Good morning, everyone, and a warm welcome to Rio Tinto's Capital Markets Day. It's fantastic to see so many of you here with us in London, and equally great to have so many joining from around the world. We really appreciate you taking your time today to be part of today's conversation. But before we get underway, a quick safety note for those with us in the room: in the unlikely event of an emergency, you will hear an alarm, and our venue team will guide you to the nearest exits, but they are here and here. If we do need to evacuate, please follow the IET fire wardens' instructions. They will be wearing visible jackets and head calmly to the assembly point outside Somerset House, Victoria Embankment, underneath Waterloo Bridge. Finally, please note that today's remarks include forward-looking statements, so our cautionary statement applies.
Thank you again for being with us, whether in person or virtually. So let's get started.
Good morning and good evening to those online, and welcome to the 2025 Capital Markets Day. It's fantastic to see so many of you here in the room and, of course, online as well. Now, throughout my career, I've had the benefit of spending time with First Nations people across our business, and I'd like to acknowledge and pay my respects to Traditional Owners and First Nations people wherever we operate. Over my 26 years with Rio Tinto, I've seen the positive impact we have on the communities that host us. I've seen the way our products improve people's lives and how our industry creates economic growth and prosperity. That same sense of purpose has guided me throughout my career. Over the years, I've done everything from fly-in, fly-out roles in operations, sales and marketing, and leading M&A transactions.
Most recently, of course, I was Chief Executive of our iron ore business. I know this industry, and I know Rio, and my beliefs are shaped by these experiences. For me, a great metals and mining business starts with a few core ingredients: operational excellence to keep people safe and drive returns, project execution, and capital discipline, all combined with a strong social license. Now, when these fundamentals are in place, a resource business is at its best. When Rio Tinto is at its best, it's extraordinary. I saw this a few weeks ago at Oyu Tolgoi and Simandou, two of the most remarkable mining projects anywhere in the world. Today, we start a new era for this business where we build on these strong foundations, deliver leading returns to become the most valued metals and mining business.
This morning, with my leadership team, we'll set out how we're going to get there. But before I start that, I want to start with safety. In my first few weeks as Chief Executive, I traveled to Guinea to meet the family of our colleague, Mohamed Camara, who lost his life at Simandou. Mohammed was a husband, a father, and a valued member of his community. I often get asked why I'm obsessed about safety. Sitting with Mohammed's family and hearing their grief was something I'll never forget. Safety must be our foundation, and safe and respectful workplaces are non-negotiable. More broadly, a safe business is also a strong business. It connects us. It drives a culture of collaboration. This is why safety will always sit at the heart of everything we do.
Let's move to today's presentation and how we're positioning Rio to become the most valued metals and mining business. You'll hear from me, from Peter, our CFO, and Vivek, the Chief Economist, and then the three product group leaders, Matt, Jérôme, and Katie, will each in turn discuss how we're driving value from their areas, but I'll start by setting the scene. I'm excited to lead this business because Rio has enormous potential, and as a leadership team, we've asked ourselves, how do we become stronger, sharper, and simpler, and unlock that full potential even faster? It starts, of course, with having the right assets in the right markets, supported by a diversified model that delivers market-leading performance and returns. It's a strategy focused on three pillars, and each one reflects the crucial ingredients of a mining business and resource business I talked about earlier. First, operational excellence.
This is about building a business that puts safety first and stays focused on the fundamentals. It means putting our unique strengths to work, especially deep ore body knowledge, mining, and process, and it means continually finding new ways to drive productivity, building, of course, on the progress we've already made with a Safe Production System. Second, project execution. To grow, we need to deliver projects reliably, safely, and at scale, and that's why great project execution is so crucial. It allows us to create value from our organic growth options, and we have been at the project model for some time. And I'll talk a little bit later about some of the benefits we're really starting to see flow through. This leads me to our third pillar, capital discipline. Strong performance requires firm financial foundations.
It starts with a resilient balance sheet, rigorous capital allocation, and a very clear focus on delivering leading returns to shareholders. None of this is possible without fostering those core enablers: our people who are brilliant, talented, and expert in what they do, and our strong social license, particularly crucial for our business, where the majority of our returns are generated by large, long-life assets that we will operate for decades, and partnerships, something that is increasingly a superpower for Rio Tinto as we work together with customers and other industry stakeholders. We've started translating this strategy into action by streamlining our portfolio to focus on four commodities: iron ore, aluminum, lithium, and copper, all of which are suited to our competitive advantages and our asset base.
