Good morning and good evening from Sydney. I would like to acknowledge the Gadigal people of Eora Nation as the traditional custodians and pay my respect to elders past, present, and emergent. I extend that respect to all Aboriginal and Torres Strait Islander people. When I presented my first result as Chief Executive last February, I set out four key objectives to make Rio Tinto an even stronger company. To become the best operator, to strive for impeccable ESG credentials, to excel in development, and to strengthen our social license. This is what we have done, and I'm proud to say that we have made progress against each objective. In October, we launched a new strategy, including more ambitious climate change targets.
We also set out how Rio will grow in commodities that facilitate and benefit from the energy transition, decarbonize our assets and value chain, and maintain our tight capital allocation, enabling us to pay attractive dividends. Achieving our objectives and delivering the strategy are entirely aligned. We all focused on execution, but as I've stated previously, it is a multi-year journey. However, even after 12 months, and only four months after our capital markets day, there's tangible progress. Today's results highlights the underlying strengths of our business. We achieved a third consecutive year of zero fatalities, which we have never achieved before. We realize this record disappears the moment we let down our guard. Having our people return home safely each day remains our first priority, and we continue to focus on this.
I'd like to take this opportunity to sincerely thank our people for their commitment, resilience, and sacrifice during another COVID-constrained year. They've done a superb job. I'm very proud. Turning to our financials, our results were very strong. They demonstrate both the quality of our assets and the strengths of our business model. We are firing on all cylinders in terms of our financial performance. Each of our four product groups were highly profitable, achieved significant EBITDA growth, and double-digit return on capital employed, and delivered strong free cash flow. Our iron ore business continues to be the primary contributor, but we also benefited from an increased contribution from the other three product groups. Not least aluminum that recorded 20% return on capital employed in the second half of 2021, up from just 3% during 2020.
In aggregate, we achieved the strongest financials in our history with EBITDA of $38 billion and net earnings of $21 billion. A highlight for me comes when you compare today's results with our performance during a similar period of strong demand and high commodity prices a decade ago. In 2021, we converted a far higher proportion of strong commodity prices into earnings, and subsequently, because of our strict capital allocation, we converted the earnings into far higher free cash flow. This enabled us to declare record dividends of $16.8 billion, a 79% payout ratio. This performance reflects our tight cost control, disciplined capital allocation, and the fact that our balance sheet is the strongest it has been for at least 15 years. In the past year, we have made important and significant shifts in how we engage, how we see ourself, and what really matters to us.
We have become more humble and better listener, both internally and externally, as we extract the full learnings from Juukan Gorge, developing relationships which goes beyond just agreements and that can deliver mutual prosperity. What Bold and the team achieved in Mongolia is a perfect example of what can be mutually achieved. Combining our operating and development know-how with genuine relationships unlocks valuable opportunities. Looking ahead, we see a positive outlook for all our commodities. This is driven by the global energy transition, which is creating new demands for our products and near-term Chinese policies that are becoming more growth focused. While the current global macroeconomic environment is strong, there are significant geopolitical and economic uncertainties, for example, surrounding Ukraine. Rio Tinto has demonstrated that we are able to continue to perform in uncertain times due to our very robust assets.
That is why we remain highly competitive when demand and prices are low, and benefit in full in periods of tight supply and demand balances. When I became CEO, I also committed to improve our culture. This goes well beyond operational safety. It's about how we care for our people, how we become less hierarchical and more humane organization, and how we unleash the potential of each individual. We're not wasting time, and we have introduced measures and frameworks to strengthen the business and empower our people. We have rolled out our new values of care, courage, and curiosity, and we are investing in our people. Through the Rio Tinto Safe Production System, we will empower our people to achieve consistent operational excellence and unlock real and sustainable improvements. In March last year, we commissioned Liz Broderick to conduct a thorough review of our culture.
The findings of her comprehensive report are very disturbing and confronting. In order to improve, we had to identify the extent of our problems. We will implement the report's recommendation in full, building on the changes already put in place to make Rio a safer, more inclusive, and more respectful place to work. At the heart of all our efforts, from changing our culture to operational excellence, is trusting and respecting our employees, becoming less hierarchical, and empowering our people. To make a real difference across the business, we are driving outcomes, not just setting targets. This applies across all four objectives. However, let me now hand over to Peter, who will examine our strong set of financials in detail. Peter, please.
Thank you, Jakob. Good morning and good evening, everyone. Let's start by taking a look at the numbers. We've announced a record set of results following strong global demand for all our major commodities. The 42% increase in revenue was driven by price, in particular iron ore. Aluminum and copper were also significant contributors. Importantly, we maintained our financial discipline throughout 2021, achieving underlying EBITDA of $37.7 billion, an operating cash flow of $25.3 billion after record taxes and royalties of $13 billion. Free cash flow of $17.7 billion was after $7.4 billion of capital expenditure and a $1.1 billion temporary working capital outflow, reflecting increased China portside trading inventories and supply chain disruptions. Underlying earnings rose to $21.4 billion, which lifted our return on capital to 44%.
This enabled us to declare total dividends of $16.8 billion for the full year. Net earnings was also a record, although we did have some exceptional items, notably the $500 million increase in the closure provision for ERA, where we have taken the midpoint of ERA's guidance, recognizing 100% of the increase. Let's now take a look at our key markets. Iron ore prices rose to record highs, with China importing well above 1 billion tons and consumption in the rest of the world largely recovering to pre-COVID levels. The steel intensity of the recovery lifted global crude steel production by almost 100 million tons to a record of almost 2 billion tons. Global scrap generation also improved, but high-cost iron ore supply was required to balance the market. This did taper off in the second half as prices declined.
Aluminum and copper prices rallied to multi-year highs on firm recovery in global demand and supply challenges. Looking forward, we're encouraged to see continued momentum in our markets, but also fully alert to potential disruption from new COVID variants and geopolitical tensions. Let's now take a closer look at the drivers. Unsurprisingly, commodity prices were by far the biggest movement, boosting EBITDA by $17.5 billion in aggregate. In past cycles, higher prices have given rise to significantly higher costs, often wiping out up to a third of the price gains and resulting in painful adjustments later on. This year, the cost variance was more modest, reflecting our intense focus on cost control throughout the cycle with $1.1 billion impact, mainly due to fixed cost inefficiencies from lower volumes. This meant that we converted most of the price benefit into higher EBITDA.
