Morning, everyone, both here in London and those of you joining us on the webcast, and welcome to the 2019 Rio Tinto Annual General Meeting. We start as always with safety, our top priority. So please take a moment to listen to the short safety announcement. It's a pleasure to introduce my fellow members of the Rio Tinto Board. Starting on my far left, David Constable, Moyah Green Simon Henry Anne Godbeher, who is Senior Independent Director and Chair of the Audit Committee Steve Allen, our Group Company Secretary J.
S. Jacques, our Chief Executive Jakob Stasholm, our Chief Financial Officer Megan Clark, who chairs the Sustainability Committee Sam Laidlaw, who chairs our Remuneration Committee and Simon McKeon And Michael Lestrange, who chairs our Australia Forum, joins us from Sydney via the video link. Over the past year, we've said farewell to Paul Telier, who retired in May, and to our former CFO, Chris Lynch, who retired in September. And after 9 years of service, Anne Godfrey will retire from the Board at the conclusion of our AGM in Australia. Following Anne's retirement, Sam Loblaw will become Senior Independent Director and Simon Henry will take over as Chair of the Audit Committee.
So I'm very pleased to welcome the 3 new members of the Board, Moyer, Simon McKeon and Jakob, and I would like to thank all our directors past and present for their hard work, insights and commitment and particularly for their advice during my 1st year as Chair. Rio Tinto has a clear purpose. As pioneers in mining and metals, we produce materials essential for human progress. And by doing so efficiently and effectively, maximizing cash from our world class assets and allocating capital with discipline, we aim to create long term sustainable value for our shareholders, while safeguarding the environment and meeting our obligations to wider society. In 2018, I'm pleased to say we did exactly this.
We delivered underlying earnings of $8,800,000,000 We also continued to simplify our portfolio, achieving 8,600,000,000 of pretax 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. And the combination of strong cash flow from operations and the proceeds from disposals enabled us to further strengthen our balance sheet with net debt $4,100,000,000 lower than 2017.
We have announced record cash returns to shareholders, totaling £13,500,000,000 for the financial year 2018, comprising a full year dividend of 5,300,000,000 or 0.0 7 dollars per share, a £1,000,000,000 share buyback announced last August and £7,200,000,000 of supplementary cash returns from the post tax proceeds from divestments, including a €4,000,000,000 special dividend and a €3,200,000,000 share buyback. On behalf of the Board, I congratulate J. S, the executive team and all of our 48,000 colleagues around the world for a year of significant progress and achievement. 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 achievements 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, 3 of our colleagues lost their lives at work. So we must redouble our efforts to ensure that safety is always our top priority. We're also 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 $6,600,000,000 in taxes and royalties to governments around the world, over a 1,000,000,000 more than the previous year. Our direct economic contribution was nearly $43,000,000,000 including payments to our employees and local suppliers. Over the past 5 years, Rio Tinto has contributed more than $200,000,000,000 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 2 environmental, social and governance investor seminars in London and Sydney. We also hosted 2 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 1st climate change report in line with the recommendations from the task force on climate related financial disclosure.
The report outlines our approach to climate change and represents another step on the journey that started more than a decade ago when we issued our first public statement on climate change. We now have a clear understanding of our contribution to greenhouse gas emissions and the climate change resilience of our major operating assets and core infrastructure. In 2015, we supported the outcomes of the Paris Agreement and the long term goal to limit global warming to less than 2 degrees 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 forged 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.
But 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. So let me hand over to J. S, who will talk more about our results.
Thank you, Simon, and 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. Was a year where our 48,000 employees moved our strategy forward, a 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 progressed high value growth. And most importantly, it was a year we created significant value, delivering $13,500,000,000 in cash returns to our shareholders, the biggest in the Rio Tinto's 146 years' history. But we are not complacent.
Our future is bright, our purpose is clear. We produce materials that are needed to help the world develop. And we have a great team of committed employees, striving to do their best every day, every shift, starting with safety. Sadly, we did not meet our own expectations on safety in 2018. We remember Francis, Muzi and Daniel, our colleagues, who went to work last year but did not return home.
This is an absolute tragedy for their families and friends. Their loss is also our loss. And is deeply felt by everyone in the Rio family. Although we have improved in some key areas such as process safety, we must do better. Nothing is more important, and we are working on it every shift, 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. And we will continue every day to actively manage our tailing 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 $18,100,000,000 of underlying EBITDA, with a strong margin of 42%.
And we delivered cash of $11,800,000,000 from our operations. We achieved $8,600,000,000 pretax in asset sales with exits from coal and Grasberg. And we also invested $5,400,000,000 in our work class portfolio. We generated a return on capital employed of 19%. Across our business, we improved our ability to drive greater productivity and efficiency.
In 2018, for the first time, our driverless trains, up to 2.4 kilometers long, David Ironor from our mines in the Pilbara to our port in Cape Lambert in WA, Western Australia. Today, we have completed more than 1,600,000 kilometers in driverless mode. We are confident that we have laid strong foundation that will accelerate productivity drive in 2019 and beyond. And we are on track to deliver $1,500,000,000 per year in additional free cash flow after tax from 2021. In 2018, we also progressed exciting growth projects in iron ore and copper and in bauxite: Amron in Queensland and Cudalary in Western Australia, our most technologically advanced mine, are just two examples of it.
