Good morning, everyone, both here in London 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 take a moment to listen to this short safety announcement.
Welcome to the QEII Center. Please take a moment to listen to the following safety message. In the unlikely event of an evacuation, you will hear a message through the public address system. Follow the instructions given, then make your way to the ground floor, where you will be directed to the assembly point. Do not use the lifts. Please take a moment to make yourself aware of the escape routes in your area. Thank you, please enjoy your event.
It's a pleasure to introduce my fellow members of the Rio Tinto board. Starting on my far left, David Constable, Moya Greene, Simon Henry, Ann Godbehere, who is Senior Independent Director and Chair of the Audit Committee, Steve Allen, our Group Company Secretary, JS Jacques, our Chief Executive, Jakob Stausholm, our Chief Financial Officer, Megan Clark, who Chairs the Sustainability Committee, Sam Laidlaw, who Chairs our Remuneration Committee, Simon McKeon. Michael L'Estrange, who Chairs our Australia Forum, joins us from Sydney via the video link. Over the past year, we've said farewell to Paul Tellier, who retired in May, 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 our AGM in Australia.
Following Ann's retirement, Sam Laidlaw will become Senior Independent Director, 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, Jakob. I would like to thank all our directors, past and present, for their hard work, insights, commitment, 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, allocating capital with discipline, we aim to create long-term sustainable value for our shareholders while safeguarding the environment and meeting our obligations to wider society. In 2018, I'm pleased to say we did exactly this. We delivered underlying earnings of GBP 8.8 billion.
We also continued to simplify our portfolio, achieving $8.6 billion of pre-tax proceeds from the sale of our remaining coal operations, Grasberg, and other non-core assets. Importantly, these divestments did not come at the expense 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 JS, the executive team, and all of our 48,000 colleagues around the world for a year of significant progress and achievement. During 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 tell 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 achievement of the UN Sustainable Development Goals. The result was a refreshed approach that ensures that sustainability considerations are integrated into all of our operational and strategic decisions. Our efforts start with a commitment to the safety, human rights, and the well-being of our employees, suppliers, and local communities. This year, three of our colleagues lost their lives at work. We must redouble our efforts to ensure that safety is always our top priority. We're also trying to improve the well-being of our people in other ways.
For example, our business in Australia was certified in 2018 by White Ribbon for our work to eradicate domestic violence in our own 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 remote 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 firsthand what we are doing well and where we need to improve. Climate change represents perhaps the greatest long-term threat to our business, and we are determined to be part of the solution.
Just a few weeks ago, 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 two degrees centigrade. 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 the existing targets when they expire in 2020. Our products also have an important role to play in the transition to a low-carbon economy. For example, aluminum for lightweight, energy-efficient transportation, and copper for electrification and renewable energy. Our products have shaped the skylines of Shanghai and Singapore. We've helped airplanes fly and cars drive. We bring power to living rooms around the world and help to make smartphones smart. After almost 150 years of supplying the world with iron ore, aluminum, copper, diamonds, and titanium, we have world-class assets and some of the best people in the industry. We forge new partnerships with customers, such as Nespresso, to lead on sustainability, and we've built the world's largest robot.
Our aim is to develop a diverse, inclusive culture where everyone has the opportunity to realize their potential and to contribute to our 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'm absolutely delighted to share that 2018 was another very successful year for Rio Tinto and for our shareholders. It was a year where all 48,000 employees move our strategy forward. The year we delivered strong financial results. The year we created innovative new partnerships. We renewed our sustainability approach. The year we invested in our business and our people. We progress 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 Tinto's 146-year history. We are not complacent. Our future is bright. Our purpose is clear. We produce the materials that are needed to help the world develop. 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 expectations on safety in 2018. We remember Francis, Muzy, and Daniel, our colleagues, who went to work last year but did not return home. It 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, 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 the global tailings management review.
The ICMM will work with external experts on the broader set of stakeholders to agree a path forward. Any solution 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. 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%, and we delivered cash of $11.8 billion from our operations. We achieved $8.6 billion pre-tax in asset sales with exit from Coal and Grasberg.
We also invested $5.4 billion in our 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 kilometers long, delivered iron ore from our mines in the Pilbara to our port in Cape Lambert in W.A., Western Australia. Today, we have completed more than 1.6 million kilometers in driverless mode. We are confident that we have laid strong foundation that will accelerate productivity drive in 2019 and beyond. We are on track to deliver $1.5 billion per year in additional free cash flow after tax from 2021. In 2018, we also progressed exciting growth projects in iron ore, in copper, and in bauxite. Amrun in Queensland and Koodaideri in Western Australia, our most technologically advanced mine, are just two example of it.
Winu, our discovery of copper in WA, also looks promising. We are also progressing other growth options. For example, on our copper mine Resolution 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 PFS 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. We have activity in over eight commodities in 16 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 deliver on our promises, $13.5 billion of cash returns to you, our shareholders. This great outcome reflects 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 includes the taxes and royalties, and wages and salaries we pay, plus our investment in building local supply chains and communities, amongst other things. I fundamentally believe that the mining industry can be part of the solution. A safe and profitable mining industry benefits the world 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 require the materials we produce. An average onshore wind turbine contains up to five tons of copper and 160 tons of steel. A typical electrical vehicle has around 80 kgs of copper and 36 kgs of nickel. We are well-placed to supply the green materials of the future. As I mentioned in our climate change report, we are also working on reducing our own footprint. Today, as we are having this meeting, 71% of the electricity used across our business comes from clean, renewable energy sources. We are investing more in this with small-scale solar demonstration projects across more than 20 of our sites. We also launched a new partnership to further develop greenhouse gas emission-free aluminum smelting technology. This partnership is called ELYSIS. It is a joint venture with Alcoa, supported by Apple and the governments of Canada and Quebec.
It is a breakthrough technology, last week we announced that the next steps will be taken at the new ELYSIS R&D center at our complex, Jonquière, in Quebec. In another first, we also announced that we would provide ASI-certified aluminum to Nespresso. Rio Tinto, your company, is the first company to have its metal certified by this independent body. I was also personally very excited to launch a Pioneer Lab concept that we are calling Rio Tinto 4.0. We launch 4.0 because the world is changing. Soon, even here at Rio Tinto, data will be one of the most valuable assets. Cars, trucks, and trains will drive themselves. Our equipment will be printed, not made. Machines will be able to communicate with each other and accelerate our understanding of the world around us. This new world will require a fundamentally different vision. Rio Tinto 4.0 is that vision.
Well, we like to call it an open-source vision because at the end of the day, we really want to harness the power of collective thinking, including that of our employees. This year, in 2019, we opened our Pioneer Lab concept in Brisbane. Six employees, chosen by their colleagues, will work at the lab and help us solve some tough problems and push the boundaries of the possible. We cannot wait to see what they come up with. We continue to invest in our communities. GBP 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 in WA, Western Australia. 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 our operations.
This year, we launched a partnership with the government of WA and TAFE, a technical college, to develop the first nationally recognized courses in automation. These courses will train and certify people in new skills, allowing them to transfer more easily so that people can follow opportunity wherever they find it, whether or not it's at Rio Tinto. I like this example a lot because it shows that our company can be part of the solution to the issues all communities face. We can say with some sense of accomplishment that 2018 was a successful year for Rio Tinto. One in which we realized our ambition on one hand to diversify returns to our shareholders, to innovate, to grow, and lay the foundation for future growth and future innovation on the other hand.
Before we look forward, perhaps it is worth taking a look back, not just at 2018, but the past three years. We can say we have generated over GBP 46 billion in cash. Two-thirds of it, GBP 34 billion, was cash from operation. We delivered GBP 20 billion in shareholder returns and declared a further GBP 9 billion, so that's GBP 29 billion in total. That is equivalent to over 50% of our market cap at the beginning of 2016. We've reduced our net debt by GBP 14 billion. We've grown the company by 1.4% every year. We reduced our sustainability vulnerabilities through the sale of our coal assets and Grasberg. 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 and Koodaideri to [Elysis].
We strengthened our focus not just on cost, but productivity, our mine to market program. 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 4 P 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, the productivity of our operations, a disciplined allocation of capital, and maintaining a strong balance sheet. We will continue our strong focus on value over volume, high value growth, and our 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 suppliers, and customers and communities and partners help make Rio a success. We will continue to stick to our values and commitment to operating the responsible way in the year ahead. 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 that future may bring, we will always aim to deliver superior value as we produce the materials essential to human progress. Thank you. Back to you, Simon.
Thank you, J.S. The notice of meeting containing the text of each resolution was published on our website on the 28th of February and posted to shareholders on the 11th of March. The notice contains supporting notes designed to give further clarification and background. Copies of the notice meeting are available in this auditorium. If anyone does not have a copy, please raise your hand and an attendant will bring you one. You should note that resolutions 1 to 16 will be dealt with under the joint electorate procedure with Rio Tinto Limited shareholders, who will cast their votes on these resolutions at the corresponding meeting in Perth, Australia on the 9th of May. Resolutions 1 to 16 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. We have included a resolution seeking authority for Rio Tinto plc to make political donations. We do not intend to alter Rio Tinto's policy of not making political donations. However, some of our activities in the ordinary course of business may fall within the widely drafted definitions of political donation and political organization under U.K. law.
This authority is therefore being sought as a precautionary measure to ensure that Rio Tinto does not inadvertently breach the law. Resolutions 17 to 20 will be voted on by Rio Tinto plc shareholders only. These resolutions, of which resolutions 18 to 20 have been proposed as special resolutions, relate to the directors' ability to manage the capital of the company and to call general meetings of the company on no less than 14 days' notice if necessary. Resolution 18 relates to the disapplication of statutory preemption rights, where we have sought authority to increase the issued share capital by 5% rather than the maximum of 10% permitted in accordance with the U.K. Pre-Emption Group's principles. The required notice of the meeting has been given. With your consent, I propose that the notice should be taken as read. Is that agreed? Thank you.
