Half Year 2025 Rio Tinto PLC Earnings Call
So a warm welcome.
To everyone as both here in the room and for those joining US remotely. We are pleased to be here today with our CEO Yaacov, Stockholm and CFO, Peter Cunningham to present to you a 2025 half year result.
This will be followed by a Q&A session.
Importantly, there are no planned fire evacuation today, if you hear the alarm. Please follow instructions from the firewater here at the London stock exchange.
With that I would like to invite Jack up to the states.
Oh.
Yeah. Thank you Rachel.
Good evening to everyone joining us in person or online.
I like to start by acknowledging and pay my respects to all traditional Elisa first nations people, who host our operations around the world.
It's great to be in London today.
I am so proud of the first half financial results, we're presenting today.
In my time at Rio Tinto, we have had periods with higher prices, but this sets of results are the strongest demonstrating.
And so and improving operational performance.
Real value from a more diversified portfolio.
Excellence in all.
Gross projects.
This is allowing us to deliver favorite sitting in financial performance, despite lower iron ore prices.
Stop to the year with four cycles in the Pilbara.
Importantly.
We are delivering on our strategy, which we set out at all Investor Seminar in December last year.
We remain on track for this year's guidance on production projects and investments.
On our strong mid term production growth.
We now have a solid foundation in place to drive ongoing efficiency and we have a diverse pipeline of growth options for the future.
When I first started as chief Executive I said, it would take time to build a stronger Rio Tinto.
In February 21, we introduced four objectives to unlock the potential of our business now.
Now for the half years later, we can see the positive impact of consistent focus against those objectives at what time with strategic investments and best in class project execution driving profitable growth.
Our copper equivalent production was up 13% in the second quarter year on year, making a 6% increase in the first half.
Led by the strong ramp up of oil Toluca.
Last year's Investor Seminar, we indicated 50% of growth.
I'm proud to report the team hit 54% in the first half.
Yeah.
Excitingly, our bauxite production also hit a new record for the half with 9% growth.
We're now in lung consistently performing above its nameplate capacity.
This is being driven by really good implementation of the safe production system.
And then similarly, we are accelerating the first shipment of high grade alternate available and will be focused on safely ramping up to full production over the following two and a half years.
These are just some of the highlights across our diverse portfolio showcasing our project building expertise and the talent of our people.
Of course, this progress would not be possible without a strong social license to operate.
Just last month I was fortunate to be in the Pilbara in Western Australia to officially open our new west the range Mike.
This is our first project with a code assigned social cultural inherits is management plan would be you know wonka traditional illness.
Being on country together.
Well, it's yet another mine called me about the importance of social license.
[laughter] strong set of results for the first half hour.
Our strategy is delivering an as Peter will share with growing while improving cost discipline.
I'm proud that our cash generation is lost the same as last year, despite a drop of $14 per ton in the iron ore price.
Demonstrates the strengths of our diverse portfolio.
Much less dependent on the iron ore price with a growing contribution from our L. A minimum a couple of businesses and it highlights the excellent work from our Pilbara operations to recover so strongly from the cycles in the first quarter by delivering the best production for a second quarter since I joined the company.
Our financial performance is very resilient with underlying EBITDA of 11, and a half billion and an operating cash flow of $6 9 billion.
Our net operating cash flow decreased by just 2%, while our volume our production volume increased 6% in sales volume increased by 4%.
Yeah.
We achieved this growth while maintaining a strong balance sheet and attractive returns to shareholders, which Peter will talk about two of them.
We can expect more global volatility, but our strategy focus on our objectives and our diverse set of tier one assets enables us to be extremely resilient in an uncertain world and capture new opportunities as they arise.
As you won't be able to see despite complex terrorist issues and melamine, you'll the return on capital.
Doubled.
Voting arbitrary Mrs into battle.
We are now building a track record of delivering projects on time and on budget.
I'll now hand over to Peter to take you through the financials.
Thanks, Jack and good morning.
Everyone.
Let's look at a very resilient financial.
Once again, we've repeatedly reported a clean set herself with few differences between underlying and net earnings.
I'd like to highlight three key points.
Firstly with our improving operational performance, we saw further productivity gains.
We've been particularly focused on our highest cash generating businesses, but I would like in particular to call out the progress made at Kennecott, which we spoke about in December last year.
Secondly, we continue to see very stable operating cash flow driven by good discipline on costs and tight control over working capital. Despite the usual seasonality in the first half.
Thirdly, our projects remain on track and are ramping up in particular, okay.
But rural copper equivalent production was up 6%.
So let's look at the numbers.
In terms of underlying EBITDA, we offset the 13% level on an oil price with a rising contribution from our copper and aluminum divisions.
Bauxite was a particular highlight.
Underlying earnings were down 16%, mainly due to the drivers of EBITDA and higher interest charge following the Arcadian acquisition and one off increases in the effective tax rate.
Cash flow from operations was very consistent at $6.9 billion.
Compared to $7 $1 billion last first half.
$7 billion in 2023 first half.
While our share of Catholic investment rose to $4 $5 billion.
Following completion of the Al Qaeda M acquisition in March we ended the half with net debt of $14.6 million.
And we've maintained our practice of paying out at 50% for the interim ordinary dividend equating to $2 $4 billion.
Let's now take a look at commodity prices.
I talked about this before but it's really important.
Taking a longer term perspective, removing the noise of short term volatility and factoring in the impact of inflation discharge shows rolling 12 month average prices for our key commodities.
Rebased 2025 real time.
We have indexes and show the average for the 15 years is 100.
In nominal terms Capri Nile opinion may appear elevated but in real time to actually trading at around that averages since 2010.
I know in lithium are well below the historic averages.
And it's an important picture because it shows our financial results are not a product of elevated prices and in fact demand is soft and a lot of traditional segments, particularly property, but it's being offset by those are driven by the energy transition.
They're like Jakob said, we're really starting to see the benefits from our diversified portfolio with higher volumes and copper bauxite that at a minimum together with improved pricing.
Setting the on oil price decline.
Now of course, our Pillsbury business continues to generate very strong margins remains a stable foundation, comprising 58% of group EBITDA.