We knew our discovery of copper in WA also looks promising. We are also progressing over growth options. For example, on our copper mine resolution in Arizona, we are spending $368,000,000 on infrastructure as we progress the permitting process. We are on track to complete the EIS in 2020. Our Yada 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, with activity in over 8 commodities in 16 countries. So our value over volume strategy is working even in uncertain times, with trade wars, critical tensions and market volatility an ongoing feature. Despite this turmoil, in 2018, once again, we delivered on our promises $13,500,000,000 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 5 years, Rio Tinto delivered $200,000,000,000 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, among other things. I fundamentally believe that the mining industry can be part of the solution. The safe and profitable mining industry benefit 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 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 5 tons of copper and 160 tons of steel. And a typical electrical vehicle has around 80 kilograms of copper and 36 kilograms of nickel. So we are well placed to supply the green materials of the future.
And 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. And 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 Elesys.
It is a joint venture with Alcoa, supported by Apple and the governments of Canada and Quebec. It is a breakthrough technology. And last week, we announced that the next steps will be taken at the new Elesys R and D center at our complex, Jean Claire, in Quebec. In another first, we also announced that we would provide ASI certified aluminum to Nespresso. Rio Tinto, your company, is the 1st 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 launched 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.
And 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.
6 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, $192,000,000 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 automations makes our business stronger and keeps our people safer.
We also know that it could have an impact on the communities near operations. So this year, we launched a partnership with the government of WA and TAFE, a technical college, to develop the 1st nationally recognized courses in automation. These courses will train and certify people 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 our communities face. So 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 laid 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 3 years. We can say we have generated over $46,000,000,000 in cash. Twothree of it, dollars 34,000,000,000 was cash from operation. We delivered $20,000,000,000 in shareholder returns and declared a further $9,000,000,000 So that's $29,000,000,000 in total. That is equivalent to over 50% of our market cap at the beginning of 2016.
We reduced our net debt by $14,000,000,000 We've grown the company by 1.4% every year. We reduced our sustainability vulnerabilities through the sale of our coal assets in 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 auto haul and cudadery to adhesives. We strengthened our focus not just on cost, but productivity, our mine to market program.
And so 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. So 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 one 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. And 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 in a 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.
And 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 February and posted to shareholders on the 11th 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 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 reelection of directors and the appointment and remuneration of the auditors. You will see that the business of the meeting includes 2 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 Director's 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 Director's 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.
Preemption 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. And 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. And 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 or in front of you, that's fine.
Good day, Chairman. Robert Muriel, also a member of the United Kingdom Shareholders Association. Page 294 and 5 of the annual report shows the shareholdings of major investors. And I found it quite incredible that the Rio Tinto Limited is 50% in those hands, about 20 companies. And for even the PLC 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. And I noticed we've had this long term relationship with Genelco, which seems a bit confusing too. Anyway, that isn't my question. It's an observation which I find confusing 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.
Well that concern I notice you are going to deny this business for the SEC and the Australian outfit, but you've already given the FCA 27,000,000 which seems to be to me something to do with a precedent for the others which is a pity and it comes not only to the company but also to the specific people who've been put out of this company, Mrs. Almanesi and Mr. Elliott. Now those 2 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 2 men will pay their own legal fees. It wouldn'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 and 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 2 major companies competing with each other, Alcan and Alcoa. So, I'd be interested on that.
Thanks very much.
I'd be interested to hear what you have to say about Mongolia. 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. But 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. And they maintain that we should have impaired our investment in the coal assets, the Riversdale coal assets in Mozambique 6 months earlier than we did. However and 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. So far as the SEC and ASIC are concerned, they are pursuing much more serious claims.
They are alleging that the former CEO and CFO of Rio Tinto deliberately withheld information from the auditors and from the Board in relation to the investment in Mozambique. And we are vigorously defending that activity that 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. And I should say that both of them departed from the company for completely for reasons completely unrelated to these allegations about the accounting practice and the provisions that we made in relation to Mozambique.
J. S, do you want to cover Alcoa and the Aliso's JV and also in Mongolia?
And uranium as well? Okay. So I'm going to start with the aluminum joint venture that we have with Alcoa and Apple. So let me step back and try to explain in very simple terms how we produce aluminum. So you put alumina, which is a white powder in a pot, and you bring lots of electricity in order to smelt the alumina into aluminum.
To bring the electricity into the potline, you need to have an anode, which is currently made out of carbon. As and when you bring the electricity, you consume the anode and you release CO2 into the atmosphere. And 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, people were working on it already. What the situation is, is to make it work, you need 2 important pieces of technology. One is your understanding of the port 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 potlines. Alcoa has the technology in relation to ceramics. So unless you put those 2 together, we're never going to crack the code. So the benefits here will be clearly for Realt, Intrar 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. So 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.
So that's where we are in relation to Helixis. And as I said in my speech, it's the first industrial will be installed and operated in our secondary operation in Canada, and that's the announcement we made last year. So the technology works in the lab in a small setup, but now it's important to ramp it up, and we'll take it from there. And we are pretty confident that we may crack the code on this one. But as I said, for the last 25 years, we've been working on it.
You as major competitors elsewhere?
Absolutely, every day, every shift of the week. Absolutely, don't worry about this one. So 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 Q2 of this year. So that's the piece.
But we still have some property uranium properties that we have mainly in Canada. And at this point in time, as 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 5, 10, 15, 20 years down the road. And 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. And 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 and I have examined the effects of the collapse of tailings dams in Brazil. This was mentioned by Mr.
