Rio Tinto Group Q4 FY2023 earnings call

Safety Focus: A tragic plane crash near Fort Smith in Canada led to a strong emphasis on safety, with safety being the top priority. ### Financial Results: Underlying earnings were $11.8 billion, return on capital employed was 20% despite $1.5 billion negative impact from lower commodity prices. Returned $7.1 billion to shareholders. ### Long-Term Investment: Invested with discipline to improve business health, including in decarbonization, growth projects, and asset health. ### Segment Progress: Stabilized and improved iron ore business, progressed projects in Pilbara, ramped up underground production at Oyu Tolgoi, evolved aluminum business with Matalco joint venture. ### Decarbonization: Making progress with renewables, repowering aluminum operations, using R&D for process improvements, and working on iron ore decarbonization projects like partnerships for electric smelting furnace pilot plant.

Iron ore had a strong year with second highest shipments on record, achieving a 5 million tonne uplift in 2023 and targeting another 5 million tonnes in 2024. Aluminum faced challenges but Kitimat returned to full production. Copper saw ramp-up at Oyu Tolgoi but had challenges at Kennecott. Iron ore contributed significantly to revenue, with its shipments being a key driver. Aluminum and copper also played roles in the company's overall revenue mix.

Production Growth: Expect overall copper equivalent gross production to grow further by 2% in 2024 based on midpoint production guidance. ### CapEx: Sustaining capital, higher returning replacement projects, and decarbonization remain priority with around $7 billion spend per year. Growth CapEx capped at $3 billion, with largest project being equity share of Simandou. ### Dividend: Declared a 60% payout for the full year, equating to $7.1 billion, with attractive dividend yield of more than 6%.

Regulatory Uncertainty: Uncertainties in approvals for Simandou project, including joint venture partner and regulatory approvals from China and Guinea. ### Labor Market Tightness: Cost pressures from tight labor markets in Pilbara, Quebec, and Utah affecting unit costs. ### Decarbonization Delivery: Uncertainties in delivering decarbonization targets, particularly in firming power for aluminum operations and regulatory approvals for projects.

Q: On iron ore costs, how to reach medium-term target of $20?

A: Focus on asset management, SPS system, and systemic learning from issues to improve.

Q: On TiO2 business, inorganic opportunities for ilmenite assets?

A: Not necessarily requiring inorganic, but looking at BlueSmelting and exploration.

Q: On capital allocation and buyback?

A: Dialogue needed, but growth and decarbonization take pressure off, but open to buyback.

Q: On copper growth and CapEx inflation?

A: BHP's decisions on Escondida are sound, testing Nuton technology at Escondida.

Q: On low-carbon products and premiums?

A: Get premium but needs to increase, Matalco deal is a start.

Q: On Oyu Tolgoi underground volumes?

A: Progressing well, on track for ramp-up to 500,000 tonnes in 2028.

Q: On lithium?

A: Focus on strong ore bodies, want mining and processing, but not cathode/anode production.

Q: On closure provisions?

A: Closure provisions are part of normal mining operations, with projects scoped and executed well.

Q: On Simandou timing disparity of CapEx and reimbursement?

A: Finance closure expected when approvals in place, will get reimbursed.

Q: On Guinea government dissolution and Simandou risks?

A: Not seen as major risk, progress on approvals in China ongoing.

Q: On Pacific aluminum carbon firming?

A: Need Queensland government and Commonwealth to provide competitively priced firming power.

Q: On Guinea and Simandou approvals?

A: Government in Guinea wants to focus on Simandou, approvals in China progressing.

Q: On iron ore and China Mineral Resource Group?

A: Constructive engagements, focusing on mutually acceptable solutions.

Q: On lithium Rincon project?

A: Spending on Rincon, first production end of 2023, studying expanded case.

Q: On IOC production?

A: Challenging year due to wildfires and infrastructure constraints, focusing on Safe Production System and asset integrity to improve.