities and accessing third-party projects. At the moment, we're still putting 55% of our spend into copper opportunities. We've upped our spend on lithium. We're now back about 25%. We're ready to drill on Canadian lithium projects once daylight reappears, and we can use the helicopters efficiently. We'll be drilling in Canada. We have lithium opportunities already in the U.S., in Arizona. Again, that's just delayed due to permitting. Rwanda, we're pretty much working up to already opportunities there. Again, this is all hard rock lithium, and we're seeing spodumene in those areas. We've just done a deal here in Western Australia to acquire a block of ground with a third party in the Yilgarn. Again, there's spodumene and copper in that area, too. We've slightly reduced our spend on nickel. I think we've looked at culling a number of our long-dated generative programs and really get down to focusing on near-term large sulfide nickel opportunities. We're not in it for the long haul. We're in it for we've got to deliver now. So that's the general play at the moment. Does that answer your question?

Next one from the line, please?

Your next question comes from the line of Amos Fletcher from Barclays.

Question for Peter. You showed quite a big growth capital allocation of about $1.5 billion in 2026 outside Simandou in your slide. What are the most likely candidates for that spend at this stage? And then my second question is just on iron ore cash cost guidance for 2024. Any hints on what that could be?

Simon is nodding. So probably nothing on the guidance on costs. We'll be doing that with our results in February. In terms of the guidance in 2026, it is open. I mean, we've got a number of things we're working on. So in both copper and lithium as we talked about, as those come through to sanction, they'll fill up that gap. But at the moment, that is open. And we're looking for the team here to bring through the best projects they possibly can to compete for those dollars.

Austin from Macquarie. The first question is on the portfolio thinking. It's interesting to learn that the exploration team has been really busy looking at the potash, graphite, rutile. So what is a perfect portfolio for Rio Tinto? And how many new commodities would you like to add into the mix?

Yes. First of all, over the last 10 years, we have reduced our portfolio, so we have a very manageable portfolio at this point in time. So I'm not too afraid if we take in 1 or 2 commodities more. I mean, you could say at some stage, we might produce more things like tellurium and scandium. But quite frankly, it's just an addition to existing plants. They are taken out of the waste stream. But on the exploration side, we are fairly disciplined. Dave, how would you look at that?

Well, the reality is exploration's about finding, making discoveries and providing Jakob and Peter with options. So my full focus is on finding the best ore bodies I can for a range of commodities. If Peter and Jakob decide they don't want them to invest them, then we'll either diversify or partner them. So yes, we're looking at lithium. Yes, we're looking at nickel, heavy mineral sands. We've got some good options there. I probably don't need to find more of that in the near term. Rutile is a new one. We're looking at some vanadium options. Again, these are all very low-cost options for us to develop hold, but at least we have the option. So that's how I would answer that. And I'm only looking for the best options. It's not just any option. So very tight portfolio, multiple options for Jakob and Peter to decide if they wish to invest or not.

It was a bit like in Serbia, where we went and explored 20 years ago, and we were looking for boron. And we found boron, but there was much, much more lithium than there was boron. That's how geology works, isn't it?

Second question on Simandou. The tax settings, I can see that in the first 8 years, you have a concession on the corporate tax at 15%. Just trying to understand if there are any conditions attached to that. Or also any options to extend that kind of lower tax rate?

Yes. Unfortunately, no, because these are investment conventions that have been signed a number of years ago. I must say that I was very pleased with the Guinean government around holding to that commitment that have been ratified by the previous parliament. So those conventions give us exactly that fiscal stability in the regime, so we are quite pleased with the existing fiscal framework that's been achieved.

One last question in the room? Lachlan?

So just to round out on Simandou. So you've spoken about wet season, dry season in terms of construction. But when you're operating, what sort of impacts are you anticipating? And what sort of measures are you taking to manage those impacts through the supply chain?

Yes. And look, obviously, transportable moisture limits has been a key consideration as we've designed, and that's another reason that we're actually going for the transhipment vessels because they're sealed hold. We're also looking at the way we crush to make sure that we actually manage those moisture limits. So we have modeled that. We have modeled the seasonal variability into our capacities because it's clearly a big driver for making sure we can ship safely.

All right. Thank you very much, everybody, and drinks and burgers in the back. The whole team is here, so please take the opportunity to ask more questions. Books available as well. If the books are not available, we will send them to you. Just put your name down. Christine and Katarina have a list. Thank you for joining.