Jacques a few minutes ago and 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 of which tailings 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 tailing dam are fully remedial. The Rio does will it is difficult to see how it will be recovered within our lifetime. What these two incidents in the last 4 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 isn't clear 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.
So, 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. And it's important to note that the size of tailings dams is increasing all the time and at a rapid pace. And if the kind of tailings dams which are being planned for the future collapse, it is even greater catastrophic risks.
Yes. Thanks very much, Mary.
So, 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? And is your company through the 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. J. S, I'm going to pass part of this to you. But let me just say, as J. S.
Said in his speech, I mean, 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. And 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 3 very clear lines of defense as we think about how we mitigate, 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. And that obviously the primary responsibility sits with site management. The second line of defense is an internal audit conducted by experts, subject matter experts to ensure that we are in conformance, the operations are in conformance with the standards that we have. And the 3rd 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 J.
S. To talk about the work that he has been promoting with the ICMN. Yes. Thank you, Simon.
As I said, we take it very seriously. An important point is we put in place our first standard in 2015. And we have one standard, a global standard for all our operations. And our standard is as good as or better than any local regulations we have to comply with. And we apply the same standards to our operation inactivity or the decommission operations and so on and so forth.
So we had these standards since 2015, even before Samarco happened. That's the first point. We did review our standards after the Samarco tragedy, and 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. And we are very clear on this one is anybody who has got an idea who is ready to challenge us is more than welcome, all right? But the other piece, which is very important, we will share everything we can to the rest of the industry.
So we're not going to create a competitive advantage on the back of it because here, it's about safety by the people and the communities and so on and so forth. So 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 warehouse 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. So that's the first part. The second part is, yes, we will play a very active role on the work carried out by ICIM, and we have sent some of our best people. One of them is in the front row, Steve Mack.
He's our ex co member in charge of technology, and he is a representative of Rio Tinto to the ICMM on this topic. So we're taking 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. But the only thing I can say is we're taking it very seriously.
And we had I think the other piece is we had to review with the board on a regular basis on these topics. So that's where we are, Simon.
Thanks, Jess. It is yes, 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. And 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 $10,000,000,000 of liability, and that covers some of the costs, rehab costs of our tailing facilities and so on and so forth. So from a Rios' standpoint, we have already provisioned, and we have done it for a long, long time. I'm looking at hand over there, a long time in that sense. So the last part of your question is, 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, Stijs.
Can we see where the 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 is Yvonne Haringo. I'm from the Angio Lease Trust. Good morning, J.
S. J. S. 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. And we've been in a protracted and very intense process with the company for 2 years.
And I want to thank, J. S, and particularly Peter Harvey and Simon Niven for the management of that engagement process and the extensive sharing of information and data that has come through. And 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. So 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.
So 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. And it also diminishes this risk of radionuclide content, which I know would be something you would be very concerned about as with your shareholders. Now our radioactivity review, as you know, and that was agreed and reviewed by your own experts, has uncovered very, 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. And we know that there is high background level radiation in the area, but we're sad and very, 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. And in the first instance, obviously, we are very pleased that you're going to do more radiation investigation this year and we welcome that.
But 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? So that's one question. And alongside that, I have to say I'm really surprised and 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. And we've been told repeatedly that Rio Tinto will not translate that. And we're a small NGO.
We've done this research with almost no money and I've been a volunteer pretty much entirely for the last 10 years. So we don't have the resource to do that. But I think with the billions that you are currently making the shareholders, I'm sure would support the translation of a very important document like that. And then 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. So that builds capacity, it also meets sustainable development goals which you are espousing together with the provision of safe drinking water for these communities.
And those are my questions. Thank you very much.
Thank you for your questions, Ivana. Thank you also for the very long engagement that we've had with you and your colleagues And then I will pass it to J. S. Just to comment on the buffer zone question, which is the first part of your question. And then I will pass it to J.
S. Just to comment on the recent report. So 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. And 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 flow to dredge on that pond and the dredge essentially sucks sand mixed with water on board, it then separates the valuable heavy mineral sands from the lighter sands and the lighter sands are returned to the pond. So 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. Now those mining ponds are separated from the environment outside the mine license by buffer zones. And 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. And on top of those buffer zones, as an additional protection, we build berms.
They're a little bit like levies that you see down the sides of rivers sometimes. They are mounds of sand. And 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. And 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 fishermen, local fishermen gather their fish. And we have not found radioactivity elevated above the sort of background levels that exist. And we have not all of those studies have indicated that there is a very low risk to public health. The latest study, which J. S.
Will talk about in more detail, has raised some other questions about additional monitoring we may do and I'll allow J. S. To talk to that. But 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 National Office of the Environment in Madagascar. And in fact it was them, not us, who said that the environmental impact was negligible. And we have subsequently rehabilitated that incursion of sand into the lake with fast growing vegetation to try and recover the situation.
But we fully accept that, that was a mistake and it caused us to redesign the way in which we construct these berms or levies along the edge of our operations. J. S, do you want to deal with the radiation report?
I think much has already been said. I mean, Ivan, good to see you first. Always a pleasure. I think you said it. I mean, radioactivity is there.
You 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. I mean, we don't add anything.
We just extract the sand and by through gravity, we extract the ammonite and so on and so forth. But 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. So we'll take this conclusion of the report on board, absolutely. And you said it, we are working on it.
