Good morning everyone, both here in Perth and those of you joining us on the webcast, welcome to the 2019 Rio Tinto Annual General Meeting. We start as always with safety, our top priority. Please pay attention to this short safety announcement.
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In the same way that safety is of critical importance to our business, so too is a deep respect for the communities that host our operations around the world. With this in mind, it gives me great pleasure to introduce Barry McGuire and Johnny Garlett, both of whom are Senior Elders of the Whadjuk people of the Noongar nation, the traditional owners of the land on which we are fortunate to be gathered today.
Good morning, Rio Tinto. Can I start by thanking the Board and to all your members of your organization for including a welcome to country. As a part of safety for us as Aboriginal people, the way that we have gathered on our lands over thousands and thousands of years, welcomes to country was about safety between each other. How to ensure that your spirituality was safe in the way that you came together, and also how did you return home in that safe aspect of the physical way of life. In that, from us as the Whadjuk people to represent all of our protocol between us as human beings on the oldest forms of human engagement, we thank you, both John and I, for including a welcome to country.
Within our language and within our songs, we hope that the energy of that old spirit of our ancestors come to exist with you as you gather as one. It's beautiful to see you and all your peoples of Rio Tinto here on our lands of the Whadjuk here today. May the energies of my grandmothers and grandfathers walk with you like they have walked with us. As you travel home to your place of rest and to your family, may the energy in this land always exist with your spirit like it has done with us. It's beautiful to be here. Welcome to our lands, and it's an honor to stand as one with you as Rio Tinto.
May I share in this old song of Kings Park that we must sing to every time we gather as people, but for us as Aboriginal people and for us as West Australians, may you be safe in your way of life.
Thank you. Thank you, Barry and Johnny, for a wonderful welcome to country and for starting our AGM in such a great way. It's a pleasure to introduce my fellow members of the Rio Tinto board. Starting on my very far left, David Constable, Moya Greene, Michael L'Estrange, who chairs our Australia Forum, Simon Henry, Ann Godbehere, who is Senior Independent Director and Chair of the Audit Committee, Tim Paine, our Company Secretary, J.S. Jacques, our Chief Executive, Jakob Stausholm, our Chief Financial Officer, Megan Clark, who chairs the Sustainability Committee, Sam Laidlaw, who chairs the Remuneration Committee, and finally, Simon McKeon. Over the past year, we've said farewell to Paul Tellier, who retired in May, and to our former CFO, Chris Lynch, who retired in September.
After nine years of service, Ann Godbehere will retire from the Board at the conclusion of this meeting. Following Ann's retirement, Sam Laidlaw will become Senior Independent Director and Simon Henry will take over as Chair of the Audit Committee. I'm very pleased to welcome the three new members of the Board, Moya, Simon McKeon, and Jakob. I would like to say thanks to all of our directors, past and present, for their hard work, insights, and commitment, and particularly for their advice during my first year as Chair. Rio Tinto has a clear purpose. As pioneers in mining and metals, we produce materials essential for human progress.
By doing so efficiently and effectively, maximizing cash from our world-class assets and allocating capital with discipline, we aim to create long-term sustainable value for our shareholders while safeguarding the environment and meeting our obligations to society. In 2018, I'm pleased to say we did exactly this. We delivered underlying earnings of $8.8 billion. We also continued to simplify our portfolio, achieving $8.6 billion of pre-tax proceeds from the sales of our remaining coal operations, Grasberg, and other non-core assets. Importantly, these divestments did not come at the cost of growth. In 2018, we actually grew production by just under 3% on a copper equivalent basis. Rio Tinto is now unique among the major diversified miners in having no fossil fuel production within our portfolio.
The combination of strong cash flow from operations and the proceeds from disposals enabled us to further strengthen our balance sheet with net debt $4.1 billion lower than in 2017. We have announced record cash returns to shareholders totaling $13.5 billion for the financial year 2018, comprising a full-year dividend of $5.3 billion, or $3.07 per share, a $1 billion share buyback announced last August, and $7.2 billion of supplementary cash returns from the post-tax proceeds from divestments, including a $4 billion special dividend and a $3.2 billion share buyback. On behalf of the Board, I congratulate J.S., the executive team, and all of our 48,000 colleagues around the world for a year of significant progress and achievement. In 2018, we also reset our sustainability agenda.
Our purpose requires us to work in remote locations and in sensitive and beautiful landscapes, often on land owned by indigenous people. Our history and experience tells us that we will not be able to create long-term sustainable value for our shareholders unless we also deliver lasting benefits for the communities in which we operate. These beliefs are the foundation of our views on sustainability. This year, we took stock of our activities and how we contribute to the UN Sustainable Development Goals. The result was a refreshed approach that ensures sustainability considerations are integrated into all of our operational and strategic decisions. Our efforts start with a commitment to the safety, human rights, and well-being of our employees, suppliers, and local communities.
This year, three of our colleagues lost their lives at work, so we must redouble our efforts to ensure that safety is always our top priority. We're also continuing to work on improving the wellbeing of our people. For example, here in Australia, we were certified in 2018 by White Ribbon for our work to eradicate domestic violence in our workforce as well as in our communities. We've since expanded this program to Canada and the United States. We aim to leave a lasting, positive legacy through the contribution that we make to the economic development of our host countries. In 2018, we paid $6.6 billion in taxes and royalties to governments around the world, over $1 billion more than the previous year. Our direct economic contribution was nearly $43 billion, including payments to our employees and local suppliers.
Over the past five years, Rio Tinto has contributed more than $200 billion to the countries and communities where we operate. While the products that we make help to build the physical world around us, our economic contribution helps to build the human, intellectual, and social capital of the communities where we operate, creating jobs and livelihoods, funding schools and hospitals, providing opportunities for our employees and suppliers to build a better life for themselves and for their children, often in locations where other opportunities are scarce. Respecting the environment is also of critical importance. During the year, the Board held two environmental, social, and governance investor seminars in London and Sydney. We also hosted two civil society roundtables in Melbourne and Washington to hear first-hand what we're doing well and where we need to improve.
Climate change represents perhaps the greatest long-term threat to business, and we are determined to be part of the solution. This year, we published our first climate change report in line with the recommendations from the Task Force on Climate-related Financial Disclosures. The report outlines our approach to climate change and represents another step on the journey that started more than a decade ago when we issued our first public statement on climate change. We now have a clear understanding of our contribution to greenhouse gas emissions and the climate change resilience of our major operating assets and core infrastructure. In 2015, we supported the outcomes of the Paris Agreement and the long-term goal to limit global warming to less than 2 degrees Celsius. Achieving this goal will require both companies and governments to address the threat of climate change with greater urgency and ambition.
During 2019, we will develop new targets for the reduction of greenhouse gas emissions produced by our operations to replace our existing targets when they expire in 2020. Our products also have a major role to play in the transition to a low-carbon economy. For example, aluminium for lightweight, energy-efficient transportation or copper for electrification and renewable energy. Our products have shaped the skylines from here in Perth to Shanghai, New York, and beyond. We help airplanes fly and cars drive. We bring power to living rooms and help people communicate on smartphones around the world. After almost 150 years of supplying iron ore, aluminium, copper, diamonds, and titanium, we have world-class assets and some of the best people in the industry. Our aim is to develop a diverse, inclusive culture where everyone has the opportunity to realize their potential and to contribute to our continuing success.
As always, the outlook for the year ahead is uncertain, with slowing economic growth in some regions of the world and continuing geopolitical tensions. By providing materials essential for human progress efficiently, effectively, and responsibly, we will continue to create long-term sustainable value for our shareholders and for the communities and countries where we operate. Let me hand over to J.S. who will talk more about our results.