Our cash conversion was also strong, with record operating and free cash flow and continued focus on capital discipline, which has not always been the case in previous cycles. However, we are not satisfied with our operational performance and recognize that it will take time to turn it around, a multiyear journey, in fact. Let's look at each division, starting with iron ore. The team did a great job keeping the assets running and delivered record underlying EBITDA of $28 billion and a 76% margin. In the first half, we experienced challenging operating conditions from prolonged wet weather, heritage management, and tying in 90 million tons replacement new mines, as well as bringing on Gudai-Darri.
Our production performance certainly improved in the second half, but tie-ins were delayed due to labor shortages and COVID restrictions. These were compounded by a high amount of project rework as we were unable to carry out quality assurance at steel and equipment manufacturers. Overall, this led to a 3% reduction in shipments. Inventory levels at China port side increased with higher volumes of lower quality SP10 and constrained availability of high grade blending stocks. These are now being drawn down in line with market demand. Our unit cash costs in 2021 at $18.60 per ton were marginally above guidance, with higher input prices for contractors, explosives, and energy. The work index also increased with vital improvements in cultural heritage protection, leading to a redesign of our blasting practices and longer haul distances to protect heritage sites.
There are three key drivers of unit costs in 2022. The most significant is a full year impact of higher input prices, which increased significantly in the second half of 2021. The second is around making the necessary investment in asset reliability with increased maintenance on our processing plants. We're also targeting further investment in our heritage and environment teams and continuing to invest at an increased level in studies for the next set of mines. These are conscious decisions which will strengthen us for the future. The third driver is further increases in the work index, driven by a rise in waste movement and longer haul cycles. Now we expect to partly offset this through efficiency gains with about 80% of our haul truck fleet now fully autonomous.
Overall, around half of the increase to $19.50-$21 per ton is driven by market factors and the remainder by the work index and longer term investment to improve our operating performance. Overall, let's not lose sight of the fact that we achieved very strong financials with operating cash flow of $19 billion and free cash flow of $15 billion. Let's now take a further look at 2022. We expect the first half to remain challenging with first production from Gudai-Darri in the second quarter and the ongoing ramp up of the replacement mines. We have experienced some quality issues at the Mesa A wet plant and rectification work is underway, but until this is complete, we will continue to be constrained in the Robe River system. As a result, we expect to see elevated quantities of SP10 until mid-year.
In the second half, pressure on the system will ease with Gudai-Darri ramping up and replacement mines fully operational. We then expect SP10 to gradually decrease. We are advancing the studies that will enable us to operate within our medium-term capacity guidance of 345-360 million tons a year and also making progress with the modernization of agreements with traditional owner partners. Just last week, we agreed a new social cultural heritage plan with the Yinhawangka people. This enables us to progress the approvals process for Western Range, one of the key replacement mines in the 2025-2026 period. Moving on to aluminum, where we had our best financial performance ever, benefiting from the stronger pricing environment and higher premiums for primary metal to deliver EBITDA of $4.4 billion.
This flowed through to both operating and free cash flow, which at $2.3 billion was more than two and a half times the 2020 level, with all four Pacific aluminum smelters making a robust contribution. Aluminum production was only 1% lower despite Kitimat operating at 25% of capacity following the strike which commenced in July. While agreement was reached in October, it will take time to clean and repair the potlines, with a gradual restart late in the second quarter of 2022 and full capacity reached in December. Our underlying EBITDA margin was 38% for the full year, with return on capital employed hitting 20% in the second half of the year. Overall, ROCE averaged 16% for the year, up from just 3% in 2020.
We are set to benefit further from price momentum this year, with aluminum close to an all-time high, 12% higher than in the second half of 2021. This underlines why we believe this is the premier global integrated aluminum business. We continue to work on finding solutions to reduce our carbon footprint. The advanced inert anode technology will be an important contributor. We made significant progress in 2021 with first aluminum produced at the R&D center in Quebec and construction of larger commercial scale prototype cells underway at our Alma smelter. On to copper. At $4 billion, underlying EBITDA was up 90%. The stronger market environment was the key driver by $2.2 billion.
We also benefited from higher sales volumes of refined metal at Kennecott and temporarily higher gold grades at Oyu Tolgoi. These compensated for lower volumes at Escondida, where ongoing measures in response to COVID-19 continued to impact workforce availability. Our C1 unit costs at $0.82 per pound were down 26%, which was mainly volume related, in particular, the higher gold grades at Oyu Tolgoi, which is set to reverse in 2022. Free cash flow was positive at $1.3 billion after paying $400 million to the Mongolian tax authority in relation to disputed items from 2013 to 2018, and $1.3 billion of investment, mainly in the Oyu Tolgoi underground. Turning to minerals, an important addition to the business was the $825 million acquisition of the Rincon Lithium Project in Argentina last December.
It is set to be a long life, low cost asset which will shape our battery materials portfolio. We're targeting completion in the first half. Demand conditions were strong across all sectors, but we did have some operational challenges. Titanium dioxide was 9% lower, with community disruptions followed by curtailment of operations at RBM in South Africa for around three months, coupled with an extended ramp-up period, as well as unplanned maintenance at RTFT in Canada. At IOC, labor and equipment reliability issues impacted production, but a 68% increase in pellet prices boosted the financials. Our QMM operations in Madagascar tend to continue to perform well, with production up by nearly 30% and decarbonization progressing to plan. Boron's performance also improved following some major planned maintenance.
Diamond production rose in line with our 100% ownership of Diavik, and we also benefited from a sharp recovery in prices. Overall, EBITDA of $2.6 billion was up 52%, while operating cash flow increased to $1.4 billion and free cash flow to $0.8 billion. You have seen our capital allocation slide many times before, and our disciplined approach is unchanged. We will also apply the same rigor to our decarbonization projects. These deliver a range of economic outcomes, but in aggregate are value accretive at a very modest carbon price. Moving on to our capital forecast. This is consistent with our October seminar. We still expect a disciplined increase in our capital expenditure over the coming years.
In 2022, it will be around $8 billion and between $9 billion and $10 billion in 2023 and 2024, which includes the ambition to invest up to $3 billion in growth each year. It is highly dependent on opportunities being available. It's not a commitment or predetermined budget. If we cannot develop or find value accretive options, we will simply not spend the money, but we'll follow our well-established capital allocation framework. The recent news at Jadar does mean we're more likely to be at the lower end of the range in 2023. The best estimate of investment to decarbonize the business stands at $7.5 billion until 2030, which includes about $1.5 billion over the next three years.