We will share the report with the authorities, and I'm pretty sure that will be in French. So the 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, I'm not ready to translate it in French. I'm sure we can sort this one out. And the report was issued only last week.
So I think please give us some time to work. We've been working on this meeting first, but I'm sure that you've got Voal here and Simon over there. We'll be delighted to take it forward. So 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. But we will improve our monitoring, that's we made a commitment we will do it on this one.
And we'll sort out the communication.
Thanks, Jess. Can we have another question? Can we take why don't we take this gentleman here with the red tie? There are 2 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, and it's not a repeat though. Following the tragic Ruma Dino 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 will know, 96 investors with over 10.3 $1,000,000,000,000 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. I mean, obviously, we spoke at some length about tailings in general in response to the previous letter. We obviously saw your the press release that the Church of England put out in relation to this initiative. I have to say neither J. S.
Nor I have actually received the letter yet. So we will, as soon as we receive that, look at it very carefully and respond, I think, in a positive way. But 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?
There's a yes, thank you.
Good morning, Mr. Chairman. Monica Rednham, shareholder, also a member of the United Kingdom Shareholders Association. Related to the previous lady speaker, I've got a question about your expansion in KwaZulu Natal. It's 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, you know, our drinking water's gone, we can't do any fishing, etcetera. What is the position with the new expansion which is due to open this year I believe?
Yes, you're referring to the Zolte 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 dosed rather than dredged. So it is a somewhat different situation.
There were indeed some people living on the Yuzulti South site. They have been relocated. They have been compensated. And to my knowledge, there are no implications for drinking water whatsoever. It is directly onto the beach area and I don't think there are any people living on or near the Zolty South who will be drawing water from that area.
But Bold is here and 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? We have another question? Thank you. The gentleman here.
Julian Pitcairn, ordinary shareholder, also a member of the United Kingdom Shareholders Association. At 18th April, a vast amount of money is being paid as a dividend, which personally I'm very pleased about. But I'm surprised that shareholders are not being asked to approve this. There's no resolution on your list of resolutions and 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, and it's been a practice that we've had for many years.
Thank you for your question. Can we take a question 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 Wildso, Stewardship Director of Climate Change at CCLA, the Charity Specialist. I'm also here today with representatives of the Local Authority Pension Fund Forum, and we're part of the European engagement team within the wider Climate Action 100 plus initiative which now has over 300 investors globally with €30,000,000,000,000 behind it. And 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. And both myself and the Australian lead provided a box for that report and we were delighted to see the exit from coal, the technological breakthroughs in aluminium and you yourself joining the Energy Transitions Commission. We have a couple of questions today. My colleagues from LAPFF have one about policy advocacy. And 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. And we just like to hear in a bit more detail how that work is going. And in particular, the focus on developing scenarios for scope free emissions relating to steel and how you envisage new metrics and targets being linked into remuneration mindful that we will be voting on a new remuneration policy in 2021? Thank you.
Thank you, Helen. And thank you for your work in coordinating the European end of the Climate Action 100 plus 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. So I think it's been a very productive engagement from our point of view.
I am going to ask J. S. To talk specifically about the target setting. But 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 3rd parties. Scope 3 are the emissions that our customers create using our products. And 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 steelmakers and overwhelmingly they are steelmakers in China who are using our iron ore to make steel. And 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. And if you take a developed country like the UK, there's probably about 10 tonnes of steel installed in our economy per capita. In China, the corresponding number would be about 6 tonnes of steel. In a less developed country like India, it is 1 tonne of steel. Now 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.
So 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. And the answer is that iron ore, which is what we produce is indeed an essential component of steel, but 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. Now there are technological means of taking that carbon dioxide out by using hydrogen, for example, instead of coal as a reductant or alternatively, you can collect that carbon dioxide and store it using CCS. But the reality is that doing either of those two things is not within the control of Rio Tinto, that is those 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.
So 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. But what we cannot do is set targets for our customers that are completely beyond our control. Jess, why don't you talk about the target setting and then I'll talk about the remuneration?
Yes, sure. I mean, the long term ambition by 2,050 has not changed, as you know. I mean, we are very clear that we want to remove as much carbon as we can from our system. That's the first point I would like to say. The second point is we believe we can be part of the solution.
And there would be, at a very high level, 2 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 Valspar, could be part of the solution, providing more copper in order to be more energy efficient and so on and so forth. So what we are doing with the team as we speak is really to look at all our key asset, cluster of assets and establish abatement curves, okay? And we have more or less, from an operational standpoint, 4 levers that we can pull.
The first one is to, in very simple term, is instead of using to change, to repower what we do, so using different source of energy, if you can. So 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. So 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've already pulled, which is using new technology, and a good example is what we discussed earlier today on the aluminum technology of inethanol, where you don't consume carbon in the process.
And last one is, which is a lever that we have, is about offsetting buying credits, but I don't think I think we should put it in a different category. So what we are doing as we speak is for all our major class of asset is establishing those abatement curves and understand the economics of them under different scenarios. But 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. So that is the work that is being carried out as we speak across the entire group.
Thanks, Joao. And I think in relation to the remuneration, it's a little bit premature at this stage. We need to develop these targets. And once we have done that, we will think about how we can incorporate them into our incentive plans. I have to say the it is likely to be in the short term incentive plan.