Thank you, Simon. Good morning to everyone here with us today. I would like to also pay my respects to the owners of the land on which we meet today, the Whadjuk people of the Noongar Nation, and to the future generations of indigenous leaders around Australia. In addition, I would also like to note the sad passing of Sir Arvi Parbo. He was an Australian pioneer, and in so many ways, his story mirrors the story of mining in Australia, a testament to the power of hard work and creativity. We wish his family and friends well at this difficult time. I'm absolutely delighted to share that 2018 was another very successful year for Rio Tinto and for our shareholders. It was a year our 48,000 employees moved our strategy forward. It was a year we delivered strong financial results.
A year we created innovative new partnerships and renewed our sustainability approach. A year we invested in our business and our people and progressed high- value growth. Most importantly, it was a year we created significant value, delivering $13.5 billion in cash returns to our shareholders, the biggest in Rio's history. We are not complacent. Our future is bright. Our purpose is clear. We produce materials that are needed to help the world develop, and we have a great team of committed employees striving to do their best every day, every shift, starting with safety. Sadly, we did not meet our own expectation on safety in 2018. We remember Francis, Muzi, and Daniel, our colleagues who went to work last year but did not return home. This is an absolute tragedy for their families and friends.
Their loss is also our loss and is deeply felt by everyone in the Rio family. Although we have improved in some key areas such as process safety, we must do better. Nothing is more important, and we are working on it every shift and every day. As an industry, we must also reflect on the tragic loss of life at Minas Gerais in Brazil early this year. Our thoughts remain with the many who lost their lives or are still missing and their families and communities. The industry must act, and Rio Tinto will play its part in a Global Tailings Management Review. The ICMM will work with external experts and a broader set of stakeholders to agree on the way forward. Any solutions must be technically sound and drive positive and sustainable change.
At Rio Tinto, we continue to review all of our controls and systems to make sure they are as strong as they can be, and we will continue every day to actively manage our tailings risk through our governance framework, which includes external assurance. Importantly, we have published our tailings standard and procedure online, as well as information on each of our tailings facilities across our business. Turning to our 2018 performance. In summary, we generated $18.1 billion of underlying EBITDA with a strong margin of 42%, we delivered cash of $11.8 billion from our operations. We achieved $8.6 billion pre-tax in asset sales with exits from coal and Grasberg. We also invested $5.4 billion in a world-class portfolio, which generated a return on capital employed of 19%.
Across our business, we improve our ability to drive greater productivity and efficiency. In 2018, for the first time, our driverless trains, up to 2.4 km long, delivered iron ore from our mines in the Pilbara to our port in Cape Lambert. To date, these trains, the world's largest robots, have now safely traveled more than 3 million km in driverless mode since they were deployed last year. We are confident that we have laid strong foundation that will accelerate our productivity drive in 2019 and beyond. We are on track to deliver $1.5 billion per year in additional free cash flow from 2021. In 2018, we also progressed exciting growth projects in iron ore, in copper, in bauxite, many of which are here in Australia.
Amrun in Queensland and Koodaideri here in W.A., our most technologically advanced mine are just two examples. Winu, our discovery of copper in this state, also looks promising. We are also progressing other growth options. For example, at our Resolution Copper Mine in Arizona, we are spending $368 million on infrastructure as we progress the permitting process. We are on track to complete the EIS in 2020. Our Jadar lithium project in Serbia is progressing well through its pre-feasibility study and give us an option to supply the world's electrification needs. In exploration, which is the upstream part of our pipeline, we have over 50 projects underway with activity in over eight commodities in 16 different countries. Our value over volume strategy is working even in uncertain times, with trade wars, political tensions, and market volatility an ongoing feature.
Despite this turmoil, in 2018, once again, we delivered on our promises. $13.5 billion of cash returned to our shareholders. This great outcome reflect the efforts of our entire global team. We also progressed on other fronts in 2018, including sustainability. Simon mentioned that over the last five years, Rio Tinto delivered $200 billion globally in total economic contribution. This include the taxes and royalties and wages and salaries we pay, plus our investment in building local supply chains and communities, amongst other things. Let me give you an example. Here in W.A., we are pleased to announce that Pilbara Aboriginal business, Yurra has been awarded a significant contract to provide civil maintenance services on the Pilbara rail network. I fundamentally believe that the mining industry has a wider role to play in society.
A safe and profitable mining industry benefits the world far beyond, far beyond just being significant taxpayers and providing employment. It is clear that the materials we produce will play an absolutely vital role in the transition to a low-carbon economy. Let me give you an example. Wind, solar, and batteries all requires the material we produce. An average onshore wind turbine contains nearly 5 tons of copper and 160 tons of steel, and a typical electrical vehicle has 80 kg of copper and 36 kg of nickel. We are well placed to supply the green materials of the future. As mentioned in our climate change report, we are also working on reducing our own footprint. Today, 71% of the electricity used across our business come from clean, renewable energy sources.
Last week, we announced that we will permanently shut the coal-fired power station that has been in operation for 75 years at our Kennecott copper mine in the U.S. and move to a renewable energy solution. This is clearly a good step, but we know there is much more we have to do across our entire portfolio to reduce our emission footprint. We have been open about this challenge. The pace of the change is different country by country, commodity by commodity, operation by operation. It will take time to transition to a low-carbon economy. Our view is leadership is about making a stand, making a start, and being upfront about the potential roadblocks. It would be very easy to throw up our hands and say, "We are polluters, and we cannot contribute." For us, that's not what leadership is about.
We know that the best solutions will come when governments, industry, institutions, and society come together. Let me give you two examples. Our partnership with Alcoa and Apple and the governments of Canada and Quebec to further develop greenhouse gas emissions, free aluminium smelting technology is an industry first. In Australia, our aluminium smelter in Queensland is also the Australia's largest aluminium can recycling facility, processing nearly 1,500 tons a year. That is roughly 96 million cans. We also continued to invest in our communities. $192 million in health, education, heritage, and environmental programs in 2018 alone. One of the programs I often talk about, an example of a Rio Tinto first, is here in W.A. There is no question that automation makes our business stronger and keeps our people safer.
We also know that it could have an impact on the communities near operations. Last year, we announced a partnership between W.A.'s resource sector, South Metropolitan TAFE, and the W.A. government to develop the first nationally recognized qualifications in automations. The new courses will provide education pathways to jobs in autonomous operations. These courses will also train and certify people in new skills, allowing them to transfer more easily so that people can follow opportunities wherever they find them, whether or not it's at Rio Tinto. I like this example because it shows that our company can be part of the solution to the issues our communities face. We can say with a sense of accomplishment that 2018 was a successful year for Rio Tinto.
One in which we realized our ambition on one hand to deliver superior returns to our shareholders, to innovate, to grow, and lay the foundation for future growth and future innovation on the other. Before we look forward, perhaps it's worth taking a look back, not just at 2018, but the past three years. We can say we have generated over $46 billion in cash. Two-third of which, $34 billion, was cash from operations. Delivered $20 billion in shareholder returns and declare a further $9 billion. This is equivalent to over 50%, 50% of our market cap at the beginning of 2016. We reduced our debt by $14 billion, grown by 1.4% every year, reduced our sustainability vulnerabilities through the sale of our coal assets and Grasberg.
On this topic, while the decision to divest was made for commercial reasons, our exit also differentiates us and benefits our shareholders. We led the industry, and in some cases the world, on innovation from AutoHaul in the Pilbara and Koodaideri to ELYSIS. Strengthen our focus not just on cost, but productivity. Our story is not just one of strong financial and portfolio performance. It's also a story of disciplined capital allocation, growth, innovation, and smart investment. As we look ahead, our company will continue to focus on our four-piece strategy: portfolio, performance, partnership, and people. We will focus on what we can control in the volatile environment: Safety, our number 1 priority, the quality of our products, our relationship with our customers and suppliers, the productivity of our operations, disciplined allocation of capital, and maintaining a strong balance sheet.
