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 for the next couple of hours, which you can see on slide five. There'll be plenty of time for questions at the end, and even after the event, for some drinks and burgers. 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 there 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 our 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. 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, are one of the biggest in Sydney, and we basically are what we are because there are no traditional owners left within the Sydney Basin. I'm here to welcome you to country, and there's two things I've got to share about a welcome to country. One, it's not a welcome to Australia. And two, 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.
A 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, 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 a Welcome to Country, it's disrespectful for us to walk on 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 yous know about this place. Alice Springs is surrounded by the Caterpillar. It's the mountains. And in the dream time, the warriors cut the Caterpillar in half, and that created Emily Gap. That's the only way in, to drive through into Alice Springs. Traditionally, that's the entry point into Arrernte and Warlpiri country. You want to get welcomed on the country, visitors would come to Emily Gap and light a fire, and 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 water holes 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 water holes 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 share a very brief history because, one, it's part of country, it's part of the land, and two, 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. Now, how many can say that about us? I always say, learn the history.
Prior to white man 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 and song lines alive, and 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, they're custodians for two song lines that run through this area, the Gadigal lands. One is the Burra, the eel, and the other is the whale. The whale song line is a very strong dreaming, very strong song line. It, it unites all clans right down the East Coast.... It even unites our, 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 Burramatta into Sydney Harbour. There's an island there called Goat Island. That island's called Me-Mel. That's actually the head of the eel. From Sydney Harbour, that eel swims all the way over to Vanuatu, and he turns around, and he comes back. Same journey. That's a song line. Hopefully, that gives you a little bit of insight into our connection to 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, one of 29 tribes that make up the Eora Nation.
The boundaries for the Eora Nation start at the ocean, surrounded by three of Australia's most beautiful rivers. We have the Hawkesbury River, the Nepean River, and the Georges Rivers. In between those three mighty and beautiful rivers, there are 29 tribes that make up the Eora. The name of the tribe you're 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 whitefella heard this instrument, he heard a song: didgeridoo, didgeridoo, didgeridoo, di-didgeridoo, didgeridoo.
And he went, "Oh, it's called a didgeridoo!" He was a very smart man, that man. Because he saw these playing, and he said, "Oh, and they're called tapping sticks." He's very smart. I told you he's a very smart man. I 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. You did? Captain Phillip sailed through the heads, pulled his telescope out, 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 toddled over, and he looked out his telescope at Manly Beach, and his comment was, "Ooh, 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 youse 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 a welcome song on the yidaki, and I'd love to stay, 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. Thank you, and welcome.
Thanks very much, Brendan. I've learned more again, and I always appreciate learning from a welcome to 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. 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, you know, this is heavy vehicles to light vehicles, which we are also seeing in our business. It's really significant.
One of the ICMM operating partner operator companies, we had 33 fatalities in 2022. Really significant for us to continue to learn. We are five 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 two 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. 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 you know, 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 non-managed operations, and we're seeing that in the same themes. It's 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 the who, who we're working with. We're adding different partners into our JV partners suite. So how do we 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 is tuning in virtually. Thank you, Kelly, 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 in our managed operation, but also those in our non-managed 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 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 two 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 four objectives in action at a world-class project.
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 demonstrates 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 one year, we did it in half a year. Yesterday, we announced that we have approved a pre-feasibility study to progress development of the Rhodes Ridge project, one of the world's best undeveloped iron ore deposits in Western Australia. 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 four 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's 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 two 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. In closing, Peter will explain how living our purpose and our four 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 are 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 zero 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 re-industrialize and secure their supply chains. We can support them. 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 confirmed 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'll hear later, we are absolutely committed to our target to reduce Scope one and two emissions by 50% by 2030. And I believe we have found an economical pathway in cooperation 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 three 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 with, 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 the Pilbara. We are on track to deliver a 5 million ton 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, Jérôme, will tell you more about this. Bold will also talk about his determination to reach 1 million tons 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. Three 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. Isabel, Dave, and Nigel, it's over to you. Thank you.
Thank you, Jakob, and, great to be here, and, we'll, we'll have a bit of a panel session to show you and, and explore with you, some, some, some opportunity for, 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.
Most exciting.
Apart from mine, potentially, and Jacob. But 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—how does it compare to our peers? Why is it creating a competitive advantage in your views?
Yeah. Thanks, Isabelle. Well, firstly, $250 million is an awful lot of money, but the key, 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 five, probably in the top three. 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 eight 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, I 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, 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. Exploration in Rio Tinto is very much about going local, getting boots on the ground, and chasing those key opportunities. 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 and 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 a third 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's 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. You know, I have no problem with being a bottom feeder. I like to get things cheap 'cause I like to see my money going in the ground, not into somebody else's pocket. So, those are the kind of key-
Yeah.
-areas that really drive the advantage of Rio Tinto exploration.
Great. Can you feel the passion of the geologist here? It's difficult to stop you on this one, but I think-
Well, I don't have a problem getting out of bed in the morning, I can tell.
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's heard about the new joint venture with Codelco in Chile, Nuevo Cobre. It's a major area of 300 sq km 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 a number of Codelco and a number of external companies. There's 450 km 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, is a great opportunity for both Codelco and Rio Tinto. It brings together the world's biggest copper company and allows us to work together with Codelco, bring to, 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, yeah, 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.
Great. Thank you.
There's confidence for you, eh?
Yeah. So you're often also making recommendation getting into, with your team, into new countries and, sometimes not the easiest countries, like you've, you know, you, and going into Rwanda, you're going into Angola. I know that 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, and, you know, weigh the benefits of, of entering versus the risks?
Well, we don't do high-risk countries just for the fun of it. 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 in 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. You know, we have Resolution, which is 1.5 Km 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 lists. 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. You know, 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 the health and safety of our people, without a doubt. Then we have a very serious look at, you know, 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 got 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 two 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 a bit explain what you're contributing to Dave's area and successes?
Well, we're working together on a lot of things.
Yeah. Yeah. 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 a 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, 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 two 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.
So 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, like, everyone calls the same rock a different name, so sometimes we create problems for ourselves. Using the LIBS system, the scanning system, it is looking and taking 2000 readings a second and giving us data about every element on the periodic table. So that's a massive amount of data that, A, the geologists aren't gonna 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 LUMO LIB 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. 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 the 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 gonna be a step change in terms of the timelines, A, to find something, and B, to bring it to production.
Well, talking about a race, you're talking about the race for technology. You're often talking about the race for technology Can you explain a little bit what you're doing to accelerate our strategic agenda?
Yeah. Well, I think the reason for the pace is the energy transition itself. That's placing huge amounts of demands on us for the new raw, you know, the, the new materials for the energy transition, and also, we have to deliver them with a zero carbon footprint, and also, which a much improved sig- you know, 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 startups.
So we've created a VC fund, and we've been making investments in startups that are creating the technologies that we need. This year, we've invested in three 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 gonna 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. Now, 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 steel making 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 zero e-fuels. So these are really interesting, technologies that will help us in our goals.
Oh, fantastic. And they're—so this is all, like, the new and 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, you know, highlight three 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 waste and our internal waste streams. They're now out in the marketplace. So I think these are three 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 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 heat leach, a bioleach heat 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 non-conventional and very rich copper sources and also from waste. We also have BioMine, but I'm gonna 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!
Yes.
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 perspectives. So there's two 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.
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 Center for Future Materials led by Imperial College in London. What we're setting in 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, you know, the future technologies that will be needed for the energy transition as well.
All right. Thank you for that. So before we finish this panel, I'm gonna ask each of you to tell me a little bit what, what excites you the most about-
Well-
What you're seeing now and in the next year or so? Dave?
Oh, in the next year, no one in Rio Tinto 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. A long list of exciting opportunities for exploration, for sure.
Yeah. Great. Thank you, Dave. And what about you, Nigel?
Well, for me, it's the startup of the next generation ELYSIS cell. It's seeing the start of our first demonstration for Nuton. It's watching that switch of the ELYSIS smelting 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 two lenses. You know, just a few things to remember. I love to see the consistency and approach with courage that the team and 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.
Vivek.
and Alf to talk about markets and customers.
Thank you very much, Isabelle. There was a height differential between the first speaker and the second speaker. It'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 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. When I look ahead, I see three 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.
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. 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, two-thirds 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 tons in annual copper demand by 2035. And as other countries work toward their Glasgow pledges, another 10 million tons 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 high-grade ores that are suitable for green iron and steelmaking, 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 zero targets and a younger fleet of conventional iron and steelmaking facilities. Importantly, high-grade ores will carry increasing value in a decarbonizing world. In this chart, and I'll take you through it in some detail, I depict the cost of making steel through several different routes, assuming a $100 per ton CO2 penalty. Now, as carbon penalties increase, the cost of producing steel through conventional blast furnace-style routes will also increase. So steelmaking technologies such as natural gas or hydrogen-based DRI become increasingly cost competitive given their significantly lower emissions. Now, this manifests as potentially large savings from avoided carbon penalties, which in turn would give rise to significant surplus value in the DRI/EAF route.
But accessing this value depends on access to low-impurity, high-quality ores that are suitable for conversion to steel in an electric arc furnace. And this creates a potentially significant set of value and use premiums for those ores. Under our assumptions, the ones here, surplus value would reach around $120 per ton of steel under H2 reduction, and this would represent a premium of around $80 per ton for 67% ore relative to the 62% product. Finally, I'm going to look at the role of scrap in delivering value to customers, and I'm going to focus on aluminum. Demand for aluminum metal, as I mentioned earlier, is expected to grow in all regions, with global growth of over 3% a year to 2035.
