Rio Tinto Group

Hello again to everyone in the room and now welcome to those online to Rio Tinto's 2024 half year results presentation. My name is Tom Gallop and I'm the acting head of investor relations. We'll follow the normal proceedings today. Jakob and Peter will take you through introductory remarks for about 30 minutes and we'll follow that with Q&A. And with that, Jakob, over to you.

Good morning and thank you, Tom. I also want to thank Brendan for a wonderful welcome to country. I acknowledge the Gadigal people of the Eora nation on whose traditional lands we are gathered today. And I pay my respects to elders past and present. I extend that respect to all indigenous people across the globe. I acknowledge the important role that continues to play within communities and our business. It's great to be in Sydney today. The first time Peter and I have reported our results from Australia, it's an excellent opportunity to highlight the strengths of our Australian operations, which are powerful drivers of our performance. The foundation for much of that strength can be traced back Long back, back to Sir Rod Carnegie, the former chief executive of CIA. Sir Rod very sadly passed away on 14th of July. And I want to recognize the impact he had on our business. He was a remarkable leader and a true pioneer of our industry. When you look at Rio Tinto, you can see a clear and consistent story. We are profitable. And we are growing. Growing because we are improving the performance of our assets. Growing organically because we are investing with discipline in projects that will create significant value, not just in one or two decades' time, but also in the near term. And this growth is supported by strategic M&A. We're executing this growth through a relentless focus on our four objectives. They are enabling us to unlock value and find solutions to even the most complex challenges. There has already been a step change in our road to best operator. This is, amongst others, clear in our bauxite business where the safe production system has helped deliver a 10% boost to production in the first half. Meanwhile, we have taken large and incremental steps to decarbonize while delivering materials for the energy transition. This includes securing competitively priced renewable power for our assets. And we are hitting milestones as we excel in development. Simundu in Guinea received the full sanctioning earlier this month, a major moment for the largest greenfield mining and infrastructure project in the world. We cannot operate unless we bring the local communities along with us, and we want communities to benefit from our operations as we grow. That's why I emphasize the importance of having a deep social license and working in partnership. For example, partnering with the Nalama Aboriginal Corporation, together we are progressing a solar farm to supply our assets. Ultimately, delivering our objectives in the right way will benefit our shareholders too. By striving for impeccable ESG and a strong social license, we can unlock even more business opportunities. We're solving complex challenges and executing profitable growth with the support of governments, customers, and communities. This is the meaning of our purpose, finding better ways to provide the materials the world needs. Our financials show we have a strong base from which to grow production further. In the first half, we deliver robust underlying earnings of 4.8 billion, a 1% increase year-on-year. Copper-equivalent production has grown 2% and is accelerating. I'll elaborate on that future growth later. As we step up capital expenditure to deliver our big projects, we are securing the profitability of our business well into the future. We are achieving this while maintaining a strong balance sheet and attractive returns to shareholders. Once again, we will hand back 2.9 billion and 50% dividend payout in line with our policy. This is not just a growing half-year result. This is stable, reliable growth. We are confident executing significant projects while building value. Peter will now go into more details. Thank you.