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 on any of the resolutions, please hold up the yellow card in the lanyard you were given at registration. To ensure that everyone watching by video and 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 the organization. Kindly return the microphone when you have asked your question. As many people usually wish to speak, may I ask 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 poll 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 poll card. I now invite you to ask any questions you may have on the 20 resolutions being considered today. Number 3, can you take the gentleman just behind you? In front of you. That's fine.
Good day, Chairman. Robert Muriel, also a member of the United Kingdom Shareholders Association. Page 294 and 295 of the annual report shows the shareholdings of major investors. I found it quite incredible that the Rio Tinto Limited is 50% in those hands, about 20 companies. For even the PLC, it comes up to 39%. It worries me that in case of the Rio Tinto Limited, one shareholder alone has over 30%, and that seems strange in relation to normal practice about having 30% and not doing anything else about it. I notice, we've had this long-term relationship with Chinalco, which seems a bit confusing too. Anyway, that isn't my question. It's an observation which I find confusing in the way those two pages are set out.
When it comes to Mozambique, it's horrifying to me to think that the SEC in America and the Australian equivalent in Australia, to say nothing of the FCA in this country, all think it's incumbent on them to pressurize you because of an accounting business in relation to Mozambique. I notice you are going to deny this business for the SEC and the Australian outfit, but you've already given the FCA $27 million, which seems to be, to me, something to do with a precedent for the others, which is a pity. It comes not only to the company, but also to the specific people who've been put out of this company, Mrs. Albanese and Mr. Elliott.
Those two men left here with a huge fortune, and although you don't expect to pay any money, there must be legal fees at the moment, and I'd like to hope that those two men will pay their own legal fees. It won't be a burden on Rio Tinto itself. Having said that, I don't want to hold you up, but I was intrigued to hear Mr. Jacques talking about the link with Alcoa. All right, I understand joint ventures in this business, but I don't quite know what the consequences are in relation to what I thought were two major companies competing with each other, Alcan and Alcoa. I'd be interested on that.
Thanks very much.
I'd be interested to hear what you have to say about Mongolia, where we seem to be putting money in without yet getting any return from it.
Sorry, could I maybe stop you there and we can answer those questions?
Well, it's a simple point. The last one is, you're out of coal. Are you also now out of uranium? Thank you.
Thank you for your questions, J.S. I'm going to pass the question on the Alcoa JV to you. Let me first of all address the question of Mozambique. This, of course, was an issue that we discussed in some detail at the AGM last year. We have settled with the FCA, as you point out, in relation to this matter. They maintain that we should have impaired our investment in the coal assets, the Riversdale coal assets in Mozambique, six months earlier than we did. However, importantly, they found absolutely no evidence of systemic failure in Rio Tinto, nor did they find any evidence of deliberate fraud. It was a large fine, but that is because FCA fines are proportional to the market capitalization of the company, and Rio Tinto is a very large company.
Far as the SEC and ASIC are concerned, they are pursuing much more serious claims. They are alleging that a former CEO and CFO of Rio Tinto deliberately withheld information from the auditors and from the board in relation to the investment in Mozambique. We are vigorously defending those accusations, which we do not believe to be true or justified. The individuals are covered by standard directors and officers insurance, so that will cover a large proportion of the legal fees that they will need in order to defend that action. I should say that both of them departed from the company for reasons completely unrelated to these allegations about the accounting practice and the provisions that we made in relation to Mozambique. Jay, do you want to cover Alcoa and the ELYSIS JV and also Mongolia?
Uranium as well? Okay. I'm going to start with the aluminum joint venture that we have with Alcoa and Apple. Let me step back and try to explain in very simple terms how we produce aluminum. You put alumina, which is a white powder, in a pot. You bring lots of electricity in order to smelt the alumina into aluminum. To bring the electricity into the pot line, you need to have an anode, which is currently made out of carbon. As and when you bring the electricity, you consume the anode. You release CO2 into the atmosphere. That is something that the industry, the aluminum industry, has been working on for, I don't know, at least 25 years, because when I started 25 years ago, people were working on it already.
What the situation is to make it work, you need two important pieces of technology. One is your understanding of the pot lines, how to design them in the most effective way, and the ability to produce anodes which are not made out of carbon, but made out of ceramic. If you use an anode made out of ceramic that you don't consume it as and when you convey the electricity across it. We have the technology in relation to the pot lines. Alcoa has the technology in relation to ceramics. Unless you put those two together, we're never going to crack the code. The benefits here will be clearly for Rio Tinto and Alcoa, and there will be 2 types of benefits.
The first one, which is very important, is about climate change, CO2 emissions, but there will be some benefits in terms of cost as well. As I said, at least for the last 25 years, we've been working on it. Maybe we find a way. Maybe we have found a way to crack the code for the benefit of Rio Alcoa and for the benefit of the industry. Although we are competitors, on this one, it's important to take the high ground and to develop a technology for the benefit of all. That's where we are in relation to ELYSIS. As I said in my speech, it's the first industrial installation will be installed and operated in our second operation in Canada, and that the announcement we made last year.
The technology works in the lab, in a small setup, but now it's important to ramp it up, and we take it from there. We are pretty confident that we may crack the code on this one. As I said, for the last 25 years, we've been working on it.
You as major competitors elsewhere.
Oh, absolutely. Every day, every shift of the week. Absolutely. Don't worry about this one. No. There was a question about uranium. Yes, we are in the process of selling our uranium assets in Namibia, and we expect the closing in the second quarter of this year. That's a piece, but we still have some uranium properties that we have mainly in Canada. At this point in time is we keep those properties in our portfolio. We're not going to exit them because nobody knows what the demand for uranium could be in five, 10, 15, 20 years down the road. It's important for us, at this point in time, to keep the optionality open in relation to uranium.
Thank you, J.S. Let's take another question. If I could just remind you to restrict yourself to one question, if you would, so that we give everybody a chance to speak. Why don't we take the gentleman there near number 2? Thank you.
Good morning. My name is Paul Robson. I have been to Brazil on behalf of London Mining Network. I have examined the effects of the collapse of tailings dams in Brazil. This was mentioned by Monsieur Jacques a few minutes ago. I understand that he's saying that your company, Rio Tinto, is working with ICMM to find a way forward about the issue on tailings dams. What has been clear from looking at the impact of these two collapses in Brazil is that due to the force with which leave a tailings dam when it collapses, the effect can be catastrophic, and it's far from clear that the effects of the collapse of a tailings dam are fully remedial. The Rio Doce, it is difficult to see how it will be recovered within our lifetime.
What these two incidents in the last four years in Brazil also show is that both of these dams were said to be stable, which suggests that the mining industry as a whole has a problem here. That it is unclear whether there is actually an adequate system for carrying out risk analysis and due diligence about the stability of tailings dams.
It is unclear how these analyses are carried out, whether a full analysis is done, and whether the consultants who carry out this kind of analysis are actually prepared to be fully honest and open about what the risks are. It's unclear whether we have an adequate independent system for doing due diligence about tailings dams, and it's also unclear whether the mining industry as a whole and individual mining companies actually have a program for risk analysis, stability analysis, and for eliminating the risks in existing dams and for decommissioning dams which are no longer being used. It's important to note that the size of tailings dams is increasing all the time and at a rapid pace. If the kind of tailings dams which are being planned for the future collapse, it is even greater catastrophic risks.
Yeah. Thank you very much.
I have two questions. Is your company committed through the industry bodies to creating a fully independent system of risk analysis about the stability of tailings dams? Is your company, individually and through industry bodies, able to commit to having ring-fenced funds for a program of decommissioning of existing tailings dams and elimination of risk in existing tailings dams? Thank you.
Thank you for your question. JS, I'm going to pass part of this to you, but let me just say as JS said in his speech, first of all, we must acknowledge the truly awful events that have occurred in Brazil, and this is clearly a problem not just for the company concerned, but for the industry as a whole. Our thoughts and sympathy are with those who were affected by that. Rio Tinto has always taken the management of tailings extremely seriously. We've had a global standard on tailings management since 2015, and we have three very clear lines of defense as we think about how we mitigate and manage the risks of our tailings facilities around the world, both those that are currently in operation and those that have closed and are being rehabilitated. That obviously the primary responsibility sits with site management.
The second line of defense is an internal audit conducted by subject matter experts to ensure that we are in conformance, the operations are in conformance with the standards that we have. The third line of defense is that at least every 2 years, our tailings facilities are inspected by independent consultants. I'm going to pass over to JS to talk about the work that he has been promoting with the ICMM.
Yeah. Thank you, Simon. As I said, we take it very seriously. An important point is we put in place our first standard in 2015. We have one standard, a global standard for all our operations. Our standard is as good as or better than any local regulations we have to comply with. We apply the same standards to all operation inactivity or the decommission operations and so on and so forth. We had these standards since 2015, even before Samarco happened. That's the first point. We did review our standards after the Samarco tragedy. We will continue to review it on a regular basis. The way we look at it is like the airline industry.
Any incident anywhere in the industry will be used for us to look at our standards, to update those standards in order to make sure they are as good as they can be. That's the first point. The second point, which is I think very important in terms of transparency, which is part of your question. We are the only mining company today who have put on the internet our standards and our procedures that we are using to monitor the performance of our tailing dams. We are very clear on this one is anybody who's got an idea who's ready to challenge us is more than welcome. All right? The other piece, which is very important, we will share everything we can to the rest of the industry.
We're not going to create a competitive advantage on the back of it because here it's about safety for the people and the communities and so on and so forth. If you go back to our website a few weeks ago, maybe a month ago, 6 weeks ago now, we have disclosed not only the list of our tailing facilities and where is storage facility, but we have, and as far as I know, we are the only one who've done it, disclosed all our procedures that we are using in relation to this topic. That's the first part. The second part is, yes, we will play a very active role on the work carried out by ICMM. We have sent some of our best people. One of them is in the front row, is Steve Mack.