Sustaining capital at $3.5 billion a year includes $1.5 billion for Pilbara Iron Ore, subject to ongoing inflationary pressure. Replacement capital is also unchanged at $2 billion-$3 billion a year. We are seeing some increases in the Pilbara projects of up to 15%, but this is mainly due to longer time frames and remains within the boundaries of our overall guidance. Lastly, it's just worth reiterating that any M&A such as Rincon is in addition to this. At our seminar, we disclosed our plans for decarbonizing the business with a trebling of the target by 2030. We believe this will safeguard the integrity of our assets over the longer term, reduce the risk profile of our cash flows, and therefore protect our cost of capital.
Our focus over the next three years is on repowering the Pilbara, where we currently spend about $150 million on gas each year. We're now focused on expanding our tenure for wind and solar sites for the installation of 1 GW of renewables. We believe this could replace up to 80% of the cost and support the diesel transition. It will abate about 1 million tons of CO2, one-third of our carbon emissions from the Pilbara. Reaching a 15% reduction by 2025 is not going to be easy. It will require a lot of planning and rapid execution. The full electrification of our Pilbara system, set to commence later this decade, including trucks and rail, will require further gigawatt-scale renewables combined with advances in fleet technologies.
Across the group, we are looking at multiple opportunities to decarbonize the business, and we've included some of these as appendices. One such example is at our Queensland alumina refinery, where the installation of heat recovery equipment could reduce the steam required for heating by up to 50% and eliminate 115,000 tons of CO2 emissions per year by 2024. Let's now have a look at the balance sheet. Net debt turned into net cash of $1.6 billion at the end of December. Let's not forget that this is just one point in time. Today, we have made a $7.7 billion dividend commitment, which we'll pay in April, moving us back into net debt territory.
We also have a AUD 1 billion Australian tax payment in June with respect to 2021, and $825 million for Rincon. This financial strength allows us to reinvest for growth, accelerate our own decarbonization, and continue to pay attractive dividends in line with our policy. Finally, onto shareholder returns. Our policy is tried and tested and has resulted in record returns. Over the last six years, we have consistently exceeded the 40%-60% range with an average payout ratio of 74%. Going forward, we've indicated our ambition of investing more in growth, but you should not expect us to hoard cash. We will continue to return any excess as we have in the past.
The record earnings and cash flows in 2021 and continued strength of our balance sheet mean we have declared our highest ever full- year dividend of $16.8 billion. This includes the final ordinary of $6.7 billion and final special of $1 billion, and brings the payout ratio to 79%. With that, let me pass back to Jakob.
Thank you, Peter. I'm convinced that the four objectives I set a year ago are the right ones. We have made tangible progress on each one on the back of a significant volume of work. In October, we launched a new strategy aligned with these objectives. This set out a long-term approach to make Rio Tinto a stronger and more relevant company for society and to secure future shareholder returns. We put in place the right structures and frameworks, creating an organization that is people-centric. We have established centers of excellence in communities and social performance, and in energy efficiency and development, to name a few. In some areas, it will take time to make a lasting difference, but we have already achieved notable successes. The start of the underground mining at Oyu Tolgoi and the acquisition of Rincon are two standout examples.
They're both driving our strategy implementation, are aligned with our objectives, and will benefit our shareholders for decades to come. We have also addressed how we engage with stakeholders. We had become too transactional, relying too much on agreements at the expense of developing proper, mutually beneficial relationships. I'm determined that Rio becomes a more inclusive and diverse place to work, where people live our values, feel empowered to challenge decisions, and speak up freely if something doesn't feel right. There's a lot of work underway, including making our camps and villages safer. It also means increasing diversity, including gender diversity and lifting Indigenous representation. We are investing $50 million to retain, attract, and grow Indigenous professionals and leaders in our Australian business. We are already seeing real improvements in this area.
We are also strengthening our communities and social performance work, taking a different approach to how we engage and operate. We have made progress in resetting relationships and agreements with traditional owners, including the Budjiti, Gurama, and Binigura people. We are proud to have agreed on our first co-designed social, cultural, and heritage management plan in the Pilbara. This is with the Yinhawangka Aboriginal Corporation, and enable us to move forward with the Western Range project in a way that reflects the views and wishes of the traditional owners of the land. To reinforce and embed this approach, we are rolling out enhanced cultural awareness training for all employees. This will promote better, more informed decisions while improving relationships and outcomes for traditional owners, indigenous communities, and employees. To support and guide our work, we have established an Australian advisory group.
It will have a key role in being a sounding board for Rio Tinto on policies and positions that are important to our Australian business. Turning to our operational performance, the safety, health, and well-being of our people remains our number one priority. I'm proud of our performance in this area. We work hard at this every day and are becoming more sophisticated in monitoring, evaluating, and addressing risks. While being the best operator is in our DNA, we won't restore that instantly. It's a multi-year journey. However, through the Rio Tinto Safe Production System, we will safely unlock real and sustainable improvements. Let me stress, this is not about stripping out costs. It's about sustainably unlocking capacity and improving operational stability. It is operator-led, targeting bottlenecks and inefficiencies.
We are focused on having our leaders understand it's important to empower their frontline, and for the frontline to recognize that they can now make their job safer, simpler, faster, cheaper, smarter, better. It's a galvanizing program that will deliver tangible benefits, and we are pursuing it with rigor. The results we are seeing from the initial pilot site after only half a year's deployment confirmed the potential of this initiative. For example, Kennecott's concentrator asset utilization ratio improved 3.5% compared to the previous 12 months. At West Angelas, drilling utilization rates improved by 12%, equivalent to 1,000 additional meters per day. We will look to replicate best practice and significantly ramp up the Rio Tinto Safe Production System rollout in 2022. The world will have to massively transform to combat climate change and undertake an unprecedented energy transition.
Mining is bound to play a vital role. I attended COP26 in Glasgow last year to engage with governments and other partners on the critical role we are playing. We must start by addressing our own footprint. Rio Tinto is among the biggest electricity users in the Western world. We also have significant land holdings. This provides a great opportunity, but also comes with responsibility and an obligation. If we do it well, we can make a real difference. This will also lead to new business opportunities. Our new climate targets are underpinned by an intention to invest $7.5 billion. We will be disciplined, and these investments will, in aggregate, be value accretive at modest carbon prices. They will also safeguard the long-term cash flow of our assets and help us maintain an attractive cost of capital.
We are mobilizing the organization, identifying various opportunities to decarbonize our assets, and invest in renewable power. For example, we are developing engineering plans for 1 GW of Pilbara renewables, and we are working with suppliers and technology providers on ways to convert from diesel-powered trucks and trains to battery-powered fleets. With various partners, we are working on a number of potential technologies to decarbonize our value chains. Our ELYSIS joint venture with Alcoa, supported by Apple and the governments of Canada and Quebec, is the most advanced. Last year, we produced aluminum with zero direct carbon emission at fairly large scale. At our Alma smelter in Quebec, we are now scaling up to full commercial size cells in 2023, and commercialization of this groundbreaking technology remains on track from 2024.