Very helpful. Thanks, Jakob. It's great to be here in Sydney to present our interims. We now have good stability at most of our assets. We're strengthening our core business segments, creating value and options for the future, and have real momentum across the group. We're also solving some of our hardest challenges. For instance, the Simundu project, where investment is now proceeding at pace, and the competitive power solutions announced for Boyne and Ansys. We'll add 170,000 tonnes of aluminium metal, or 5%, to our portfolio when the transactions to add our partners' interests complete. Our Pilbara operations are very consistent, delivering production above the five-year average in the first half. And the underground copper mine at Oyotorgoy continues to ramp up, in line with our long-term plan and will drive considerable free cash flow expansion over the next few years and we saw a step change in borg site production and a very stable performance at our smelters the safe production system is delivering results and unlocking value three sites set best throughput rates over a 90-day period during the half and more on that later But we can still realise much more from our existing assets through productivity improvements. Kennecott remains the biggest challenge, but also a real opportunity to unlock value. So turning to the numbers. All in all, it was a very consistent financial performance. On a net-net basis, underlying EBITDA increased 3% to $12.1 billion, with our aluminium and copper divisions more than offsetting the lower, but still impressive performance from iron ore. Cash flow from operations was stable at $7.1 billion, and free cash flow of $2.8 billion reflected the rise in capital expenditure to $4 billion as we invest in growth to deliver enhanced future earnings. Following payment of the 2023 final dividend and receipt of $400 million from our Sinfa JV partner, CIOH, we ended the half with net debt of $5.1 billion. Overall, we delivered a healthy return on capital employed of 19% on underlying earnings of $5.8 billion. And as Jakob said, we've maintained our practice of paying out at 50% of the intrams for the ordinary dividend, equating to $2.9 billion. Now, unusually, movements in commodity prices were not a significant driver of our financials. The Platte 62% iron ore index dropped 3%, LME copper rose 4%, and LME aluminium was up 1% compared with the first half of 2023. The prices we're currently seeing reflect a global economy which is not firing on all cylinders. Construction in all major markets is soft, although for different reasons. Interest rates in the West and over capacity still being managed down in China. Steel demand from the Chinese property sector is now down by as much as 30% from its peak in 2020. However, manufacturing in China is strong, with the energy transition at the heart of growth. The energy transition sectors accounted for nearly a third of Chinese GDP growth in 2023, and strong growth has continued in the first half of 2024. Other drivers are performing okay. So in summary, prices were below the average of the last 10 years when adjusted for inflation. Focusing on iron ore, if we look back over the last five years, consensus has underestimated the price by about $22 a tonne on a one-year forward look, an average of $39 a tonne on a two-year forward. And over the last three years, iron ore has averaged around $120 a tonne, trading in a range of around $20 per tonne either side, highlighting the market's resilience. And if we look at the drivers, firstly, there's been a steepening of the cost curve with broad-based inflation affecting supply, and the impact of this is heightened for the higher-cost marginal producers, which has limited their ability to supply economically in this price environment. Secondly, the market has underestimated global iron ore consumption. Now, this is partly due to China's steel production outperforming expectations, supported by exports and a shift to non-property sectors. also due to scrap supply being less than predicted. Turning now to the EBITDA movement. Overall, we've seen more modest variances this half, reflecting the consistent performance of our assets. In aggregate, commodity prices and currency movements offset each other. Likewise, lower market-linked prices for raw materials like caustic, pitch and coke, together with lower energy costs, offset the impact of 3.5% general inflation on our cost base. In copper equivalent terms, our production was up 2%, a very positive outcome. But when it comes to the bridge, the fact that we had lower iron ore sales in the period, our highest margin with business, means the increase in our productive capacity has not yet flowed through to earnings. Turn to cash costs. We achieved broadly flat period-on-period outcomes, except in the Pilbara and TIO2. Higher iron ore unit costs were driven by input price escalation and lower volumes. And we also saw fixed cost inefficiencies at our TIO2 business, again mainly volume-led from weak market conditions. Overall, these pushed EBITDA down by some $400 million. With our iron ore volumes set to rebound and our active focus on cost management, we would expect a more positive cost performance in the second half. Now, there were some one-off factors in 2023, such as the smelter shut and conveyor breakdown at Kennecott, the forest fires at IOC, and the Kitimat restart. In addition, exploration and evaluation expense to the P&L was $200 million higher last year, as Simundu costs were not being capitalised. In comparison, this half year has been very clean. So all in all, this brings us to a strong underlying EBITDA of $12.1 billion, a 3% rise. Turning now to our cash generation, as ever, this half, there were a number of factors impacting conversion of EBITDA to cash. Some are one-offs, some are seasonal. But overall, it was a very consistent, strong performance. An increase in working capital of $700 million was mainly driven by movements in non-trade payables. Now, these included a drawdown of royalties and taxes as prices fell from late 2023, along with seasonal movements in amounts due to our JV partners. We'd expect most of this to reverse in the second half. If I look