He's our ExCo member in charge of technology, and he is a representative of Rio Tinto to the ICMM on this topic. We're taking it very seriously. We're putting our best people, and we will work very closely with the ICMM and other stakeholders to find a better way to deal with it. The only thing I can say is we're taking it very seriously here. I think the other piece is we have the review with the board on a regular basis on this topic. That's where we are, Simon.
Thanks, JS. That's a good point. It's worth saying, I talked in my speech about the ESG seminars that we held last year in London and Sydney. Megan Clark, who chairs our sustainability committee, specifically spoke in those about the risk management of tailings facilities. That was well ahead of the Brumadinho disaster.
The last point, Simon, is on our balance sheet, we've got $10 billion of liability, and that covers some of the rehab costs of our tailing facilities and so on and so forth. From a Rio standpoint, we have already provisioned, and we have done it for a long, long time. I'm looking at Ann over there. A long time that since. The last part of your question, you see, are we ready to put some money to deal with it? The answer is, we've done it for a long time, and everything has been provisioned in our books at this point in time.
Thanks, JS. Can we see where there are a couple there. Can we take the lady on the right-hand side, my right-hand side? Thanks.
Thank you. Good morning. My name's Yvonne Orengo. I'm from The Andrew Lees Trust. Good morning, JS. JS knows we've been in very close engagement with Rio Tinto for the last 2 years, from questions arising that we brought to the shareholder meeting in 2017 concerning the breach of the environmental buffer zone in Madagascar that protects the waterways and lakes where people fish and gather their drinking water from the mine tailings. We've been in a protracted and very intense process with the company for 2 years, and I want to thank JS, and particularly Peter Harvey and Simone Niven for the management of that engagement process and the extensive sharing of information and data that has come through.
We arrived at being able to deliver 2 independent reviews, both of the buffer zone and related radioactivity levels of the mine, both of which were relevant to this breach. First of all, we thank you for that. We welcome the fact that you have finally, after 2 years, admitted the breach of the buffer zone by as much as 90 meters, and that you've also admitted that this breach of the buffer zone has been done by the production of your berm or dam that is used to contain the mine tailings, made with mine tailings that have unfortunately entered the lake together with their radionuclide content.
Our concern is, first of all, that we're very slightly unhappy that the outcome of that is the company is saying that this breach is negligible because, in fact, it's not only broken agreements with the Malagasy government, it's also broken local law around public domain and entering public water bodies. It also diminishes this risk of radionuclide content, which I know would be something you would be very concerned about, as would your shareholders. Now, our radioactivity review, as you know, and that was agreed and reviewed by your own experts, has uncovered very high levels of uranium in the water close to where your mine is discharging into the lakes, as much as 50 times higher than the WHO drinking water guidelines. We know that there is high background level radiation in the area.
We're sad and very disappointed that you're not taking our experts' advice to then use this opportunity, not knowing what is causing that toxicity, but to understand that it needs to be managed. In the first instance, obviously, we are very pleased that you're going to do more radiation investigation this year, and we welcome that. Why would you not then agree to provide fresh, safe drinking water for the communities immediately around the mine who are at the moment living on less than $2 a day and having to take their drinking water from surface groundwater and lakes? That's one question.
Alongside that, I have to say, I'm really surprised, we've requested quite a few times now that the technical study we produced on the radioactivity review, which is 68 pages long, we've requested that as part of the communications work that we've agreed, that that document be translated by you for your local partners, for your government partners, for your local staff, for your local stakeholders that are going to be charged with following up the recommendations and need to understand what's in this review and what's been found. We've been told repeatedly that Rio Tinto will not translate that. We're a small NGO. We've done this research with almost no money, I've been a volunteer pretty much entirely for the last 10 years. We don't have the resource to do that.
I think with the GBP billions that you are currently making, the shareholders, I'm sure, would support the translation of a very important document like that. Lastly, the question would be, will you please commit budget and professional independent resource to bring a proper radioactivity education and communications plan to the local communities so that they can understand what's happening in their environment and help you through participatory community monitoring, monitor the quality of the water for the long term. That builds capacity. It also meets Sustainable Development Goals, which you are espousing, together with the provision of safe drinking water for these communities. Those are my questions. Thank you very much.
Thanks for your questions, Yvonne, and thank you also for the very long engagement that we've had with you and your colleagues in relation to QMM. Let me touch on the buffer zone question, which is the first part of your question, then I will pass it to JS just to comment on the recent report. I think for the benefit of people in the hall, it's important to just slightly step back here and explain the situation we have in Madagascar. The sands that we mine in Madagascar do have an elevated level of natural radioactivity associated with them. This is common.
There are lots of rocks all around the world that do have quite a slightly elevated level of radioactivity, including in Britain, in places like Cornwall and Aberdeen. That radioactivity was there before we arrived, and it will be there after we depart, long after we depart. The actual process that we use to mine the sands is quite complicated, but in essence, it's quite simple. We create a pond in the sand. We float a dredge on that pond, the dredge essentially sucks sand mixed with water on board. It then separates the valuable heavy mineral sands from the lighter sands, the lighter sands are returned to the pond.
The material that goes out of the back of the dredge is exactly the same as the material that came into the front of the dredge, apart from the removal of the relatively small proportion of valuable heavy mineral sands, which go for further processing. We do not mix any chemicals during that process. The only thing we add to the sand is water. Those mining ponds are separated from the environment outside the mining license by buffer zones. Most of those buffer zones are 80 meters wide, but there are some areas where the ore body is quite narrow, which we call pinch points, where the buffer zone, with the agreement of the regulator, was reduced to 50 meters. On top of those buffer zones, as an additional protection, we build berms.
They're a little bit like levees that you see down the sides of rivers sometimes. They are mounds of sand. The purpose of the berms is to make sure that there is no spillage from the mining ponds into the natural environment. In addition, we maintain the level of the mining ponds below the level of the surrounding water, so that if there is any spillage, it will be from the exterior environment into the mining lease rather than out of the mining lease. The berms are really there as an additional precaution in case of extremely heavy rainfall events where potentially the level of the mining ponds may rise and then water may flow over into the environment.
We, of course, ever since the mine started, have been monitoring radioactivity in the environment, in the air, in the soil, in the water, in the lakes and lagoons where the local fishermen gather their fish. We have not found radioactivity elevated above the sort of background levels that exist. All of those studies have indicated that there is a very low risk to public health. The latest study, which JS will talk about in more detail, has raised some other questions about additional monitoring we may do, and I'll allow JS to talk to that. That covers, I think, the point on the berm. I should say the incursion that Yvonne was talking about occurred, it was a mistake. When we were constructing the berm on one of these buffer zones, some of the sand did indeed flow into a natural waterway.
That was not what was intended. We reported it to the regulator, the Office National pour l'Environnement in Madagascar. In fact, it was them, not us, who said that the environmental impact was negligible. We have subsequently rehabilitated that incursion of sand into the lake with fast-growing vegetation to try and recover the situation. We fully accept that was a mistake, and it caused us to redesign the way in which we construct these berms or levees along the edge of our operations. JS, do you want to deal with the radiation report?
I think much has already been said. Yvonne, good to see you first. Always a pleasure. I think you said it. Radioactivity is there. We fully acknowledge that. It occurs naturally. I read the report. From my understanding of the report, there was no evidence that further radioactivity uplift was linked to QMM operation for the reason that Simon mentioned. We don't add anything. We just extract the sand, and through gravity, we extract the ilmenite and so on and so forth. We take your point about, and you said it already, that the monitoring can be improved. Currently, the monitoring is only, or mainly focused on the mine site, and I think there will be opportunity to increase it. We take this conclusion of the report on board, absolutely. You said it, we are working on it.
We will share the report with the authorities, I'm pretty sure that will be in French. I think you said it all. The only point which I would have to respectfully disagree is that the point about the communication, that we are not ready to communicate and not ready to translate it in French. I'm sure we can sort this one out. The report was issued only last week, so I think, please maybe give us some time to work. We've been working on this meeting first, but I'm sure that you've got Paul here and Simone over there will be delighted to take it forward. We have nothing to hide, but I think the important point is there is no radioactive uplift because of the QMM operation per se. All right? We will improve our monitoring. We made a commitment.
We will do it on this one, we'll sort out the communication.
Thanks, J.S. Can we have another question? Why don't we take this gentleman here with the red tie? Oh, there are two red ties. My apologies. I'll come back to you.
Thank you, Mr. Chairman, for calling me. My name is Stephen Barry, and I'm the Deputy Director of Ethics and Engagement for the Church of England Pensions Board. It's another question on tailings, I'm afraid. It's not a repeat, though. Following the tragic Brumadinho tailings dam disaster at Vale, which over 300 people were either killed or are still missing, I have a question on tailings and specifically, I welcome the additional disclosure from Rio in February on each of your tailings dams, and also support the work you're doing and the support you're giving to ICMM for a consequences-based standard in tailings management that is now the focus of a global review being convened by ICMM, UN Environment, and the UN Principles for Responsible Investment.
As you well know, 96 investors with over GBP 10.3 trillion of assets under management have recently written to every single mining company asking them to disclose information on their tailings footprint. I'd be grateful if you could confirm that Rio intends to respond positively to this letter and provide additional disclosures beyond those which you've already made. Thank you.
Thanks for your question. Obviously, we spoke at some length about tailings in general in response to the previous letter. We obviously saw the press release that the Church of England put out in relation to this initiative. I have to say neither JS nor I have actually received the letter yet. We will, as soon as we receive that, look at it very carefully and respond, I think in a positive way. Actually neither of us have received it yet, so we will make sure that we get hold of a copy of that letter. Can we take at the back there? Yes. Thank you.