We will continue our strong focus on value over volume, high-value growth, and mine-to-market productivity. Partnership and sustainability will be important priorities. We will continue to make every effort to keep our people safe, healthy, and fully ready to meet the challenges of the coming years. Our 48,000 employees, around 37,000 suppliers and customers, communities, and partners help make Rio a success. We will continue to stick to our values and commitment to operating in a responsible way. With a world-class portfolio, a strong balance sheet, and some of the best people in the business, your company is well-positioned for the future. Whatever the future may bring, we will always aim to deliver superior value as we produce the materials essential to human progress. Thank you very much.
Thank you, J.S. Notice of meeting and an addendum to that notice containing the text of each resolution to be put to this meeting were published on our website and posted to shareholders on the 22nd of March. Copies of the notice and addendum are available in the foyer, and if anyone would like a copy, please raise your hand and an attendant will bring you one. The required notice of the meeting is being given. With your consent, I propose that the notice and the addendum be taken as read. Resolutions 1- 16 will be dealt with under the joint electorate procedure with Rio Tinto plc shareholders who cast their votes on these resolutions at the corresponding meeting in London on the 10th of April.
These resolutions relate to the routine business of annual general meetings, such as the receipt of the annual report, the election and re-election of directors, and the appointment and remuneration of the auditors. You will see that the business of the meeting includes two resolutions relating to remuneration. The first relates to the approval of the implementation report which describes the remuneration arrangements in place for members of the Board and of the executive committee during 2018. This vote is advisory and is required for U.K. law purposes. The second relates to the approval of the directors' remuneration report. This vote is also advisory and is required for Australian law purposes. As in past years, we have included a resolution seeking authority for Rio Tinto to make political donations.
We have no intention of altering Rio Tinto's policy, which is not to make donations to political parties or to political candidates. However, the U.K. law on this issue is very broadly drafted. We are seeking this authority as a precautionary measure. Resolution 17 will be voted on by the Rio Tinto Limited shareholders only and has been proposed as a special resolution. It is a routine resolution which comes up every year to allow Rio Tinto Limited to buy back its own shares. This year, Rio Tinto Limited has two requisition resolutions put forward by Market Forces as agent for 109 shareholders. These resolutions are set out in the addendum to the notice of meeting dated fifteenth of March, 2019.
Resolution 18 seeks an amendment to the constitution of Rio Tinto Limited to permit shareholders to propose non-binding advisory resolutions at the company's general meetings. As with any amendment to the constitution, this resolution is proposed as a special resolution and requires a 75% majority to be approved. Resolution 19 is a non-binding advisory resolution requesting that Rio Tinto report annually on its transition plans consistent with the goal of the Paris Agreement to limit global warming to 1.5 degrees Celsius. The resolution requests that these plans include short, medium, and long-term targets to reduce Scope 1, 2, and 3 greenhouse gas emissions. As well as detailed strategies to meet these targets, the resolution also requests that this reporting should outline how capital expenditure decisions will align to that goal and how executive remuneration will incentivize adherence to the targets.
As Resolution 19 is a non-binding advisory resolution, it will only be valid if Resolution 18 is approved by the required 75% majority. Consistent with our position on a similar resolution requisitioned in 2018, your board does not support Resolution 18, as it is likely to cause uncertainty in relation to the authority and accountability of directors. Your board is vested with the power to manage and control the business affairs of Rio Tinto. It is important that your directors are able to do this and to exercise their powers as they see fit. In doing so, the Board is, of course, accountable to shareholders. We support the principle of engagement with shareholders to ensure that their views are taken into account. The status of non-binding advisory resolutions under Australian law is unclear.
As such, the introduction of a constitutional amendment to enable such resolutions would undermine both the authority and the accountability of your board. We therefore recommend that you vote against Resolution 18. We also recommend that you vote against Resolution 19. We have already publicly committed in our recent TCFD report to fulfill many of the requirements of Resolution 19. A vote on a resolution is binary. You either vote in favor of all the provisions of the resolution or you vote against it. You cannot pick and choose the components of the resolution that you support. The main reason that your board cannot support Resolution 19 is that it calls for Rio Tinto to set targets for Scope 3 emissions. Scope 3 are primarily the emissions of our customers, mainly steel makers in China, Japan, and Korea, over which we have very limited control.
Options exist for the reduction of these emissions, but the speed, economic viability, and ultimate deployment of these technologies lie within the control of our customers, not Rio Tinto. We can and will provide scenarios for the speed and effectiveness of these abatement measures, we cannot provide hard targets for actions that lie outside our control. Your board therefore recommends that you vote against Resolution 19, as we cannot support all of its component parts. Ladies and gentlemen, we will now take questions from shareholders on any matters relevant to the business of the meeting before we move on to voting on the resolutions themselves. If you have a question, please hold up the yellow, blue, or green-colored card which you were given at registration. To ensure that everyone watching by webcast can hear, please wait until a microphone is brought to you.
Before asking your question, please state your name, and if you represent an organization, the name of your organization. Kindly return the microphone when you have asked your question. As many people usually wish to speak, may I request that you keep your questions short and to the point. In order to give as many shareholders as possible the opportunity, I will discourage supplementary questions from those who have already spoken. If you are entitled to vote at today's meeting, you should have been handed a yellow or blue voting card when you registered this morning. If you do not have one, please raise your hand and an attendant will bring you one. When we have finished the question and answer session, I will ask you to complete your voting card.
Before I open up the floor for questions, I would like to invite Julien Vincent from Market Forces to make some remarks on Resolutions 18 and 19. He's here. Thank you, Julien.
Thank you, Chairman. I'm speaking today as a Rio Tinto shareholder, and also as the Executive Director of Market Forces, which worked with more than 100 other shareholders to lodge these resolutions. In recommending shareholders vote in favor of Resolutions 18 and 19, I'd like to present three very straightforward points. The first is that Rio Tinto is clearly aware it's heavily exposed to transitional climate risk. Now, for those less familiar with this term, what I'm talking is those risks that are faced as the economy moves to limit global warming. This will tilt demand in favor of products and services that are more efficient and less carbon intensive. The risks being borne by companies investors that are exposed to more polluting activities. Clearly, Rio needs no convincing about this point.
It's recently sold its coal assets and deals that investors should be pleased with, acknowledging it faces significant long-term risks as well. But when I say significant, people need to think as big as Australia significant. The emissions produced downstream from our iron ore operations are equivalent in scale to Australia's greenhouse gas emissions on an annual basis. Now, this isn't about blaming Rio for these emissions or saying Rio is as much of a polluter as Australia. Rather, this point is just that our company has a massive degree of exposure to sectors that need to decarbonize. Unless this exposure and risk is managed, it could result in our assets becoming stranded and the destruction of shareholder capital. The second point is that this resolution would satisfy the expectations of regulators and investors.
Regulators have been calling for greater transparency over for climate change risk management for several years. ASIC has gone so far as to foreshadow regulatory action after it found many companies were breaking the law by failing to adequately consider and disclose climate risks. Investors and companies, including Rio Tinto, have backed the recommendations of the Financial Stability Board's Task Force on Climate-Related Financial Disclosures. One of which is to disclose metrics and targets that will demonstrate how key climate change risks will be mitigated over time. In case it's not obvious by now, that's exactly what this resolution is calling for. The final point is that it's well within Rio Tinto's capacity to set these targets. We've already seen it here. Through engineering, business development, Rio can become more efficient and reduce emissions. We know that. It's got the capability.