The moment, as you probably know, we have 3 components to that. 1 is safety, 1 is financial performance and the third is personal objectives. And one of the things that we will evaluate is how might we incorporate within those personal objectives greenhouse gas reduction targets for those executives who have direct responsibility for delivering some of these GHD reduction projects. The reason that we're probably not going to think about putting it into the long term plan is because 2 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. Can I take let's take the gentlemen there holding up the yellow card? Card. I'll come back I'm sorry, I will come back to you.
Thank you. I hope you don't mind, I'm showing notice just a bit by sitting down. My name is Richard Harkinson, I'm an individual shareholder. I listened with interest. I know what the Church of England said and what you said in response about tailings dams.
I hear a figure of $10,000,000,000 that was 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 $10,000,000,000 for that liability. But my point here is to come here and ask questions on behalf of NGOs in Ulaanbaatar, Mongolia.
My first question therefore concerns the fact that for 2 quarters recurring, you've announced that there are ground conditions making it inadvisable to move forward with the deep mining in 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 a term it's about the characteristics of the rock in the tunnels and the cabins that are used in excavated and stable conditions for the rock in the round would mean that it would there would be lower risk and it would be easier and cheaper. Unstable conditions obviously add to possibility to add to risk, add to need to counter that risk in terms of roof bolting, etcetera, etcetera. I assume that you've learned from the unfortunate tragedy at Grasberg in 2014 when there was a collapse in block caving and 34 minuteers died.
But 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 the government that helps with their social programs. So that's the first question. The second question is in relation to what Rio Tinto has been what Oyu Tolgoi has been engaged with has been a complaint mechanism under the IFC, under the World Bank and that is not moving forward satisfactorily. A lot of work has been done, but 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 hydro geological.
I think we've got that.
Yes, yes, okay. And 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, which 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.
I think we have we've got your question now. Thanks. Thank you very much. So I think there are 4 questions there.
You've got seepage and you've got a problem with selenium in that seepage.
So
it's been identified, it's in the independent audit report, 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. So go to the Thanks very much. So, J. S, I think there are 4 questions embedded there. First of all, EMRN, Alumard operations in Brazil and the tailings there, there's a question in relation to the OT tailings.
There's a question into the hurdles and the closed inquiry, I think, now by the IFC. And probably the most substantive question is in relation to the ground conditions at OT.
All right. So I'm going to start with the first one on MRN. So we've got 100 tailing facilities which are in operations, so to speak. 8 and 8 only are managed by other people in Rio Tinto. So we're not the operators, including the one in Brazil called MRN.
So the numbers you quoted are not correct, is the first point. The second point is in the context of MRN is you should note 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 with assets as safe. However, as I mentioned earlier today, is we are very clear that we would like all operations managed and unmanaged by using the Rio Tinto standard, which is as good as better than any of the local regulations where we operate. And that's important because we have operations in Canada and people regard Canada as a very advanced regulatory context. So 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 Mobile Yard. There is a big difference. If you build a tailing facility in a valley where there is a lot of rain compared typically, for example, what you have in Brazil, compared to where it's flat like a pancake and dry, like in Mongolia. So in some parts of the world, having an upstream construction for tailing facility is safe, okay?
And the standards we are applying to our tailing facility at Mongolia is, as we said, as per our global standards. So we will continue to take it very seriously, but I think we cannot mix our drinks on this one. So that's the second point. The third point is you asked a question about the herders. As far as we're concerned is you're absolutely correct, there was a long lasting dispute that was managed by the IFC.
And in November of last year, the dispute was closed. So remember, as and when we have developed or you took over, there were 100 and 28 or 129, sorry, areas potentially impacted. And we have been through this long process with nearly 6 or 7 years of monitoring by the IFC, and this entire process was closed by the IFC last year. So I'm not saying it's we're not going to continue to do what we've been doing in terms to make sure that our orders are properly looked after and so on and so forth. We will continue to do that, but the dispute has been closed last year in relation to the IFC process.
So that was your third question. The 4th question is about the ground conditions at Oyu Tolgoi underground. So where we are in the process of developing the mine is that you need to split what you took on the ground into 3 buckets: the infrastructure in terms of shaft, crushers, then you have to see it, the 2nd bucket is about the mine. Remember, the block cabin mine is you go underneath the ore body and you draw small rocks from the ore body. That's the 2nd element.
And the third one is a ramp up. If we step back a year ago, it 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 2nd phase, which is building really the mine in the ore body. And 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 and but potentially cave faster than what we expected. And 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. So 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, very carefully. This is absolutely normal.
You mentioned the case of Grasberg. As and when Freeport did develop the TMLG mine, underground mine, they had to go through this process at least 3 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. Because 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 100, I mean, tens and tens of kilometers of tunnels, I cannot move them.
They are there, and they are here to stay. So 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 because otherwise you may have a bigger problem. So what we are going through at this point in time is absolutely normal in the context of a block cave.
Thanks, Strauss. I did say I would come back to this the gentleman here with the red. Thank you.
Okay. Thank you. So my name is Councillor Paul Dowsey. I'm here representing the Local Authority Pension Fund Forum, which has been referred to today. And we're an association of 80 local authority pension funds and 6 pools with assets under management in excess of £230,000,000,000 And a majority of our members hold stocks in Rio Tinto, probably about 2% of shareholders in total.
So to my proposed question, LAP welcomes Rio Tinto's work in forming partnerships with customers along with ICM 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? And also, would Rio Tinto be willing to go a step further by changing its approach to risk assessment to focus on the impact of the environment on society in the first instance rather than the risk 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 questions. So starting with the partnerships, I think J. S. 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.