Now, we do expect robust demand for primary metal, especially in categories where greater purity is highly valued, such as transmission lines. At the same time, scrap is expected to grow by 5% a year, substantially increasing its share of the market. Increased scrap from domestic sources will reduce supply chain risks for our customers. For example, today, 40% or over 40% of the OECD's overall aluminum demand is met by imports. but scrap utilization within the OECD could grow by up to 50% over the next 10 years, and that would reduce their import dependency by well over 10 percentage points. Finally, our customers and their customers recognize that scrap use provides scope for substantially reduced carbon footprint relative to primary aluminum, especially primary aluminum that has been smelted using coal-fired power.
For example, by 2030, Coca-Cola wants to increase its use of secondary materials by at least 50% for its packaging. And all of the major auto manufacturers, and I know Alf spends a lot of time with them, have intentions to increase their utilization of scrap substantially. So in conclusion, global trends present an opportunity-rich environment for commodities, and I believe that Rio Tinto is very well positioned to provide sustainable products to meet our customers' growth requirements, their green demands, and their desire for supply security. So thank you very much, and over to Alf.
Thank you. Thank you, Vivek, and good morning, good afternoon, good evening. It's great to be back in Sydney. Unfortunately, a city I don't visit as often since I moved to Commercial nearly three years ago. However, I now get the opportunity to hear the voice of our customers directly across all our commodities and regions, and their message is quite clear. Against the backdrop shared by Vivek, they're increasingly telling us they want us to help them find better ways to advance their decarbonization by providing low-carbon materials, the right materials needed for the energy transition, and also support them on decarbonizing their own processes, our Scope 3. Additionally, they want security to supply. For our customers, this means having reliable access to scarce materials with the right provenance and traceability.
Rio Tinto is well-positioned to meet their needs and be a partner of choice for our customers across our portfolio of products. A prime example of finding better ways is a game-changing move into recycling with the Matalco joint venture in North America. We started working on this opportunity during my time in aluminum some years ago, and last Friday, I was thrilled to participate in the signing ceremony and proud to see how our teams have come together to bring this to fruition. Matalco is addressing our customers' needs for both decarbonization and security supply. Our North American customers increasing their use of recycled materials by around 70% in the next 10 years. The Matalco JV combines the leading secondary aluminum producer with the leading primary aluminum producer in North America, and Rio Tinto will be responsible for marketing Matalco's entire output.
This will add approximately 45% capacity to North American aluminum marketing portfolio and almost double our portfolio of value-added products. In addition, over the last five years, Matalco has more than doubled its production capacity, and there are opportunities for further growth. Combining this with our existing responsible aluminum offer, which has grown over time from RenewAl to ASI, ELYSIS, START, and now Matalco, allows us to create tailored offerings and help our customers meet their needs, especially in the growing and high-value sectors like transport, construction, and packaging. We're absolutely focused on accelerating decarbonization of our value chains. Mark will speak later on Scope 1 and 2 emissions from our operations. I'll cover Scope 3 emissions from our customers, transport, and suppliers. As Jakob mentioned, I recently got back from a two week trip around China, Japan, and Korea with Jakob, meeting customers and suppliers.
Almost every conversation started with, "How can you help us decarbonize?" especially from our iron ore customers. 95% of our Scope 3 emissions stem from our customers processing our products, particularly producing steel and aluminum from iron ore and bauxite. We engage with our customers and their governments on climate change, and they have real commitments to reduce their emissions. However, as they stand today, we estimate a trajectory for those emissions reaching net zero by around 2060. It is clear that our customers and suppliers see Rio Tinto as a key player to help them reach their targets, but we must do more than that. We are committing to partner with our customers and suppliers to find better ways to reach their targets and bring them forward by a decade to reach their targets by 2050.
The best way to achieve this is for us to invest now in the development of breakthrough technologies that will help decarbonize our value chains and upgrade our ores to be suitable for these. We're taking action mainly on steel decarbonization technologies, net zero fuels in marine, and helping our suppliers decarbonize. As the world's largest iron ore producer, we have a key role to play in the decarbonization of the steel industry. Our approach is to partner with our customers and other industry players to build a portfolio of options that span the steel value chain. Firstly, we're actively working with our customers to help them reduce their carbon emissions from existing blast furnaces by 20%-30% by 2035. Secondly, we will leverage our high-grade iron ore from IOC and eventually Simandou to help accelerate the proliferation of emerging DRI-based low-carbon steelmaking.
However, the most important part of our work is on the Pilbara ores, unlocking future competitive low-carbon pathways for these grades, which represent the majority of the world's consumption. We're working to solve the key constraints, for example, reducing impurities, so these ores are better suited for low-carbon pathways, where we're developing the electric melter technology and also working on beneficiation our ores. We're also really excited about BioIron. We're developing this process, which uses biomass instead of coal, along with microwave energy, to convert Pilbara ores into metallic iron. Overall, our team is working on over 50 projects with over 40 partners in 10 countries, which are prioritized around a clear purpose: to unlock the most sustainable and economic pathway to for our iron ores and to future-proof our iron ore business.
We strongly believe that holding ourselves accountable on real, measurable commitments to near-term actions is the best way to accelerate the transition. We are therefore setting out additional targets. For example, we will commission both a BioIron continuous pilot plant and electric melter pilot plant by 2026. We will reduce our Scope 3 emissions from IOC by 50% by 2035. We will increase our marine emissions intensity reduction target to 50% by 2030, ahead of the IMO target. And as part of the First Mover Coalition ambitions, we will have 10% of our time charters with net zero fuel capability by 2030. In procurement, we have initially prioritized our top 50 highest emitting suppliers, representing over 40% of our upstream emissions, to drive for accountability around targets and collaborate on decarbonization initiatives.
We will also strengthen decarbonization as an evaluation criteria in high-emitting categories, raw materials, explosives, and mining equipment in 2024. Let me wrap up by saying that I'm energized and excited about the role we are playing, working together with our customers and suppliers to meet their needs on decarbonization and security supply. In particular, a significant move into recycling with Matalco is a game changer for us, creating a unique position to support customers in North America and a real opportunity for growth. And finally, our concrete near-term actions to address Scope 3 will help our customers and suppliers accelerate their pathways towards reaching net zero by 2050. Ultimately, it's all about technology development. So I'd like to invite Nigel back up on stage to share a bit about BioIron, which I'm sure will do a much better job than I could do.
Nigel, the stage is yours.
Okay, thanks, Arn. BioIron, the first thing you need to know about it is a technology that can treat all types of Pilbara ore that we currently sell, sell today, and take that to a zero-carbon form of iron. The way it works is we take our Pilbara ores, and we mix it with biomass. That biomass is actually a biomass waste. We use rapidly growing crops. The crop or the plant that's useful gets taken away, and the stalks and things, that biomass waste gets left behind. That's the biomass that we're using. We then put those pellets that we've made through a microwave furnace, and that microwave energy transforms the iron oxide into iron.
So we end up with an iron, a hot briquetted iron pellet, that's what we call it, and that then gets fed into a melter. The melter separates out the oxides that we find in the iron ore from the iron, and that pure iron then gets sent to the basic oxygen furnaces to be converted into steel. The first thing, the first thing about the BioIron process, it reduces our CO2 emissions relative to the classic blast furnace, basic oxygen furnace process by 95%. We achieve that because the biomass itself is taking CO2 out of the atmosphere to grow, and as it grows, it emits oxygen. We then combust that. We use that biomass then to extract the oxygen from the iron oxide to produce the iron, and the CO2 goes back up.
But you have this virtuous circle that operates. So that's the way we get to a net zero solution there. The microwave energy that we use is renewable. That's the. Then we aim to use in renewable electricity, so we have zero carbon there. So to make that iron, we have a zero carbon footprint, near to zero carbon footprint with that 95% reduction. One of the other important things about BioIron is the electricity usage. Compared to, you know, a hydrogen-type shaft furnace reduction, we're gonna have a 65, you know, use 65% less electricity. There are two fundamental reasons for that. One is because to electrolyze and produce green hydrogen to split water is very, very energy intensive. We don't have that.
The second thing is, if you think about heating something in an oven at home versus heating something in a microwave. When you heat something in an oven at home, your whole oven is hot, so you've had to heat that and waste all that energy heating that oven up. Whereas in a microwave, you just heat the food that you want to heat. It's the same thing with BioIron. The energy of that microwave energy is going straight into those pellets and doing the job and converting the iron oxide into iron. So hopefully, you've got a good appreciation of how the technology works and why it's so important to us.
Thank you, Nigel.
Oh, now, I nearly forgot. Over to Kellie, Arnaud, and Simon, who are going to share with us a little bit more about our journey towards best operator.
Hiya.
Thanks, Nigel.
... Thanks very much, Nigel. You know, I was hoping that you weren't gonna say, "And please don't try that at home." So when I think about Best Operator, I have images of people winning, you know, trophies and coming through the, you know, running race and winning. Being best means that you've got to create the environment for that performance. I've been in this game for 22 years and seen multiple different programs, and what I have loved about Safe Production System, which is what we'll abbreviate as SPS, because we love abbreviations, is how much we listen. So all of the lessons that we've learned after Juukan about we need to deeply listen, we need to deeply listen to our stakeholders and understand what's happening.