Our product group leaders will delve into where the opportunities lie, but I'll give you a sense of why these are the right markets for us to invest in. Turning first to iron ore, where we have the best assets in the industry, we expect demand to stay strong with tight supply and significant depletion continuing to shape the market fundamentals. Next, our world-class aluminum and bauxite assets, with strong demand from the energy transition and lower supply growth from China, driving up marginal costs and, of course, prices. Lithium, fast-growing market vital for electrification. Following the Arcadium acquisition, we have world-class options to grow at the bottom of the cost curve. And Jérôme will talk about this shortly. Finally, copper. We're seeing extremely strong demand combined with constrained supply. So our message today is clear.
We have the right assets in the right commodities, and we will grow in a capital-disciplined way. This brings me to our commitment to deliver 3% compound annual growth rate through to 2030, with the project options to extend that into the following decade. This is industry-leading growth delivered with discipline and rigorous capital allocation as our guiding principle. In practice, this means our projects compete with capital with a decision-making framework to deliver those exceptional returns. It also means we'll maintain a strong balance sheet. Next, meet the executive team who will drive this strategy forward, and welcome to Matt Holcz, the newest member of ExCo leading our iron ore business. Now, you may notice that there's fewer faces on this slide. I wanted a smaller and more accountable ExCo group, and we reduced its size by 20%.
That's because, in my mind, greater simplicity and accountability equates to faster and better decision-making. So what sets this team apart? For me, it's the depth and diversity of experience around the table. Two centuries of combined experience in extractive industries, together with decades across other sectors. And when you put this together, you get something special: a balance of different perspectives combined with deep operational experience. Now, we all recognize when you try and do everything, you get nothing done. So we're directing our energy to where we can move the dial and taking immediate action on three areas for our shareholders. One, to simplify and sharpen our focus on performance. Two, to deliver and ramp up our growth projects: Simandou, OT, and Rincon. And finally, to release up to $10 billion in cash from our asset base. All of this is about creating a stronger business.
Firstly, let's talk about how we're simplifying the business. We've streamlined the organization, and we've moved to three product groups, supported by a diversified model that brings together long-life, low-cost assets, and a strong commercial front end. Reduced complexity translates into a sharper focus. By moving decisions to our assets as close as possible to the point of impact, we'll achieve greater accountability and sustainable improvements in productivity and cost savings. We're already seeing results. In our first three months, we've taken action to deliver $650 million in cash from the business on an annual run rate basis. $325 million is banked, and just under $325 million will be banked over the following few months. We're targeting significantly more. I'll update you as we deliver. Our growth projects are our second area of focus.
In Q4, we completed the OT underground project, one of the most technically challenging we've ever undertaken, 200 km of lateral development. Katie will be speaking more about this incredible work a little later. Last month, I was in Guinea to mark first ore at Simandou, which we achieved just over a year after major construction began. The rail spur was commissioned five months ahead of plan, and we're on track to deliver the mine and port on or ahead of schedule. This is an extraordinary outcome given the development scale and complexity. I want to recognize Bold and Mark for their leadership and enormous contributions. Our experience at Simandou was a game changer, and it's created a new model of partnership for our business. Collaborating with our Chinese construction partners has brought speed, efficiency, and scalability. As a result, we're doing things differently.
Instead of starting from scratch, we're using a category engineering infrastructure design, and we're uniquely positioned to apply those learnings across other parts of our portfolio as we drive lower capital intensity and speed up our projects. Let me give you an example. After pivoting to a Chinese EPC delivery model at a project in our mineral sands business, we've been able to reduce capital costs by 25%. We've accelerated our schedule by nine months, and we expect a 10% increase in processing throughput. I'll turn now to our third area of focus, our plan to release up to $10 billion of cash from our asset base. Now, two principles guide us. Firstly, being disciplined with our capital allocation. Secondly, innovating to capture our assets' full potential. Our strategic reviews of RTIT and Borates are advancing as planned, with the next phase focused on testing the market for those assets.