The last first half it was 73%.
Over the next few years, we expect to increasingly see all financials driven by the entire portfolio.
As growth projects ramp up and productivity improvements flow through.
We are intensely focused on cost discipline.
Operational employee numbers across the group have decreased by 2% over the last 12 months, which is impressive when set against the context of production growth this half.
In February I talked about finding solutions to complex problems and how we can unlock value Ken.
Kennecott is a great case in point, we're now seeing much more stable operational performance.
We've made substantial efforts to lower the cost base, achieving a 10% headcount reduction changing contractor engagement and driving operational improvements.
Kennecott is well positioned to benefit as a Catholic producer one of only two active U S copper smelters.
We've also launched a business transformation program that are on in titanium operations in Quebec as part of our asset productivity drive.
And functional support costs for the group are tracking below 2022, a trend we expect to continue.
Now, let's unpack habit D a trough standard waterfall.
This underlines the operating strength and financial resilience I mentioned earlier.
Commodity prices were the biggest driver netting out to $800 million negative, but note the iron ore price impact with $2 billion negative.
In copper equivalent terms sales were up 4%, which gave rise to a 700 million dollar volume uplift.
This is mostly driven by bauxite and copper for the ramp up that I T and higher grades at Escondida and more than compensated for the modest decline in iron ore sales, which we expect to recover in the second half given the Q2 shipments were constrained by port maintenance.
Exploration and evaluation with $200 million law, mainly a function.
[noise] of wrinkled costs, now being capitalized with underlying spend slightly below 1 billion pullets for the full year as we prioritize copper and lithium.
Turning to cash unit costs.
These will love it and that opinion and copper on a gross basis with efficiencies from the higher volumes from O T N escondida.
C. One copper costs, which decreased by 34% benefited from the higher gold credits, which reflect in the price and volume variances for this analysis.
Overall, we continuously improving on all costs with Sps, giving us momentum and a safer operating environment.
So after factoring in $600 million of other movements, mainly provision related this brings us to a very resilient EBITDA of $11 $5 billion.
Onto the product groups.
All in all remains a cornerstone delivering $6 $7 billion.
Yeah.
We saw good levels of productivity improvement with the highest Q2 production since 2018, and so that's telling us from western range and we're now implementing our new product strategy.
Sales to our system as we continue to meet the needs of our customers.
Unit costs were within guidance at $24 30 per ton, despite lower production and additional cost to recover from the full cycle ends in Q1.
And as Yakov mentioned Allo Minion continues its impressive record of stability in particular for smelting and bauxite.
We took full advantage of stronger markets, leading to a step change in financial performance.
Our commercial team were able to proactively flex the business to optimize our position in the wake of the changing tariff environment.
And today, the Midwest premium is substantially offsetting the tariff.
The main thing pegged on our financials is the cancellation of the 10% section 232 exemption Canada previously enjoyed.
Coupled with strongest still with EBITDA driven by higher prices are rising volumes up more than 50% did I T. What we've retained our longer term guidance of 500000 tons a year by 2028.
Unit costs have now guided lower driven by disciplined cost control and strong production.
Lastly, minerals, we saw increasing operational stability and I see it.
And at island titanium, we're focused on improving plant performance, but T. I O two volumes remain weak.
Reflecting continued weak market conditions.
The integration of Rio Tinto lithium is proceeding well following the closure of the Arcadian transaction.
RIN corn now an integral part of this business.
I'd now like to returns on ore as I'm, often asked about the industry structure and the impact of Simandou, which will bring online about 120 million tons over the next few years from the two blocks. That's helpful to show our view of the iron ore industry and how the cost curve has evolved.
The Red line shows the 2020 forecast Cub, we forecasted back in 2018.
It shows that we expect more production in the lower half of the cost curve and.
In reality, we are seeing many more high cost operators remaining in the market.
When the curve steepens relative to 2028 expectations with a larger proportion of high cost producers and anticipated compounded by inflation.
And then do it comes online some higher cost production will probably be pushed out but it's also important to note that going forward over the next 10 years, we expect a 40% of production from the majors needs to be replaced.
And finally note the size of the contestable on all market is around 1.9 billion tons.
China's steel consumption has plateaued there is demand growth elsewhere in global steel markets often supplied by Chinese exports.
We therefore continue to expect an attractive industry structure into the future.
Our approach to capital allocation remains very disciplined with no change to our well flagged capex guidance of around $11 billion in 2025, and $10 billion to $11 billion thereafter.
This includes growth of around $3 billion, each year without Katy I'm now absorbed in our guidance.
Would you took complete sell davita in the Phoenix expansion next year as we went through the phasing of the various lithium growth options.
There's a recent pill burden replacement approvals capex will be weighted to the second half of the year with major commitments, including the ongoing delivery of Simandou and construction a wrinkle.
Net debt has risen to $14 $6 billion following completion of the al Qaeda them transaction.
Oh comfortably in our range consistent with our commitment to a single a credit rating.
All of our debt metrics are in a reasonable place.
This remains a strong balance sheet.
Since 2021, we've invested to grow our production base through productivity improvements and capital expenditure.
You'll see on this chart, how we have increased capex. Since 2019 ended at four consecutive years of production growth faltering following declines between 2018 and 2021.
The rate of production growth gathered momentum in the first half of 2025. This.
This is stretch it is strengthening our cash flows.
Allowing us to absorb the effect of a lower oil price over the last few years and grow our cash flows in the future.
But the growth has not been at the expense of shareholder returns.
Our commitment is unwavering and in line with our usual practice, we've declared a 50% payout for the interim.
Now into the 10th year of our policy, which has proved to be highly successful unpredictable.
And this has been achieved while maintaining a strong balance sheet and the commitment to shareholder returns.
So to summarize.
Our operational performance is improving.
Projects are on track right and pick up.
This is driving our copper equivalent production, which was up 6% this half.
We're generating very stable operating cash flow.
Our consistent strategy and diverse portfolio will ensure Rio tinto remains strong in the short medium and long term, while continuing to pay attractive returns.
With that let me pass back to Yakov.
Okay.
Yeah.
Yeah. Thank you Peter.