The biggest stakeholder we've got in our business is our frontline, and Safe Production System is really listening to them. And when I see how much that happens and how engaging it is, we really see the step change in safety and in the value and the performance. I'm really excited about that. I see as it gets rolled out, the step change in safety is phenomenal, and we're seeing such a different engaged workforce. But you know, Arnaud, this is really your work that you've led for us, and you know, over to you for your reflections.
Yeah. Thanks, Kellie. Maybe actually I'll start with your word of winning. It's something that we are discovering with implementing the Safe Production System is actually we cannot lose. We can only win or learn, and this creation of a learning organization is exactly what the Safe Production System is about. So we've been making a lot of progress in the deployment of SPS. You may remember, if you listened to the capital markets a year ago, we were at 16 sites, and we were aiming for 20-24 sites. So year to date, we have deployed SPS in 23 sites, and so we're working on the 24th. So we should be able to deliver the upper end of the range of our target. Of course, we've chosen those sites carefully.
We've prioritized based on the potential value creation, and with 23 sites, it's roughly 55% of our sites that are now engaged in SPS, and we've unlocked a bit more than 80% of the potential value. So we're making good progress there as well. The biggest opportunity is obviously in iron ore, and that's the reason why we've brought lots of help and special attention to Simon and his team. We've made tremendous progress under the great leadership in iron ore, where we've deployed SPS in 14 out of the 16 sites. We're making also progress in the other product groups. Every single product group has got at least one site involved and usually several of them.
So when you look at this all together, this is really powerful because this is the first time in the history of Rio Tinto where we are building a productivity improvement program, which is worldwide, and we're building it involving representative from all product groups and technical representatives, functional representatives, where it's important in a bottom-up, inclusive and empowering approach. So that, I believe, is extremely important because this is building ownership, and with ownership comes more sustainability. Overall, when you look at the progress being made, one thing that I found quite interesting when I visited a couple of weeks ago the Pilbara sites for the last time before I retire, is I saw two things that impressed me.
One is quite a good maturing in the mindset and behavior of our people. And for the people in this room that have had the benefit of visiting the Pilbara not long ago, I'm sure that you've seen it. I can see some heads nodding. And so that is great progress. The second thing that I saw and beyond, you know, the use of best practices, the value creation, all of this is important, but I'm looking for some intangibles as well. And what I saw that was really interesting is because now worldwide, we're talking the same language, we're using the same best practices, the same tools, there is the creation of a learning organization that I mentioned earlier on. And I've seen lots of evidence of that communication being a lot easier between product groups and learning from each other.
The last point I will make on this update on SPS is around the system itself. We are close to finishing describing what we believe will be, at this stage, the best practices that will be required to get us to best operator. So, in a few months' time, we'll have a standalone system that has been built in a very inclusive way in Rio.
And Arnaud, I see how that system comes together, and I see how the best practices are being used and how you get that language happening across different sites. But, you know, can you give us some examples of value?
Yes. Yes. As someone told me once in America, "In God we trust, everybody else brings data." So in terms of the data, first of all, the biggest value creation, as I said, is in iron ore, and I will let Simon give you an update on the progress towards creating an additional 5 million tons with SPS. But to link it to what you said at the very beginning, Kelly, about safety, we see some real evidence of the safe operation system helping our safety performance in two ways. First of all, we do a very thorough assessment of the progress in safety in each site that we call the Safety Maturity Module.
More and more, we're seeing evidence of a stronger and a better mindset where we're implementing SPS, which that will help in our safety journey. The data evidence of that is, if you look globally, wherever we've implemented SPS, we've improved the all injury frequency rate, which means the most serious injury frequency by 20% year on year. That is not a walk in the park, okay? It requires fundamental changes to be able to get there. In terms of productivity improvements and engagement improvements, maybe I'll give you two quick examples. One at Kennecott. You may remember that we started our journey at the concentrator of Kennecott, and I was there a couple of weeks ago.
At the concentrator, the past three months, we've broken yet another record, and now we've reached over those three months an average of 86% asset utilization. So that is starting to get closer to what we would consider world benchmark. That has been really helped with a stronger engagement of the workforce, with an 8% increase in employee satisfaction since we implemented SPS. And the other example is at Amrun, our bauxite mine in Queensland, where we've seen a 6% improvement in employee satisfaction and a 12% increase in operating time over the past 12 months compared to before starting SPS in the field. So... And we've got, you know, those are just a few examples.
As I said, I think it may be better to go deeper into iron ore. So maybe, Simon, you'd like to tell us a few more about how SPS is helping you greatly?
That's a bit leading, Arnaud. Maybe before I get into that, Arnaud, as you said, coming up to retirement, I just really wanted to acknowledge, over the whole journey, and particularly, it's been a privilege working with you on the work around SPS.
Thank you.
You've certainly really helped. I've got a consulting arrangement in my bag—so I look forward to that negotiation as well. I really appreciate it, Arnaud.
Thank you. Thanks very much. Thank you. It's been a pleasure working together.
In terms of, actually, probably the best way is, in the field in the last few weeks, we're sort of bringing a cross-functional team to look at a particular problem or challenge. And the dozer operator there, you know, literally sits in a cab all day, just looking out the window, thinking of ways that we can operate the crusher, operate the logistics around the crusher better. And to me, SPS is really just a structured tool for liberating those ideas and then actioning them. And it was just really refreshing seeing the way the team was coming together.
Probably the other example in Tom Price, because it is effectively the birthplace of our business more than 50 years ago, the oldest plant that we have. As Arnaud talked about, delivery, we're on track for 5 million tons this year. A good chunk of that from Tom Price. And really unpicking, you know, bringing that cross-functional team from a lot of the different departments across that site to really go after that uplift, choke feeding the crusher.
So the team's been empowered to, you know, change road designs, change some of the training of digger operators, improve blast conformance, changing the way that we enter and exit through the crusher there, to really make sure that we're choke feeding that crusher, and that's helped as part of that uplift. You know, Tom Price and then working with Yandi, for around about an 80% reduction in shut over on times. 80%, which is also delivered around about a 15% reduction in terms of the number of units of labor that we need for those shops. About the average across the PMO, actually, for 2023, about a 15% reduction, which obviously flows through to safety.
But maybe Kelly, to go back to and you started with mindsets and behaviors, but just interested in some of your observations on that, particularly with the safety journey and the connection between those two.
Yeah. So in our safety maturity model, which we've had for some time, and we've been improving it, it's an externally assured process that we audit people at the end of the year to see how they're progressing. And what we're really seeing is, as we're driving into mindsets and behaviors, people are feeling that they can actually talk about the culture that they've got in their workplace. They can—we can see and feel how that's changing, and particularly as we introduce health and environment into our daily rituals. So we're starting to really see how that is changing and engaging the front line.
I think, you know, as I opened, it's this is around how do you create the conditions for that sort of excelling performance. And I think we've also seen the Everyday Respect work help as well. That as Simon said, the ability for that dozer operator to actually feel comfortable to say, "Hey, these are my ideas," and they're put on the table, and it's respected, is also also very important. And I think, you know, you've done some really good work with purple banners and Stop for Respect, which is all just additive to how do we actually ensure that those are winning conditions.
Yeah. We are, and I've mentioned this story to a few people in the room, but we do a Stop for Respect every year, where we take the whole Pilbara system down. I remember, I think it was the one last year, standing in a small group, and someone put up their hand and talked about an incident that day where they'd been having a conversation on a bus, someone had overheard them. And they realized in the moment that it wasn't an appropriate conversation, and so they'd gone and apologized to the people. But I was just reflecting on how closely knitted together a lot of this work is.
And if we get there, if we get to where someone's prepared to stick up their hand in front of the Chief Executive and talk about an incident that they were involved in, but also is self-correcting in the moment, that's the sort of cultural change that if we get there, it'll unlock enormous safety benefits. It'll unlock enormous productivity benefits, but it'll unlock enormous benefits in terms of having safe and respectful workplaces and the sort of place that everybody wants to work in.
Yeah, that's right. I was only in the Northern Territory last week at Gove and staying for the biggest demolition job in the world going on in Nhulunbuy. And so the camp's full. The camp has changed. You know, there's locks, there's lights, there's areas for people to gather, that's not, you know, near a wet mess, and it felt different. And you knew that this was the conditions that you're working in and living in is about respect. So, you know, it all just feels to me like how we bring these threads, this golden thread together to how we engage our people, and then we can launch further and greater improvements in our performance.
Yeah.
Yeah.
I think it's a great example of our values in action: care, courage, and curiosity. As you said, there is a common thread in this cultural transformation that we're actively embarking upon with Everyday Respect, with the leadership the training of Voyager and with the Safe Production System, and that thread is fundamentally respect. By showing more respect, giving a voice to our employees, particularly on the shop floor, giving them a chance to have a say on the way they do their job, listening to them for the ideas that they've got and helping them to implement their best ideas, is an incredible potential of value creation. I know it by experience because I've been using this approach, which is fundamentally based on lean manufacturing.
I've been using it for 25 years, and one thing that I've seen systematically, and I think, actually, Simon, people at Tom Price are starting to realize it, to discover it, is we think that we know the full potential of our business. Wait until we empower, truly, our people on the shop floor, and they will show us what the real, true potential is. And this is what is really at stake. This is what we are chasing currently.