As a member of the Energy Transitions Commission, it is aware and seeking out opportunities to reduce emissions in sectors like steel. Yet, the company has so far failed to commit to setting targets to reduce emissions on an absolute basis as the resolution requests. Instead using intensity targets that can be skewed because they also depend on revenues and don't necessarily mean emissions go up or down in any case. We need to see these set in absolute terms. In light of this, it's disappointing that Rio would balk at a proposal that would allow the company to reduce its exposure to risks that it already knows it possesses in a framework it already supports and in a manner that the company is perfectly capable of achieving.
Unfortunately, the Board has made out that this resolution would require Rio Tinto to instruct its clients or direct its clients to set their own targets, as Mr. Chairman, you've just reiterated. Unfortunately, this is disingenuous, and I'd say misleading. Most disappointing because the resolution and supporting statement set suggests nothing of the sort, and we've also made this clear in our dialogue with the company. To the extent that Rio is sending a market signal through a Scope 3 emission reductions target that encourages current and prospective customers to be more efficient and lower emissions, that'd be great. That's a positive outcome for the planet and for our company's risk profile.
All this resolution asks is that investors are given assurance that Rio Tinto has its house in order and can set a business strategy that allows it to seek the most efficient and low- carbon operations in future. If the Board has a better metric or target that can demonstrate to investors the company is managing down the acknowledged risk it faces from its iron ore business, we'd love to see it. As things stand, the only proposition on the table that would require Rio to plot a course for managing its climate risk facing our iron ore business today is the resolution on today's notice of meeting.
That is why I, on behalf of the shareholders that have lodged this resolution, and with thanks to the investors that have already indicated their support for it, encourage everyone here to vote in favor of both Resolutions 18 and 19. Thank you.
Thank you very much, Julien. We haven't met, but I know my colleagues have engaged with you and actually in a very constructive way. We really do appreciate that. I mean, you made a few points there. Just to be absolutely clear, we agree with large parts of this resolution, as I hope I made clear in my speech. We are intending to set targets for our Scope 1 and Scope 2 emissions. Those are the emissions that are produced by our operations and the emissions that are produced by the power that we purchase in order to run our operations.
The area where we disagree with Market Forces is whether we can set hard targets for emission reductions by our customers. I have certainly been asked, and Julien sort of alluded to it in his comments: Is our position on coal consistent with our position on steel? I want to make clear why we got to the conclusion that we did. You can see our purpose. As pioneers in metals and mining, we produce materials essential to human progress. It is our judgment that steel is essential to human progress. If you take an advanced economy like Australia, there's probably about 10- 12 tons of steel installed around us per capita in buildings, in bridges, in transportation, in machines of all kinds. If you take an economy like China, that number is probably about 6 tons of steel, installed steel per capita.
If you take a developing nation like India, it's only 1 ton. Unless we are gonna freeze the development of the world in its current state, it is inevitable that people are going to have to produce primary steel in order to develop and drive human prosperity and development. In the case of coal, there are viable alternative sources of energy that do not produce greenhouse gases. We would argue that coal is not essential to human progress. In the case of steel, there are no obvious substitutes in a whole range of applications, and J.S. talked about some of them. Even in renewable energy, you think about wind turbines. There is no obvious substitute for steel for making wind turbines. The question becomes: How do we decarbonize the supply chain from the mine through to the end user of steel?
The iron ore is an essential in the steel manufacturing process. You can use hydrogen as a reductant, or you might be able to use biomass as a reductant, or you could continue to use coking coal, but then you could capture the carbon dioxide that is produced and store it using CCS. There are technically viable alternatives for making steel that would decarbonize the value chain from the mine through to the end user. We don't make steel. Our customers make steel. What we can do is work with our customers to supply the products that will help them make that transition to low greenhouse gas emission steel manufacturing. In fact, the high-grade iron ore that we produce, it certainly helps with this process.
We can also work with others, such as the Energy Transitions Commission, to look at the whole supply chain and try to decarbonize that supply chain from start to finish. What we cannot do is set hard targets for the steps that will be taken by steel mills in China or Korea or Japan or anywhere else in the world so far as they try to decarbonize their part of the supply chain. It really is for that reason that we recommend that you vote against these two resolutions. Julien also referred to whether we're going to use absolute or intensity targets. I have to say, we haven't taken a firm decision on that yet. The work is in progress in developing the targets, which will replace our existing targets.
I want to be absolutely clear that we are not trying to muddy the waters on this. We want to be absolutely transparent with everybody about just how challenging this is. This is a challenge for Rio Tinto, but it's actually a challenge for society as a whole to decarbonize the economy. What we want to do is to put forward a series of technically feasible alternatives for how we can decarbonize our business. Then we need to have conversations with governments and consumers around the world about how we collectively create a policy framework and the incentives that allow industry to invest in the necessary changes in technology that will drive decarbonization of the economy in accordance with the Paris Agreement.
With that, Julien, thank you very much for your remarks, and I will now throw it open to the whole floor for questions. If you could raise your hand, and we will bring you a microphone. There's a lady there on the aisle holding up a blue card.
Thank you, Chairman. My name's Mia Pepper. I'm here representing the Australian Conservation Foundation. I'm a counselor with that organization. I'm here to ask about the Ranger uranium mine in the Northern Territory on Mirarr country. We'd like to acknowledge and welcome the comments made by Rio Tinto at the London AGM about the commitment to finance the rehabilitation of that project, which is no small undertaking. It's good to hear today that Rio is not shy about confronting some of these really difficult environmental problems. We've got a uranium mine which the whole world is really looking at as a case study of how to rehabilitate what is a very problematic site in an area that's increasingly affected by climate change.
And it's also completely surrounded by one of Australia's biggest national parks and dual-listed as a World Heritage site. How to rehabilitate this site to allow it to be reincorporated into a national park and a World Heritage site has got the attention of a lot of people. And we'd like to just hear more about how conversations with ERA are progressing about how to fulfill that commitment to ensure that the company has the financial resources to make sure that that site can be properly rehabilitated.
Thank you for that question. Of course, you're absolutely right. I referred in my speech to working in beautiful landscapes and the whole board visited the Ranger mine late last year. I have to say the Kakadu National Park truly is an extraordinary landscape. We appreciate the, you know, the gravity of the task that we have ahead of us. Production at Ranger is going to finish in 2021. We are under a legal obligation. They, ERA is under a legal obligation to achieve closure by 2026. I'm gonna ask Megan Clark actually to talk shortly about just the governance that we have generally on closure. Because this is not just a specific problem to Ranger.
It obviously also applies to other mines here in Australia, including Argyle, which are approaching closure. I think it's important we talk more generally about that. Specifically in relation to the closure of Ranger, we have now completed the feasibility study on the closure. We've done a huge amount of stakeholder engagement as part of that. The estimated costs of closure, and I'm talking in U.S. dollars now, have gone up to $720 million. The cash resources of ERA currently sit at about $280 million. There is clearly a gap.
Rio Tinto is a shareholder in ERA, we have been absolutely consistent in saying that we will work with the Board of ERA to ensure that they have the financing available in order to fulfill their obligations on the closure. We are still finalizing precisely how the mechanics by which we will support them to do that. Megan, perhaps you could just talk a little bit more generally about how the Board supervises some of these, some of these issues.
Yeah. Thanks, Simon. First of all, we include closure in the design of our mines. In some cases, we continuously rehabilitate. For the governance of this, we have established a separate team, a central team that will look after all of our closure, all aspects of our closure, and that's in our G&I group. In terms of the Board, the Sustainability Committee has oversight. The board has oversight of our closure activities. At our Committee, we review the plans and also the strategy. In fact, at our board meeting this week here in Perth, the Sustainability Committee just this week reviewed our strategy and our annual plans for closure around the world and of course, our immediate priorities.