This is even more exciting when you consider the prospect of combining ELYSIS with renewable power like we have in Canada, Iceland, New Zealand, and Tasmania. At the same time, we are exploring a number of pathways to produce green steel, exploring green hydrogen-based DRI in Canada and in Australia, and developing partnerships with BlueScope, Baowu, Nippon Steel, and POSCO as we look to decarbonize the entire value chain. These type of partnerships are key to cracking the code on emissions. We also need allies in government and industry association to join us in making the energy transition happen. It isn't just about decarbonizing our business and value chains. There's also a huge opportunity for Rio Tinto. All the materials we produce are fundamental for today, even more so for the energy transition and beyond, including iron ore. We are well-placed to grow in order to meet this demand.
In the past year, we have made progress on various options at different stages of development. We have the ambition to double our growth capital to $3 billion a year from 2023 onwards as we develop new options. We are also looking at ways to bring projects on faster, always with a focus on value and capital discipline. This starts with exploration, where Rio Tinto has consistently been a leader. We have a strong portfolio of exploration projects with activity in 18 countries across seven commodities. We also have an attractive pipeline of other projects at various stages. We will ramp up production from Gudai-Darri this half and are advancing other Pilbara projects, such as Western Range. We're progressing Simandou, Resolution, and Winu, to name a few. Jadar is an amazing project, which we believe in, but you will all have seen the challenges we are facing.
We are disappointed by this development. We are exploring all options and remain willing to meaningfully engage with all stakeholders. Finally, we demonstrated our willingness to grow through acquisitions, something Rio have not done for a decade. The addition of the Rincon project in Argentina brings growth in a commodity essential to the energy transition and with a very attractive outlook. We will continue to look for additional opportunities, but we'll only pursue ones that create value. We will not chase volume or commodities where there isn't value or asset that don't fit our portfolio. Without doubt, the most significant development in terms of growth was resetting the relationship with the government of Mongolia and Turquoise Hill. One of the highlights of my career was to stand side by side with the Prime Minister of Mongolia as we commenced underground mining.
It was the culmination of years of hard work and dedication to develop such a complex greenfield project. I would like to thank the Prime Minister for his commitment to reaching this agreement, which also has the support of the Mongolian Parliament . It demonstrates to the world the attractiveness of Mongolia as an investment destination. Together, we have now unlocked the most valuable and complex part of the mine, with first sustainable production expected in the first half of 2023. At peak production, Oyu Tolgoi is expected to operate in the first quartile of the cost curve and produce around 500,000 tons of copper per year from 2028 onwards. This additional copper will come on stream at a time when copper demand is expected to be robust. Let me summarize.
In 2021, we set out four key objectives to make Rio Tinto an even stronger company. We also set a clear strategy for the company to grow, decarbonize, and maintain our strict capital allocation in order to pay attractive dividends. We have made progress on a number of fronts and demonstrated how we are changing and strengthening Rio Tinto. We did this while achieving strong financial results across all our product groups, and we had our third fatality-free year in a row. Our culture is evolving and improving, but we must work even harder to strengthen relationships in a respectful way, both internally and externally. We clearly have more to do, and we will continue to work hard throughout 2022 and beyond. Crucially, our underlying business is strong, and we have a clear strategy to make Rio Tinto even stronger for the long term. Thank you. We will now move to questions. Operator, please, open the lines.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. Please limit yourself to one question and one follow-up only. Once your name is announced, please go ahead and ask your question. If you are asking a question and also watching online, please remember to mute the webcast. To withdraw your question, press the pound hash key. Your first question today comes from the line of Paul Young from Goldman Sachs. Please go ahead. Your line is open.
Thank you. Evening, Jakob. Morning, Peter and Menno. Can't fault the financials, gents. I have a question on growth, in particular, Jakob, on OT. No project at the moment in your portfolio seems, you know, that easy to execute in advance at the moment. Fantastic to see the government approvals at OT. Jakob, the question is that it on the negotiations? I.e., is the investment agreement now rock solid with the government?
We feel very comfortable. We feel that it is an agreement, a wide agreement with the Parliament in Mongolia. There's a couple of remaining issues to be solved. There's a tax dispute, but you have tax disputes from time to time. I'm absolutely convinced that with the resetting of the partnership, the relationship in Mongolia, that we will be able to also solve issues in the future in a very constructive manner. So yes, I think it was a very important moment to overcome. Thanks for the question.
Thank you. Your next question comes from the line of Jason Fairclough, Bank of America. Please go ahead. Your line is open.
Yep. Good morning, gentlemen. Thanks very much for the presentation. Just to carry on with the growth theme, I mean, grow is the first word on the title of your presentation deck, and you spoke a lot about it today. A couple of fairly simple philosophical questions. First, you're a $130 billion company. Can you actually grow and have it make a difference and having it create value? Second, do you think that your efforts to deliver growth over the last few years have been successful and ultimately had a positive impact on Rio Tinto?
Well, thank you, Jason. It is very clear, given the size of our company and given the markets we are facing, Rio Tinto in aggregate will never be a high-growth company. But we haven't grown for quite a while, and we can see that we can move the company towards modest growth within a strict capital allocation framework. We did not grow last year. If you look at the guidance for this year, we have included modest growth, but that's from our existing business. What I've talked about, number three of my four objectives about excellent development, is really about building the portfolio to the next decade and the decade beyond. That's what we are doing when we unlock Oyu Tolgoi, and that's what we're doing when we are going in and buying Rincon.
We don't wanna go out and spend a lot of money at probably the high end of the cycle, and therefore, I thought it was quite intelligent to go in and buy a project that is you can buy at a modest price and then develop the project. We do want to excel in development, but we don't wanna lose the strict capital allocation. I think you're absolutely right in making the point we're never gonna be a high-growth company. If we can have a modest stable growth going forward, that will make immense sense. We have the competencies in Rio Tinto to be the right owner of a number of assets that we don't have today. That's how we are developing our future. Thank you.
Thank you. Your next question comes from the line of Hayden Bairstow from Macquarie. Please go ahead. Your line is open.
Good evening, Jakob. Just a question on the CapEx outlook. I mean, obviously, you've upgraded cost guidance in the Pilbara, but just interested in your view on your ability to actually spend the money. I mean, obviously markets are fairly tight and labor is still tight. You know, is there risk of some slippage in that number, particularly for this year, I guess, but just to line all these projects up and get everything spent that you need to?