And 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 and 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. And in Australia, it has certainly been quite a controversial issue because part a related part of that organization called COL21 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.
And 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 government setting targets in accordance with the Paris Agreement. Clearly, there are a number of industry associations around the world where our influence, frankly, is rather modest, But that will not prevent us from advocating our position, but 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. So 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. So our whole risk management framework is premised on looking at the broad range of risks, including ESG risks, not solely business risks. And as we think about the impact of our operations, it will vary obviously depending upon the particular circumstances, But 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 4 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 Pork 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 Cal Cartage 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 hard working truck drivers who haul excuse me, the hard working 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 2 of our port truck drivers. Gustavo, I think you're going to go first.
[SPEAKER CARLOS GUSTAVO
BERIA:] 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. And our company supply chains, why we believe that Rio Tinto must take swift action against this exploitation. My employer is NF5, 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 realty into Borax, make us to the port on time. We are the force behind the company's success and we are here to tell you that the injustice need 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 health care and unemployment insurance, the misclassification makes it too easy for NFI mistreat us and they take advantage of that. This is a company that is 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 engine supply chains. You're 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 to we are working all those hours. Our wages are so low, we can keep raising 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 mercy of NFI with no protection and 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 and we no end this insight. We shared our story and we are going on strike. We filed lawsuit and now NFI owe us $7,000,000 in stolen wages. We have even reached out here to Rio Tinto and nothing has changed. We can no longer wait and do nothing and we call on you make change.
Things can all and will not stay the same and I really thank you to everyone here.
Thank you very much for your statement. Just in the interest of time, are there additional points that you want to make?
Yes. Thank you.
Could you keep this as brief as possible? Because I think we do understand absolutely the issue.
[SPEAKER CARLOS ALBERTO PEREIRA DE OLIVEIRA:] Okay. Good morning. My name is Jesus Maldonado. I've been a port truck driver in 85 Southern California for 10 years. I'm here therefore today because Rio Tinto has major mess in the supply chain and it's way past time cleanup.
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. Cogares tells me where to go and when. I'm not able to work with Air on my own. How does it make me independent?
It doesn't make me a misclassified employee. So many deductions are taken from my 2 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 upgrade. Our trucks meet clean standards.
It's been nothing for issue. Now our port truck drivers, we certainly want clean air. I know first stand breaking in dirty diesel does our health.
However I'm sorry to interrupt. I think we really are we're very sympathetic and we understand the point that you're making. But just in the interest of allowing other people to speak, do you mind if we if I answer your question and then we move on or are there some additional points you want to make?
Sure. Mr. Chairman, I will just if you can just close and say thank you and then Ricardo just has one quick question and we will be finished. Thank you.
Thank you.
All right. Thank you very much.
I'm sorry to interrupt you.
Thank you, Mr. Chairman. So my name is Ricardo with Algo with the International Brotherhood of Teamsters. And for one, I do and our organization does look at Rio Tinto as a company that really values its workers' rights. We 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. And one is, this is actual the mine that's in Southern California. And in California, if you don't know, right, there was a recent law that just came into effect in 2019, which allows, right, workers like these 2 that have already filed wage claims, which he mentioned $7,000,000 with 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. So just want to make sure that you guys understand that portion of it. But after realizing the issues that here at hand that these two fine workers have done and representing another couple of 100 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 code of conduct, your employer code of conduct, what is Rio Tinto going to do about it?
Very good. Look, thank you very much to all of you, first of all, for making the journey over here to raise this issue with you. And I'm sorry to cut the question short. But I mean, 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 Calcutt California Cartage Express. And 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. So we're very grateful to you for bringing this matter to our attention. And I think as my colleague said yesterday, we will certainly keep you informed as we proceed with that inquiry with Calcutt 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.
So we will certainly investigate this and we will keep you fully informed of that investigation. Can I there's a gentleman there? Yes, number 3. Thank you.
Thank you very much. My name is Andy Whitmore. I'm a shareholder. And before I ask a question, I have got one quick question, but I would like to be the 2nd shareholder to point out that I don't think there was a reply to Yvonne's question about the safe drinking water for communities. So it would be great to get an answer to that if we may.
So my question is regard to the Ranger Uranium mine in the Kakazoo National Park region of Australia, which is operated by Rio Tinto's subsidiary Energy Resources of Australia. As you're aware, mining has ceased and is only processing 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 8th February this year, Energy Resources Australia announced the increase in the rehabilitation provision from $526,000,000 to $830,000,000 So my question is simply given the increased provision, will our company still keep that commitment it made?
Thank you.
Yes. Thanks for your question. And the short answer is yes. As you know, we published the ERA published the closure plan last year after fairly extensive consultation with local stakeholders. And 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. And 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're still discussing
In water?
Well, as I said, the background radiation in Madagascar was there before we arrived and it will be there after we leave. That was the Yes. Let
your shareholders understand. So, 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. So you can't really make this claim in the way that you are doing. And if you are, you have to provide the data because we haven't seen that. Otherwise, it would be in the report.
And our expert who has written the report and written the recommendations about the safe drinking water has been quite strongly assertive on this point and 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. And therefore, why would the people of Madagascar be any less important than the people of Canada? I mean 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. But 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. And to be perfectly clear, Jakob and I went to visit QMM in January, yes, 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.