As Peter highlighted.
While some prices are well below the long term average in aggregate.
We have a very profitable business.
We're still facing an opportunity rich environment.
The world is growing and the energy transition despite.
Despite all would you mind reading the newspapers is moving us Tridex reciprocation is really happening.
The demand is growing around one six times faster than even if you come out of dry power and international Energy Agency predicts this will accelerate up to six times by 2035.
As you can see here demand for iron always stable and due to the energy transition demand for copper and aluminum are rising and.
And there's major growth unleash them, where we see close to 30% increase year on year.
When we paid our projections a year ago before buying occasion, we knew there would be increasing demand for electrical vehicles.
And despite less subsidies in various parts of the world reality has actually exceeded our projections.
The electrical vehicle is penetrating now on its own married.
Even more positive is the rather dramatic and I have to say unexpected development of the stationary battery demand.
It's more than doubled over the last year's prices on those batteries have significantly reduced.
Let's take a closer look at lithium.
After a period of low prices there has been a significant increase in the lithium price over the last month.
Prices are still much below the 15 year average so unless you can see a large portion of the cost curve is still under water.
Ramping up existing developments on projects under construction will bring some supply to market.
However to meet demand in 'twenty, three and even more so in 2035 in number of new investment decisions will need to be taken.
The current price environment will not support this growth and production required to satisfy demand, while allowing producers to recover their cost and justify the capsule required.
We are absolutely convinced that we have sitting right at the bottom of what will develop into a rather steep industry cost curve with the assets. We are getting from our brine operations and projects in South America.
With a strong technology from our combined occasion, when Rio Tinto teams. We believe we can boast to live our purpose of finding better ways to deliver the materials the world's needs.
And create a sizable and very profitable business for decades to come.
To unlock our growth options, we need to be best in class in both business development and <unk>.
Project execution.
People are partnering with us because what we stand for our dedication to our full objectives and doing what we said we were doing through our strategy.
I'm, particularly proud that we are now able to execute all major projects project portfolio on time and on budget.
Let's take a quick run through.
In the Pilbara wisdom.
What's the range was officially opened on time on budget and government approvals have been received and construction is underway for hope downs two in Brooklyn fall.
Oh, that's how the car is ramping up strongly unscheduled and this year it will produce 50% more copper than last year.
A P 60 is progressing well despite a small cost overruns. We are four months ahead of schedule.
Production is ramping up at the rain comes to auto plant, while we are progressing with the full scale projects.
In March.
Close the Acadian and integration is progressing well under the leadership of Paul Graves, the former CEO of Acadia.
We deepened our strategic partnership with Codelco, India Tacoma.
First with a new collaboration agreement fall a couple of development in the way of a Cobra and then through a binding agreement for a high grade lithium project in the sell out and conquer.
His latest last week, we also signed a binding agreement with the army on this allowed us to run demos project.
In the United States. The administration has made the resolution copper project a priority with the final environmental impact statement published.
The federal land exchange is now imminent, which will unlock the next phase of this project.
Now, let's zoom in on.
The world's largest mining project simandou.
It is focusing at breathtaking speeds.
The project was sanctioned just last year.
We will deliver its first shipment of high grade iron ore in November.
I'm so impressed with what our combined teams are doing at Simandou.
Let's take a minute to watch a short video that brings to scale up the project to life.
Okay.
[noise].
Okay.
An incredible engineering achievement.
But perhaps more important.
It has a significant role in this project is playing for the Canadian government and people and building their economy.
Our partnership here has the potential to create a lasting source of development for current and future generations.
Boosting beginning in the economy, improving infrastructure and creating thousands of jobs.
The high grade iron ore kind of Nabors steelmakers to produce steel with less C O two emissions.
And our teams are continuing to learn and strive everyday.
Payable ESG performance from safety to biodiversity.
And in harmony with local communities.
Yeah.
As I said earlier I'm very proud of these financial results. While we have had times when prices have been better. These results represents the best underlying performance from all business in the low 14 sets of results that I have been involved in disclosing you.
You were seeing improved.
Our ratio of efficiency with growing volumes and controlling costs.
At our Investor Seminar I spoke about the three sides highlighted for improvement.
You heard Peter.
Talk about great progress being made at Kennecott.
And our Ireland titanium operations and keep it while the market is crowded really tough the business is becoming more efficient and we are continuing to progress to save production system implementation at the iron ore company of Canada IOC.
We are seeing real momentum.
And improving operational performance, the increasing value from our diversified portfolio and the excellence reissuing and unlocking growth projects.
My time as CEO of Rio Tinto is ending soon.
I felt very privileged that I'm very grateful for the white support I've experienced internally or externally there's been a tremendous journey.
As I look ahead to the next chapter in real terms was 153 Years' history.
I believe we are facing an opportunity rich world.
I've been reflecting on the legacy our team will leave from our work over the last 35 years and one thing that stuck with me.
Is that conversation I had with one of our former Ceos John Ralph He.
He told me that when he and his predecessor Rod discussed how most value could be added to the company. They concluded it was about providing options for your successor.
Rio Tinto is truly a long term company and I believe that the next chief executive has many options.
It's beautifully symbolized by this photo.
We'll now be shifting so Simon who's here today and listening mode, I should say [laughter] as the usual approach.
And was the case for me when I was named CEO Simon would be taking some time with the team to think about his approach you.
You can expect to hear from him throughout the rest of the year in north east at the upcoming Investor seminar.
I'm delighted that the board has chosen an internal successor as I believe we have developed a very strong bench I select assignment to run our biggest business four and a half years ago. He has in my view done a great job and I'm convinced he will do very well as our next CEO.
And I'll look forward to watching this incredible company continue to thrive and deliver value for our shareholders, including myself. Thank you.
[noise]. Thank you Yakov.
Just invite these guys back to the states.
Okay.
They might just need a bit of Mike support.
At the front.
Does that do it.
I'll, probably take the first part yet.
And so we have about 45 minutes for the Q&A and I do ask you to limit yourself to one question and one follow up we will start here with the audience in London, and then real quick cause those online.
Okay.
Let's start here at the front.
Yeah.