Good morning, Mr. Chairman. Monica Redman, shareholder, also a member of the U.K. Shareholders' Association. Related to the previous lady speaker, I've got a question about your expansion in KwaZulu-Natal. It's a mineral sands development again, which have quite a few difficulties, especially with regard to drinking water, which I believe you didn't answer her previous question either. What are you doing to prevent any more of these people having to stand up and say, "Our drinking water's gone. We can't do any fishing," et cetera? What is the position with the new expansion, which is due to open this year, I believe?
You're referring to the Zulti South expansion which the board recently approved, which is actually using a somewhat different mining method. It will not be using water ponds in the way I described. It will be just the sand is free digging, so it will just be dozed rather than dredged. It is a somewhat different situation. There were indeed some people living on the Zulti South site. They have been relocated. They have been compensated. To my knowledge, there are no implications for drinking water whatsoever. It is directly onto the beach area, I don't think there are any people living on or near the Zulti South who will be drawing water from that area. Bold is here. Bold, just put up your hand if you wouldn't mind.
Perhaps the best thing, could he speak to you after the meeting and just confirm that my understanding is correct? Can we have another question? Thank you. The gentleman here.
Julian Potton, ordinary shareholder, also a member of the UK Shareholders' Association. At the 18th of April, a vast amount of money is being paid as a dividend, which personally I'm very pleased about. I'm surprised that shareholders are not being asked to approve this. There's no resolution on your list of resolutions, that's very unusual. I attend a lot of company AGMs and we're always asked to approve it. No doubt it would most likely be approved, but I'm just wondering why it's not on the list.
Steve.
Thank you. There's actually no requirement under law for shareholders to approve that dividend, it's been a practice that we've had for many years.
Thank you for your question. Can we take one of the questions over here? Can we take Helen, who's wearing a red scarf? Thanks.
Hello. Good morning, everybody. I'm Helen Wildsmith, Director of Climate Change at CCLA, the charity specialist. I'm also here today with representatives of the Local Authority Pension Fund Forum, we're part of the European engagement team within the wider Climate Action 100+ initiative, which now has over 300 investors globally with GBP 30 trillion behind it. Collectively, we're asking over 150 systematically important greenhouse gas emitters to work with us to improve their governance, disclosure, and alignment with the Paris Agreement. We very much welcome your first TCFD report that you mentioned earlier, both myself and the Australian lead provided a box for that report, we were delighted to see the exit from coal, the technological breakthroughs in aluminum, and you yourself joining the Energy Transitions Commission. We have a couple of questions today.
My colleagues from LAPFF have one about policy advocacy, I'd just like to follow up on the point about metrics and targets. We're mindful that new metrics and targets are needed for the 2020s, we'd just like to hear in a bit more detail how that work is going, in particular, the focus on scenarios for Scope 3 emissions relating to steel, and how you envisage new metrics and targets being linked in to remuneration, mindful that we will be voting on a new remuneration policy in 2021. Thank you.
Thank you, Helen, thank you for your work in coordinating the European end of the Climate Action 100+ group. We have found that engagement extremely helpful. It's a very efficient way of engaging with a number of shareholders and getting a better understanding of their concerns and issues in relation to climate change. I think it's been a very productive engagement from our point of view. I'm going to ask JS to talk specifically about the target setting. Let me just tackle the question of Scope 3, because this is the subject of a special resolution in our Australian AGM, but not here. Just so people understand, Scope 1 emissions are the emissions that we produce ourselves directly from our operations. Scope 2 emissions are the emissions that arise from power that we purchase from third parties.
Scope 3 are the emissions that our customers create using our products. The special resolution which has been put into the Australian AGM is asking us to set targets for our Scope 3 emissions. That is the emissions created by our customers. The reality is that most of these emissions relate to steel makers. Overwhelmingly, they are steel makers in China who are using our iron ore to make steel. I think the critical thing here from our perspective as we think about our purpose, is that steel is a material that is essential to human progress. You can substitute coal, for example, with other sources of energy that do not produce greenhouse gases, but there is no obvious substitute for steel in a large number of uses in the economy.
If you take a developed country like the U.K., there's probably about 10 tons of steel installed in our economy per capita. In China, the corresponding number would be about six tons of steel. In a less developed country like India, it is one ton of steel. If India is going to develop and become prosperous, it is certainly going to require primary steel production because there are really no economically viable alternatives to steel in many applications. The question then becomes, how do you decarbonize the supply chain from the mine through to the steel producer, looking at the entire flow of materials? The answer is that iron ore, which is what we produce, is indeed an essential component of steel. That's not what produces the greenhouse gases.
It's the metallurgical coal, which is added during the steel-making process, which creates the vast majority of the greenhouse gases, the CO2. There are technological means of taking that carbon dioxide out by using hydrogen, for example, instead of coal as a reductant. Alternatively, you can collect that carbon dioxide and store it using CCS. The reality is that doing either of those two things is not within the control of Rio Tinto. That is, we have no control over the speed of adoption or the economics or the ultimate deployment of those technologies by our end customers, who are, in the main, state-owned steel companies in China. What we have said is that we will certainly produce scenarios for how we think the entire supply chain, including our mines, can be decarbonized in line with the Paris Agreement.
What we cannot do is set targets for our customers that are completely beyond our control. JS, why don't you talk about the target setting, I'll talk about the remuneration.
Yes, for sure. The long-term ambition by 2050 has not changed, as you know. We are very clear that we want to remove as much carbon as we can from our system. That the first point I would like to say. The second point is, we believe we can be part of the solution, and there will be, at a very high level, two drivers. One is the product we provide. I think, aluminum, especially if it comes from Canada and using the new technology we're developing with Alcoa, could be part of the solution. Providing more copper in order to be more energy efficient and so on and so forth. What we are doing with the team as we speak is really to look at all our key cluster of assets and establish abatement curves. Okay.
We have more or less, from an operational standpoint, four levers that we can pull. The first one is to, in very simple term, is instead of to change to repower what we do. Using different source of energy if you can. If you switch to a renewable source of energy, then there is a benefit. The second point, second driver that we have is about the usage of electrical vehicles. You know the big trucks, I don't know if they were on the videos, but the trucks, the drill rigs, the trains, is to see if there is a case to shift to electrical vehicles. Acknowledging that today the technology doesn't exist at scale.
The third one, which we already pulled, which is using new technology, and a good example is what we discussed earlier today on the aluminum technology of inert anodes, where you don't consume carbon in the process. Last one, which is a lever that we have, is about offsetting buying credits, but I think we should put it in a different category. What we are doing as we speak is for all our measure class of asset, is establishing those abatement curves and understand the economics of them under different scenarios. That the work is underway and this work will enable us to have a proper conversation in the coming months with the board in order to set the target beyond 2020. That is the work that is being carried out as we speak across the entire group.
Thanks, J.S. I think in relation to the remunerations, it's a little bit premature at this stage. We need to develop these targets. Once we have done that, we will think about how we can incorporate them into our incentive plans. I have to say, it is likely to be in the short-term incentive plan. At the moment, as you probably know, we have three components to that. One is safety, one is financial performance, and the third is personal objectives. One of the things that we will evaluate is how might we incorporate within those personal objectives.
Yeah
greenhouse gas reduction targets for those executives who have direct responsibility for delivering some of these GHG reduction projects. The reason that we're probably not going to think about putting it into the long-term plan is because two years ago, in 2017, we did approach shareholders with the proposal that we should move towards restricted stock and away from the rather complex and opaque long-term incentive plan that we currently have. That was well-received in London. It was less well-received in Australia. We haven't taken any decisions, but I think it is quite likely that at some stage we will come back to shareholders with a proposal to use restricted stock, because we do absolutely believe, the board and the executive believe that that is by far the best way to align the interests of management and our shareholders. Let's take the gentleman there holding up the yellow card.
I'll come back. I'm sorry. I will come back to you.
Sorry.
Thank you. I hope you don't mind. I'm showing no disrespect by sitting down. My name is Richard Harkinson. I'm an individual shareholder. I listened with interest. I note what the Church of England said and what you said in response about tailings dams. I hear a figure of $10 billion that would deal with all risks connected with tailings. The list of 50 tailings dams that Rio Tinto put on its website last month, 25 of those are in Brazil, in the co-mined bauxite extensive developments up there. 25 of those, majority are upstream dams or single embankment capable of being raised, therefore could become upstream dams. Since what has happened post-Brumadinho with regard to potential legislation and with regard to litigation, I think that this question, it may be an underestimate, $10 billion for that liability.
My point is to come here and ask questions on behalf of NGOs in Ulaanbaatar, Mongolia. My first question therefore concerns the fact that for two quarters recurring, you've announced that there are ground conditions making it inadvisable to move forward with the deep mining copper mining in Oyu Tolgoi. What is being said by Rio Tinto on that is that the strength of the rock mass is more variable than anticipated. Now, you say the ground conditions. You talk about that. It's about the characteristics of the rock in the tunnels and the caverns that are used and excavated. Stable conditions for the rock in the ground would mean that there would be lower risk, and it would be easier and cheaper.
Unstable conditions obviously add to possibility to add to risk and add to need to counter that risk in terms of roof bolting, et cetera. I assume that you've learned from the unfortunate tragedy at Grasberg in 2014 when there was a collapse in a block cave and 34 miners died. I wait to hear, and certainly people in Ulaanbaatar want to hear what it is, what these technical details of what specific ground conditions you've encountered to delay the underground mine operations for almost a year. They want to know because they want to know the cost implications for Mongolia, for their government, that helps with the social programs. That's the first question. The second question is in relation to what Oyu Tolgoi has been engaged with, a complaint mechanism under the IFC, under the World Bank.
That is not moving forward satisfactorily. A lot of work has been done. There's a want from the elected herder team of the Tripartite Commission that was established under that procedure for Rio Tinto to provide the technical details on the hydrological and hydrogeological.
Very good. I think we've got.
Yeah. Okay.
Let me just.
About the tailings. Okay. The tailings down there is not according to your list that you produced. It's not a downstream. You want to convert it into a downstream dam, but it is an upstream dam. This is what you built, and you constructed that from the period you did I don't know. During the period of engagement, more intense engagement after 2015. It's possible you raised upstream.