Yes. No, it's a very good point. Peter, why don't you underpin a little bit, because there's fundamentally no changes since the capital markets update in October, but you always have a few things that goes a bit slower and certain things we accelerate. Maybe you wanna flesh it out, Peter.
No, thanks very much, Jakob, and thanks for the question, Hayden. I think for the capital guidance this year, we're very comfortable. Clearly, you know, we are still finishing off the tail of the replacement projects that we bought in in the Pilbara, the 90 million tons. As we say, Gudai-Darri will come in in Q2 for first production. That is a very clearly, you know, important components of our capital plan this year. In terms of sustaining capital, in terms of that replacement, and in terms of the growth with Oyu Tolgoi, all very clear.
I think as we get forward into 2023 and 2024, Hayden, you know, we've set that, and we've been very explicit that the growth component of our capital plan is an ambition. We're working on a range of projects there that will come through, and it all depends on us really finalizing value-accreted plans as to exactly when that capital comes through. If we don't have the projects that are ready to progress, we won't spend the capital, and we'll just put it through our normal sort of capital allocation framework that we have. I think that's very clear.
Clearly, the news on Jadar, you know, does probably put back some of our capital spend, but broadly, I think we're very comfortable with the framework that we set out. Thanks, Hayden.
Thank you. Your next question comes from the line of Alain Gabriel from Morgan Stanley. Please go ahead. Your line is open.
Yes. Thank you, gentlemen. My question is on Koodaideri and the replacement projects in the Pilbara. Can you give a bit more granularity on the operating challenges there beyond COVID, and how do you see the risk of further slippage into Q3? In a hypothetical scenario where the ramp-up continues to stall, do you have enough flexibility in your system to top up volumes with SP10, or would the slippage constitute a risk to your full- year volume guidance? Thank you.
Yeah. Thank you. Let me start off and then hand over to Peter. Look, I visited Gudai-Darri in the first half of last year. There was really good progress. What unfortunately has happened as part of Gudai-Darri is that we haven't been able because of COVID to have the same inspection, quality inspections of the material. So when a number of things arrived at site, we had to do quite a lot of rework, and there has been quite limited access to people to the project in the Pilbara because of the closure of the borders. So that has led to delays. I'm very excited the borders are opening next Thursday.
I'm going there myself, and I'm really looking forward to see how we come back on track. Peter, why don't you share the numbers on CapEx and the question on SP10?
Thanks very much, Alain. Thanks for the question. I mean, clearly, Koodaideri coming through is very important. Yeah, right now, you know, we're through a lot of the work. We are now moving towards sort of first production, as we said, in the second quarter. All of those issues that we've had around COVID, around labor constraints, around rework, we've worked through a lot of those, but we still have work ahead. It is very important Koodaideri coming in. If that doesn't, if any slippage, that would just result in us. We still have the flexibility in the system, but it would result, as you say, in just increased sort of production of SP10 as we have to fill the gap.
We have those options. I think in terms of the other projects, I mean, you know, the main one we pointed out is around the Robe River system and some issues that we've had around Misery. We're working through those, and we would expect the Robe River system to be up and running at capacity when that's resolved. Thanks, Alain.
Thank you.
Thank you. Your next question comes from the line of Lyndon Fagan from JP Morgan. Please go ahead. Your line is open.
Thanks very much. Look, my first question is on the iron ore cost guidance, which now puts you well above BHP and Fortescue in terms of unit costs. I'm wondering when you reflect on that, what the key differences are between the Rio Tinto business and your main competitors in the Pilbara? I'm also interested if there's any potential to rein them in, given that the seminar last year showed the work index going up in 2024? The next question is just related. There's still really no mention of Simandou in the presentation today, and obviously it's the elephant in the room when it comes to the iron ore market. When do you think you'll be in a position to articulate a potential scope for that project? Thanks.
Yeah. Thank you. Let me just start off on Simandou and introduce the first question while Peter will explain to you the differences. On Simandou, we're not saying too much, and that's actually because we are working very, very hard on it. I myself visited Guinea in December, and every week we have more people in Conakry. We are really ramping up our presence in Guinea. There is intense discussions with the government amongst the joint venture partners and between the two consortia. The reason why we're not saying a lot is we are actually really working hard on trying to find the right solution. The government is very keen on seeing the project moving forward. We are very keen to participate. It has to be done to the right standards.
I think we agree on that. Now we just have to get the work done and define the right project. It's big and it's complex, so I hope that we can get some good progress this year and tell you more about it. There's little in the middle of discussions right now that I can share. I would say you call it the elephant in the room, I don't see it like that. I mean, we are. The global iron ore market is 1.8 billion tons. If you have, let's say, a 100 million tons development, it's the kind of replacement that you need. In any case, it's a much higher quality than the Pilbara, so it doesn't compete directly.
I think it would fit very well to our portfolio, and I'm also very excited about joint venturing with our customers on this front. I think it serves many purposes, Simandou, and I don't think you should see it as an elephant in the room. Coming back to the Pilbara, I just wanna take one step back and remind you, this is an amazing asset. It had a free cash flow of $15 billion last year. It's one of the world's largest industrial assets. I'm absolutely convinced that Simon Trott and his team are doing all the right things. I just wanna say to you, what we are doing right now, you'll see the results of two, three years down the road. It's not the kind of assets you do the right things, and then next quarter, things are really changing around.
We are at a crossroad right now with 90 million tons of replacement volumes trying to come in as Peter was just explaining. It will take a while before we can get the efficiencies in place. The Rio Tinto Safe Production System is also gonna help us a lot. Again, we gotta be patient here. It's a multi-year journey. Peter, you might like to just share the development of cost.
Thanks very much, Jakob. What we said in guidance when we went into 2021 was that we thought we'd be about $17.20. We've come out at $18.60, as we said, and that a lot of that increase was really two factors. One, you know, in the second half, we did see higher input prices into the business, and we also did see some slippage in the projects for all those reasons we've talked about around COVID and labor constraints in Western Australia. As we look into 2022, we're being very deliberate, I think, as to what we're gonna do because we're absolutely clear we do need to put some more money into some of the plant in the Pilbara.
We absolutely do need to make sure that we're putting the right investments in studies in the future because we've got to be thinking about the replacement mines that will come in, you know, in the middle of the decade as well. We do, as you said, have to deal with higher sort of work index. You know, that is where the productivity play really comes into importance. I think those are the drivers. I think we're being very deliberate about what we're doing. I think as Jakob said, this is a multi-year program of work for us to really get the Pilbara where it can be.