Sure Jason <unk> with Bank of America, Thanks for the presentation.
Congrats.
Good luck with the next step.
Two I guess related questions on cement.
One you've brought forward the first production.
How are you thinking now about the progress from here up to 120 or I guess for your share of the 60 million tonnes. So how do we think about that ramp up.
On that.
You do sound surprised when you talk about the project like it's gone very very quickly. So I guess as an organization you know what do you take away from that what could you apply to some of your other projects.
And the latter is the real big question look at them.
We obviously have some limitations we are already producing to stockpiles are at the mine et cetera. So we are quite confident that we can convey the first the first shipment in November.
But there's a lot of work that has to be done and if it is the ramp up of about two and a half years and you should be aware that the port is like two parts and only the one port will be ready. So you can first you know the first 60 million tons you can round out run it up to and then you'll get the second port in place and then you can go up to the 120 million tonnes. So he does have a fairly.
Long ramp up period, but maybe not entirely Pat in terms of penetrating to pick the open market, except I I Hope you got good comfort from what Pieter showed also on the cost curve that they shouldn't be space for four assuming do while all the mines hitting the normal decline I think.
The real Big question, which is fascinating is the second part of your question.
We have learned a lot from our Chinese partners in terms of the engineering capability in China. The whole ecosystem. It's just unbelievable the Chinese have been very good learning from the west or a couple of decades, we got to learn from the Chinese and I think we are ahead of the game here.
And the and we certainly need to see how we can use that elsewhere as well I'm proud of that we are bringing projects on time on budget, but I actually still would like to see them being done faster and cheaper.
Are there any specific learnings that you can point to.
Yeah.
That did.
It's just a it's a different commitment we see from from from from.
From a a.
The contract us.
So.
You actually agreeing a price.
Agree or a schedule IV.
And just being delivered.
And I also think that.
The way you see in.
The ecosystem working together understand dots et cetera. It's just worked extremely well. The best example, I have is very often when we design things. We asked engineering firms to engineer everything was very often the Chinese just have their manual and saying that bridge fits there that bridge fits there et cetera, and then you can do things.
Completely different speed.
Thank you.
Yeah.
Good morning, My congratulations as well for your tenure here at Rio Tinto.
Friday.
Peary copper tariffs kick in in the United States, a 50% premium you have one of two operating smelters in the U S. You have undeveloped minds in the U S.
Where do you think the tariff policy is going for copper and how do you take advantage amidst that range of potential outcomes. Yeah. So you're right a couple of terrorists represent an opportunity for us.
Cuz.
Our reason for.
I don't have entirely know from before my time, we have actually had a smelter that we haven't made a lot of money on for long periods of time at 10 o'clock a.
Even though the U S biggest on only one out of two.
And as I said, we barely have made money, but it should become much more profitable from the tariffs immediately. So that's one positive thing the other thing in terms of a couple of opportunities is that the but that's not related to the tariffs. It's just that the administration is putting a much more focused on developing our mining opportunities.
Both inside the U S and outside the U S and they have made resolution copper a priority project and I think the evidence of finally getting a so this is a populist the environmental impact study and let the clock starts ticking is showing you that we will get to the next chapter in in for resolution.
And May I remind you. It is an unbelievable all body that should be able to produce a quarter of the copper consumption in the U S for decades to come.
And that that next chapter would be an updated feasibility study the chapter after that would be potentially.
Potentially.
How have you updated your probabilities of those chapters, given where we are but we're going to learn a lot immediately we will roll it as soon as we get the land exchange, we will immediately start drilling in what used to be a federal land because we need to characterize the full all party also depart that's not part of all of our land today.
And of course, depending on that characterization you can stop developing the mine mess with them in the mine plan.
Okay, well now go to the line so over to you operator.
Thank you to ask a question science of thing. Please press star one on your telephone and wait for your name to be announced too.
To withdraw your question. Please press star one one.
On the first question comes from the line of Paul Young from Goldman Sachs. Please go ahead. Your line is open.
Thanks, Good morning.
Firstly I know this is your last set of results and looking short it's been an absolute pleasure.
Yeah. The first question is on on copper really good EBITDA baked from copper the first we've seen in some time.
And part of that was all you told when the ramp up which is performing.
Very well or we say no because it had been a bit of it at least one and I'd say this half with regards to the delay in the in the transfer into laser don't try and resources and also the ongoing.
Tax dispute, but also sign of changing in your Prime Minister there.
So I just wanted to get your thoughts.
At the moment, just on where you think things are with the government and any comments you can you can make on the timing of that lease transfer and also the taxes for you. Thanks.
So first of all you're right, it's a real highlight the whole product group offer.
Peter mentioned the progress that Kennecott also kudos to abuse P fall, how escondida has run in the first half, but the biggest highlight is clearly or a total call. It from a technical and economic point of view and then there's of course also the political view I should say.
I went with the case of Jackson to the main two or three months ago, and we took for the first time ever the precedent underground and with him. He had his chief of staff, who later on it has become the prime minister of the country. We work very close with them, we have a very good relationship.
I had a very good relationship with the previous Prime Minister, but this is what is happening you know in politics people are changing and we feel very comfortable with the people and we have a good cooperation and specifically on this I'm sorry, an issue, let's not make it a bigger issue than it is right now we are mining in panel.
Number one we were planning to go to panel number sorry in Panama.
Zero, we were planning to go to panel one.
But we can instead of go to a panel of true if we don't have to transform and [laughter].
Kindly B mind exactly the same way.
It might be the case.
But I apologize.
That then.
It might be the case that in.
The slightly lower grade and therefore, there can be a little bit of time value of money loss, but that's about it Paul So so don't get don't get too worried about it I actually feel very good about the state of Oh, It's hard to go out and you might not be able to see but there's nothing.
Yeah, I mean without a doubt yes, because it seems like I said.
Impact metal production you know in three Years' time, I understand that but just want to understand the timing there and just on the taxes for you to me the fact that the mogul.
Mongolian Gaviscon International Court of arbitration in my view as a positive because they're trying to they're trying to actually get a ruling on the tax.
Yeah.