at our working capital rises over the last five years, the main driver has been inventory. Now, we've taken some decisions actively to increase inventory. For instance, around $400 million of iron ore held portside in China, and around $900 million in our Pilbara supply chain, increasing overall system resilience. However, the biggest driver has been the flow-through of inflation through costs to inventory over the period. We certainly have opportunities to reduce the capital invested in inventory, but a substantial proportion of the increase does reflect market drivers. Onto product group performance. Iron ore had a robust half, although EBITDA was down 10%, with some pricing impact, higher costs, as mentioned earlier, and lower shipments, which was still above the five-year average for the first half. Now we're on track for another 5 million tonnes from SPS, with 10 million tonne benefit from this year and last, delivering significant incremental value. Unit costs were at the top end of our guidance in the half, with shipments weighted to the second half. Meanwhile, replacement mines are advancing, with construction of Western Range now 70% complete. The performance of the aluminium business was strong, and we're well positioned to take full advantage of better markets. The 38% increase in EBITDA was driven by growing bauxite and aluminium production, and margin expansion as prices improved and input costs declined. Our copper business saw EBITDA rise by 67%, driven by LME prices, the rise in output from the Oyotogoi underground mine, and the restart of the Kennecott smelter, following completion of the major rebuild last year. As I mentioned earlier, Kennecott remains a key focus, as recent changes to the mine plan to manage geotechnical risk have delayed access to higher-grade ore in the pit. The team is currently reworking the plan, and we'd expect to update the market in our third quarter report. Lastly, minerals. As I said, volumes were significantly down at our TIO2 business, reflecting weak market conditions. We saw a recovery at IOC with a further pickup in volumes expected in the second half. And on lithium, the Rincon start plant is on track for first tons by year end, and we expect to complete the feasibility study for full-scale operations in the third quarter. Moving to the safe production system. This is now being deployed at 26 assets and we're deepening maturity at the initial sites. It's simply how we do business. The early investment in the cultural journey is beginning to show results. We set best throughput rates over a 90-day period across three assets during the half, Weeper, Tom Price and Rogue Valley. Using the Kaizen process, ideas from Frontline team members helped increase plant feed rates at the Ameren bauxite mine at Weipa by 9% and reduced scheduled lost time by nearly 10 days per year. Moving on to capital allocation. Now you've seen this slide before many times. The key message today is nothing has changed with strict discipline remaining paramount. Sustaining capital, high returning replacement projects and decarbonisation remain our priorities with about $7 billion of spend per year unchanged from previous guidance. That's followed by the ordinary dividend and then compelling growth. Our guidance for growth capex is also unchanged at $3 billion. Now, as I have said many times before, we will remain very disciplined. Our investments in growth are highly dependent on the timing of commitments, but most importantly, by our ability to generate value. Over the next few years, we will see the contribution from our growth projects take off, with Otogoi Underground ramping up significantly. For next year, it will become free cash flow positive as we complete the key infrastructure investments, building up the resilience of our cash flows. Simundu is advancing at pace. As you can see from these images, the team is making impressive progress. At the end of May, we achieved nearly 9 million hours with a SIMFA workforce of nearly 9,000, more than 80% of whom are Ghanaians. We're ramping rapidly up with more than 20,000 supporting the entire project, manufacturing contractors and those working for WCS. And this is set to peak at 50,000. In June, we announced the completion of 327 bridge piles on our 70-kilometer rail spur, and these were completed six months ahead of schedule, forming the foundations of five bridges with a total length of 1.7 kilometers. The team achieved this operating safely 24 hours a day, seven days a week. In summary, our scope and WSC's scope are on track. First store at the Simfer mine gate remains on track for 2025 together with the 30 month ramp up to 60 million tons per annum. Turning now to Simundu's capital expenditure, the majority of the full Simfascope will impact our free cash flow under construction, with $5.1 billion of capex for the mine and $3.5 billion for the TSV port and rail spur reflected against free cash flow. Meanwhile, the cash contributions from CIOH are a financing activity and therefore fall outside of free cash flow. However, as the mime ramps up from 2025, it will become a significant cash contributor. We saw $900 million invested in 2023, of which $500 million was our share and $400 million has now been refunded by CIOH. In 2024, our share of expenditure remains at about $2 billion. And as is typical of large capital projects, this has started quite slowly with just $400 million invested in the first half. Now that we've received the funds from our partner, including a further $575 million in July, I'd expect to see the cash flow spend rise quickly. In fact, just earlier this month, together with CIOH, we made our initial funding for investment into the WCS managed port and rail infrastructure, where our Chinese partners are making impressive progress. Finally, the dividend. In line with our usual practice, we've declared a 50% payout for the interim, which equates to $2.9 billion, consistent with our now eight-year-old shareholder returns policy. It's been another period in which we've proven that our financial strength, we can decarbonize, reinvest for growth, and continue to pay attractive dividends through the cycle. With that, let me hand back to Jakob.