One of the things that Susco does reviews the plans, but our Audit Committee, which is chaired by Ann Godbehere and to be future chaired by Simon Henry, looks at the provisions that we make in regard to closure. We also have internally in the management team a closure steering committee. As Simon mentioned, we take this responsibility very seriously. We're working with ERA and its shareholders to meet those obligations. One of the important things that the Board does is visit our sites. November last year, the Board visited ERA, in particular to review the rehabilitation. We delved into three key areas. First of all, the management of water. We have obligations, very long-lasting obligations in the management and ongoing management of water. Secondly, the tailings.
The removal of the tailings. We'll put the treatment water and tailings into one of the pits that have been created. Thirdly, the rehabilitation of the site, as you mentioned, given that we're surrounded by both national park and World Heritage site as well. That rehabilitation is also done in conjunction and collaboration with the indigenous people. In particular, things like some of the, you know, some of the food as well that they take from that area. Making sure that we have the right species for bush tucker. Making sure that we're taking in that indigenous knowledge of how to rehabilitate the site.
Very important for the Board to do that as part of our governance and go walking on the ground and see that these plans are in place. As Simon mentioned, the Board was very comfortable that ERA is in position to be able to meet its obligations by 2026.
Thanks, Megan. Other questions? There's a gentleman at the back. About the third row from the back, third or fourth. Yep, there. Thanks.
Thank you, Mr. Chairman. My name is [Nick Chester]. I'm a proxy holder for [Chilla Bulbeck ]. My question is, the company has been quite vocal in its opposition to shareholders' request that the company set Scope 3 greenhouse gas emission reduction targets. However, a recent climate change report recognized the transition to low emissions could impact on the competitiveness of our iron ore product. Setting Scope 3 emission reduction targets to guide the company's strategy seems the most appropriate way to manage the recognized risk posed by the decarbonization of the steel industry as the world moves to meet its Paris Agreement. How does Rio Tinto plan to manage this risk, if not by setting Scope 3 targets? Which alternative metrics and targets do you propose to reassure investors that Rio Tinto's future strategic and capital expenditure decisions will reduce exposure to transitional climate change risk.
Yeah. Thanks for the question. It, I have to say, is very similar indeed to the question that I think I've just answered from Julien. To be clear, we will be producing scenarios to describe how the steel industry can decarbonize, but we cannot set hard targets for the actions of others. It's just impractical. What we can do is work with them, our customers around the world, to try and provide the products that will assist them in decarbonizing their part of the supply chain, and we can work with other stakeholders, such as the Energy Transitions Commission, to look at supply chain solutions to decarbonization, but we cannot set hard targets. Are there any other questions? Yes, there's a lady in black on the aisle there. Thank you.
Thank you, good morning. I have a question about carryover credits. Our company is a member of both the Business Council of Australia and the Minerals Council of Australia, both of whom have called on the Australian Labor Party to use Kyoto carryover credits in order to meet our Paris Agreement commitments. Climate scientists have warned that this would have the effect of further weakening our 2030 target. Given our company's explicit commitment to the Paris Agreement, and its vow to be part of the solution, not the problem, does the Board agree that Australia should be using Kyoto carryover credits?
We have clearly set out our ambition to decarbonize our business by 2050 in accordance with the Paris Agreement, and we've clearly signaled our support for the Paris Agreement. The TCFD, the targets that we will set for our business will set out the technical solutions that will enable us to achieve that. What we cannot do, of course, is to set the policy framework that surrounds that. That is the job of government, and we will work with government to try and ensure that that is supportive and provides a level playing field and the right incentives for us to achieve the decarbonization of our business. That applies here in Australia and around the world, wherever we operate.
We will, I am sure, have different solutions in different commodities, in different regions, driven by technological issues, economic issues, and policy issues. What we cannot do is dictate what the policy framework should be. We must work within the framework that is set by government. Are there other questions? Gentleman holding up a blue.
Chairman, my name is John Campbell from the Australian Shareholders Association. I've got proxies for, from 677 shareholders and about 856,000 shares, which I calculate to be less than one half of 1% of the combined vote of the dual listed entity. I've got several questions. One on, a couple on the annual report, one on remuneration, and one on board composition. Do you want me to ask them all in one hit or?
Let's go one at a time.
One at a time.
First of all, we spoke on the phone, of course, but.
Yes.
Thank you for coming to the meeting.
Not a problem. I think most shareholders would want to congratulate the Board and management on the excellent result and the very much appreciated shareholder benefits in terms of increased dividends and the buyback. The first question I've got is on Oyu Tolgoi, your mine in Mongolia. Having had the opportunity to discuss this, you mentioned that it was to be mined using a block cave mining approach, which was new to me. I understand that it involves getting underneath the ore body, drilling up into it and allowing it to collapse down onto the onto where you're undermining it.
I can see that that obviously carries some—on the annual report, comments about the difficult ground conditions that you've encountered, which were unanticipated. That obviously carries some dangers in terms of risks to the project's viability and to personnel. It, the difficulties you've encountered presumably push out the point at which free cash flow will start to be generated. I'd like you to comment on the choice, the risks, likely point in time, where it does, we do get to cash free generation because free cash flow generation, because it seems to me pretty important to the future of Rio Tinto given that you've invested $6 billion in Oyu Tolgoi.
I'd be interested to know what happens to the ground above the ore body as you mine it out. I'll assume that I think I'm right in saying it's in the Gobi Desert, it's presumably a fairly sensitive, ecologically sensitive area and the consequences for rehabilitation provisions.
Thank you. J.S., will you take that question?
Yes, for sure.
Not many questions here. That is correct. Block cave technology is we go underneath the ore body, and then we extract the ore from beneath, and so on and so forth. Answer the first question, and sorry, your last question is to say, as and when we draw the ore, yes, at the surface you start to see a subsidence zone that is being created, and so on and so forth. When the mine is closed 60, 70, 80 years down the road, this whole area will be totally protected. It's limited in terms of space, and it will be totally protected, so people cannot get into that zone and so on and so forth. All right. I think it's important to step back.
This block cave technology has been used by many mines, especially in Chile by Codelco. It's not a new technology per se. It has been used for many years. Has been used in Indonesia as well as another example. Has been used in Australia as well. If you remember, we had a small mine called.
Northparkes.
Northparkes, that's right. Not far away from 45 minutes from here. We've been using it for many years. There are risk. We understand the risk, and it's up to us and the management team with our consultants and experts, is to manage it, those risk as best as we can. That's the first point. The second point is as we are having this conversation, we are mining into the ore body. In order to create the infrastructure beneath the ore body, that's what we're doing as we speak. We have a better understanding of the ground conditions. Where we are is, the good piece of news is the cave is gonna cave. The old question is how quickly the cave is gonna cave. All right.
That's the work that is being carried out as we speak, all right? As soon as we have more information, we will inform the market accordingly. I think maybe, I can see we've got Steve Mac, which is on your right-hand side, who's our technical guru in this company, who knows everything about block cave, and Because there were so many questions in your questions, I can only propose at that, at the coffee break for Steve to answer any other questions you may have on this one.
I think the critical question then is how far the cash flow is delayed and the point at which the mine starts to provide free cash flow.
I can answer this question very, very simply. First of all, remember that the Oyu Tolgoi mine, there are two mines. One, there is an open pit, which is already generating cash flow since 2013 when we started to ship it, and we have extracted some money on the back of it. The second point is as and when we have a better understanding of the ramp-up, then we will inform the market accordingly. We have no doubt in our mind that Oyu Tolgoi is a world-class resource, and there is cash flow on the back of the very strong copper and gold concentration over there.