The international community and a lot of the foreign banks and well. Thank you could've invested them Ogunleye handset.
And I do this properly is that your view as well.
Look the reality is I would've loved to have salted invigorating bilateral negotiations long time ago, but politically it's very difficult and I think you just have to respect that it's it's a it's actually quite unimpressive democracy.
They haven't gone girl, yes.
We feel very confident because we have shipped if they have she had the abuse. We actually had all of us and now we go through a controlled process with a hearing here in September. So it is progressing and we feel very confident that we will also end up with a decent outcome.
Okay. Thank you yeah, a couple of years.
Thank you, we'll take our second call from online.
Your next question comes from the line of Robert from Morgan Stanley. Please go ahead. Your line is open.
Hi, Yes Pedro.
Peter and team thanks for the coal.
Great inning, Jakob best wishes for your future endeavors.
Okay.
My question is on beyond all business, obviously, you dropped the great. There. So my question is what are the impacts you're seeing on the revenue line is the impact better or worse than a simple great adjustment and how much can you actually save on costs considering your supply chain is going to be much more simplified now with your product streams going from.
Five to one.
I'll come back with a follow up thanks.
Alright.
So Peter I, just wanted to teed off I'm, saying, one thing, but I really been pleased about is that we have seen.
Deep analysis, good cooperation between the product group and commercial and the part that I have been involved in mainly engagement with the customer says well we had choices to be made and we have consulted them you found and made choices that are aligned with our customers. So it's actually been quite well received in that regard and economic impact Peter.
I think right now we started making the first shipments under the new specification and it is early days, but I think so far all the work we did with the customers. So they understood our system and our that are ready to meet what they needed and it's working out well. So I think we're pretty comfortable with that with the initial shipments and where they're landing from a revenue.
It had been in terms of cost clearly that the near term impact is just simplification of the of the product because we're going to out nicely to one blend rather than having a set of the that the degree of SP time, we've had so as to be telling you can expect to come down in the second half of the year, but if I really look at the benefits I mean more than.
For the rest of the business on a long term, it's about actually increasing the amount of production capacity online, it's about that and sort of the capital intensity of the business in the long term and about managing a set of closure liabilities as well, it's a package, which is a longer term benefits, which are already part of this I think solution to meet the needs of our customers.
I will say to maximize the value from our system.
Thanks, Peter and my follow up is to someone else's question earlier on the tariff situation, obviously copper are positive but.
Obviously, I think more than offset by the <unk> business shipping tons from Canada to the U S. So could you perhaps help me understand sort of what the strategy is under the current circumstances are you looking to reroute volumes to other geographies or is that not an option in size given logistics. Thanks.
I mean, we have spent a lot of time on this first of all terrorists are small.
It's between nations.
And there are many other aspects to them not just the tariffs in this part here the beauty, but you can see today with all the salt and says that we're actually able to navigate that with very limited impact do we like all list do we like a 50% of terrorism.
Not really but it's not forced to throw too to make much statements around that we are demonstrating that we can actually manage it.
I think it's much more of the final consumer that will have to pay we are we able to pass on things I think the good example, you got the data very clearly in our disclosures today.
Although many of them.
Our unit price.
Unit revenue is up 14%, but if you deduct the impact of tariffs. It is still up around 6%. So how have we doubled the profitability of aluminium.
Great operational experience good pricing in bauxite and actually retaining the marching in the alumina aluminium business as well pretty good now, but it doesn't guarantee you that they couldnt come up something tomorrow. So I cannot promise you anything but the reality is when we started the year, we have absolutely no experience we have now.
<unk> learned a lot over the first six months and conclude that we can actually manage yellow medium situation and if you didn't take the carbo. That's positive on our Dominion was slightly negative than all of the impact is actually not very significant.
Thank you very much.
And we'll go back here in the room will go to the left the room.
Yeah.
Uh huh.
Yeah.
Thank you I think particularly U K earnings has anything else he has pointed out.
It's just you always remain convinced that lithium is could it be a bottom quartile Costco can you just give us where the confidence comes as that grades is that technology with daily. It's a rationalization of the arcadian business that you bought it just which combination of those.
But if I should call it out and make it very simple.
We now know.
Moving cargo.
Can run that operation around four and a half thousand doors.
<unk> per ton up opex.
And we have also told you that the capital intensity of RIN cost is $43000 per tons, you can take a capital charge of 43000 or whatever you use of you come to five five and a half that means that as soon as you get 10000, where you create NPV.
And that's because.
Amazing reservoirs.
And on top of that.
I think you have to think about what is the impact to nature.
This theory is actually a way where you can just suck up the the brine and read them and find ways to re inject it does well and have very little environmental footprint, we have.
It's able to see anything that has so little impact from nature that can be done at that price and that brings us at the bottom of the cost curve on top of that you didn't take the occasion them organizationally with Rio Tinto you bring the technologies together and you start learning journey, how can we make this better and cheaper so I'm.
Are you optimistic that we are competitive today, and we will become even more competitive tomorrow and the future of that industry is a lot needs to be built this is not a static one it's one of those that as soon as you don't do something you'll exercise.
And so the implications for the hydro assets that came along with this.
Good.
And would they have to stand up by themselves or would you like to keep the market share.
Look.
We it's still early days, we are I think it's fair to say it Peter and assignment on all of us.
There will of course be much more details around our more white Master planning Felicia I'm at the capital of August date later in the year, but.
But so far we have attached most value to the Latin American assets. We are very proud on top of a cage him to add the two assets in Chile, but we're also finding ways and means to progress through Nebraska project in in Canada, but we only close the deal four months ago.
Let's go to the end of the line.
Yeah.
Hi, I've got two questions for me.
The first is we're starting to see some of your competitors talk about broader cost savings. So I'm. Just wondering if you see opportunities for cost savings within the Reds integrate not just productivity light.
So a couple of things on that because youre asking for future I realize.
As you can imagine I've been a little bit busy this morning, but I do have seen the chemical has reported results as well.
What I like to say is.
The journey, we are at with the four objectives, particularly at best Operator has taken a long time, it's a continuous improvement I think what you see with the half year was sold stays real benefit coming out of it we are growing it's not so much about cutting cost its more about can be controlled cost, while we're growing the volume and become more efficient.