We'll also look at opportunistically releasing cash from our asset base, where we can get a competitive cost of capital, and as part of that approach, we're exploring commercial partnerships and ownership options across land, infrastructure, as well as our mining and processing assets. There are times when we need access to infrastructure, but we don't need to own it. All these together will drive increased return on capital as we invest in the growth and replacement projects we've announced earlier. Of course, none of our plans for growth and for delivery could happen without the trust and support of the communities and the countries that host us, but we need to earn that trust and be their partner of choice. Strong community relationships and social license come from listening carefully, engaging early, and focusing on outcomes.
Our commitment to sustainability is also an example of the way we live these partnership values. We remain focused on decarbonizing our business, and we have a pathway to a 50% emissions reduction target by 2030. As always, achieving this target is dependent on addressing our largest emitting assets, Pacific Aluminium in Australia, and Peter will talk more about how we're decarbonizing our operations in a financially disciplined way, so to wrap up, as we enter this new era for Rio Tinto, we've taken some significant steps forward, and three words: simplify, deliver, and release speak to what we've achieved in the first few months, so today, we announce $650 million in productivity benefits and savings as we simplify the business, and we're targeting significantly more. We are delivering our major growth projects: Simandou, OT, and Rincon, with 3% CAGR to 2030.
We're focused on capital discipline with a commitment to release $5-$10 billion in cash proceeds. Behind all this progress are our people, our social license, and our skills at developing partnerships. The message I want you to take away from today is that there is plenty more to come. For you, our investors, that will mean leading returns. For the communities where we operate, it will mean lasting positive impact. For Rio Tinto and our employees, it will mean becoming the most valued metals and mining business. Now, Peter, over to you.
Thanks, Simon. Let me build on your introduction by putting some numbers around the group for the next few years. We have a clear pathway to increase volumes, reduce costs, further strengthen our balance sheet, and release cash from our asset base, all of which will drive returns.
This year, we are reconfirming that our production will grow at over 3% CAGR for the rest of this decade. Now, that equates to 20% growth to 2030 and is underpinned by committed projects such as OT and Simandou. So the growth is locked in and coming. Delivery in 2025 has been strong, with production growth at 7%. Now, OT has been the main driver, but it's been a good year across the portfolio. Next year, we'll be relatively flat before picking up again as we scale up Simandou and deliver higher lithium volumes. Post 2030, we have multiple options to extend our growth, particularly in copper and lithium, but that will depend on locking down the economics and capital intensity. Capital discipline is key. We have a strong pipeline and will only advance the best projects.
Our mission here is to be, as Simon said, the most valued metals and mining company. That means strengthening our margins. We don't control price, but productivity and efficiencies will drive down unit costs and allow us to increase volumes. Now, this chart shows the competitiveness of our business. Through cost discipline, efficiencies, and uplift in our volumes, our cost per copper equivalent unit shows a 4% annual reduction, equating again to 20% reduction by 2030. Taking out fixed costs is an absolute priority. As Simon said, we have already reduced the annualized run rate by $650 million and have real momentum going into 2026. Now, let me give you some more detail. We've acted quickly to reset the organization and cost base with three main focus areas. First, simplification.
We now have three product groups instead of four and have reduced the executive committee and one level below by 20%. We're bringing down the size of the center, making it leaner, and devolving accountability to the assets. By year-end, we will have $200 million of annualized savings, which will be augmented over time by the benefits of streamlined decision-making closer to the assets. Second, we're continuing deployment of SPS practices to remove waste and strengthen operational discipline. We're driving efficiencies through labor productivity, contractor management, raw material sourcing, and reducing central spend. We're also changing how we invest in digital solutions, and this in aggregate is releasing $300 million. In parallel, we have accelerated the next phase of our SPS productivity uplift by challenging the medium-term plans of each of our businesses and functions to ensure they are aligned with their full potential on output, costs, and productivity.
Now, this has been a very detailed process to test operating assumptions around volumes and cost and to eliminate work that is not on the critical path to value creation. And third, we've looked hard at our portfolio of early-stage projects and reduced $150 million of spend where we don't currently see a compelling pathway to create value. Hence the decision to put Jadar into care and maintenance. We have a strong portfolio of development options and will be highly disciplined in allocating capital to them. Now, we do face some cost headwinds, particularly in the Pilbara, so some savings will be offset, and Matt will cover this in some more detail. Also, some costs in our business are non-negotiable, such as the hard-won gains we've made in asset integrity and maintenance.