Next question.
Second question on annual report is in relation to the Koodaideri iron ore mine, the new mine in the Pilbara. It's the annual report indicates that it's an intelligent mine. I was just interested to know quite where that intelligence runs to.
I mean, I can envisage the sort of situation where you have a manager in a Chinese steel works that confirms an order for iron ore, and the next human intervention is the pilot stepping onto the bridge of a bulk carrier off the Pilbara coast and walking up to the computer and saying, "Siri, port 20, and put the tenders out over the starboard side." Is that the sort of position that you envisage, and what does that do for the W.A. economy and the employment and so forth?
Would you like to come and join our Growth and Innovation team? It sounds like you'd be a great addition to Steve's team. This is something the two of you should definitely get together over coffee and talk, because this is not something we can do, you know, in a few minutes. J.S., can you have a go at summarizing?
Yeah. I can try to have a go at this one. I mean, it's a smart mine, but not as smart as what you've just described, okay? There is still lots of room for improvement. I think there is a message for some of my colleagues in the back. Don't hide, Steve, on this one. What we are doing, we are introducing new technologies like autonomous truck that we've been using in other areas. We have, for example, something which is important for us is the first fully digital mine. What we're gonna have is in the cloud, we will have a copy of the mines, and therefore, we will monitor on real-time basis the performance of all the assets in the mines.
Therefore, we will be able to plan the maintenance in a better way in order to increase the availability of the assets and so on and so forth. Are we gonna have lots of people still working in the mine? The answer is yes. By using all those new technology, it will be a safer place and more productive place. There are around 100, maybe 150 new technologies that we will introduce in the context of Koodaideri. Now, you're touching on something which is very important, is there is still plenty of room for improvement. Because fundamentally, if I step back, the vision would be to link the blast furnace management of our customers, either in China, either in Korea, either in Japan, and how we run our mines in the Pilbara.
You know, the 16 mines that we have, the 1,700 km of railway and the four ports. If we were able to connect those dots, there would be massive efficiencies, benefits in terms of supply chain management and so on and so forth. That's the vision. We're not there yet, we are making progress. Really, the Koodaideri will be an important steps in that journey.
Next question.
Winu. The deposit in the Pilbara that's a copper-gold prospect that's generating a good deal of local interest, not mentioned in the annual report, or at least if so, very, very obliquely. What is the exploration program, and will it likely lead to a statement in 2019 as to whether it's a find or not a find, and, therefore, feature in next year's annual report?
So, um—
I hope so.
Again, you Steve is also our Head of Exploration, you two definitely need to get together. In fact, the whole board met the Winu project team yesterday afternoon, which was great. They are in very good spirits, as you would imagine. I mean, it is early days. Look, we should stress that. This is a very exciting project for us, and the copper is one of the areas where we want to grow. Australia, of course, is a country where we are very happy to grow. This is an exciting find. At this stage, we shouldn't get ahead of ourselves.
There's an awful lot of work that we need to do on drilling out the deposit and finding precisely what the scale and the grade of the resources will be. That is a process that we are targeting achieving during the course of this year so that we should have a sense of whether this is a Rio Tinto-sized deposit in the early part of next year. We think we have a mine. The question is, do we have a mine which is large enough for Rio Tinto? It's very exciting, but early days.
Next question would be on the remuneration report. It's actually not so much a question as a statement of our position on it. Do you want me to wait until you get to that in the agenda or?
No, no. Go. Please ask now.
Well, I think our position overall is that we note the very high level of remuneration, also that it's not dissimilar to other large companies of Rio's status. The issues that concern us are, well, the high level I guess does concern us in that it worries us that the executives that receive such high levels of remuneration or have the capacity to receive it if they achieve the targets that are set, might be tempted to make decisions that involve greater risk and decisions they might not have taken had it not been for that high level of remuneration, i .e., the risk profile is skewed by the level of remuneration they're getting. That's the first point.
The second point is in terms of our policy. Our, our policy is that short-term incentives should not exceed base salary. Well, yours substantially do, probably by twice in most instances. The long-term incentive, we prefer to see having two criteria for measurement. A relative TSR measurement, comparing executive benefits with shareholder returns, but also an absolute one that would limit the benefits in the event the shareholder returns are negative. That we don't see there is in the policy.
There are aspects that we don't like about it, but by the same token, we appreciate the information the Board gets is much better qualified to make decisions about levels of remuneration and the competitive environment in which you live, and therefore, we have decided to support the report.
Thank you. Look, I'm going to ask Sam to answer the specific questions you raised there in relation to alignment with the strategy and the risk appetite of the Board and the STIP and the LTIP. Just, I mean, to give, I suppose, some context for this, I mean, of course, the Board is very sensitive to the issues of growing inequality in society generally. We recognize that executive remuneration is a very sensitive issue. Having said that, as J.S. outlined in his presentation, it has been an extraordinary year of performance. Record returns to shareholders, significant progress on strategy, real progress on growth projects, and also de-risking the business, to your point about, are they taking too many risks? De-risking the business from a sustainability point of view.
I mean, I think the context is one that supports a good level of reward for our executives. Sam, could you deal with the specific issues that were raised?
Yes, Mr. Campbell. I think, certainly just to build on what the Chairman said, I think we are, you know, very aware of the overall sensitivity in terms of levels of executive pay. What we're always trying to do is get a balance that rewards performance and yet is also competitive in the marketplace. Just dealing with the second of those first, you know, obviously we benchmark, as you rightly suggest, against not only global mining companies but also the FTSE 30 major companies in order to ensure that pay is competitive. I think the important point around alignment and performance is, as the Chairman and J.S. has indicated, this has been a year of very strong performance.
66% of the CEO's pay is actually entirely performance related, and 50% of it is actually deferred into shares. I think that there is long-term alignment in terms of the ultimate performance and the ultimate vesting, and the quantum at vesting all depends on the share price, much of it in 5 years' time. I think we have to bear that in mind when we look at this total single figure of remuneration. That is by no means all cash today, and it only accrues and vests if the share price does well over time. I think the other important point is that this isn't just about financial metrics. It's also in terms of long-term alignment about the values and sustainability, many of the things that we've been talking about in this morning's session.
70% of the short-term bonus is tied to financial metrics, and the hard metric also of safety is included in that. It's 50%, it's 50% purely financial, 20% safety, which is very important. Against that measure, we didn't do as well as we would have wished last year. Against the financial metrics, it was very strong. There's a further 30% that is based on individual targets, which are all very closely aligned with the long-term objectives of the company and the sustainability of the business. You know, we're always trying to find a balance here.
If you look at overall compensation for the CEO last year, actually the fixed element only moved up fractionally, more than only by 2.5% less than the employee group as a whole. The bonus actually was at a slightly lower level than prior years. The increase was a result of share price appreciation, but also as a result of the fact that the year of comparison was a split year. I think by the standards of industry as a whole, recognizing this has been a year of great performance with $13.5 billion returned to shareholders, actually we think that it was a very fair reward and well-earned by the CEO, who did an outstanding job.
Thank you.
Thanks, Chairman.
Do we have another question?
The final one.
Right.
This is on the Board composition. We note that your personal background in geology and mining, mine management is important in the skill set of the Board. We note that there's not a lot of other mining and geological and technical background in board members, generally scientists, accountants, lawyers, one engineer. My question really is about the capacity of the Board to effectively question the technical assertions of management as they come up in various decision-making processes. The independence of the chair is an issue that then becomes relevant because, you know, the chair of a large entity like Rio Tinto, I guess, has very close relationship with management.