It's Simon talk to answer the question, but at a later date.
Just hope I believe as a shareholder that we will continue this continuous improvement journey, because I think we only at the foothill up the mountain here.
That's why I also at the year and set the thing about doubling down on operational performance and our chairman repeat it that they're not long ago.
Thank you and second question question.
Comes up very frequently searching okay is there any update you can provide us with on conversations or progress with respect to the chinalco.
The dialogue for Peter and for myself, I'm going there and shortly.
It is ongoing the one thing I want to say to you as shareholders as we take it very serious we want to find a pathway, where we can buy back shares as well.
But you know I don't have a solution today.
Okay, well now go back to then it goes on the line or two from the line. Please operator and please I'm just reminded to announce your name and where you're from.
Thank you. Your next question comes from the line of Robert Stein from market.
Please go ahead your line is open.
Thank you very much and congratulations yaacov again, just on the auto market.
It's interesting that ebay insights will be buried in your conversation around the auto market today, you make a comment that you say a lot of production.
Capacity coming out from the majors by deflation.
Can you potentially haul lot what do you think that's going to come and if not can you provide a view on what your deflation rates low base from the Pilbara and what assuming very well.
Replace any of that that's okay.
It's actually a really tough question because it's.
It's like every mine goes towards depletion. So it's not kind of one place I think the most evident thing is you can see that all of the producers in the Pilbara all facing lower grade.
A good indicator.
Don't have minds. Unfortunately in eternity, and I think you just need to look at the numbers. The numbers is that you've got $1 9 billion tons of contestable iron all year and assuming there was only 120 million tons. So that's kind of like 6% ramping up or with two and a half years.
So you only need to kind of have a depletion rate of around 3% to be back to status quo. So.
It looks it looks quite attractive.
Thanks, Rob your second question.
And just on costs that obviously, there's been quite a same here in the racing.
Quarterly reporting season in Australia.
Ex deferral and aggressive cost out given the market conditions in some of the commodities.
Can you, perhaps comment on what youre, saying, well globally, where the productivity and inflation starting to bought in your different.
Different regions and how you can address that going forward.
Well I think all the teams from the various product groups has and and the biggest challenge. We had was probably a little while ago in western Australia, but they actually managing inflation very very well and that's you're seeing that Peter gave a good example of that would be actually producing.
Our manpower and a number of places not about I wouldnt call. It cost cutting it's just about continuous improvement becoming more efficiently. Every day you go to work you would have to be a little bit more more efficient and I think that's what we are seeing we are blessed Rio tinto with not having big loss, making assets.
A number of other parts of the mining industry have got that we don't there's a couple of asset that has very very low profitability in and we got to improve that but the reality is our three out of all the three biggest product groups had double digit return on capital employed so you've got to be careful of actually protecting that profitability of all of that.
Drawing that profitability.
And I think operationally when you look at the big the big product groups that are really driving the profits. The amendment that mean it is that continuous improvement.
Need to make corrections were made kingdom in chemical that I talked about in terms of chemicals cost base, Oh tier two again, it's very challenging markets again that really are working very hard to take out cost. So I'd say, it's a reflection that each business has its own context, but really it's about being consistent and how you really drive costs over time.
Thank you and then one more from the upper Iraqi clean.
Thanks, Rob.
Thank you. Your next question comes from the line of Lyndon Fagan from Jpmorgan. Please go ahead. Your line is open.
Yeah.
I just wanted to ask about the <unk>.
Slide Slide 17, I'm just wondering if.
Demand profile, which shies.
There are 80 million tons in.
In 2030.
Got it.
Essentially 20% higher than some of the market estimates out there is that.
Is that a number that you already it's RMB.
Two <unk>.
And I get it.
Follow up.
Can you, perhaps talk to some of the wise too.
Thanks.
Hi.
Nine might be.
Maturity in the project pipeline.
<unk>.
Yeah no. Thank you. Thank you.
I thought I did a bad thing and for sure. This stuff I just presented we do believe in it.
There's a couple of things we spent a lot of time with our economist last year to really really try to understand the drivers behind the leisure demand and also set to evs have actually always shoot it but evs will always go a little bit up and down you know one year's fashion over the next year, it's a little bit less.
But it's happening.
I think the other thing that mill economists no. One have seen was the stationary batteries because that becomes so cheap.
Got it now.
Repowering Boyne smelter, we thought we would do it with gas P goes to affirm the electricity and then suddenly realize the battery is cheaper.
That's doubled in just 12 months and that's a whole new significant stream of lithium demand. So yes, we do believe in it.
And in the lithium demand we are working on Peter it's not more than a week ago, Pete and I was with the whole team was going through a master plan on on projects, but you know what we need to reiterate that many times because we are bringing Paul is very well, bringing two organizations together with learning from each other in every.
Time, we meet we mature that and we're going to give you a real good run through at the capital Logins stay on the priorities, but the one thing I can say to you as we.
We have a lot of options here anything you want to add Peter.
You say I mean, the immediate priority is delivering the instead of synthetic cell expansion and cell Davita stage, one which will be in 'twenty six and then the other in flight as Nebraska hydroxide, and and Spodumene project, which is in flight but.
Anything else as you say I mean, we need to work through the plethora of options, we have how best to deliver those and analysts to deliver value for them for shareholders in the context of the market, but I think well set up but lots of thinking going on that.
Thanks, Jim.
Okay.
Just a quick follow up.
Yep.
Are you able to talk to the ramp up profile.
Is that essentially straight line from November one.
Can you maybe give a bit of color on how that looks.
30 months.
Yeah, I mean, I think we said I mean first shipment will be November this year, but then it's really a factor of how infrastructure comes in and how then we can ramp up within.
Within the context of sort of sharing initially rep, Paul Paul capacity with.
That's sort of blocks wanted to develop a site.
It is over 30 30 months and I think it will be probably you know, we'll try and optimize that as we work through our the infrastructure coming on.
Online.
Great well move back into the room. Please.
Thanks.