But we met with 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 spoke we had a seminar with local businessmen about diversification of the economy. I mean, I have to tell you, you are rightly focusing on some of the issues that we have at QMM, but 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. And 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. And furthermore, if you just take some of the infrastructure that we've contributed, we built, as you know, at a cost of nearly $200,000,000 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 and you cannot get fresh products to market other than in containers through that port. And as we've seen increasingly, we're also seeing cruise ships coming into that port, which is encouraging eco tourism. So we're seeing people going to the nearby Lima Sanctuary and so on. So 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. So I do feel very proud of what we're achieving there.
Do we have any other there's a gentleman here. Yes, okay, you go first.
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. Jocke 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 and as time goes on more problems arise than are resolved. Given current problems with failed tailing 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 1,500,000,000 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?
And are your shareholders comfortable with being liable for 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. J. S, two questions there, tailings and water and the status of the discussions with the U. S. Forest Service.
S. So Roger, always good to see you. We had a long conversation yesterday, so I think you know already most of the answers, but for the benefit of everybody. So 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. But I think I've made it very clear twice today is our standards applies to all operations globally. So 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. So our standard is as good as or better than any regulations local environment where we operate globally.
So 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. So that's the first point. The second point is, and you said it yourself, the permitting process in the U. S. Led by or coordinated, should I say, by the U.
S. Forest Services is a very comprehensive process. It covers all aspects, including water. You know that we have already secured around from memory between 50% 60% of the water through an agreement for a series of agreements, I should say, with some of the local Native Americans, and the team will be working to secure additional water going forward. But to date, are we concerned about the availability of water?
The answer is no. But once again, I've got no doubt that as and when we get to the next phase of the permitting process with a broad based consultation, some of those issues will be raised and will be discussed in the appropriate manner. So and then 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. And 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. So on the back of the metrics that we have, where the study is not finished, is today we believe there is a case to study. But we are not there yet. And we'll carry on with the assessment, and I'm sure you and I will continue to have this conversation.
And once again, thank you for the invite that next summer in resolution, we go hiking together. So I'll bring my shoes, so 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 you can.
Thank you, Chairman. John Farmer, shareholder. Forgive me please if I speak seated. There are 3 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 Whispy Gray?
There's a story told of Prime Minister Sir Alec Douglas Hume receiving a file from bulky file from 1 of of his civil servants marked, the minister will be interested in reading this, and 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, on how you might make the report a bit more pithy and easier to assimilate. And 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, except he does it in stages, but perhaps he'd like to comment.
I'm going to pass that to Sam to answer. But first of all, I mean, 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. And 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, and we will endeavor to make it even more pithy next year. Sam? And I
think specifically, Mr. Farmer, welcome. We do in remuneration as well, obviously, as you understand, have to comply with both the Australian regulations and the U. S. And the U.
K. Regulations. We do itemize all the individual directors. If we don't summarize the directors' remuneration as a whole, then that's something we can certainly include for next year.
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 5 years, and these accidents are recurring.
And of course, they're harrowing. People are losing lives. And my slant is secondly that there is potential implication on dependents and family and friends, notwithstanding that 2 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. And just a final sentence on that.
I think I've read somewhere in the annual report that 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 window. It all sounds pretty chaotic. Should you not be giving more attention to this and being perhaps more generous to the dependence of those killed?
Well, 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 learned from each of these tragic events. But 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 it's a traumatizing event for the people who are around and who witnessed this as well as for the victim themselves. So that is absolutely our top priority and I think we manage that as sensitively and appropriately as we possibly can. But Megan, could you talk a bit about the role of the sustainability committee?
Yes, thank you Mr. Farmer and 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. So 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. So 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 1,450,000 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 prove and 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. And 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. So, I can assure you as the Chairman has that there is nothing more important than safety of our people and around the world, and 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 $13,500,000,000 to shareholders. My question is twofold. First, you still have debt on the balance sheet and interest in the income statement. Might you have eliminated a lot of it?
But more importantly, what about any opportunity cost? You've regaled us with this panoply of returns, but what about the future of the company and investment in new assets so that long term we continue to prosper. And behind my question is perhaps that although you have a healthy 10 year total shareholder return of, I think, some 300%, the 5 year return that you also quote is rather more modest at some 30% the last 5 years. So to what extent have you planned for the future and asset replacement?
Good. Look, thank you for that. So in relation to growth, our capital expenditure last year was about £5,500,000,000 We have said that, that will increase this year. The guidance we've given is 6. We think it will go up to 6.5.
A large part of that is funding growth projects. J. S. Talked about Kudaidiri, which is our new intelligent mine, iron ore mine in Australia. We've talked about Oyu Tolgoi.
We've talked about Mazzotti South, which is a major expansion and extension of the mine life of Richards Bay in South Africa. And 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. So for example, Oyu Tolgoi where we there are other shareholders alongside us is financed with project financing. And 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 and we regard that as an important component of the political risk mitigation of that project as well as providing debt financing to the project.
So there is that element of structural debt on the balance sheet. Can we just have a show of hands and see how many of this 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
Sorry, my name is Andrew Hickman. I work with the London Mining Network as well. My question is about the Grasberg mine that you recently sold for 3,500,000,000 dollars And I've 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.
And I think, Mr. Jacques, you talked about the vulnerabilities in reference to the Grasberg asset. I was recently with an indigenous elder of the Hmongme tribe, Mama Josefa Aleman, 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. And as you know, the tailings issue has been a big issue for many years. As I understand it, you and Freeport McMurray have been dumping something like 100 of 1000, perhaps 200,000 tons of mining waste the River Aqua every day.