Yeah, it's very exciting, Arnaud, and I'm deeply grateful that you've been teaching us and showing us the way. We will miss you, and you know, we'll probably tap Simon for that consultancy. But you know, you have-
Small mark-up.
But, you know, have really, really appreciated.
Thank you, Kellie.
everything that you've contributed to our business.
Yeah. Thank you. And, you know, I'm prepared also to provide a free consultancy next year. I think I'd come to the, the general assembly and ask a few questions. Because, remember, you know, Rio, this wonderful company, has been my past, a big part of my past, my present, and it's going to be my future as well, because actually I've got no pension, so my future is highly dependent of the good work that my peers are going to do in creating value for all shareholders. So I'm counting on everyone indeed.
Yeah, thanks very much, Arnaud. And maybe, Simon, we've got a video of some of this in action, and-
Yeah. So the video is from one of our leaders in Pilbara Mine Operations. Quite a personal story. Just highlight some of the work that we're doing, that cultural transformation, and I guess why it's really important to her. So we'll have a short break after the video, which goes for four or five minutes.
Hi, I'm Molly Singline, and I'm here to tell my story. I've been with Rio Tinto for just over 20 years. I started my career in Tom Price from the ground up as a Cat One contractor, doing any job that I could to gain some experience and only getting paid when I worked. There's power imbalance. You're one woman on a team of 80 men. If I didn't work really, really hard to prove myself and to fit in, I wasn't gonna be accepted. As a superintendent at the ports, I led a large team of belt maintainers and crane operators. I feel like that journey defined who I was because I was able to do what I see as my hardest work. It was a tough environment at times, and I did have to deal with things that my male peers would never have to deal with.
So when you release a report like the Everyday Respect, and you read it as a leader, there's an aha moment where you go, "Finally! Finally, we actually call this out because it's not okay." As part of my journey over the 20 years, I'm really proud to have been the general manager for Robe Valley Operations. But when the report came out, what I did realize was all those behaviors was all happening at the Robe Valley. It was really clear to me as a leader and as a senior leader, you have to put the line in the sand and say, "Enough is enough." So my personal reflection on the report is I held it really tight. It actually meant something to me because I could also see the way forward. I could also see that this is gonna become a better place to work.
In March this year, when I was looking at the stats, there were 60% women in mine operations manager roles, and that's an outstanding effort. Which then led into a Balance Boost project that was introducing a balance into the crews of entry-level operator roles, and by the end of the year, we would have brought in approximately 270 women into the Pilbara. We have a transferable pathways program that is bringing in women into leadership roles. We put in an independent business conduct office that reviews, investigates all incidents that happen on-site. Our facilities division are doing an amazing job to work on the infrastructure around the camps, which includes better lighting, security cameras in public places.
If I go back to my younger self, not feeling like I could be Molly and I needed to fit in, to now going, "I can be myself, and I can fit in, and I'm accepted," that's the biggest change I've seen in the 20 years. We need to open the gates to everyone. Everyone that wants to work for Rio Tinto will have the opportunity and know that it's safe. The dial hasn't moved yet, but I can see the future, and it looks really, really good.
We'll take a 10-minute break, so we'll restart at 5:40. Ten minutes.
All right, well, well, welcome back. And hello to everyone here and online. Thank you very much for joining us. I'm gonna kick off this after the session, after the break, on our, on our decarbonization journey. So look, as many of you will recall, in 2021, we set targets to reduce our Scope 1 and 2 emissions by 15% by 2025, and by 50% by 2030. These are ambitious targets, particularly as unlike our competitors, around 80% of our emissions come from hard-to-abate processing activities. The pathway to reducing our carbon footprint focuses on the six decarbonization programs we discussed last year. But to accelerate these activities, this year we established the Rio Tinto Energy and Climate Team, led by our new Chief Decarbonization Officer, Jonathon McCarthy .
It's actually exciting to see some real momentum this year. However, while we will have made financial commitments to abatement projects that will total more than 15% of our emissions by 2025, our achieved emissions reductions will lag this. In 2023, we've made project commitments which will deliver around 2 million tons per year of abatement, mostly in renewable energy contracts and biofuels deployment. We have a well-defined project pipeline accounting for nearly all of our carbon. However, not all of the technical solutions exist today, and the marginal cost of abatement is a very important consideration. So our approach to investments is threefold. Firstly, commercial transactions. These are projects with available technology and attractive economics, including power purchase agreements and renewable energy certificates. And so we're moving quickly on these.
Secondly, transformational projects, those which transition our assets to the low-carbon future. These include repowering of our Pacific Aluminum operations and changes to our processing facilities. Included in these two categories are more than 2 million tons of projects that are either approved or in execution. There are also a further 6 million tons of executable projects, including Pilbara Renewables and additional PPA contracts in Africa. Thirdly, industry breakthroughs. These are R&D activities, some of which Nigel has mentioned, which unlock technical and commercial challenges in our hard-to-abate processing plants. We're progressing programs here, including piloting our blue smelting technology, which I had the opportunity to visit in June as it was starting up, and ELYSIS, which targets more than 6 million tons of emissions from the anodes used in our aluminum processing.
Now, I'd like to go through some of the examples of the progress that the team is making. Commercial transactions, specifically in renewable energy, have been our largest contributor to date. These protect our assets' positions on our on global carbon intensity curves. In the Pilbara, we remain committed to building a gigawatt of renewable energy capacity. However, due to the extended timeline of the deployment of battery electric haulage solutions, we now estimate that only 600-700 megawatts of capacity is required by 2030. As well as reducing emissions, renewable energy deployment in the Pilbara will significantly reduce our annual gas spend, which is currently running at around $150 million per year. We continue to progress the potential development of a Pilbara coastal solar farm and are partnering to explore innovative renewable energy solutions in the region.
An example of this is the MOU signed with the Yindjibarndi Energy Corporation, where we'll explore opportunities to collaborate on renewable energy projects on their land. We continue to believe that electrification is the most efficient and cost-effective pathway to eliminate our diesel emissions, but we're not expecting the large-scale deployment of electric fleet to our operations before 2030. In the interim, we are investigating and deploying transitional drop-in solutions, including renewable diesel. In May, Boron became the world's first open-pit mine to successfully transition heavy machinery from fossil diesel, resulting in an annual abatement of around 45 kilotons. This week, we announced the deployment of renewable diesel at nearly 10 times this scale at Kennecott in Utah. Replacing diesel fuel with renewable diesel at this site reduces emissions by an expected 495,000 tons, making Kennecott 80% carbon-free in 2024.
In our alumina processing, digestion is the first of four stages in the refining process, where alumina is dissolved from bauxite. Double digestion is a less energy-intensive process which exists today and which we are now testing for application on our bauxite and our process fleet flow sheet at Queensland Alumina Refinery. If we are successful, we will look to expand this to industrial scale between 2025 and 2030, potentially reducing our emissions by around 400,000 tons per year. Finally, we are working to secure the technology breakthroughs we need. As an example, in July, in partnership with the Australian Renewable Energy Agency, Rio Tinto and Sumitomo agreed to build a hydrogen calcination pilot plant at Yarwun. If we're successful, converting the whole plant could reduce emissions at that plant by around 500,000 tons per year.
Now, I sort of need to start this slide with a little bit of a boring note on reporting basis for our 2018 and 2022 emissions. So we've actually updated our reporting of Scope 2 emissions to use a market basis as our primary measure, which does align with emerging global greenhouse reporting standards. But the impact of this is a 4% increase to our 2018 baseline and a 6% increase against our 2022 audited emissions. A key driver here is ISAL, where moving to a European market factor has added nearly 2 million tons of emissions, despite no change to the actual smelter energy source. Our six global decarbonization programs tackle the key sources of carbon in our business, and we have a strong pipeline and committed investment, which supports our pathway to our 2030 target.
Our single largest lever, accounting for around a quarter of our emissions, is to develop and finalize a competitive renewable energy solution for the PacOps aluminum smelters, which Jérôme will discuss later. Like many things, our decarbonization trajectory does face some headwinds, typical to the mining industry. Increased work indices, longer haul distances, and declining ore grades impact emissions. Production growth and growth from new projects such as Simandou, Jadar, and Rincon must also be accommodated within our absolute emissions reduction target. The actions we are taking and the projects we are approving maintain our roadmap towards a 50% reduction in emissions by 2030 and net zero by 2050. However, there is real complexity in delivery, including the availability of technology and the nature of our portfolio, where high emissions are often found in our lower margin businesses.
Our pathway to 2050 will be further defined as the technology matures. But we continue to invest in decarbonizing our business, which, as Peter will discuss shortly, provides the opportunity to enhance value and de-risk our business in the face of evolving carbon costs. We are focused on structural abatement projects to deliver emissions reductions, but these will be complemented by high-quality, nature-based solutions. The challenge we face in addressing our carbon footprint is clear, but it is one we are striving to achieve. We have a clear pathway, supported by clear capital investment and exciting innovation and research partnerships to mature the technology solutions that we need. I'm now going to hand over to Jérôme, who will, among other things, discuss the role that aluminum has to play in the energy transition. Thank you.
Thanks, Mark. Good morning and good evening. It's a pleasure to be with you today. I joined Rio Tinto seven weeks ago after eleven years running Alstom, then GE's global renewable energy businesses. Before this, I spent thirteen years in the mining and minerals processing sector. I feel both experience will help me a lot to contribute to the success of RTA going forward. I've now been able to spend some very valuable time in our key regions, the Saguenay in Canada, Gladstone here in Australia, as well as our French R&D centers. I listened to our people across the business. I got feedback from our customers. My first impressions are extremely positive. We have huge opportunities for profitable growth in aluminum.