Sandy could you portfolio exits businesses, but they're not material enough in the context of the group profits do you see an opportunity there to simplify the portfolio and if so in which businesses does this opportunity buckets. It.
Yeah, you should always try to simplify and you'll never simple enough and not pick up as I said, just a moment ago. The good news is we don't have big loss, making assets. There's no assets that we have put on care and maintenance et cetera, and that shows about the quality of the Rio Tinto.
Our portfolio I would call it second to none and I forgot that shouldn't stop us from asking ourself crucial questions about who has the best one off certain assets et cetera, but you have to be careful of is not just a matter of size. If you have an asset that you have the past operate off and is very profitable and generate a lot of cash it's fine to have it but you.
Should always ask yourself those questions, it's not different from asking yourself. The question should you buy something and you know we've just this half close to the Lubbock hate him because yes, we wanted to have more exposure to a lithium.
And a follow up question is what is the one thing that is still on your bucket list that that you wish you had done it at Rio Tinto have you had more time and if you you confidently give onto your successor no look I'm very very happy to leave a lot of options to two two.
So Simon and also happy to see it as a shareholder from the side seeing it it it happening because I also have to remember remember myself. It's not first of all it's not me, but we as a team that we have created a lot of things most of the things I think we have inherited from our predecessor and many of the things goes back from.
No.
Just previous predecessor, but actually 20 years 25 years back. The key thing is when you have those options. What are you going to do about it and what was missing in my time I think it's just a simple thing as well.
Always you would like to have done things.
More and more with pasta.
Things takes time I told you on the four objectives. Some of the things I felt went very fast, but it's only now that you really see crystallizing that the operational performance towards best operator, and EXL in the development in terms of project execution is really coming through and of course, its frustrating that it take.
So on a half years, but it's a big company and that and those things just take time.
Thank you.
Oh perfect.
Okay.
Thanks, Amos Fletcher from Barclays. Just one question actually for Pizza gearing levels.
Slightly higher you know post the okay Jim acquisition.
Are you happy with the remaining of that sort of level would you want to look to bring them down overtime.
So that's why we've always said that we're very happy with the balance sheet being strong being at a a credit rating and that gives us flexibility I mean, hi, its 19th saying gearing ratio right now.
We feel the balance sheet isn't really good shape and we have flexibility going forward. These sorts of levels, but will go up and down I mean, this is a cyclical industry cashless woke up and down what we've got to do is use the balance sheet to really make sure. We can deliver against the strategy and also deliver shareholder returns.
Hey, Eric Peterson I created from Goldman Sachs, maybe just a follow on to the lithium question earlier.
And your incentive curve are you you've announced American girl and I'm, saying Ddos is this off and yeah could you just walk through the incentive price little wrinkle in with these new projects, what's your expectation on the incentive pricing for those Chilean projects.
So.
Chile, and Argentina are slightly different in terms of their royalty schemes versus the breaking legislation you could also say that have slightly different risk profiles as countries et cetera, we feel quite confident with both of them all inclusive.
We are very happy that we kind of have a little bit of a diversified fine Brian of having it both in Argentina and.
And in Chile, because you can never predict exactly how things are developing but if you take something like my Red Conger.
The plants were doing the beliefs.
Very much the same everywhere. So why it's different so it's a matter of getting in and understanding the reservoir and then repeat what you already have done and we need to learn like the Chinese every time you repeat building a plant you do a cheaper so how do you get on that continuous improvement and if you get on that you will get some.
Very competitive lithium in the future.
Thanks, and then my follow up is I mean, you've touched on it slightly but or is not sold any assets to achieve you've added more commodities more jurisdictions more costs into the business.
You've mentioned titanium quite a few times in this presentation today. So I guess, just taking a step back and I, probably can't comment on that but.
Israel actively looking to streamline and potentially reshape the business to recycle capital and streamline it.
So.
I've seen that there are some articles around that I can't comment on rumors, but if you were actually doing anything I could not make a presentation without talking about that okay.
We are streamlining things by the way as you can see we are slightly growing out of of diamonds. We closed the Hawk Isle Diavik is coming to an end at the end of the year. We took out the complexity of T. O. Q, we have sold a number go screams, except with good profits et cetera. So we are streamlining the company and that might.
Be more to come.
Look at T O T had low profitability in the first half to have a difficult conditions, but the question is though I'll be the first of all not all of it all we are not and I have to leave that for my successor.
Thanks, so much so that could turn to the line we have another one on the line. Please operator.
Thank you.
Your question comes from the line of Glenn No Cook from Bevan Geri. Please go ahead. Your line is open.
Oh, good morning, Yakov Yaacov to the extent you can comment I'm just interested in your comments around the Glencore discussions you know what was the attraction where they actually serious will just simply passing and can I take that to mean.
We are as a company is contemplating a return to call as well thanks.
Well. Thank you very much first of all I can't comment on rumors so but it is amazing how much has been written about something which we don't really know where that has happened a lot happened.
So it is very difficult, but I will say to you right now I don't think we've just in the previous questions talked about simplification. So I wouldn't be surprised that we are actively looking at going into a call at this point and at this point in time.
Yeah, I'm I'm, sorry, there's not much more I can say about that I do think you'll have to think about this is not about.
I'll be for M&A or via against M&A and other partnerships very simple there could be some of that back deals and we are trying to pursue the good deals I believe that the deals like we have done like to your Q like metallic code like like Green car and like Ah. Okay for them that they are good deals, but time will tell.
Alright, Thanks, Jakob all the best for the future. Thank.
Thank you.
Okay here are different things.
Yeah.
Yeah.
Myles Allsop UBS just to clarify a couple of things Peter first on the net debt and leverage. So we're just shy of 15 billion.
It's relatively high compared to what you've enjoyed for the last decade or two.
Are we right to assume that you would rather have lower leverage given the capex and the obvious cyclicality of the commodities on a look forward basis is this a high end of the range as we look at it.
Well I mean, I think that's kind of a set a level we feel comfortable with I mean, if you look at our balance sheet that that might be hard to the balance sheet is much bigger than it has been previously and the cash flows are much bigger.
I would say is I mean, it's a very comfortable level of Oh, it's catering for the size of the company now and so I just think sometimes looking back at the debit decades to say that that was a lot or is not public.