So Mike, 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. And 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?
And 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 that continues to have, because that mine at some point will there will need to be a reckoning for the actual for the real costs of that mine. So thank you for your time and I would really appreciate the answers that you gave because I will be trying to transmit them back to the communities and the people that live there. Thank you.
So look, thank you for those two questions. I mean on the question of would we invest in the mine today, I think it's impossible frankly to go back 20 years and ask what was the mindset of the people who made that decision. But 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 a tailings disposal, which is one of the issues that you raised. So we're happy just to reiterate that, 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. So 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 $1,000,000,000 and that price included the assumption by the purchaser of all of the liabilities associated with the mine. And 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.
And our future involvement with Grasberg has came to an end when that transaction was executed. So that is the situation. We have actually relatively few people now in Indonesia. I think we have a handful of people still monitoring Kelly Ann, which is a mine we closed about 10 years ago, but very few people on the ground.
You have to manage the tax situation and so on and so forth. So we have around 30 people in Jacobin.
Can we
£5,000,000,000 Are you saying that there is no money set aside for the responsibilities and liabilities that could still exist for that mine.
So 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. Can we take another 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 the Board knows its product. So 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 J. S. Has visited in the last 12 months, but I would I'm guessing 20 24. 24, okay.
And 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. So we as a board always have at least one site visit per year and often 2. 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 6 or 7 operations the last 12 months. Wherever we go, we try to have town halls. JES must have held I don't know how many town halls over the last 12 months. And 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. And we will have 2 visits, 1 to the Saguenay, which is our biggest part of our aluminum operations and another to Kennecott in Utah in the U. S. And then 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. So it is there is a regular program of making sure we get onto the ground.
Do you all go, or is it you've said the 2 of you have
been missing lots of
No, no, no. J.
S. And I do more than most, but the whole board is went to well, practically the whole board went to Ranger and the whole Board will go either to the Saguenay or to Resolution next year and I hope also to visit the Pacquiao assets in Australia. Questions? We have one over here and we've got one here. So 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, then 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 now.
Thank you. Then I didn't
ask anything. 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 you produced this year. I'm particularly happy because we've got net cash on the balance sheet, which is a fabulous thing to achieve 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 €1,000,000,000 to €2,000,000,000 actually pay quarterly dividends.
And 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 3 interims and a final. But I wonder if the Board could actually consider that because it certainly made Mrs. Clark very happy and that would be a great thing for shareholder and management alignment. So if you could consider that please.
My question is this, I noticed on Page 27, you talked about the auto haul project, the autonomous trains. I was just intrigued by that. I was staggered that the amount we spent was €940,000,000 I'm assuming that what we've done there is upgrade in the existing railway. So I'm curious then if that's the case, how on earth does it cost £940,000,000 and if all it is the savings we'll get back from us is savings and driver 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 Yaacob, who is the custodian of our balance sheet to talk about that. And J. S, perhaps you could start off by answering the question on Autohall.
All right. Yes. So autohall is a big number, as you said. There have been lots of investment the context of Autol. One of them, we had to change the entire telecom and signaling system.
So remember, in the Pirrah, you've got 16 minutees, 4 ports, 1700 kilometers, right? And we moved 1,000,000 tonne of ore every single day. So we had to revamp the entire system from that perspective. And the second aspect is which is a very good question around how we're going to make our money out of it. The bulk of savings are not on salaries of the people.
So let me explain the way it is. When you move the ore from all 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. Then you change the driver, then you restart and so on and so forth. So by not having drivers on the train, then you don't instead of using only 22 hours per day of the train, you can use it 24 hours.
So in doing so, you uplift the capacity of your entire system. So, you've got the benefit from that perspective. The second element, which is more important, which links back to the safety. Today, the way a railway is managed from a safety standpoint is to say you have physical blocks. And in the physical blocks so let's say, let's use this piece of paper, in the physical block, you can have only one train moving at any point in time.
In having an autonomous system where you have a driver, the block here becomes a virtual block from a safety standpoint. You move with the train as well. And 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. So the bulk 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 our savings from our significant investment in the O2O project in February.
Yes.
Thank you. I very much hear your sentiment around being protecting our strong balance sheet. Rio Tinto has the fortunate development over a 5 years period to delever its balance sheet and has today a very strong balance sheet. It's not more than a little more than a month ago, we were upgraded by Moody's, so we have a straight A rating. And 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. So the underlying we still have underlying debt probably
pro form
a to the tune of around €8,000,000,000 Also, if you take into considerations the new accounting rule, IFRS 16. So 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. So 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 are 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 it. 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. And I wonder what our involvement in Zimbabwe is nowadays and the future there.
And 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. And 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 UK. It is not a big part of our lives. On the question of Zimbabwe, I'm looking at Steve Mack in front of me. Are we exploring in Zimbabwe currently?
No. We are certainly exploring elsewhere in Sub Saharan Africa. We've got exploration projects in South Africa, Namibia, Botswana, Zambia. So we are certainly active in Southern Africa, but we are not currently active in Zimbabwe. So I think unless there are any other questions, we will move on now.
So 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. But those of you who have 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 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 9th 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 and 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 1st floor.
There are signs outside that will show you the way. As you leave, please remember to hand in your completed poll cards and I now declare the meeting closed.