But on a net basis, we are now firmly on a reducing cost trend and with much more to come. So we have a well-defined pathway to a 20% increase in copper equivalent production by 2030. These additional tons, together with productivity gains from operational excellence and cost discipline, will lift EBITDA by as much as 40%-50% at long-term consensus pricing. At the same time, we will see increased diversification in our earnings with a growing contribution from copper, aluminum, and lithium. Turning to capital expenditure, 2025-2027 are peak years as we complete OT, Simandou, and Rincon, and execute replacement projects in the Pilbara and Amrun. Post completion, we expect CapEx to decline to less than $10 billion. Now, the shape of our capital spend remains consistent with prior guidance, with around $4 billion for sustaining, $3 billion for replacement projects, and $3 billion for growth.
Growth is pretty much committed for the next two years, but capacity opens up from 2028. We have very good options across the portfolio, particularly copper and lithium, which will compete for capital. As Simon said, lowering capital intensity is an absolute priority. We have industry-leading capabilities in project delivery, and our strong partnership with Chinese contracting firms and their project ecosystems is starting to pay real dividends. Lastly, let me touch on decarbonization. We have a pathway to our 2030 target of a 50% reduction, which is achieved by leveraging third-party investment. We estimate we will underwrite $9 billion of private renewable energy investment on competitive commercial terms by 2030. Now, this, together with some rephasing of spend on new emission reduction technologies, has lowered our decarbonization capital estimate to $1-$2 billion. Let's now take a look at the balance sheet.
As I have said consistently, we have chosen not to have a net debt target, but have adopted a principles-based approach around a single-A credit rating. Net debt increased to $14.6 billion at the half-year following the Arcadium acquisition. Now, that's still a comfortable level, but we will be looking to further strengthen the balance sheet over the next few years. As Simon said, we will release cash of $5-$10 billion from our asset base on an opportunistic value accretive basis. We're in active discussions on one particular infrastructure asset, which could release up to $500 million. We remain committed to our capital framework, including our returns policy of paying 40%-60% of underlying earnings, noting we have a nine-year record of paying at the top of this range.
So to conclude, business performance is improving, and we will drive value through financial discipline, productivity, and growth. Unit costs are coming down as we take costs out of the business. Volumes are increasing as we deliver in-flight projects. We will be disciplined on capital at spend. We expect return on capital to lift from 2026 as volumes grow, costs decline, and capital expenditure reverts to sub-$10 billion a year from 2028. And finally, we remain committed to industry-leading shareholder returns across the cycle. With that, let me hand over to Vivek to talk more about our markets.
Thanks very much, Peter. And good evening, everyone, and good morning, I guess, for you. Today, I will talk about the forces shaping our markets over the medium to long term, what's happening on the demand side, what's happening to supply, and what all of that means for our commodities.
With demand, two big themes stand out for me: economic development in emerging markets and the energy transition. So let's start with economic development. The chart on the left shows global income distribution. Historically, metals demand in the region picks up when per-person incomes into the $5,000-$20,000 range. That's when urbanization and industrialization accelerate. The rapid expansion of this income group during China's boom and our granular insight into commodity intensities informed our early prediction of China's billion tons of steel. Looking to the future, growth in India and ASEAN will expand this same key income group, creating another wave of building construction and infrastructure-led metals demand, even as China becomes richer and slows. Moving to the energy transition, electrification of the global economy will drive substantial commodity demand.
Electricity is replacing fossil fuels, for example, in transport as EV adoption continues at pace, and new electricity demand is coming from fast-emerging applications such as data centers. At the same time, renewables are scaling quickly, driven by climate policy and falling costs. Put all of those together, and global electricity use could rise by nearly 4% a year, requiring significant new infrastructure and therefore substantial metals demand. Turning to the supply side, the industry now operates under two defining constraints. First, scrap has not delivered. Many analysts had expected recycled metal supply to grow quickly and therefore reduce the need for primary supply. But slower product life cycles and demolition rates mean scrap availability across steel, copper, and aluminum has been lower than predicted. This has meant additional requirements for mined ores and primary metals.
Scrap use will expand more rapidly in the future because that is the direction of government policy, but we need to recognize the limits. The second constraint is that new projects are taking longer. This is due to deeper ore bodies requiring more complex engineering, higher environmental and social standards, and increasingly complex approval processes. All of that slows supply growth and pushes costs higher. So let me step back for a minute and consider the big picture so far. We have economic development, the energy transition, and expansion of the digital economy continuing to drive demand across our portfolio. On the supply side, scrap availability, longer project timelines, and higher costs reinforce industry structure. So what stands out to me is the diverse range of positive forces affecting the markets for our commodities.