I think you told me that the you have a Chairman's committee with the CEO and the CFO, which met weekly. That the sort of level of interaction between the Chair and senior management tends to break down independence over a period. The question is, can you maintain it over your term as Chairman?
Yeah. We just correcting a matter of fact, we don't meet weekly, but it is an important mechanism for the three of us to communicate. I think you underestimate the depth of mining expertise that we have on the Board. To start in a more general sense, you don't want a board where everybody has the same set of skills. A good board is one that actually brings a diverse range of experience and skills and background and cognitive styles together so that you get a range of views on any particular topics. I think we are extremely well-covered. I mean, David at the end of the table, as you, he's presumably the engineer that you were referring to.
David has not only built a lot of mines around the world when he was working for Fluor, but he has also been directly responsible for running a lot of mines. There were coal mines in South Africa that fell within his job as Chief Executive of Sasol. Megan, I think I'm right in saying, was one of the first women in Australia to get her underground ticket as a mining executive geologist, and then you did a PhD in geology also. That is, she may not be an engineer, but she actually has real, you know, at the coal face, not mine, actually. It's hard rock rather than coal face, real mining expertise. Of course, as you say, I also have a mining industry background.
In addition, we have a huge amount of natural resource experience. I mean, there are some differences between oil and gas and mining, as Jakob is discovering currently with his move into Rio Tinto. Actually, there are a lot of similarities as well, particularly in terms of above- ground risks, environmental, social risks, and so on. We have great expertise with Simon Henry, who's former finance director of Shell, and Sam Laidlaw, who's worked for all kinds of, well, still does, actually, executive chair of an oil company. I think we do really cover the ground as well as bringing in all the other skills that we and judgment that we need to deal with all of the complex issues that we have. Thank you for your questions.
Can we throw it open to the floor for, just behind John, there's a gentleman holding his hand up with a white shirt.
Thank you, Chair. I'm [Louis de Villiers]. I am here under proxy from Mrs [Alexandra Elizabeth Moores]. I was really encouraged by comments that both you and the CEO have made about what Rio has been doing recently and where it's intending to go. I think there's been a lot of focus on climate change recently, the fact that you seem to be taking that really seriously is highly encouraging. Just this week, however, there's also been the report from IPBES, which is probably much less well known, which says that we're not facing only a climate crisis but also an ecological crisis. As encouraging as your comments are around safety of employees, I'm just wondering about the concern for the safety of humans on the planet and for the planet itself more generally.
Just to preface, the question which I'll come to now, if I just shuffle my papers. You have confirmed concern and action on Scope 1 and 2 greenhouse gas emissions, which is very encouraging. What one wonders is, are there dates attached to the targets for these emissions? What will the baseline year be? Are we looking at 2025, 2030? What is the intention there? How will the company ensure these targets are consistent with the goal of the Paris Agreement to limit global warming to no more than 1.5 degrees Celsius? Is there intention for external verification, et cetera, or is it all in-house?
Good. Thank you for that question. The process of setting the targets is ongoing. There is a huge amount of analysis and work being done at the moment on that. Peter Toth. Peter, can you just stand up? Would you mind? Peter Toth is our Head of Corporate Development and Strategy, and importantly, he is also the individual who is responsible for climate change. That actually, I think, is significant because it just shows that climate change is now central to the way that we think about corporate development and strategy, and Peter is the person who's working on the target setting. The two of you might try and get together after the meeting.
To try and summarize all of the extremely complex work that Peter is doing at the moment, we are analyzing this asset by asset. We are looking at the technological solutions that we might use. We're looking at the economic consequences of those decisions, and we're also trying to put that in the context of the legal, fiscal, and regulatory environment in the various jurisdictions we work. It's a multidimensional problem. What we are aiming to do is to create, for each asset, abatement curves, the methods by which we can reduce our GHG emissions to achieve carbon neutrality by 2050 in accordance with the support we've given to the Paris Agreement.
We are currently working off a 2-degree scenario, 2 degrees Celsius scenario, because that was the scenario that was established at the time when we started this work. Obviously, we're well aware of the new scenario work looking at the 1.5 degrees scenario, and I think we will progressively transition to that. I have to say, it doesn't make a huge amount of difference if you track the two pathways, the 2-degree scenario and the 1.5-degree scenario. They don't deviate markedly until 2040 and beyond. I don't think that the scenario work that we're doing using the 2-degree scenario is gonna be significantly different from a 1.5-degree scenario on the sort of medium-term targets that we're setting, but it certainly will impact the longer-term targets.
On the specific questions you asked about what is the baseline going to be? How far will they extend? I can't answer that yet, but we certainly will be in a position to answer that before our existing targets expire in 2020, and we will certainly produce a, you know, make sure that that is in the public domain so that people can interrogate us on that. Again, on the question of verification, we must talk about that. Clearly, at the moment, PwC, our current auditors do actually verify our greenhouse gas emission numbers. We're, as you know, in transition to new auditors as we speak. Again, we haven't at this stage, I'm looking at Ann now as Chair of the Audit Committee.
Far as I'm aware, we haven't had any discussions with KPMG about the verification of ESG.
Can we—t hat was just a no. That's fine. It's a work in progress. Can we take another question? Yes, there's a gentleman here with a yellow card. Yes, sorry, let's take that one first. I'm sorry. I'll come back to you, sir.
Mr. Chairman, thank you for listening. I, my name is [Paul Slyth], and I'm simply asking a question. Has the Board considered anything other than what the Paris Agreement might be? Everyone continuously talks about the situation of CO2 being the problem in the world, but it is not a proven science, and I wonder if they have considered the submission by the Council for the National Interest, who have stated that CO2 is not a pollutant and provided a comprehensive proof of this. Have you considered that?
It is in the nature of science, of course, that you can always disprove a hypothesis. You can never ultimately prove it. That's just the nature of science. The evidence, so far as we are concerned, is overwhelming. Frankly, even if it wasn't absolutely overwhelming, I think this is a subject where the consequences of getting it wrong are so catastrophic that one would adopt a precautionary principle. We do accept the science of climate change, and we are positioning our company to be part of the solution to that problem. You're quite right in saying that it is in the nature of science, unlike religion, that you cannot prove absolutely that it is true. Oh, yes. This gentleman at the front here was about to ask a question. There's the one here.
Can we just check here? Yes, I'll come to you, sir, shortly.
Thanks, Mr. Chairman. [Derek Miller], long-term shareholder and long-term worker in the Pilbara. I want to maybe change the tone from climate change to something else. The thrust of my question is industrial relations. Not from a union point of view, but from your business strategy point of view. In your annual report, I think on page 72, industrial relations as a risk gets a fairly brief mention, if I could put it that way. The thrust of it is, just mentioning quickly in passing that there's some logistical risks from industrial relations. I suspect there's more than that. You mentioned the mitigating issue is geographical spread of the business, that you can presumably produce copper here and copper somewhere else if there's a strike. Obviously, that's the case.
My concern is industrial relations in the Pilbara, where the whole system is just one rail system and three ports. So you don't have that geographical diversity. The Pilbara has been going for nearly a bit over 50 years, as a matter of fact. There was 25 years, half of it was absolute industrial disaster, chaos, and hopelessly low productivity. I can verify that. I worked in it. The second half, thanks to Robe River initially, and then through Hamersley Iron, resolved those issues with individual contracts, workplace agreements, Australian workplace agreements, and so on. The golden results you produce today are largely a reflection of that. If you'd stayed in the old world, you wouldn't be where you are today, I think is a fairly confident statement.