I'm excited by our portfolio, by our customer relationships, by our very competitive hydro assets, by our deep technical capability, and by the stakeholder partnerships we have built. Most of all, I must say I'm impressed by our employees. It is a great and committed team. I believe we have the right position at a good time in the market, and we have engaged the right strategic actions. I am convinced that bringing our assets back to full operating capacity and deploying SPS to improve our reliability and productivity has to be the key pillar in everything we do. But allow me first to reiterate our strategy. Aluminum has a key role to play in a net zero world. As Vivek explained, the demand for aluminum in green applications is driving most of the growth in our sector.
We are the biggest Western and the leading low-carbon producer of aluminum, so we are very well placed to handle this. Our strategy to do it is articulated through four lenses. Our focus is first leveraging our strengths, including our hydro generation, to grow our position in North America. At the same time, we need to decarbonize our Pacific assets while maintaining their competitiveness. We need to optimize our alumina supply chain, and we need to maintain the volume and the quality of our bauxite reserves for our own needs and for our profitable export business to China. Let me provide here some specific update on the decarbonization of our Australian operations, which is a big topic and an area where my past experience is proving useful. To illustrate the scale of the topic, our smelters and refineries use 10% of Australia's electricity.
We are also keenly aware of their importance as a large employer. Decarbonizing them will require to promote development of large volumes of competitive, renewable power, starting in Queensland. But given the size of our needs, a whole other system view needs to be taken, and the mechanism for firming and transmission needs to be clear. The scale of that challenge also means we can't act alone. So we will need, we'll need to work in close partnership with the Government of Australia and Queensland, notably in the context of the new capacity investment scheme. We are working really hard to deliver a viable solution for these assets, which still operate out of fossil fuels in Australia, and at the same time, to renew the contracts we have for CO2-free electricity, for example, in New Zealand.
I'm optimistic, but there are still some steps I have to close on this. Continuous improvement and stable operation are essential. This work has to be done on the shop floor by empowered employees driving progress every day. We see this as a multi-stage process using SPS. The first step is getting our operations to full capacity and running stably. The second is safely maintaining their conditions, including by targeted investment. The third is about optimization of costs, capital, employee engagement, and productivity. SPS builds on the good continuous improvement culture and system in place at RTA, which I could witness firsthand during my site visits, and it will get them to the next stage of performance. We will monitor progress across our operations with a proper set of leading key operational indicators.
At our smelters at Boyne in Queensland and at Kitimat in British Columbia, we have worked very hard to address the challenge and have now recovered full capacity. I was in Boyne last week, and the team there took me through the work they have done to improve the condition of the process and take us back from excursion in one pot line to stable operation. The statistics you can see are impressive, with dramatic improvement in a range of leading indicators that contribute to the health and performance of the pots in which our aluminum is made. We have been similarly successful in stabilizing Kitimat. With these changes, after our significant investment there, we expect this will become a very high-performing smelter and one of the flagships in our aluminum portfolio.
Also, in our alumina refineries and our bauxite mines, the deployment of SPS will stabilize operations and deliver full potential. As Arnaud said, we have already made good progress at our Amrun mine in Weipa, improving processing plant stability and reducing feed variability by 6%. The broader macro context continues to highlight the importance of what we are doing to improve cost and margins. Raw material prices are reducing, albeit from a higher starting point and at a slower pace than what we have seen in previous cycles. Anode raw materials are down by a third from recent peaks and caustic by two-thirds. This is alleviating some of the margin squeeze we have seen since the second half of 2022, and we are starting to see EBITDA levels progressively climb back.
To complement that, we have been taking a disciplined approach to managing all our costs, and we'll optimize our working capital through the chain. In aluminum, we have been playing to win, actively investing to reinforce our business, executing together a strategy which was brought to you last year, focused on green growth in North America. Alf has already discussed how the Matalco joint venture, closed at the end of last week, fits into our broader customer and recycling strategy. Matalco is a 50/50 JV between RTA and Giampaolo Group. It operates seven facilities in North America, with annual capacity of 900,000 tons of high-quality recycled aluminum, enabled by scrap collected by our co-shareholder. We will market 100% of Matalco's output, allowing us to have a unique complementary offering, combining the best sources of primary and secondary aluminum in the market.
This will greatly improve our value proposition and increase our ton produced in the region by 45%. The Matalco business has been growing rapidly. This and the synergies potential make all of us very upbeat about this partnership. We will use this platform to grow our responsible metal offering, and I'm convinced that recycled metal will be a very important part of what RTA has to offer globally going forward. Earlier this year, we also announced the installation in the Saguenay of 96 pots of AP60 technology, replacing old Arvida capacity with the lowest carbon emission technology available today. For this part of the Saguenay, this will halve our carbon emissions per ton of aluminum produced. We are also making good progress on the development of the technology of our ELYSIS joint venture.
ELYSIS has the potential to transform the way we produce aluminum towards zero carbon, and it can, it can fundamentally reshape our industry. We have significant steps planned in 2024. I am convinced that all these decarbonization efforts can allow us to create a lasting competitive advantage. We are also aware we operate as part of a broad ecosystem and can only achieve our goals by building the right partnerships. Mark mentioned what we are doing here in Australia with Sumitomo. Our vision is fully supported not only by our customers, but even more by the customer of our customers. They are all looking beyond low carbon content. They are keen to source aluminum that is produced responsibly and that can be traced back to the bauxite source to guarantee ultimately a zero carbon content.
More broadly, we have great partnerships with government across the world, and we want to invest with their support. This approach extend to First Nations Group, where we have our assets, demonstrating the importance we are placing on developing long-term, sustainable partnerships with our host communities. I could already see live a few example of this with the Mashteuiatsh in the Saguenay-Lac-Saint-Jean region and with Ngāi Tahu in New, New Zealand last week.... Together, all these partnership and joint ventures around the world are essential to ensure we have the foundation to grow and deliver the aluminum the world needs. In conclusion, we have a great aluminum business with strong strategic position in Canada and here in Australia. Moving to Best Operator will make it an even better business.
Aluminum is an essential part of our broader vision at Rio Tinto to become the leading producer and partner of choice for safely delivering responsible green materials to support the global energy transition. By implementing our strategy, we can be a value-creating growth engine for the company and lead its decarbonization efforts. Thank you for your attention, and I will now hand it over to Bold.
Thank you, Jerome. Well, the good news is, copper and aluminum are essential for energy transition, so, looking forward to working with Jerome in the years to come. It's great to be here in Sydney as well, Alf. I don't really come very often, so I'm really enjoying the weather here in particular, compared to London. Look, we heard earlier from Vivek and Alf about the customer and the markets, and what this reinforces is that under all scenarios, copper is in high demand. So the challenge, you know, that excites me the most, actually, is how we're gonna fill that supply gap and where are we gonna get the volumes from. And it is absolutely essential and crucial in supporting the global energy transition.
Now, Rio Tinto is anticipated to account for 25% of the growth in global copper supply in the next five years. And some of you joined me in Mongolia in July, and my message remains the same: We are on track to deliver 1 million tonnes within the next five years, and 90% of that capital, thank you, Peter, is already spent. So those of you who went underground at OT will have seen that we have a rare Tier 1 asset on track to ramp up to 500,000 tonnes per annum with additional expansion options. Now, only four mines in the entire world have reached this size historically, with a further two expected over the next few years. And we are well positioned in the U.S. with our expansion pathways at Kennecott and the development of our Resolution Copper project.
We also have further options with Nuton, La Granja, and Nuton. So a lot of options. Now, last month, we have finalized our Nuevo Cobre joint venture with Codelco, and thank you, Dave. This is an early-stage exploration project, and we're very excited to be exploring it actively in Chile and partnering with Codelco, who we already work today on the technical side. Now, to get us to 1 million tonne, the good news is we're investing, and investing consistently to support capacity and sustainability of our major operating assets. Now, at Kennecott last month, we celebrated 120th anniversary, a year in which we successfully delivered the largest and most complex smelter rebuild in Kennecott's history. Now, 300 engineering and maintenance projects with 65 different contracting companies and more than 3,000 contractors.
Now, that's nearly double the size of our existing workforce in a period of two months. Now, our investment demonstrates Rio Tinto's confidence in the smelter as a long-term asset and is one which will deliver now and in the future through increased reliability and throughput. Now, you heard Arnaud talk about Safe Production System being a key enabler by achieving our best operator ambition. We successfully rolled out our Safe Production System at the Kennecott Concentrator. In fact, we are one of the first, bellwether flagship projects for SPS. SPS has been implemented at the smelter this year, which gives us confidence in a successful ramp-up and stable operations in 2024. We have made significant investment also in the underground and supporting infrastructure, with production due to commence in 2024.
There's a little bit of coming this year, but I'm not gonna tell you the number. It's a huge step for us because that, that project, that, that mine is, is gonna be transitioning in the future from an open cut to potentially an underground mine. Now, at Oyu Tolgoi, where 20,000 of my countrymen, Mongolians, work every day, I'm massively proud of the progress we're making. Phase 2 of the project is 92% complete, which includes the concentrate expansion, conveyor to surface, shaft 3 and 4, and our primary crusher, too. Now, these are crucial for the OT ramp-up and which remains ahead of schedule and since the commencement of the underground production in March of this year, with 83 drawbells blasted as of end of November. Now, I'll talk more about OT a little later.