So let's explore all of this in more detail for aluminum, lithium, and iron ore, and copper, obviously. Turning first to aluminum, global demand is expected to grow by around 2% a year, supported by the energy transition globally and construction, especially in the Global South. Aluminum benefits from positive substitution thanks to its lightweight and conductivity. But the strongest structural tailwind blows from the supply side. For over 15 years, China has dominated global aluminum supply growth due to its low smelter construction costs and speed to market. But that era is ending. With China now near its 45-million-ton production cap, the next wave of supply must come from outside China, primarily emerging markets across the Global South. Projects in these regions have been more capital-intensive and slower to deliver. This creates supply risks as the market diversifies beyond China.
While these challenges play out, cost pressures are also building. In particular, electricity costs are rising due to decarbonization, grid reforms, and competing demands from other sectors. This will tend to steepen the aluminum operating cost curve. Finally, trade measures add a layer of upside to regional prices, leading to a fragmentation of market outcomes. For example, Europe's Carbon Border Adjustment Mechanism, or CBAM, which is due next year, will mark a step change in premiums that will favor low-carbon aluminum producers. Together, these supply-side constraints and cost pressures underpin robust long-term support for the aluminum industry, especially for those producers toward the bottom of the cost curve and with access to low-carbon power. Lithium sits at the heart of the energy transition. The largest source of demand is, of course, electric vehicles, where global growth remains rapid, driven by falling battery costs and still supportive policies.
More recently, stationary energy storage has overtaken EVs as the fastest-growing source of lithium demand, with broad-based expansion in all parts of the world. An underappreciated source of demand is supply chain stocks. Ongoing industry growth requires very well-stocked inventories throughout the supply chain, and that's to hedge against shortages. These inventories themselves need to grow over time to keep pace with the market. Meeting all of this demand growth requires rapid supply expansion. This year, that challenge has been met largely by hard-rock lithium from Africa and China. Hard-rock has been quick to the market, but it also has higher operating costs than lithium from brines. Looking ahead, significant additional supply will need to be incentivized to meet the demand that's coming, likely including from the upper half of the project cost curve.
But with strong growth in both lithium demand and lithium supply, there's uncertainty around the evolution of market balances over time. So in this context, we continue to monitor closely the relative pace of the energy transition versus supply developments. Copper has a very attractive industry structure. Over 40% of future demand growth will come from the energy transition. So that's electric vehicles, renewable power, and grid infrastructure. Data centers also require significant copper for cooling and cabling. Even relatively conservative estimates suggest that this segment could add over a million tons of demand in the next decade. On the supply side, the challenge is clear. By 2035, the industry needs millions of tons of new mine supply to meet demand, plus additional volumes to offset grade decline and closures.
While at 16 million tons, the project pipeline looks large on paper, history shows that only a fraction of this will be developed once technical, environmental, and social hurdles are considered. It's very hard work. This means that balancing the market will require three additional strategies. Mine lives will need to be extended. New projects will need to be brought into the pipeline through exploration, and new technologies will be needed to increase the productivity of existing ore bodies. Finally, I'll turn to iron ore. This is a market where prices have been significantly higher than forecast by most analysts, and there are five key reasons for the miss. First, forecasters have underestimated the scale and frequency of disruptions to supply. Second, rates of depletion have been underestimated. Third, the extent of grade decline and therefore reduced availability of iron units was not projected.
Fourth, and building on one of my earlier points, the availability of steel scrap has been overstated, and finally, the resilience of Chinese steel production and therefore iron ore demand has been under forecast. Together, these factors have led to a structurally tight market with a steep cost curve dominated at the top end by over 100 small, price-sensitive producers from over 20 countries. Looking to the coming decade, we expect substantial demand growth from the Global South, especially from India and ASEAN. This will offset the expected decline in Chinese demand. The market will need around 950 million tons of new capacity to meet this demand, to manage regular disruptions, and more importantly, to offset around 800 million tons of depletion at existing mines, a point that Matt will pick up on in a moment.