With the changes coming potentially likely in the government, we've got a potentially worse situation than we ever were in the past. We've got Shorten now saying he's gonna run the country like a union, that's a quote I've seen somewhere. We've got the ACTU with their change the rules, change the government situation, threatening, frankly, I think, taking it back to the seventies in industrial relations. That is a real risk and worry, I think. How well are you prepared for this potential change? I guess you've got to say it's potential. It's certainly something that needs to be looked at. Secondly, how robust are your systems, this is the individual contracts, to withstand what legislative changes you might be faced with the government dominated by the ACTU?
Thirdly, do you have anyone on the Board or in the executive with the experience of that past time and what it was like? The final point is the Pilbara is seen as a golden area for the union movement. It was certainly that in the past, and I suspect they'll be trying to head it back to that in the future. Thank you.
Well, let me answer that in general terms, and then I'm going to ask J.S. just to talk a little bit about employee engagement more generally. We will work with any future government in Australia, and we will work with them to try to ensure that we create an environment where businesses can invest and where they can create jobs and wealth and economic growth. I think the key issues for us, regardless of which government takes over here, and we've discussed some of them, but they are reliable, affordable, and sustainable energy policy. They're maintaining the competitiveness of Australian business. They're global trade because we depend absolutely on global trade.
Finally, last but not least, it's all about creating the skills within the workforce that will enable Australia to remain competitive for generations ahead. J.S. has talked about the extraordinary pace of change that is taking place in technology. We need to make sure, and we're working very hard to ensure, that we have up-skill our own workforce and have the skills and capabilities that enable us to take advantage of that. J.S., why don't you talk a little bit about, you know, staff engagement?
Yes, for sure, Simon. I mean, first of all, you asked the question, do we still have people in the leadership team who knows the good old time? I think I can see at least three of them just in front of you. Yes, we haven't lost.
The knowledge on this one. We try to engage with all stakeholders wherever we operate. That's as a matter of policies. We do it in a respectful way. That doesn't mean that we agree with everything they ask. Sometimes agreeing to disagree is a form of agreement, if I may put it this way. We and we will continue to do it, right? What we want at the end of the day. Let's step back. What we want to do, what we want to achieve is to have a globally competitive business. Using the example of iron ore, I mean, our competitors, yes, we have a few competitors. I can't remember where their building is, you know, along the river. One is very tall, the other one is slightly shorter, if I may put it this way.
You know, all competitors are in India, all competitors are in China, all competitors are in Brazil, and so on and so forth. At the end of the day, what is important is to have a respectful but grown-up conversation with all stakeholders. Not only the unions, the employees, the goal, and to make sure that we continue to have a globally competitive business. You know, iron ore is no different from any other business. Today, we are experiencing lots of volatility, and we need to remain competitive. I don't know who's gonna be in power in the next two weeks. I'm not sure anybody knows at this point in time. We will engage, but the important piece is to remain competitive in the global landscape.
Thank you. Finally, I'm coming to you. Thank you for your patience.
Thank you. My name's [Barry Cusack]. I am a shareholder, and I have been associated with Rio over many years. My question relates to mining companies recently have been commenting on their concern about the future supply of graduates and technical expertise for this industry. Does Rio share that concern, and if so, what are your strategies to deal with it?
Yeah. It is a very good question. It is true that there are fewer undergraduates choosing to study the traditional disciplines of mining engineering and metallurgy and so on in countries like Australia and the U.K. It's much less true in other countries. It is still the case that it is perceived as a very attractive course to pursue particularly in South America and so on. I think that the issue that we face here is that the mining suffers from an image problem. It is perceived, you know, to be a dirty, dangerous, old-fashioned industry. Frankly, that perception, I think, is based on an industry that might have existed 10 or 20 years ago, but really doesn't reflect the industry as it is today.
I mean, J.S. talked about some of the extraordinary work that we're doing on R&D. We have built the world's largest robot. You know, the joint venture that we have with Apple on ELYSIS, where we, you know, we are absolutely breaking new frontiers on trying to decarbonize the smelting part of the aluminium value chain. There's a tremendous amount of hugely exciting work going on in this industry, and I think it's up to us to just communicate that more effectively. That will then, I hope, start to attract people back in. Of course, the skills that we are gonna need in the next 20 years are also different from the skills that we probably needed 20 years ago.
We're not just competing for mining engineers, we're also competing with Google or anybody else for data scientists and data analysts. In this case, I think technology is our friend. As a large part of the work that used to be done in the Pilbara is now done here in Perth. Perth is a lovely city to live in. It's much easier to compete with Google and Microsoft and others when people are working in pleasant cities like Perth and Brisbane and Montreal, where we've established our hubs. Part of the thinking behind that model was that would enable us to compete effectively for, as what you say, is a scarce resource. We're very much aware of it. Thank you for the question.
Gentleman at the back with the red shirt. Oh, sorry. Jumper.
Thank you, Mr. Chairman. [Tim McLain] is my name. I had 15 years working for CRA and RTZ subsidiaries way back. It might be a thought bubble, but listening to your Resolutions 18 and 19 and the concerns about trying to dictate to your customers as to what targets they might set with respect to global emissions. In a parallel level, I was really pleased that the industry as a whole has taken an industry approach to dealing with tailings dams in the aftermath of the disasters, recent disasters with Vale. Vale, BHP, Rio Tinto, and Fortescue are all very professional organizations which no doubt have a very similar approach on climate change.
Why can't the iron ore industry get together, 'cause those four companies represent a huge proportion of the global iron ore seaborne trade, and put pressure on your customers in China, Japan, Korea to set some reasonable targets with respect to global greenhouse emissions?
Yeah. I think there's no question that we need to have cooperation across the supply chain. We need to be conscious, of course, about antitrust implications of all of this. There is no question that we have to find more collaborative ways of working together. Looking at the whole supply chain, I mean, it isn't just the mining part, it's the shipping part, and then of course it's the steel manufacturing, and then it's the end user of the steel. There is a hugely complex task trying to take here.
This is why we are trying to be as transparent as we can about the challenges that we face in that part of the value chain that we can control, and we are absolutely up for collaboration with other players within the industry and within the supply chain to try and come up with joint solutions. Ultimately, let's be clear, industry can't solve this problem alone. This is going to require government policy and supranational policy to ensure that we create a level playing field, and that we create the right incentives for everybody to invest in the technology that is going to be necessary in order to deal with the challenge of climate change. Any more questions? I think we are coming towards the end of the questions.
This is your last opportunity to ask a question if you. There are no more questions, and the screens are slowly rising. Ladies and gentlemen, I think that we have had a good discussion, and the time has come for us to take a vote on the resolutions, which I've determined should be taken on a poll. Many of you have already sent in your proxy forms, and you do not need to vote again. Those of you who have not appointed a proxy are now being eligible and wish to vote, should complete your voting card. These are on the back of the yellow and blue admission cards, which you were given when you arrived earlier this morning. Please now cast your votes by filling in your name and voting intentions and signing the voting card. Sorry, do you need a voting card?
Could someone just assist this lady? Thank you. Please either hand your card to the registrar staff or post it into one of the ballot boxes at the exits as you leave the room. If you have any difficulty, one of our attendants will assist you. The polls will close approximately 15 minutes after the end of this meeting. Scott Hudson from Computershare Investor Services has been appointed as the Returning Officer for the poll, and the results will be announced as soon as possible after this meeting and will be posted on the rio tinto website. Ladies and gentlemen, that brings us to the end of our meeting.
On behalf of the Board, I would like to thank you all for your participation and your continued support, and I hope you will join my fellow directors and members of the executive team for some light refreshments in the Mallee and Eucalypt rooms opposite the foyer to this auditorium. As you leave, please remember to hand in your completed poll cards. I now declare the meeting closed.