Thank you. I think we've got your question now. Thanks. Thank you very much. I think there are four questions there.
You've got seepage, and you've got a problem with selenium in that seepage. It's been identified. It's in the independent audit report. It acknowledges. It seems strange that you're saying that you can't actually monitor that effectively.
Perhaps we could answer the question, and then we can-
Okay. Go to that.
Thanks very much. J.S., I think there are four questions embedded there. First of all, the MRN Alumar operations in Brazil and the tailings there. There's a question in relation to the OT tailings. There's a question into the herders and the closed inquiry, I think now by the IFC.
Yeah.
Probably the most substantive question is in relations to the ground conditions at OT.
All right. I'm going to start with the first one on MRN. We've got 100 tailing facilities which are in operations as we speak. eight and eight only are managed by other people than Rio Tinto. We're not the operators, including the one in Brazil called MRN. The numbers you quoted are not correct for the first point. The second point is in the context of MRN, is you should know that there was a review conducted by the authorities a few weeks ago on the basis of different safety factors, increased safety factors, following the tragedy in Brazil and the MRN operation were assessed as safe.
However, as I mentioned earlier today, is we are very clear that we would like all our operations managed and unmanaged are using the Rio Tinto standard, which is as good as, better than any of the local regulations where we operate. That's important because we have operations in Canada, and people regard Canada as a very advanced regulatory context. That's where we are. The second point is, I think I'm going to step back and try to make it simple, right? There is a big difference, and I think it's important in the context of the tailings question in Mongolia. There is a big difference if you build the tailing facility in a valley where there is a lot of rain. Compare typically, for example, what you have in Brazil, compared to where it's flat like a pancake and dry like in Mongolia.
In some part of the world, having an upstream construction for a tailing facility is safe. Okay? The standards we are applying to our tailing facility at Mongolia is, as we said, as per our global standard. We will continue to take it very seriously, but I think we cannot mix our drinks on this one. That's the second point. The third point is, you asked a question about the herders. As far as we're concerned, you're absolutely correct. There was a long-lasting dispute, that was managed by the IFC. In November of last year, the dispute was closed.
Remember, as and when we have developed Oyu Tolgoi, there were 128 or 129, sorry, herders potentially impacted, and we have been through this long process with nearly six or seven years of monitoring by the IFC, and this entire process was closed by the IFC last year. I'm not saying we're not going to continue to do what we've been doing in turn to make sure that the other herders are appropriately looked after and so on and so forth. We will continue to do that. The dispute has been closed last year in relation to the IFC process. That was your third question. The fourth question is about the ground conditions at Oyu Tolgoi underground. Where we are in the process of developing the mine is that, you need to split Oyu Tolgoi underground into three buckets.
The infrastructure in terms of shaft, crushers. You have to see the second bucket is about the mine. Remember, the block cave in mine is you go underneath the ore body and you draw small rocks from the ore body. That's the second element, and the third one is a ramp-up. If we step back, Oyu Tolgoi is 5 years to build the infrastructure, 7 years to ramp it up. Where we are in the construction process is we are now in the phase 2, which is building really the mine in the ore body. As and when we mine, we develop a better understanding of the geotech conditions. The good piece of news is that the mine will cave. It will cave, but potentially cave faster than what we expected.
Therefore, our engineers and our experts have to rethink where we put the tunnels, where we put the extraction drives, in order to make sure that as and when we initiate the cave, we don't destroy the infrastructure within the mine itself in order to protect the ramp-up. The good piece of news is it will cave, which is always a question mark in the context of a block cave. The question is to make sure we manage this process very carefully. This is absolutely normal. You mentioned the case of Grasberg.
As and when Freeport did develop the DMLZ underground mine, they had to go through this process at least three times in order to make sure that as and when you have a better understanding of the geotech issues, where the faults are, and so on and so forth, to make sure you build the mine in the best possible way. There is fundamentally a big difference between an open pit and underground. In an open pit, when I build the open pit and I find some fault, I can manage in the sense of I can move the roads, I can move the sequencing, and so on and so forth. When I've built tens and tens of kilometers of tunnels, I cannot move them. They are there, and they are here to stay.
It's so important that as and when we understand better the ore body, we can refine the sequencing on how we're going to develop the mine, otherwise you may have a bigger problem. What we are going through at this point in time is absolutely normal in the context of a block cave.
Thanks, Jacques. I did say I would come back to the gentleman here with the red tie. Thank you.
Okay. Thank you. My name is Councilor Paul Doughty. I'm here representing the Local Authority Pension Fund Forum, which has been referred to today. We're an association of 80 local authority pension funds and six pools with assets under management in excess of GBP 230 billion. A majority of our members hold stocks in Rio Tinto, probably about 2% shareholding in total. To my proposed question, LAPF welcomes Rio Tinto's work in forming partnerships with customers along with ICMM and the Energy Transition Commission. To this end, would you be able to provide an update on the MCA situation and proactive global climate advocacy with peers?
Also, would Rio Tinto be willing to go a step further by changing its approach to risk assessment to focus on impact to the environment and society in the first instance, rather than the risks to business, on the understanding that full business risk cannot be assessed without first understanding the impacts the company has on the environment and society within which it operates? This request comes from Rio's approach to Resolution Copper Mine in Arizona and the QMM mine in Madagascar and the company's approach to climate risk. Thank you.
Very good. Thank you for the question. Starting with the partnerships, I think Jacques spoke earlier on about our partnership with Alcoa and Apple, which I think is a great example of industry partnerships that really are seeking to decarbonize the whole value chain. The fact that that is also involving a customer, I think is indicative of the way forward because this is ultimately being driven by consumers demanding more sustainable products. We are responding to those demands from our customers and trying to find ways of doing that. The question on MCA, that's the Minerals Council of Australia for people not familiar. This is an industry association that represents mining companies in Australia of all complexions, including coal mining companies.
In Australia, it has certainly been quite a controversial issue because a related part of that organization called COAL21 has been lobbying for coal, understandably, because that's what their members produce. The position from Rio Tinto's point of view is very clear. In all of the industry associations that we are members of, we will always advocate in line with the policy statement that we put out on climate change. In those industry associations where we have significant influence, we will certainly use that influence to encourage the industry association to also promote and lobby in favor of the Paris Agreement, in favor of a technology-neutral approach to energy generation, and also in favor of governments setting targets in accordance with the Paris Agreement. There are a number of industry associations around the world where our influence, frankly, is rather modest.
That will not prevent us from advocating our position, it certainly will limit our ability to influence the organization. I think the MCA has actually changed its policy position. We are certainly very much aligned with their policy position, and we're very pleased with the work that they're doing now in support of climate change initiatives and many other things where they provide a valuable service to us. Far as the risk to society, I would say that that is already the case. As we consider the risks that face both our existing operations and especially our new projects, we spend at least as much time thinking about the environmental and social and governance risks as we do about the business risk because they are intimately linked. You cannot separate one from the other.
Our whole risk management framework is premised on looking at the broad range of risks, including ESG risks, not solely business risks. As we think about the impact of our operations, it will vary obviously depending upon the particular circumstances. In many cases, the biggest risk may well be a social or environmental risk, and we will have plans in place to mitigate and manage that. Can I take another question? There's a lady here. You just wait for the microphone. It's on its way. Thanks very much.
Thanks, Mr. Chairman. I'm actually with a group. There's four of us speaking today. If we might speak together and ask you one question at the end, would that be all right?
Sure.
Okay, great. Thank you. Okay, good afternoon, Mr. Chairman, Mr. CEO, members of the executive board. My name is Christina Montorio, and I am here as part of the International Brotherhood of Teamsters. On behalf of our General President, James P. Hoffa, and our Port Division Director, Fred Potter, we are here to urge Rio Tinto to enforce its supplier code of conduct. Rio Tinto is a company that upholds high standards when it comes to workers' rights, and the company should hold its trucking company, NFI Cal Cartage Express, to this same standard. NFI Industries, specifically its subsidiary CalCartage Express, which hauls borax from the Rio Tinto mine to the Port of Los Angeles, has a demonstrable track record of violating Rio Tinto's code of conduct.
The hardworking truck drivers who haul this heavy cargo 150 miles from Boron to the harbor have experienced rampant wage theft due to unlawful misclassification by their employer, NFI, as independent contractors rather than employees, and you'll hear from them today. We are here with our drivers today urging Rio Tinto to enforce its supplier code of conduct and to commit to doing business with only trucking companies that align with Rio Tinto's values. We are here today with two of our port truck drivers. Gustavo, I think you're going to go first.
Thank you, Chairman and President of the Board of Directors. My name is Gustavo Villa, and I'm a truck driver in the Port of Los Angeles, of course, United States of America. Our company supply chains, why we believe that Rio Tinto must take swift action against this exploitation. My employer is NFI, doing business here with Rio Tinto. We are drivers going to every day back and forth from the Port of Los Angeles to the Mojave Desert in California. We are drivers that ensure Rio Tinto borax makes it to the port on time. We are the force behind the company's success, and we are here to tell you that the injustice needs to stop. Our daily experience at NFI completely goes against the Rio Tinto supplier code of conduct.
The code of conduct says that it will not tolerate labor or human rights abuses in our supply chains. I hate to be the bearer of the bad news, but labor and human rights violations are abundant in NFI. We face abuse at the hands of NFI for far too long, almost 40 years. We are misclassified truck drivers, employees without the basics, workplace protections like workers compensation, paid healthcare, and unemployment insurance. The misclassification makes it too easy for NFI to mistreat us, and they take advantage of us. This is a company that extremely anti-worker, anti-union. This is a company that use intimidation and scare tactics to prey on the workers who dare speak up about the problems we endure every day.