In the meantime, you know, I'll just reiterate that those fantastic sort of financial results and the fact it did actually give 100% return on capital employed in 2021. Thanks, Lyndon.
Thank you. Your next question comes from the line of Liam Fitzpatrick, Deutsche Bank. Please go ahead. Your line is open.
Good morning, Jakob and Peter. Just another one on Simandou, but more from an ESG perspective. From the discussions that you've had so far, what is giving you comfort that Rio can participate in this project without risking your goal of impeccable ESG credentials? Are there any sort of specifics you can give us over some of the ESG-related challenges that you're aiming to address and de-risk with your partners? Thank you.
Yeah. Look, I can give you two things. First of all, when I was visiting the government and meeting with the president, I made it very clear it's a red line for Rio Tinto. All areas. E, environmental, it's highly sensitive. It's about biodiversity, the chimpanzees, et cetera. It has to be impeccable. S is social, about in-migration, that we have everything controlled, and that has to be done together with the government. G, of course, there has to be integrity in everything we do. That's absolutely a red line. The second part that gives me a lot of confidence is that if you look carefully and listen carefully to what Chinese leaders are talking about, they're actually emphasizing the same things.
I think we are very aligned with our partners, Chinalco and Baowu, in terms of that this has to be done to the right ESG standards. That gives me hope and confidence. Thank you.
Thank you. Your next question comes from the line of Kaan Peker, Royal Bank of Canada. Please go ahead. Your line is open.
Thank you. Hi, Jakob and Peter. The question on copper, really good to see a large resource increase there. But just on the back of the envelope suggests that it'll be producing around 70,000 tons of copper. Given the size, is Winu an asset that belongs in Rio's portfolio over the long term? If developed, it will be Rio's smallest copper asset by a significant margin. Thanks.
I'm really struggling to hear what you're saying. Peter, could you capture it?
Unfortunately, I couldn't either, Jakob.
Do you think there's any way you can speak differently to the microphone and repeat the question?
Sure. Is that better?
A little bit, yeah. Thank you.
Just wondering the size of Winu. It looks like it's gonna be something around a 70,000 tonne per annum copper asset. Given its size, does it belong in Rio's portfolio over the long term?
Peter?
Thanks very much for the question. I mean, we're progressing. Winu, as we've said, we've done a lot of the actual sort of project work and a lot of the reasons why Winu hasn't yet come forward is for very good reasons. The permitting process and the engagement with the traditional owners has just taken longer. That's just within the context with which we're operating, and it's just very important to do that at the right pace. That's the context around Winu. I mean, I just think this, with Winu, it's something that, you know, there's the initial mine, and then there's the potential around it.
We've been very focused on trying to really make sure that we develop something with Winu that has the potential there if the regional district proves prospective for us to grow over time. We need to just work through that and finalize our studies and that broader piece around getting the appropriate approvals for the project, and then we'll make the decision on where to go from there. Thanks very much for the question.
Let me make a little announcement because we have done extensive disclosures today, and one of them is an update on the reserves, maturation, and you might like to just look at what we're announcing from Winu. It's heading in the right direction. Thank you.
Thank you. Your next question comes from the line of Bob Brackett from Bernstein. Please go ahead. Your line is open.
Good morning. In terms of the $7.5 billion of decarbonization investments, the way to think about that, for example, the marginal abatement cost curve projects, those have to clear a 10% hurdle rate at an internal carbon price of $75 a ton. Is that the right way to think about that overall block of investments? The follow-up would be, h ow often do you think that the external or local carbon price will match your internal carbon price?
That's an excellent question. Let me ask Peter to explain the exact methodology, but I would like to make just a philosophical comment. What really matters for the economics is, of course, not what the carbon price is today. It's what it is five years from now and 10 years from now. That's what really have an impact. If you wanna be really specific, that's not what we are saying. We are saying we're using 75% as carbon price internally, and we are saying, independent of the 75%, we are saying that our portfolio that we will spend $7.5 billion on is value accretive at modest, CO2 prices, so, well below the 75%. Peter, do you wanna elaborate? I think you covered it quite a lot in your presentation.
No, I'm happy to do so, Jakob. I mean, that's exactly right. I mean, what we're talking about is a whole range of projects here that have different economics, and those economics will change over time as we do more work. You know, clearly, we will sort of prioritize those projects that actually, you know, some of them being positive without any carbon price that are at our sort of hurdle rates of investment and at the lower end. You know, we've given a couple examples of those in the pack, in the appendices to the presentation. It is a whole range.
What we want to do with the $75 per ton is make sure we're incentivizing the work, make sure that we're doing that work that later this decade will be needed around projects around the group to continue taking us down the decarbonization path. 'Cause, you know, we have to do this. We have to de-risk the long-term cash flows of the company. As Jakob said, it's, you know, what will carbon prices be in the future, that determines sort of so much of the competitiveness of our assets. This, to me, is just a continual process of our investing to take us down that carbon intensity curve and to de-risk our cash flows for the long term. Thanks very much, Bob.
I was in Brisbane a week ago sitting down with the decarbonization team, and we have a lot of progress. It's only four months ago we announced our targets, but I can see that we are progressing and maturing our plan. There's nothing in it that doesn't give me confidence in what we said at the Capital Markets Day. We are still not there where we have the kind of final projects, but we're pushing ahead as fast as we can. Thank you.
Thank you. Your next question comes from the line of Myles Allsop from UBS. Please go ahead. Your line is open.
Great. Thank you. Just going back to the M&A question. I mean, do you— you know, you're saying you'll only look for opportunities that create value and fit within the portfolio. Could you give us a sense of, you know, the size of acquisitions you're thinking about, the commodities? You know, is it just future-facing co- sort of commodities, you know, smaller ones, larger ones? And just, you know, around are there opportunities out there? Obviously, Rincon shows there are some opportunities, but is there a long list? Is this gonna become more of a theme over the next 12 months? And then, I guess, related is around large scale M&A that's obviously been talked about in the press. Do you think there is potential in the sector for larger scale M&A that Rio can play a role in? Thank you.
Yeah. Thank you. I can just talk for Rio Tinto and I will say to you, I'll be very cautious right now to talk about big M&A because I don't know where we are in the cycle, but we are certainly not at a low point. We are pretty high up in the cycle and I just really would dream about looking back one day and say that we invested counter cyclical and making acquisitions right now could very easily be pro-cyclical. You could say that larger scale M&A is really not for now, but there are opportunities, and I think Rincon is a good example of it.