At Escondida, looking ahead forward, we will be working with BHP, our joint venture partner, on some long-term decisions to decide capital investment requirements for the next decade. The biggest and most imminent decision relates to the concentrator strategy. We'll be looking at several pathways, including concentrator replacement, leaching, or an integrated solution. Discussions and decisions are set to happen in the next 24 months. Now, expanding on our ramp-up strategy at Oyu Tolgoi, and for some of you, this is an old slide. You can see that we are well on track to hit 500,000 tonnes per annum with our copper head grade increasing significantly to 1.24% in 2028, and I can't convey enough just how important this is.
Now, when fully ramped up, Oyu Tolgoi will be in the first quartile on the cost curve as production begins to drive a truly cost-competitive position. And also, Oyu Tolgoi will become cash flow positive in 2025. Now, you've heard me to say it before, but to put this into perspective, 2023 is arguably Oyu Tolgoi's first year as a truly integrated business between an open pit and underground. Now, this is the beginning of an exciting new chapter in Oyu Tolgoi's history, and we haven't stopped there, and we're looking ahead at the next phase of Oyu Tolgoi's development. Now, this includes portfolio of other growth projects, including oxide heap leaching, additional concentrator capacity, and renewables, now which are all currently under various stages of studies. So the future for us is hugely exciting. Now, as a business, we're well positioned to support the US energy transition.
If you look back to the '80s, the US produced copper from 87 mines, 16 smelters, 24 refineries. Even as late as 1995, domestically defined production delivered 90% of the US copper needs. Only 10% was imported. Today, with demand of 2 million tons growing to 4 million tons over the next decade, it is anticipated that 70% of that will be import-dependent. 70. Today at Kennecott, we have one of only two smelters that are operating in North America and is an important strategic asset to us and to the US as a whole. We have recently also approved $500 million to start underground mining, and we have future options to extend the mine life to 2032 and beyond, including the next potential pushback. We have options for new mines, like our Resolution project in Arizona.
Resolution is about rebuilding the copper triangle in Arizona. That's where most 70% of U.S. copper comes from today. In this clean energy triangle, we're seeing growing manufacturing industries for semiconductors, batteries, solar, and EVs. Actually, Resolution is a brownfield mine, arguably because it goes under the old Magma mine to cover a deeper deposit. We have even redeveloped some of the old shaft infrastructure. This is an area that has a long, long mining history, and in the 1980s, there were more than a dozen operating mines in that copper triangle, and today there are only two. So the tellurium we're producing, as Nigel has discussed earlier, is absolutely another great example of how we're leveraging our R&D capacity to innovate and unlock new supplies.
We're one of only two producers of this critical mineral used in the solar panels and other equipment in the United States, and it's actually being recovered from streams generated from our waste and tailings. Also, Nigel talked about Nuton. Now, this is our bioleaching technology venture, and I'm particularly excited about this technology. We're talking about extremely encouraging recovery rates, up to 85%, greatly exceeding the 25%-35% of traditional leaching methods on primary sulfide ore bodies. Nuton now presents very real opportunities to add copper volumes from low-grade primary sulfide ore bodies, from materials with complex mineralogy, and from recovery of mine waste, such as tailings. Now, partnerships are essential for Nuton's business model.
Since we began our outreach in 2022, the market response has been incredibly positive, and I'm proud to say this has resulted in an impressive 6 joint venture partnerships. A major differentiator is its potential to deliver game-changing ESG performance. Compared to conventional concentrating, smelting, and based on our comparative environmental benchmark study with the University of Technology here in Sydney, Nuton is projected to have a carbon intensity up to 60% lower than a global average of 5.2 tons per ton of copper. 60% lower reduction through that technology. This doesn't yet include opportunities for renewable energy that can further reduce emissions from Nuton. That's an incredible outcome. We also see Nuton as a cost-competitive solution with the capital intensity about 40% lower compared to the existing concentrator route and as well as lower operating costs.
Nuton isn't just about a new venture; it's a necessity. It presents an ambitious trifecta opportunity to unlock new sources of copper, enhance ESG credentials, as well as reduce cost per ton. Now, to conclude, let me summarize what I'm most excited about in 2024, and no surprise, it's about tons. It's about additional growth tons, and it comes from OT ramp-up, which is on track ahead of schedule. And secondly, we have to get better and improve stability and get our return on investment in the smelter at Kennecott. And then lastly, the commercial scale-up of Nuton. Now, thank you, and I will now hand it over to Simon Trott.
Thanks, Paul. That was great, and hello, everyone here and to those online. Actually, given our recent Pilbara tour, I did suggest to Jakob that I might watch this year's capital markets from the couch, but as you can see, I didn't win on that one. And in all honesty, it's great to be here today, and it was a pleasure to show many of you around the Pilbara earlier this year. The Pilbara is a very special part of the world, and I acknowledge traditional owners on the lands that we operate throughout Western Australia and recognize their deep and enduring connection to country.
Now, you heard from Jakob and Vivek a little bit earlier about some of the global forces, that define our strategic context: a maturing economy in China, the global energy transition, and of course, society's increasing ESG expectations. These trends are linked, but there's a tension that sits between them. People need the products that we produce. The energy transition, requires our commodities. However, society's perspectives towards mining and land disturbance are changing. Mining is needed, but it's not always wanted by all. Now, in my view, success in the resource industry requires us to navigate those tensions, and in the last 20 years, success for a bulk business like mine was about access to infrastructure. Our competitive advantage was, was built on, on building out that infrastructure faster than others.
As an example, Rio Tinto in the last decade has sold more iron ore than any of our competitors. Success in the next decade will also be determined by access to resources and access to markets, and this informs and, in fact, shapes our strategy. The work we've done, for example, at Rhodes Ridge, resetting relations with traditional owners, and connecting with communities wherever we operate, all support access to resources. Strategic joint venture relationships at Western Range, and Paul and Mark will talk in a moment, about Simandou support market access going forward. Turning back to the Pilbara, we're making good progress against that next tranche of mines to replenish and grow our production. So construction at Western Range is on track for first production, in early 2025.
The foundations are currently being poured for the primary crusher facilities in readiness for the arrival of structural steels. Hope Downs One and Brockman sustaining projects are in feasibility study with notice to proceed targeted in 2024 before Rhodes Ridge's development by the end of this decade. Now, as we saw in the Pilbara in October, Rhodes Ridge is a phenomenal ore body, 6.8 billion tons of mineral resources, averaging 61.6% FE, close to existing infrastructure. Its development will enable us to establish a scalable grade and cost advantage mining hub at a time when the market is increasingly looking for higher grades. We announced earlier, we've completed now the Rhodes Ridge order of magnitude study, and the pre-feasibility study will now follow and is due in 2025.
Development of Rhodes will require strong partnerships with Nyiyaparli and Ngarluma people to ensure that areas of high cultural significance are protected and preserved. Similar to the Western Range, we'll follow a co-design approach, which will enable us to consider the development options together. Turning now to production, and we've talked about momentum, and I'm really proud of the efforts the team has made. I'm always uneasy about safety, particularly at this time of the year, and we can never take safety for granted. Our focus remains on fatality prevention, particularly through our critical risk management system, which Kelly talked about earlier, and the work on mindsets and behaviors. Now, a few examples over the last 12 or 18 months. Our focus, we've been have materially improved our mine health.
We completed and then tied in 130 million tons of capacity, and we've taken Gudai-Darri to its nameplate capacity within 12 months of its commissioning. As a result of all of that, in 2023, we expect to land at the upper half of our original production guidance of 320 million tons -335 million tons, with a revised midpoint of 331 million tons. 2024 production guidance of 323-338 million tons, and then 345 million tons -360 million tons in the medium term. So let me focus for a moment on that medium term. If I take the midpoint of our revised guidance this year of 331 million tons, and look forward towards the end of the decade, say 2028, depletion from our existing mine base will be around 90 million tons.
We will then commission another, another 130 million tons of capacity. Now, not all of that will be utilized by 2028, so call it replacement of around 100 million tons of product. Pushing Goodard Darri to 50 million tons, and the full ramp up of the Rhodes Ridge provides another 10 million tons. Ongoing productivity and capacity enhancements from SPS. Now, that gets us deep into that range of 345-360 million tons. In 2023, we expect SP10 levels of around 50 million tons, and levels will remain elevated until replacement projects are delivered, which remain subject to approvals and heritage risks. In 2023, we're on track to deliver the 5 million ton uplift from SPS. As we talked about on the panel earlier, we're chasing another 5 million tons next year.
Now, Menno wanted me to delete this slide, but I kept it because I really like the way that that it shows how we're systematically using SBS to improve the nodes across our supply chain. And to use an example from last week at West Angelas , out in the field, the team were talking about a recent, recent improvement initiative utilizing SBS tools. Now, members of the team had come together to address rock breaking delays at the crusher, and they'd gone about that by changing blast designs to address issues in drill and blast conformance, adjusting digger operating training and rock breaking practices. And that improved the plant performance, and that team's now chasing 100,000 tons product capacity from those improvements per month. Turning to costs.