Ever since I started at NFI, I've been very vocal about the unfairness for our employer and the need for us drivers to band together and form a union. I've experienced this intimidation firsthand, but I will not remain silent. That fact alone should disqualify NFI from operating in your supply chain. Your operating standards, but it's not the case. The intimidation and exploitation continues. We face long wait times, either at the port or over the mine. Many of these hours are unpaid, even though we are working all those hours. Our wages are so low we can keep it rising cost of living, let alone any of our other financial obligation placed on us in this job. Despite our status of independent contractors, we are not free to work ourselves elsewhere. We are at the mercy of NFI
With no protection, it is true injustice. These occurrences are common for us and fly in the face of what Rio Tinto says doing business should look like. This is a battle that has gone far for years, we know end is in sight. We shared our story, we are going on strike. We file lawsuit, now NFI owe us $7 million in stolen wages. We have even reached out here to Rio Tinto, nothing has changed. We can no longer wait and do nothing, we call on you, make change. Things cannot and will not stay the same, I really thank you to everyone here.
Thank you very much for your statement. Just in the interest of time, are there other additional points that you want to make?
Yes. Thank you.
Could you keep this as brief as possible? I think we do understand absolutely the issue.
Okay. Good morning. My name is Jesus Maldonado. I've been a port truck driver at NFI Southern California for 10 years. I'm here therefore today because Rio Tinto has made your mess in the supply chain, and it's way past time to clean up. My employer, NFI, has exploited me for all 10 of the years that I worked there. I'm classified as an independent contractor, but my day-to-day expenses says otherwise. Cal Cart tells me where to go and when. I'm not able to work with any on my own. How does it make me independent? It doesn't make me a misclassified employee. So many deductions are taken from my too small wages, tax, diesel, insurance, taxes. When the truck breaks down, it breaks down often. I'm responsible for the repairs since I'm having to upgrade our trucks to meet clean standards. It's been nothing for issue.
Port truck drivers, we certainly want clean air. I know firsthand braking and dirty diesel does our health.
I'm sorry to interrupt. I think we're very sympathetic, and we understand the point that you're making. Just in the interest of allowing other people to speak, do you mind if I answer your question, and then we move on? Or are there some additional points you want to make?
Sure. Mr. Chairman, if you can just close and say thank you, then Ricardo just has one quick question.
Okay.
We'll be finished. Thank you, sir.
Thank you.
All right. Thank you very much.
I'm sorry to interrupt you.
Not at all.
Thank you, Mr. Chairman. My name is Ricardo Hidalgo with the International Brotherhood of Teamsters. For one, I do, and our organization does look at Rio Tinto as a company that really values its workers' rights. With our sister unions in America and here in the U.K. and Europe, we understand that. However, with some of the issues that were just raised here, we do want to give you guys some good information as well. One is, this is actual the mine that's in Southern California. In California, if you don't know, there was a recent law that just came into effect in 2019, which allows workers like these two that have already filed wage claims, which he mentioned $7 million worth, and there's more coming. These were just recently awarded.
If their employer does not reach an agreement with these workers, the law states that these workers are legally able to come after the customer, which is Rio Tinto. I just want to make sure you guys understand that portion of it. After realizing the issues that here at hand that these two fine workers have done and representing another couple hundred here in the ports of Los Angeles, the question to Rio Tinto is now that the underlying issue has been demonstrated to you guys, and it's a clear violation of your employer code of conduct, what is Rio Tinto going to do about it?
Very good. Thank you very much to all of you, first of all, for making the journey over here to raise this issue with you. I'm sorry to cut the question short, but first of all, you're right. Rio Tinto does have a very clear supplier code of conduct, which sets out our expectations for all of our suppliers, and we take any breach of that code of conduct extremely seriously. I gather that you had a meeting with some of my colleagues yesterday to explain the situation. We were aware of some of the allegations against Cal Cartage Express. We have already, in fact, written to them asking them to address the specific allegations that you have raised, but also more generally to demonstrate that they are in compliance with our supplier code of conduct.
We're very grateful to you for bringing this matter to our attention. I think as my colleague said yesterday, we will certainly keep you informed as we proceed with that inquiry with Cal Cartage and take the appropriate actions. I should emphasize, we have in the past shown a willingness where we have had suppliers who are persistently in breach of our code of conduct in terminating those contracts. We will certainly investigate this, and we will keep you fully informed of that investigation.
Thank you, Chair.
There's a gentleman there. Yes, number 3. Thank you.
Thank you very much. My name is Andy Whitmore. I am a shareholder. Before I ask a question, I have got one quick question, but I would like to be the second shareholder to point out that I do not think there was a reply to Yvonne's question about the safe drinking water for communities. It would be great to get an answer to that, if we may. My question is in regard to the Ranger Uranium Mine in the Kakadu National Park region of Australia, which is operated by Rio Tinto's subsidiary, Energy Resources of Australia. As you are aware, mining has ceased, and there is only processing of stockpiled ore. The focus is shifting solely to rehabilitation. At the 2015 Rio Tinto AGM, there was a commitment to ensuring sufficient funds from the company are available for the full rehabilitation at the mine.
However, on eighth of February this year, Energy Resources of Australia announced an increase in the rehabilitation provision from $526 million to $830 million. My question is simply, given the increased provision, will our company still keep that commitment it made? Thank you.
Thanks for your question. The short answer is yes. As you know, ERA published the closure plan last year after fairly extensive consultation with local stakeholders. In fact, the board went out to visit ERA to see for ourselves how they are progressing with the closure plan and indeed talk to the traditional owners and get their perspective on how matters are proceeding. The mine will cease operations in 2021, and we are obliged to close it by 2026, which is a very tight timetable. Rio Tinto remains committed, notwithstanding the fact that it is not a wholly owned subsidiary, to making sure that ERA has the financial resources to deliver on that undertaking. The actual mechanism for that is a matter that we are still discussing with the board of ERA, and they will make an announcement on that in due course.
Drinking water question.
Drinking water. As I said, the background radiation in Madagascar was there before we arrived, and it will be there after we leave.
I'm sorry to interrupt.
Yeah.
Your shareholders understand. First of all, there is nothing in the data that you gave us or that has been identified in the study that allows us to separate out what is the mine influence on the water and what is a natural background, and you know that. You can't really make this claim in the way that you are doing. If you are, you have to provide the data because we haven't seen that. Otherwise, it would be in the report. Our expert, who has written the report and written the recommendations about the safe drinking water, has been quite strongly assertive on this point in saying that even if at this moment you can't identify whether it's your mine or natural background levels, it doesn't matter if it was Canada.
If it was Canada and those levels of unsafe toxicity were in the water, it would have to be managed. It would have to be managed. Therefore, why would the people of Madagascar be any less important than the people of Canada? Are they just collateral damage to progress, or do they deserve something better?
No. Look, of course, the people of Madagascar are as important as the people of Canada. As we said in the answer to your first question, Yvonne, we are looking at the recommendations on additional monitoring, which were in the report, and we will certainly revert to you, as we think about how we can address that. It is, as you would concede, a complex situation. To be perfectly clear, Jakob and I went to visit QMM in January. Yeah, just a few months ago. It is a site which is quite difficult to understand until you actually go and visit it and see it for yourself. We met with the local community leaders. We met with the local government. We met with aid agencies, representatives of the World Bank. We spoke to the local fishermen.
We had a seminar with local businessmen about diversification of the economy. I have to tell you are rightly focusing on some of the issues that we have at QMM. Overall, I feel enormously proud of what we are achieving in Madagascar because the quality, for example, of the rehabilitation work that we're doing at QMM is absolutely world-class. When you look at the impact that we're having from an economic point of view in what is a desperately poor part of Madagascar, the impact in Fort- Dauphin, which is the nearest town to our operations, is obvious for anyone to see that through the well-paid jobs that we're creating, both with our employees but also with our suppliers, we are enriching that part of a very poor part of Madagascar. Furthermore, if you just take some of the infrastructure that we've contributed.
We built, as you know, at a cost of nearly $200 million, a port which is available to all users, not just Rio Tinto. That is the only means for local farmers to get fresh product to market because the roads outside the town, apart from the roads that we built, are dirt roads. You cannot get fresh products to market other than in containers through that port. As we've seen increasingly, we're also seeing cruise ships coming into that port, which is encouraging eco-tourism. We're seeing people going to the nearby Lemur Sanctuary and so on. Slowly but surely, we are seeing the economy around our mine diversifying beyond mining and giving the people of Madagascar some hope of a sustainable and more prosperous future. I do feel very proud of what we're achieving there. Do we have any other There's a gentleman here.
Yes. You go first.
Okay.
Thank you, Mr. Chairman. My name is Roger Featherstone. I'm the Director of the Arizona Mining Reform Coalition in Tucson, Arizona. I'd like to start by thanking Mr. Jacques for taking the time to meet with me yesterday. I have a question about your Resolution Copper project.
Beyond what we discussed yesterday. The Resolution Copper project is a large block cave copper mine proposal that would destroy a sacred ecological and recreational haven called Oak Flat and bury another 5,000 acres of public land under a mountain of tailings. We've been squaring off on this proposal for 15 years now. As time goes on, more problems arise than are resolved. Given current problems with failed tailings dams in Brazil and Canada, with the severe water supply shortage Arizona faces, and many other problems, it's clear to my members that this project is not viable. It's time for you to abandon this project. To do so would be a win-win solution for you, your shareholders, and for Arizona. No one should be forced to choose between water for communities and the environment, water for agriculture to grow the food we need, or for your proposed mine.
It is clear that the U.S. Forest Service moves forward in writing their draft environmental impact statement, that there are no good alternatives for the disposal of 1.5 billion tons of tailings. In light of yet another tailings dam failure in Brazil, the worldwide community is working to better regulate tailings. It is clear that Canada and Brazil have stronger laws regulating new dam construction now than the United States. Are your shareholders comfortable with the very real possibility that the U.S. Forest Service could approve a tailings dump location for the Resolution Copper project that doesn't meet developing new international standards? Are your shareholders comfortable with being liable for a potential tailings dam failure in Arizona that could bury the communities of Queen Valley or Dripping Springs? Thank you.