Are you still sort of a comparison, so we feel very comfortable I mean, I think an a credit rating gives us flexibility to manage it.
From where we are and to absorb you know whatever cycles throw at us and them to maintain.
Doing that business, because I think what I've learned is just being very consistent with how you invest and how you sort of a run off business as the way you deliver the most value for shareholders, we'll use the balance sheet to enable that.
Assume it's kind of reset that they sort of level and it was under good historically is the right way of thinking about it.
I wouldn't have instead of leaving is that most of that I would just say it isn't the balance sheet to sort of enable strategy and to enable us to run the businesses as well as we can for shareholders and that's what we've done I mean, we view some of the capacity for al Qaeda and we think that really builds a long term business for the future.
Patti shell doesn't mean that that's what you can enable with a strong balance sheet.
Maybe just don't leave US there was not a lot of appetite from the shareholders by equity financing of occasion, and you'll also see I think Peter's team have done a tremendous job of racing what is it 30 40 years bonds. So we have long maturity on the debt and the you know the interest cost is a fraction of all our EBITDA. So.
So I feel very comfortable.
Maybe just on the dividend as well obviously the unwavering focus as you said and I think Jakob you did a great job at the capital markets day kind of hammering that home last year.
But there is there's still debate around is it 50% pounds or 60% payout yeah. When it comes to the final and you've been very consistent with the 60% for the full year with the final.
Hmm.
And how should we think about it with this transition now should we still is this a board kind of resolute, 60% for the full year or could we see a kind of come down like we've seen with BHP for example.
But look first of all as you will see if it will continue to be Peter Simon will not say anything right right today and ultimately.
It's a board decision.
What has been unwavering in their support of the 60 person as a practice and so far it hasn't given us excessive leverage I think the way to think about things is we are building a lot of dividend capabilities growth profitable growth means more earnings means multi with them a capability you just.
<unk> seen a what is called all of the money we have St until Ot is coming back now and very soon we'll start seeing the money, we're putting into assuming do coming back et cetera.
Q&A just hand, it behind you.
Thanks for the presentation, I'll dispense BMP Pemex and thinking.
Thinking about portfolio simplification again, you talked about asking yourself are you the best operator of it but also assets of course need to make a return. So is it return on capital employed or another metric, what's the minimum level you need to see across the asset base as well as being the best operator.
Okay.
We don't I mean, ultimately it's about creating NPV.
If you are having an asset that is not performing very well enjoy apus will make it much better than you actually create value, it's probably not possible to get all of our businesses to the incredible good profitability level of viral but that's not the purpose of it I mean step.
Step back financial theory, it's about creating MPV until the company. So if you can just improve things you create value, having said that I'm very happy that the three out of four product group has double digit return on capital employed what do you think Peter.
I think that's exactly right I mean, yeah, I mean element you had very very strong return on capital employed.
A.
A few years that's grown massively in the last few years, that's what we like to say, that's improving our business isn't delivering fish ELD.
And.
The operational Ftes were down 2% year on year I'm, assuming that doesn't include contractors do you have a sense of if you could it contractors would it also be Lora Ho.
So it's a it's of course this FTE so it's across the board the contractors as well.
Okay. Thank you.
Okay. Thank you.
And good morning, Richard Hatch Bamberg, and thanks for the time and congrats and transporting Nike you underlying earnings by business unit has been renamed from disclosure just wonder if you might be able to add that back in just because it sort of sounds like community to better and better understand your business I agree kind of story Peter.
Yeah, well just simplified our reporting I mean, there's various reasons.
Nevada reporting yet in line in line with peers.
Makes it more complicated for us to understand.
Second point I'd have to challenge you and you'll come in on the aluminium business.
Bauxite prices alumina prices have been very high but if you look at the.
North American only medium business margins have really deteriorated.
Really negative.
What's going on that I appreciate there's a tariff at element to it but you know what.
Getting on with it.
<unk> space and the same guys with Pacific aluminium and then secondly, just on IAC I know I keep going on about what I see and but there's a step change in cost in this business is going up more because of what's going on because he even getting better.
So Richard I think the point on aluminium is there's just a transfer price because of the way I'd alumina prices are much higher. So if you look at the profitability of the whole thing then you can have a much clearer picture of performance because effectively where we are transferring alumina into our smelters at spot price with.
Quarterly lag. So it's just that that that's what drives a lot of profitability is it purely alumina prices.
Line that the businesses are performing better and better.
In terms of in terms of I think it was down I mean, you know I think that the day with that 540 million down to just over 200, but a lot of that again with price I mean in fact pellet prices was more than the 62 pricing was down about 15% price. They also had an insurance claim last year and they'll say.
Having to put more sort of work into the into the mine to really position the business for the future and it's it's it's not probably the biggest thing on calls that we really are very focused on how do we really sort of put the mine in good shape. So that we can see the full potential of this business is that it's just a huge focus.
The team and that that really gives us a platform for the future.
Okay.
Lastly, I'm looking at the clock, we have literally 60 seconds. Thank you this will be on Simandou OMB. So firstly the project is done so it's derisked pretty much.
E are you with the best operator or is it the Chinese given they have been instrumental in building. The project secondly, putting undue be used as a tool to get.
Chinalco too kind of Mystique I E.
Simandou speak to that.
It's an alco and and kind of get that speak down is that something that's on the table. We certainly lost this structure I mean, it's it works well and the reality is the most competitive advantage that the Chinese have it.
Developing assets, we bring an awful lot into himself knowing how to operate in a country like give me in terms of E. S. T standouts et cetera, I was just trying to play towards all the great things of our partners are contributing but I will say to you. We also bringing a lot to the table and I would find it.
Very difficult to see that we will participate in developing an iron ore assets. We are the world's largest producer of iron ore just to retrench from that iron ore and but you know you should never say never but it's certainly not something that we're planning for.
Okay. Thank you.
So thanks to everyone for joining us today.
We conclude our time with you know how that was here in London I. Welcome you can now join us for light refreshments just outside the theater. Thank you again and with that I conclude our presentation today.
Thank you.
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