Our unit costs increased by $6/ton between 2020 and 2022. So $4/ton of that increase was driven by material price inflation, including a 150% increase in the price of diesel. $2/ton is attributable to the work drivers, including the work index. In 2023, we will be in the lower half of our unit cost guidance. Ongoing inflation has been offset by productivity and disciplined cost management. Exchange rates this year have also provided a tailwind. Improved system performance and productivity gains we're seeing allows us to provide the midterm cost guidance of around $20/ton. We have hard targets in place. Frugality drives innovation. The midterm target will take time to achieve, and we will not compromise on asset health or the health of our people.
In summary, over the last few years, I've made a number of commitments at Capital Markets Day, and it's pleasing to see our teams have delivered. There remains a lot of work ahead of us. Our vision is to be the most valued resource business in the industry, as defined by total cash flow and as viewed by our stakeholders. Now, this requires prioritizing safety and culture. It requires capital-efficient growth, such as at Rhodes Ridge, 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 Davies.
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 seven 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've 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 he's our construction crew. I kind of secure the commercial agreement. 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 of its kind on African soil. Now, we're talking about a high-caliber Tier one resource, the largest known untapped iron ore deposit of its kind. Its high-grade, low-impurity formation makes this as 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, while 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 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 honorable portfolio across four continents, with port side 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.
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. As Vivek mentioned, the value in use premium for a 67 FE product could be as high as $80 per ton at a $100 carbon price. Now, I'm told the highest FE grade you can ever achieve is 70%, so 67 is like, as somebody called it, a caviar of iron ore. Now, there are three dimensions that make up this massive undertaking. The WCS joint venture between the Republic of Guinea, Simfer, and WCS will own and operate the co-developed rail and port infrastructure.
Simfer, which is a joint venture between Rio Tinto and CIOH, led by our partner Chinalco, will develop Simandou Blocks III and IV, and WCS will be developing Blocks I and II. 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 steelmaker in the world, has joined forces with WCS in Blocks I and II, 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.
Yeah. Thanks very much, Bold. It's been a pleasure working with you on this one. So, sort of keeping his promises 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 three times this year, and it's absolutely impressive to see the progress that has occurred over that timescale. 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 co-developers to co-develop the rail and port infrastructure through a joint venture.
Simfer is responsible for building a rail spur to connect Blocks III and IV to the main line and for the second phase of the port at Morebaya , while WCS will connect the main line rail and the spur to Blocks I and II, and the first phase of the port. The Simfer mine is expected to ramp up to produce 60 million tons 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 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 70Km rail spur, capable of using cars with a 25-ton axle load, and includes the construction of five bridges and one tunnel.
The Simfer port facility will have the capacity to export 60 million tons per annum of ore, using transshipment vessels to carry the ore from the dock to an offshore mooring, where it will offload onto large ocean-going vessels. Meanwhile, WCS has the responsibility for constructing the approximately 550-kilometer main rail line and the spur connecting to Blocks I and II. They're also responsible for the first phase of the port, which has a capacity of 60 million tons 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 tons per annum due by 2028. I've got to say, you know, 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 rail route. 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 two 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. 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 headcount 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've developed our Culture by Design program, locally known as Wantanara, which means we are together. This is to provide a common sense of purpose and a way of working together for the entire Simfer team. 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. We have to recognize that Simandou is gonna 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 look 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 will have seen earlier in this year.
I'm now gonna hand over to Peter, who's gonna 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, 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. And 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 tons uplift from SBS next year. We've seen a solid rise in aluminum, up 9% year-on-year, driven by Kitimat and Boyne. 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. 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, at 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. We have a consistent R&D budget, which includes decarbonization studies of up to $400 million a year. Now, 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 three 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-$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 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 twelve-month moving average prices for iron ore, aluminum, and copper, starting from May 2010 and rebased to 2023 real terms. We've 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 onto 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 at 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%, 65% and 70% of our abatement to 2030. Due to the increased role of commercial partnerships and our expected timeline of fleet electrification rollout post-2030, we now anticipate the total capital spend on decarbonization to be lower than previously forecast, at $5-$6 billion to 2030, including $1.5 billion over the next three 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%-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%-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 two 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. With that, let me pass back to Jakob.
Yeah. 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 two 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 four 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.
Great. Thank you, Jakob, and thank you, everybody. We'll follow the usual schedule, so we'll take two in the room and then two online. It's about 7:30 A.M., I think, in London or 7:00 A.M., so people should have 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 you could. That's okay. So let's, Paul, you want to say in the back there? Paul McTaggart . Paul, Paul. Oh, sorry.
Paul.
Two Pauls.
This Paul, the better-looking Paul. Thank you. Older, but better looking. Enough of the comedy. So we talked about renewables being affordable now in terms of the pricing you can attract, but the problem, of course, is firming for the aluminum industry, and you mentioned that roughly, you know, you got 10% of East Coast electricity demand. Historically, that's 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?
Yeah. No, thank you. It's a super good question because, fundamentally for Australia, it's so important. You cannot have industry longer term because decarbonization is about electrifying society and therefore having a competitive and effective grid is crucial, and we can actually contribute to that. Why don't I ask you, Jérôme, to say a few words about that? You have an enormous amount of experience with renewables from your previous job.
Thanks. So I think your point is correct—your two points are correct. The first one is our smelters have a big role to play in providing a number of services to the network in New South Wales, in Queensland, in New Zealand. It's demand response. It can also be things like frequency regulation and other matters. There are places where we get paid for that. I would 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 or 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 team. Our smelters are working better and better on flexibility.
We can go down in production 20%-30% for 2-3 hours, depending on the smelter. So, so it means our smelter are not only a problem to the, to the system by because they draw 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 renewable grow in the system because that need for firming will get higher and higher. So, 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, with Jakob, with recently when we discussed Boyne, is once we have secured 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 get developed here in Australia. This storage can be either co-located 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 side, and that will be the primary source for self-firming. So again, 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, yeah? The other- Yes, Ken.
Yeah. Yeah, Paulie from Goldman Sachs. A couple of questions for Bold and Mark to begin with, just on Simandou. Actually, before I say, I just say thanks for the update on exploration 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 that detail there as well. Just to clarify, if FID is achieved and all regulatory approvals, et cetera, in the first half of 2024, just looking at the time frames, is first iron ore theoretically on boat late 2026, early 2027?
Well, we got a more ambitious plan for the first shipment in 2025, actually. Now, the ramp-up is gonna 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, you know, 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, you know, it's, it's 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 timeline, maybe in the first quarter.
But I think so that's kind of ±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, you know, 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 tons of ore that we sort of, as 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. You know, so that ramp-up from initial production to the 60 million tons is as we bring on, obviously, the WCS port, they've already started on, they're working on that.
That first 60 million tons will be where the initial shipments go out of, and then obviously we build the second 60 million tons that allows, yeah, capacity to ramp to 120 million tons for the system.
Maybe I should say, it's only four weeks ago, I was down there and went around with helicopter, seeing the mines, the harbor, the rail lines. It is an amazing progress 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.
Thanks. 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, you know, big gap in your other potential growth CapEx since sort of 2026, we're getting to that point where you can potentially roll the OT team onto 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, you know, and the approvals to actually get this project, you know, construction start?
Yeah, look, as you can see from our strategy, social license circles everything we do, and it's 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 four 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. One thing we say is that, in Australia, we talk about CRM.
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 the cultural heritage program, doing social surveys, 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 also think that we actually contributed more into protection of the Oak Flat area in the form of Apache Leap.
Oak Flat is a bit like, you know, think about the Central Park of New York, and the area that we're talking about, called the Oak Flat Campground, is like a parking lot of Central Park. So we contributed massive, big mountain valleys into protecting the total Oak Flat areas and two creeks to it. So I think there's a bit of a, you know, clarification that's probably required as we talk about that permitting process.
Let's go to the line for next question, please.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again.
We will now take the first question. And your first question, one moment please, comes from the line of Richard Hatch from Berenberg. Please go ahead.
Yeah, good morning, thanks very much for the presentation. I've just got a question on your lithium strategy. You haven't really talked about it today. You know, 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 act a bit more countercyclically, and perhaps go for some of these derated majors? Perhaps not in Australia, but elsewhere? Thanks.
Well, it's a good question, Richard, but do you know, first of all, I said in my introduction, we're 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. You know, a 600Km rail line is obviously gonna pose a lot of safety issues for local communities and people wandering around. I mean, what's your view on that? How are you sort of mitigating that risk? Thanks.
Yeah, Bold. You're absolutely right. It's not easy.
No, you're absolutely right, and I think Mark and I are actively engaging with WCS around safety standards. We actually seconded six of our health and safety trainers into the joint venture already. They've been working on it closely 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 you know, 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, 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.
That's right.
And has experience. And look, I would say, you know, 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.
Thank you. Your next question comes from the line of Lyndon Fagan, from J.P. Morgan. Please go ahead.
Thanks very much. 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 timeline.
Thanks.
Yeah, I mean, Bold, I mean, we can't really say that, but what, what we can say is that the whole road, the 650 Km of road that supports the construction is done, that, there has been cleared up for, for, for rail lines. But what, how would you say that? I mean, I have seen it visually as well.
No, look, I think the guess is anywhere between 20%-30%, some kind of. And the reason why I say there's such a wide range is of course there's a way we measure it, and then there's a way that obviously you know 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 you know well, as you know, 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 you know, Mark-
Yeah. No, look, Bold, I think probably the key point is actually, I think the big tunnels are the critical path for the WCS mainline, and I think they've made pretty. They've been working on that for a couple of years. A nd they've made pretty good progress. I, I wouldn't like to give an exact number because of the, the challenges in measuring, but they-
Yeah
... they were well developed on those main tunnels, which are the key tracks.