Thank you very much for the question. JS, two questions there, tailings and water and the status of the discussions with the U.S. Forest Service.
Yeah. Roger, always good to see you. We had a long conversation yesterday, I think you know already most of the answers, for the benefit of everybody. There is an important point, is yes, you have to write the U.S. regulations in relation to tailings can be different from the rest of the world, I think I've made it very clear twice today is our standards applies to all operations globally. There is no difference in terms of approach, no difference between the way we run the tailing facility in Canada, in the U.S., in Mongolia and in Australia. Our standard is as good as or better than any regulations, local environment, where we operate globally.
At the end of the day, when we get to a position of potentially taking a decision on the investment, it will be on the basis of our global standard and not only on the back of the local regulations and so on and so forth. That's the first point. The second point is, you said it yourself, the permitting process in the U.S. led by or coordinated, should I say, by the U.S. Forest Service is a very comprehensive process. It covers all aspects, including water. You know that we have already secured around from between 50% and 60% of the water through an agreement, through a series of agreements, I should say, with some of the local Native Americans. The team will be working to secure additional water going forward. To date, are we concerned about the availability of water?
The answer is no. Once again, I've got no doubt that as and when we get to the next phase of a permitting process with a broad-based consultation, some of those issues will be raised and will be discussed in the appropriate manner. The last question about what you said about, you believe that there is no business case for Resolution going forward. I think I would like to make a few comments, is the world needs copper, including in the U.S.A., as you know. If Resolution were to be brought online, Resolution will account for 25% of all the copper consumption in the U.S. going forward. That will be part of the solution to the U.S. economy and so on and so forth.
On the back of the matrix that we have, the study is not finished, is today we believe there is a case to study, we are not there yet. We'll carry on with the assessment, I'm sure you and I will continue to have this conversation. Once again, thank you for the invite that next time in Resolution, we go hiking together. I'll bring my shoes, as we agreed yesterday. Thank you, Roger.
Very good. Can we just have a show of hands just to get a sense of how many questions there are still to go? We've still got a few. Let's start with Mr. Farmer here if we can.
Thank you, Chairman. John Farmer, shareholder. Forgive me, please, if I speak seated. There are three quick and constructive points. First, as one who reads many annual reports, may I constructively suggest that in future you perhaps shorten your 300 pages of wispy gray? There's a story told of Prime Minister Sir Alec Douglas-Home receiving a bulky file from one of his civil servants marked, "The Minister will be interested in reading this." He sent it back with a note saying, "A kind thought, but entirely erroneous. Please abstract." In other words, what thoughts have you before I go on how you might make the report a bit more pithy and easier to assimilate. One specific point in that question in that connection is that I've struggled to find in Mr. Laidlaw's remuneration report an aggregate figure of board remuneration.
I accept he does it in stages, but perhaps he'd like to comment.
I'm going to pass that to Sam to answer. First of all, I think actually the report is substantially more pithy than it was last year. However, I would concede that it is still a very, very long report. That, of course, is simply because the ever-increasing number of demands that are correctly placed upon us for disclosure and for transparency and the various regulations that we have to comply with, not just here in the U.K., but also in Australia. We take up the challenge, and we will endeavor to make it even more pithy next year. Sam?
I think specifically, Mr. Farmer, welcome. We do, and in remuneration as well, obviously, as you understand, have to comply with both the Australian regulations and the U.K. regulations. We do itemize all the individual directors. If we don't summarize the directors' remuneration as a whole, that's something we can certainly include for next year.
Thank you. The second point, Chairman, is I stress quick reversion to safety. You ruefully say on annual report page 20, we delivered strong results. However, we must do better on safety. My slant is twofold. First, that lower on that page, you do show all industry frequency rates for the past five years, and these accidents are recurring, and of course, they're harrowing. People are losing lives. My slant is secondly, that there is potential implication on dependents and family and friends. Notwithstanding that two of these accidents were in relatively rich countries, Australia and Canada, a third in South Africa. Specifically, what is your policy to providing generous compensation to dependents for these accidents, in addition to anything you may be doing to stop the accidents happening in future? Just a final sentence on that.
I think I've read somewhere in the annual report, which I can no longer find, that one of these accidents was something falling on someone's head, and the other was a collision between a vehicle and a windrow. It all sounds pretty chaotic. Should you not be giving more attention to this and being perhaps more generous to the dependents of those killed?
Let me deal with those two questions there. I think, Megan, why don't you, if you wouldn't mind, talk about the Sustainability Committee and the lessons that we learn from each of these tragic events. Let me just say in the first instance that aside from learning the lessons, our top priority, our absolute top priority is to make sure that we do provide support to the family of the victim and indeed to their colleagues, because this is a traumatizing event for the people who are around and who witness this, as well as for the victim themselves. That is absolutely our top priority, and I think we manage that as sensitively and appropriately as we possibly can. Megan, could you talk a bit about the role of the Sustainability Committee?
Thank you, Mr. Farmer. You're absolutely right. They are tragic incidents, and we work extremely hard to learn the lessons of every incident that happens, a serious incident across the organization, right through all of our operations around the world. We also look to learn the lessons of what's happening in the industry. Any incident that happens in the industry, we also try and learn those lessons. In terms of how we approach preventing both fatalities and serious incidents, one of our frontline mechanisms is called our critical risk management. That is, we absolutely focus on those risks and controlling those risks that could end up with a serious injury or indeed a fatality. We're absolutely focused on the priority.
Just to give you a sense of what that entails, it means our leaders, our people on the ground, will go out and verify that the controls are in place to make sure that we prevent incidents in their first place. Our leaders and people do 1.45 million verifications. This is checking something to check that it's in place before anything happens. That's 4,000 verifications around the world a year. We take this really seriously to find those issues and to find them before they cause an accident. In terms of lifting our game, we always look to see how we can improve. Our focus for 2019 is in a couple of key areas. We're ensuring that this critical risk management is part of our DNA. It's not just something that's an instruction or a piece of paper.
This is part of how we work right through our organization, training our leaders, embedded in all of our processes and what we do. We're also looking at how we can mature our safety process model and how we even reward as well on that front so that our leaders absolutely understand what they need to do to mature their operation, their teams to the next level. Lastly, we're focusing on the controls around those hazards, making sure that those controls are in place and making sure that our standards, you've heard a lot today about our standards for tailings. We have standards for all of our major areas of hazards and risk. Making sure that those standards are rigidly applied across the world.
I can assure you, as the chairman has, that there is nothing more important than the safety of our people and around the world. We take this issue dreadfully seriously.
Well, thank you for a comprehensive answer. My last point, Chairman, is that it was also mentioned on that page I quoted, you've returned $13.5 billion to shareholders. My question is twofold. First, you still have a debt on the balance sheet and interest in the income statement. Much you have eliminated the lot of it, more importantly, what about any opportunity cost? You've regaled us with this panoply of returns, what about the future of the company and investment in new assets so that long-term, we continue to prosper? Behind my question is perhaps that although you have a healthy 10-year total shareholder return of, I think, some 300%, the five-year return that you also quote is rather more modest at some 30% the last five years. To what extent have you planned for the future and asset replacement?
Good. Look, thank you for that. In relation to growth, our capital expenditure last year was about $5.5 billion. We have said that that will increase this year. The guidance we've given is $6 billion. We think it will go up to $6.5 billion. A large part of that is funding growth projects. JS talked about Koodaideri, which is our new intelligent mine, iron ore mine in Australia. We've talked about Oyu Tolgoi. We've talked about Zulti South, which is a major expansion and extension of the mine life of Richards Bay in South Africa. We have a pipeline of new projects that we will continue to invest in. On the debt on the balance sheet, some of that is structural debt, and it's there for a very specific purpose.
For example, Oyu Tolgoi, where there are other shareholders alongside us, is financed with project financing. One of the benefits of that is that it does bring a number of other parties into the relationship with Mongolia, including export credit agencies, multilateral and bilateral agencies. We regard that as an important component of the political risk mitigation of that project, as well as providing debt financing to the project. There is that element of structural debt on the balance sheet. Can we just have a show of hands and see how many Let's take the one. Yes. Thank you. I'll come over to you.
Thank you, Mr. Chairman. My question is about the Grasberg mine that you've recently sold for-
Sorry, would you mind just introducing yourself?
Sorry. My name is Andrew Hickman.
Yeah.
I work with the London Mining Network as well. My question's about the Grasberg mine that you recently sold for $3.5 billion. Been listening to your presentation today, and you yourselves talked about the lasting benefits for communities within which you operate. I think, Mr. Chairman, you also talked about Rio Tinto always having taken management of tailings very seriously. I think, Mr. Jacques, you talked about the vulnerabilities in reference to the Grasberg asset. I was recently with an indigenous elder of the Amungme tribe, Mama Yosepha Alomang, and she described this mine in terms that speak for her as a snake that's living beneath the land that she lives on and her community lives on. As you know, the tailings issue has been a big issue for many years.
As I understand it, you and Freeport-McMoRan have been dumping something like hundreds of thousands, perhaps 200,000 tons of mining waste into the River Aikwa every day. I have two questions for you. You've been involved in the mine for 20 years. You've been mining that mine for 20 years. You've obviously sold up, and you've obviously made quite a decent amount of money from that mine. Looking back, do you consider that that was a wise decision to invest in this mine, now that you have formally exited from it? My second question is perhaps more appropriate for the communities and the people and the environment that exists in West Papua, and the mine, as you know, is still ongoing.
How much money have you set aside for the responsibilities that you still have for that mine and the liabilities that you still have for that mine? How much money have you put into, I don't know what you would call it, a performance bond or something, whatever you want to call it, for the communities for the impact of that mine that continues to have. Because that mine, at some point, there will need to be a reckoning for the real costs of that mine. Thank you for your time and I would really appreciate the answers that you give because I will be trying to transmit them back to the communities and the people that live there. Thank you.