Whereas it would've been very expensive to buy a lithium company right now, we are buying a lithium project at a decent price, and we use our technology, our competencies, our people to develop that project. That's an example of how we add value. But the overall guidance from my perspective is first ask yourself, why are we the best owner of an asset? What can we bring to it? Then, of course, we tend to look quite conservative on prices through the cycle. When you have very high prices and people expect a high price, it probably doesn't stack up. I think Rincon is the example of how it's possible, but overall for Rio, I don't see the big M&A out there. Thank you.
Okay. Thank you.
Thank you. Your next question comes from the line of Richard Hatch from Berenberg. Please go ahead. Your line is open.
Yeah. Thanks very much. Two questions. First one, just on costs. I mean, you talked about trying to get back to where you were. I mean, in 2017, iron ore costs were $13.40 a ton. You know, what kind of and we're going into $19.50-$20.50 for this year. What can we expect for costs sort of into the medium term? Can you give us a target? Then secondly, just on IOC, I mean, that asset seems to continue to underperform. Just operationally, you talk in the release to a number of operational issues. What exactly is going on there, and when do you think you can finally get back to a stable operational run rate? Also similarly in costs, I think they're up about 40% versus 2017. I appreciate there's inflationary factors there, but what can you do for cost of that asset, I think?
Yeah. Thank you. I'll let Peter explain the cost development in the Pilbara, but I do think I have to take account of IOC. I think it's an amazing asset, but it hasn't been operating super good. I think we have last year externally recruited a great CEO for the asset. It was already improving beforehand, and I think we are right now taking it to the next step. There is some very basic things that needs to be improved. There are also some investments that needs to be made, and I'm really excited about implementing the Rio Tinto Safe Production System in IOC. My starting point just to say is it produces the world's best quality of fines and pellets. It has got a very long mine life. It has got a great infrastructure. We've got to get that asset to perform every day at its best, and we'll get there, but it will take a while. Peter, the cost breakdown, please.
Thanks, Jakob. I mean, just one more point on IOC. It did make $2 billion of EBITDA in 2021, so just putting things in context. In terms of the unit cost progression in the Pilbara, I mean, clearly we've seen a set of drivers that have been, you know, across the industry in terms of exchange, in terms of input prices coming across the industry. You know, for us, over the last couple of years, and as we said, going into the first half of next year, there's some very specific drivers as well, as we've had to bring in, you know, new capacity into the system.
We're being very deliberate in 2022, as I said, to put more investment into the business, particularly around maintenance and particularly about building out that sort of midterm capacity of the system, which is critically important to us. Certainly as we get into the second half of the year, you know, Gudai-Darri coming on does give us some flexibility into the mining system. That is important. It doesn't sort of resolve all our issues. We'll still have work index increases. We'll still have challenges to do, but it gives us more flexibility. As we then build out to that midterm capacity, as we've talked, with the next set of new mines coming on, and we talked about Western Range earlier.
I think you know, our job is to really focus to stabilize that system as it is, bring on Gudai-Darri, ramp up production, and to really then deploy the Safe Production System you know, across the Pilbara, so that we can manage that sort of natural effect of work index over time as we build out then that midterm capacity. Thanks very much.
Thank you. Your next question comes from the line of Rahul Anand from Morgan Stanley. Please go ahead. Your line is open.
Hi, Jakob and Peter. Thanks for the opportunity. Look, I had a question on lithium and Rincon. In terms of the DLE absorption technology, I think Livent is the only other producer in Argentina that's currently using that technology, but that's used in conjunction with solar evaporation. I guess a pure DLE process that's required for the project remains at pilot stage. What I wanted to understand really was, you know, what level of due diligence occurred that gave you the confidence that there is actually a solution available for the project? What are your next steps here? Can you provide some kind of a timeline as to when we should expect some more news around Rincon? Thanks.
Yeah, no, thank you. Look, we did an awful lot of technical due diligence and you should probably talk to Sinead Kaufman. Both Peter and I in our investment committee, that was the issue. We went all over that. There was not that much the commercial issue. Yes, the price was the price, but it was really about getting our best technical experts at it, and I think Rincon had actually matured things very well. We went through it with deep technical due diligence. I'm not saying there's no risks with it, but we ended up being comfortable it was a risk worth taking.
It's interesting because we will end up with a project that is not only producing very well battery-grade lithium, but it will also be done in a very environmentally friendly way. Yes, I feel comfortable about that. If you wanna get more details, we can definitely let you talk to a couple of our technical experts. Thank you.
Thank you. Your next question comes from the line of Tyler Broda from RBC. Please go ahead. Your line is open.
Great. Thanks very much for the call today. In effect, the recent intervention by China into the iron ore market, obviously, it's a major customer. Is there anything you can share from the meeting that you've reportedly had with the government? I guess on a wider basis, just with the increased volatility we've seen over the last year or two, do you see the current spot sales structure as being optimal? I guess, is there any thought from Rio's side in terms of seeing that evolve as we go forward? Thank you.
Sorry. I need a little clarification. What meeting with the government are you referring to? And what government?
Sorry, from the Chinese government. There's a report from Bloomberg that suggested that Rio Tinto met with the government as part of their-
Oh, sure.
Their current investigations into that. Yeah.
Look, it's very difficult for me to comment upon an article. It's rumors. I mean, the only thing I can say is that we work, and we have always worked constructively with our customers and other stakeholders for having a free and transparent price setting in a free market of iron ore and we'll continue to constructively work on that. I cannot say anything concrete. What you're referring to is simply rumors.
Understood. Thank you.
Thank you. Your next question comes from the line of Lachlan Shaw from UBS. Please go ahead. Your line is open.
Yeah. Hi, Jakob. Thanks for the call. Maybe just the lithium strategy, first question. Obviously Jadar has a bit to play out, and Rincon sounds pretty interesting. You know, assuming Rincon goes through development, you know, is that where you wanna get to? You know, do you see yourself wanting to get bigger in that space given the growth outlook there? You've obviously indicated by acquiring the asset, you're quite, you know, quite good appetite for lithium. Just interested in how you're thinking about the broader strategy in terms of lithium in the portfolio.
Yeah. Thank you. I don't look too much in kind of the spreadsheet part of it, where the numbers should bring us. The starting point is that we expect the global lithium market to be 10 times bigger in 2030 than in 2020. That means that you, the world needs a number of new mines. What we are doing, we have actually been working since 2003 in Jadar. We have developed a lot of good technology. With Rincon, we can give something new to our now going into brine, giving something new to our technical experts, and we develop technological know-how competences. It's really from that technical expertise pool that we wanna see expansion. It's actually more the technical competences that drives it than necessarily setting a specific target because, quite frankly, it's going to be opportunity-driven.