Yeah. And I think, Mark, the other thing we remember is that they've split the scope across nine packages.
Yeah.
Nine simultaneous packages of work by nine Chinese railway construction bureaus, all taking place at the same time. So it's not a sequential construction of a railway.
Great! 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 think, you know, 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, you know, the port wharf under the EIS, which is already underway, which been completed. It's been submitted to the regulators. So we are working within the EIS standards, absolutely.
Okay, come back to the room here. Glenn, and then Oakland. Yeah. So she keeps standing up for- I'm sorry. Yeah, don't sit down. Ease.
Hi, so Glyn Lawcock at Barrenjoey. Yeah, don't sit down, Bold. Look, I'm sorry to keep focusing on Simandou, but I guess it's the big announcement today. A couple of things. Firstly, it doesn't go unnoticed, I guess, $230 a ton of capital intensity. You know, we're talking 4x-5x times what you're spending in WA, and maybe one, probably a couple of times what you're spending on Rhodes Ridge. And I'm getting 11%-13% return, at some probably reasonable, decent iron ore prices. Just, you know, I don't want to put the cart in front of the horse, but, you know, you're only getting 27 million tons for all the money you're spending.
You know, 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's 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 a lot said.
That's three already.
But let me start off, because you actually said a few triggering words that was very helpful. I happen to have spent 20 years of my career in Shell. So, you referred 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 wealth was built around daring to take those greenfield investment decisions. Now, we're not talking about what is the price, what prices assumptions do we have. So the only thing we are doing with the IRR is we are taking an external benchmark and going for it.
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're quite convinced that this, 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.
Yeah, 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've looked at it because I had to go through intense IC approval processes, and actually they're very competitive Brazilian greenfields with full rail and port-integrated options. Most of the, of course, Pilbara brownfields are about just the mine replacement, so they come in obviously at a very, you know, different capital intensity.
Now, I think looking forward, you know, 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 a decision. And then the other part that's, you know, 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 and Midrex's 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's indeed a premium, it kind of becomes a very attractive rates of return.
At the moment, we're quite taking a conservative view around the premium end, and obviously, that we're using long-term Wood Mackenzie kind of prices for iron ore.
Yeah. Sorry, I just, I guess maybe I just ask my question a little bit clearer. Beyond the current 60 of transshipping, can you do more than that to, to Australia? We can get the LNG type returns on stage 2 and stage 3, or is 60 through transshipping the, the upper limit, and then you're going to spend more capital on a full port?
Yeah, look, I think, you know, 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 sea port 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 it's gonna 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?
Yeah, Lachlan Shaw, UBS. So two from 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-
Yeah, Mark.
Yeah. I think the rate of ramp-up is driven by how fast we bring the infrastructure on. You know, and so we're actually gonna start shipping from the mine using temporary crushing facilities and temporary loading facilities while 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.
Yeah.
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 it, we're putting a lot of iron ore stockpile to the side. The rail, I think, is reasonable shape. It's the first 60 million ton, and then the next 60 million ton. So that next 60 million ton is that schedule, kind of what you're referring to in that 42-month.
Okay, great. Thank you. Then changing gear to aluminum. So just on the outlook, 45 million tons 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?
Yeah, look, you can only be impressed with what China is achieving on building renewable energy right now. Last year, they did 125 GW. This year, they have already done 160 GW in the first 10 months. They'll probably reach 200 GW this year. It's mightily impressive. But a couple of things. There is a long way till 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 wanna do is to have much more of the most energy-intensive industry on the planet.
So I actually think they're quite serious about the ban, and that's the indications we're getting from industry players in China. Plus, you actually need two 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.
A follow-up, Lachlan, or that's it?
No.
You're done? Great. Two more from the line, please. Yeah. Efficient. Thanks, Lachlan.
Thank you once again. As a reminder, if you'd like to ask a question, please press star one and one on your telephone. We will now take your next question, and the question comes from... One moment, please. The line of Alain Gabriel from Morgan Stanley, please go ahead.
Yes, sir. Thank you. Hi. Hi, everyone. I just have one question from my side. Given your clear commitment to develop Simandou over the next three years, with the bulk of your spending occurring in 2024 and 2025, 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 two years? Thank you.
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 are—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 wanna 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 three years I've been in the seat, suddenly having projects that are ahead of schedule and below budget, et cetera. And we were struggling a little bit on that early on.
So I feel quite good about the program t hat we all and Peter have expressed today. But I would say there's not a lot more we can do or. Well, I think we can, but Mark is telling me that we can't.
Alan, the one thing I'd add is that spend is spread across 2024, 2025, and 2026.
Thank you. That's all done.
Great. Next question, please. Online.
Thank you. We will now take the next question. Your next question comes from the line of Myles Allsop from UBS. Please go ahead.
Great. Thank you very much. Just a couple of questions, one on Simandou and one on the copper assets. But with Nuton and Oyu Tolgoi, yeah, Bold Baatar saying that you are 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, 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? Thank you.
So I'll let Mark ask and answer the question on the 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 gonna look like. All I can say is that all of those options are less capital intensive. They would be, especially in the case of OT, brownfield-like expansion options. And when talking about, you know, 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, you know, we have to finish this ball mill, but, this we're not ore body bound, so to speak, because I think if we can get that concentrator expansion, it will 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. So just no, no fertilizer business. But Nuton, is an interesting one because this year we have, commercial scale-up opportunities with two. And, look, if the, if the scale-up is, is, is successful, you know, we're going to have ability to market those tonnes. And but at the moment, we have to still go through a proof, of at the commercial scale. Mark, do you wanna-
Yeah. And look, I'd say that there is no one contingency number that makes sense in the context of Simandou, because probably I think between 70%-80% of our spend is actually either under fixed price contracts or is already a tendered price. You know, so, you know, there's obviously the fixed price contracts, the risk sits with our counterparty, and they are 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.
Thank you. Back to the room. Anybody? Ben.
Thanks. Kaan Peker from RBC. Maybe just building on Glenn's question. With rail capacity at 160 million tons, you know, being able to push the bottleneck to the most capital-intensive part of that value chain, would that not mean, you know, transshipping would be the limit? So the question is: What is the actual limit of transshipping, 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 are using barges, we're using transshipment vessels that are both going both ways and also self-offloading at 40,000 tonnes. I think we have, you know, started securing those contracts in terms of construction and build. So it's just a lot of traffic in that river.
The reason we went to transshipment vessels was because actually, if everyone went to barges, you couldn't get to 120.
Right.
You have to do transshipment to get to the 120.
Don't forget, the rail line is multi-users, so you cannot just say, "We're going all in on iron ore here." We will have to figure out what other users there will be in the country.
Yeah, but I think I just want, you know, correction. I just want to make Jakob, which is under our investment convention, we do have an obligation to study a deep seawater port, but it has to be economical. And, you know, that we have to find the right location, do a proper study, environmental assessment, so that work is still ahead of us.
Sure. Thank you. And the second one for Dave. I mean, recently... Well, over the last couple of years, there's been focus on brine with lithium. Recently, there's been some JVs or farming JVs in Canadian spodumene. I mean, what's changed with the thinking and, why Canada?
Yeah, 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 at about 25%. We're ready to drill on Canadian lithium projects. Once daylight reappears and we can use our 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 outcrop 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, we're not in it for the long haul, we're in it for we've got to deliver now. So, that's, that's the general play at the moment. Does that answer your question?
Yeah. Thanks.
The next one from the line, please, just to go through that.
Thank you. Your next question comes from the line of Amos Fletcher from Barclays. Please go ahead.
Yeah, good afternoon, everybody. Thanks for the opportunity. Question for Peter. You showed quite a big growth capital allocation of around $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? Thank you.
Simon is nodding. So probably no, not on the guidance on cost. We'll be doing that with our results in February.
Yeah.
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.
No follow-up? No. No. Austin, please.
Yeah, thank you. Austin from Macquarie. The first question is on the portfolio thinking. Like, it's interesting to learn that the exploration team has been really busy looking at 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? Thank you.
Yeah, 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 of if we take in one or two commodities more. I mean, you could say at some stage we might produce more things like tellurium and scandium, but quite frankly, it's you know, it's just an addition to existing plants that 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, you know, 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.
Mm.
That's, that's how I would answer that, and I'm only looking for the best options.
Mm.
It's not just any option. It's a very tight portfolio, multiple options for Jakob and Peter to decide if they wish to invest or not.
You know, 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?
Well, yeah.
Thank you. Second question on Simandou. The tax settings, like I can see that in the first eight years, you have a concession on the corporate tax at a 15%. Just try to understand if there are any conditions attached to that or also any options to extend that kind of a lower tax rate?
Yeah, unfortunately, no. Because these are investment conventions that have been signed a number of years ago, and I must say that I was very pleased with the Guinean government around holding to that commitment that, you know, had been ratified by the previous parliament. So, those conventions give us exactly that fiscal stability in the regime, so we're quite pleased with the existing fiscal framework that's been achieved.
One last question in the room. Lachlan? Yeah.
Thanks for taking my question. So just, to round out on Simandou.
That's right.
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?
Yeah, now, 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 transshipment vessels, 'cause they have a sealed hold. Yeah, we're also looking at the way we crush to make sure that we actually manage those moisture limits. So yeah, 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.
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