Look, thank you for those two questions. I mean, on the question of would we invest in the mine today, I think it is impossible, frankly, to go back 20 years and ask what was the mindset of the people who made that decision. We have been quite categoric in saying that we would not, Rio Tinto would not invest in mines that use riverine tailings. That has been a clear statement of tailings disposal, which is one of the issues that you raised. We are happy just to reiterate that today we would not invest in a mine that used riverine tailings disposal. We were never, of course, a shareholder in Grasberg. We had a slightly strange metal strip arrangement. Whilst we had an economic interest in the mine, we were never actually a shareholder and we were certainly not the operator.
As you correctly say, we sold that interest last year for $3.5 billion. That price included the assumption by the purchaser of all of the liabilities associated with the mine. The purchaser was a state-owned Indonesian mining company and therefore a company that, of course, would be fully aware of all of the issues related to Grasberg. Our future involvement with Grasberg came to an end when that transaction was executed. That is the situation. We have actually relatively few people now in Indonesia. I think we have a handful of people still monitoring Kelian, which is a mine we closed about 10 years ago. But very few people on the ground.
Yeah, we have people in Jakarta because you have to manage the tax situation and so on, so forth.
Yes. Okay.
We have around 30 people in Jakarta.
Can we-
Can I just ask, the money, the $3.5 billion, are you saying that there is no money set aside for the responsibilities and liabilities that could still exist for that mine?
The purchaser of the mine, Inalum, which is the Indonesian state-owned company, assumed those liabilities. That was part of the negotiation and that was reflected in the purchase price that was paid. Sorry, this lady has been waiting a long time.
Hello, my name is Lucy Harrow. I'm just an ordinary shareholder. I don't represent anybody. I've never been to a shareholders meeting before and I'd like to thank everybody who's asked questions because it's given me a balanced view in view of your presentation. My question is to your board. I always think it's important that a board knows its product. I'd like to ask how many of the mines the board has visited and how many of the board have visited mines. Thank you.
It's a very good question. I can't imagine how many mines JS has visited in the last 12 months, but I'm guessing 20?
24.
24. Okay. Actually, it's a hugely important point, not just because of actually seeing the situation on the ground, but also in terms of engaging with our employees. We, as a board, always have at least one site visit per year and often two. I did mention earlier on that the most recent site visit that we had was to ERA, where there was a question earlier on about the closure of that mine and therefore it was led by Megan and the Sustainability Committee, but very much focused on closure. I get around a number of mines. I think I've probably been to about six or seven operations in the last 12 months. Wherever we go, we try to have town halls. JS must have held I don't know how many town halls over the last 12 months.
20
I do the same thing whenever I visit a mine, which is just a very good way of taking the temperature and understanding what may be on the minds of our employees. In the coming year, we are planning a visit to Canada. We'll have our employee AGM, as we call it, a similar event to this, but for our employees in Montreal, which is one of our hubs. We will have two visits, one to Saguenay, which is our biggest part of our aluminum operations, and another to Kennecott in Utah in the U.S. Later in the year when we go to Australia, we'll be having a site visit to Gladstone to visit the Boyne Smelter and other assets there. There is a regular program of making sure we get onto the ground.
Do you all go?
Yeah
you've said the two of you have been visiting.
No.
You all go.
JS and I do more than most, but the whole board went to, well, practically the whole board went to Ranger. The whole board will go either to the Saguenay or to Resolution next year and I hope also to visit the Pilbara assets in Australia. Questions. We have one over here and we've got one here. I'll come back to you immediately. Can we just take this one first and I'll come back to you.
Hello, my name is Richard Solly. I'm a shareholder. Before I ask the question, can you confirm that Rio Tinto is involved in the Trinidad project in northern Chile?
If it's not, it makes no sense me asking a question.
We're not. Is that the other company that's got Rio in its name? It's nothing to do with us.
No.
Thank you. I needn't ask anything else.
That was a good question. Thank you.
Hello. My name is Phil Clark. I'm an exceptionally happy shareholder. I'm very happy because of the quality of the results that you produced this year, and particularly happy because we've got net cash on the balance sheet, which is a fabulous thing to have achieved for a company like this. It's particularly good. It puts us in good fortune for the future, and it's a great thing to have achieved, and long may that continue is a subtle hint to you. Please keep it that way. I've got a request and a question, please. The request is this. Most companies quoted on the London Stock Exchange who pay dividends of more than $1 billion-$2 billion, actually pay quarterly dividends. Quarterly dividends are a very good thing if you're a small retail shareholder. You wouldn't have to pay 4 equal dividends.
You could pay three interims and a final. I wonder if the board could actually consider that, because it would certainly make Mrs. Clark very happy- and that'd be a great thing for shareholder and management alignment. If you could consider that, please. My question is this. I noticed on page 27, it talked about the AutoHaul project, the autonomous trains. I was just intrigued by that, but I was staggered that the amount we'd spent was $940 million. I'm assuming that what we've done there is upgrade an existing railway. I'm curious, if that's the case, how on earth does it cost $940 million? If all it is, the savings we'll get back from it is savings on drivers' salaries. How on earth will we get our money back and how will it pay for itself? Thank you.
Well, first of all, thank you very much for your kind words. On the quarterly dividend question, let me take that and we will review that. I'm going to pass the question on the balance sheet to Jakob, who is the custodian of our balance sheet, to talk about that. JS, perhaps you could start off by answering the question on AutoHaul.
All right. Yes. AutoHaul is a big number, as you said. There have been lots of investment in the context of AutoHaul. One of them, we had to change the entire telecom and signaling system. Remember, in the Pilbara, you've got 16 mines, 4 ports, 1,700 kilometers. We move 1 million ton of ore every single day. We had to revamp the entire system from that perspective. The second aspect is, which is a very good question, around how are we going to make our money out of it. The bulk of savings are not on salaries of the people. Let me explain the way it is. When you move the ore from out of the mine to the port is every 12 hours. You have to stop the train and change the drivers.
When you have a train which is 2.4 kilometers long, it takes more or less 30 kilometers to stop the trains. You change the driver, then you restart, and so on and so forth. By not having drivers on the train, then instead of using only 22 hours per day of the train, you can use it 24 hours. In doing so, you uplift the capacity of your entire system. You've got the benefit from that perspective. The second element, which is more important, which links back to safety. Today, the way a railway is managed from a safety standpoint is to say you have physical blocks. In a physical block, let's use this piece of paper. In a physical block, you can have only one train moving at any point in time.
In having an autonomous system where you don't have a driver, the block here becomes a virtual block from a safety standpoint. It moves with the train as well. Therefore, as a result, you can put more trains at any point in time in your network, and therefore, you can increase the capacity of your system as well. Without getting more into the details, the bulk of the payback will be by the ability from our perspective, to flex up the capacity of our entire iron ore system to meet the demand of our customer, either they are in China, in Japan, in Korea, and so on and so forth. That's how we're going to get the bulk of those savings from our significant investment in the AutoHaul project in Pilbara.
Jakob.
Yeah. Thank you. I very much hear your sentiment around protecting our strong balance sheet. Rio Tinto has the fortunate development over a five years period to delever its balance sheet and has today a very strong balance sheet. It's not a little more than a month ago, we were upgraded by Moody's. We have a straight A rating. We really want to continue to have a strong balance sheet. Right now, though, you have to look at the end of the year. We got a lot of money in from the divestments that we have talked about, and we are paying out some dividends. We still have underlying debt, probably pro forma to the tune of around $8 billion. Also, if you take into considerations the new accounting rule, the IFRS 16. We feel very comfortable with this level.
We can still delever a little bit, but it's not the aim. The aim is overall to be able to protect the profitability of the business and use the flexibility of having a strong balance sheet, but not losing the strong point here. I very much hear your sentiment, and we will do what we can to protect our balance sheet. Thank you.
Thanks, Jakob. I think we're probably getting towards the end of the questions. Is there any last question that we should take? I'm sorry. I've been overlooking you. My apologies.
My name is Jonathan Lawley. I'm another very happy shareholder. I also happen to be an ex-employee. One thought, going back a few years, I'm aware of the pioneering role played by Zimbabwe in the whole of our policy towards and our success in southern Africa as a whole, I wonder what our involvement in Zimbabwe is nowadays and the future there. If I may slip in another quick one, I just wonder if the company has any view or fears or see any opportunities in Brexit.
I was rather hoping we might get through the AGM without mentioning Brexit. I have to say from Rio Tinto's point of view, because we have really very few operations, or have no operations now and relatively few people in the U.K., it is not a big part of our lives. On the question of Zimbabwe, I am looking at Steve McIntosh in front of me. Are we exploring in Zimbabwe currently? No. We are certainly exploring elsewhere in sub-Saharan Africa. We have got exploration projects in South Africa, Namibia, Botswana, Zambia. We are certainly active in southern Africa, but we are not currently active in Zimbabwe. I think unless there are any other questions, we will move on now. I think we have had a pretty good discussion, and the time has come for us to take a poll on the resolutions.
Many of you have already sent in your proxy cards, and you do not need to vote again. Those of you who have not appointed a proxy and now being eligible wish to vote, should complete your voting card. These are the white cards which you were given when you arrived earlier this morning. Please now cast your votes by completing your poll card and either hand your completed card to the registrar's staff or post it into one of the ballot boxes at the exits as you leave the hall. If you have any difficulty, one of our attendants will be happy to assist you. The polls will close approximately 15 minutes after the end of this meeting. The results of the polls on resolutions 17 to 20 will be announced as soon as possible after this meeting and will be posted on the Rio Tinto website.
The results of the polls on the remaining resolutions will be published after the Rio Tinto Limited AGM on Thursday the 9th of May. 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. I hope that you will join my fellow directors and members of the executive team for some light refreshment in the Pickwick Suite on the first floor. There are signs outside that will show you the way. As you leave, please remember to hand in your completed poll cards. I now declare the meeting closed.