The only thing we know, and, you know, it might not be a linear development, but what we know quite sure, if we believe in the energy transition, is that the world needs much more lithium, and we think we can contribute here.
Thank you.
Thank you. Your next question comes from the line of Dominic O'Kane from JP Morgan. Please go ahead. Your line is open.
Hi, Jakob and Peter. I just wonder if you could just quantify for us in a bit more detail the SP10 guidance for 2022. SP10 is about 11% of the sales mix in 2021. Is it reasonable to assume it should be more than 11% in the first half of the year? Again, how should we think about that evolving as we move through 2022? Thank you.
Peter.
I mean, I think broadly, you should see the first half of 2022 as similar to the second half of 2021. You know, the key is then Gudai-Darri coming on, which will then give us much more flexibility. At that stage, we should then assume sort of SP10 will come down towards the sort of that midterm guidance that we've given. Thanks very much, Dominic.
Thank you. The next question comes from the line of Amos Fletcher from Barclays. Please go ahead. Your line is open.
Yeah. Morning, Jakob and Peter, and thanks for the opportunity. The first question is just on the iron ore unit cost guidance, which implies year-on-year inflation of 5%-13%. Can you give us some color on what scenarios set the top and bottom end of that range? The follow-up would just be on the aluminum business, can you give us a bit more color around what's happening at Kitimat and why the ramp up is taking so long there? Thanks.
Yeah. Let me start with Kitimat and leave the cost guidance to Peter. I visited Kitimat in September last year, and it's very sad to have such a strike situation. What is happening is when a strike is invoked and if it happens fairly quickly, is that there's actually a lot of cleaning up of pots before you can get started. There was clearly also a need for a reset of the culture at the site. We have been absolutely crystal clear for everyone, management and staff, that we need to find the right way of working together in the future. Therefore we are taking the time. People are well back. We are bringing maintenance up to staff.
We are cleaning the pots, and we will have a very controlled startup. That's unfortunately sometimes the characteristics of an aluminum smelter. If you shut it down quickly, it takes a long time to bring it back. It would have been nice to get it up earlier, but we are trying to achieve a number of objectives with the startup plan that we have set. Peter, over to you on the iron ore.
No, thanks very much. What we've built in is what we think is a fairly realistic set of input price assumptions. That's key clearly to the price progression, the cost progression as we get into 2022. Given the increases that we've seen in diesel and other inputs into the business. The other sort of key assumptions really are around, you know, the commissioning and ramp up of the new replacement mines and also Gudai-Darri. Again, we think we've built into that guidance a sort of a range which is fairly sensible from everything we see today.
Those I think are the two key sort of, you know, scenario that need to be placed on those numbers. 'Cause, you know, I think we're fairly clear on the side of, you know, investment in maintenance and investment in studies for that midterm development of the Pilbara system. I think those variables are pretty clear. Thanks very much.
Thank you. Your next question comes from the line of Peter O'Connor from Shaw and Partners. Please go ahead. Your line is open.
Good evening, Jakob. Good morning, Peter. My question is twofold, and it comes through the lens or the narrative of income versus growth. My first question is, given the spend that Jason asked about earlier of $3 billion per year on growth versus a $130 billion market cap size, is that again sufficient to grow the company at that level? As your pie chart on slide 17, it seems to be skewed less than one third of that pie. Secondly, Jakob, you've mentioned twice in your commentary in the Q&A about the high point of the cycle, the keyword being high and the second word cycle. Are you foreshadowing an end to the cycle? And if so, does Peter's rhetoric and narrative about big dividends, is that about to change? How do we think about the income versus growth of the company given that lens of commentary which you've presented?
Yeah. Thank you. I have to admit it was a little bit difficult to hear your question, but I think I captured it. Do come in if I'm not answering it sharp enough. The thing about the cycle is that what we are trying to do is we are trying to ramp up our organic investments. Organic investments are, of course, to a certain extent when it comes to inflation, exposed to the cycle, but the real exposure to the cycle is M&A. You just don't wanna buy at a very expensive point in the cycle. My comment about the cycle is mainly about M&A.
I think organic development is actually quite important that you try to have some stability there because it's not just a matter of money. It's also a matter of competence, is having a great organization that can execute project in the most efficient way. I think that's the gist of it, but there might be one or two things I missed in your question. Please clarify what you're missing.
It sounds like you've clarified. We're at the high point of the M&A cycle, not the high point of the commodity cycle. Is that [to be clear?]
Well, exactly. I don't know the commodity prices, but obviously we have very attractive commodity prices right now. The only thing I can say is it's certainly more expensive to buy assets than it was a couple of years back. I think as I said early on, we only know it afterwards. Five years from now, looking back, I would love to see that we have not bought too much on top of the cycle, but rather at a lower point in the cycle. That's why I'm cautious about M&A, but I'm not cautious about us really investing in our project capabilities and experiencing and becoming better and better and really what I call excellent development.
Thank you. Your next question comes from the line of Carsten Riek from Credit Suisse. Please go ahead. Your line is open.
Thank you very much, Peter and Jakob. My question is on aluminum. You mentioned, I think in your release, that the tensions between Russia and Ukraine could actually send aluminum prices even higher. Could you actually think about a way that Russia could actually redirect those volumes to China, and could the price impact hence be less pronounced in your opinion? A follow-up, could you actually up production in aluminum in the short to mid-term other than at the Kitimat smelter in British Columbia to benefit from strong aluminum prices? Thank you very much.
Yeah. Thank you. You're right. I think it goes for Rio Tinto, and it goes for all aluminum smelters. You have very little flexibility. You either run a smelter or you run a smelter flat out. I don't think I predicted increased prices in aluminum because quite frankly, I don't know where prices are going. What I said about the Ukraine conflict is that it has the potential to create disruption in the market. I think what you're saying there is one scenario. There are many scenarios that can pan out. What I'm trying to say is, I think actually we have tried sanctions before. I think we are quite well-placed because we have got that integration between bauxite mines, refineries, and smelters so that we would be quite robust if there is disruptions. Predicting prices, I leave for you.
Okay. Fair point. Thank you very much.
Thank you. I will now hand the call back for closing remarks.
Well, thank you very much for taking the time here, attending and showing interest in Rio Tinto. It's an important day for us. We have disclosed a set of very strong financial results, but leave no doubt, we see everyday opportunities to continue to improve Rio Tinto, to strengthen our culture, to strengthen our operational performance, always in a safe manner. Thank you for joining, and have a nice day.