To illustrate the magnitude of this supply growth challenge, only just over 300 million tons have been committed to date, including Simandou, and achieving further supply growth will need to take place in the context of lengthening mine development timeframes. This underscores the continuing strong industry fundamentals for iron ore, so wrapping up, the key picture I would like you to take away from my presentation is that our commodity portfolio benefits from exposure to the full range of diverse structural forces shaping commodity markets. And on that note, I'll hand over to Matt.
Perfect. Thank you, Vivek, and good morning, everyone. It's a pleasure to be here today. I've been in role for three months, and I'm immensely proud to be representing our iron ore business.
By way of introduction, I joined Rio Tinto in 2007, and I've worked in the mining industry for over two decades across commodities, including iron ore, copper, and nickel. I've covered business development, commercial, major projects, and operational roles in geographies including Australia, South America, and the U.K. I've stepped into this role having been the managing director of our Pilbara Mines for the last four and a half years. It's an exciting time to take leadership of the iron ore business. We have a significant opportunity ahead of us. This is grounded in two core principles. The first is the strong fundamentals of the iron ore industry. The second is that we have a global portfolio with unmatched scale and superior optionality. We aspire to be the most valued iron ore business. To achieve this, there are three things that really matter.
First, we must ensure a safe and sustainable business where people go home safely and where communities and partners value our contribution. Secondly, performance. Simply, this is getting the very best out of our assets. And finally, disciplined capital allocation, meaning we select the right investment options and deliver attractive financial returns. We have strong conviction in the industry fundamentals, and I'd like to build on two points that Vivek made. The first point is that we expect the volume of new supply required over the next decade to be around 800 million tons, unchanged from the past decade. Rather than meeting rising demand, the driver for new supply has shifted to offsetting growing depletion. The second point is that the sector has underinvested at a time when developing new projects is more challenging than ever. This provides significant opportunity for those that can bring quality new supply to market.
This brings me to the second core conviction: the unmatched scale and superior optionality of our global portfolio. The Pilbara, with IOC and soon Simandou, will together form the world's largest iron ore producer under one leadership team. This brings opportunities. One is a greater focus on core technical disciplines and applying leading practice. At IOC, we are currently facing substantial challenges with pit health and asset reliability. There is expertise we can leverage from the Pilbara. Another opportunity is partnerships. Our joint venture partners bring diverse expertise from construction and steelmaking to trading and financing. Then there's market reach. With exposure to both the key Atlantic and Pacific markets, we will be the largest supplier of both high-grade fines and mid-grade lump and fines. This gives us deep insight into the market and a better understanding of customer needs.
Beyond our committed replacement mines, our Pilbara business retains significant optionality. We have choices on overall mine volumes and the rate at which we expand. Our rail and port infrastructure already has surplus capacity, significantly reducing the capital required to uplift volume. Secondly, we have choices around product quality, including how we blend our ores. The Pilbara product strategy implemented earlier this year is a great example. The strategy allows us to better utilize our ore bodies, bringing in 2 billion tons of resources into our mining schedule. This means after Rhodes Ridge, we delay the need for new mines, we defer closures, and we run a simpler business. Simandou further strengthens our product strategy options. As you can see in the graph, the sheer size and quality of Simandou will increase our average grades at a time when the overall industry grades are declining.
Having good options is not enough. We need to execute the right options at the right time to maximize returns. In the Pilbara, our replacement mines will replenish 130 million tons of capacity. Western Range was delivered on time and on budget earlier this year. The next tranche of projects will sustain the Hope Downs, West Angelas, and Brockman 4 hubs. All projects are on track to deliver first ore over the next few years. For Nammuldi, we have optimized the schedule and scope with a pathway to first ore in 2028. These are all highly attractive, low-capital brownfield investments that leverage our existing infrastructure and generate internal rates of return of between 30% and 70%. At the same time, we are also pursuing opportunities to monetize our existing infrastructure. At IOC, we now generate revenue from railing 25 million tons of third-party ore.
At Hope Downs, at our joint venture, we have reached an agreement to access an additional 400 million tons of resource. With infrastructure already in place, capital will be minimal. Beyond these options, we also have the two best undeveloped iron ore deposits in Simandou and Rhodes Ridge. Simandou I will cover shortly. Rhodes Ridge will complete the pre-feasibility stage by year-end with first ore in 2030. We are targeting 40-50 million tons, with options to increase beyond that. Last month, Simandou celebrated first ore. Seeing the project in person really put into perspective the enormity of what has been achieved. It was a moment of deep reflection as we remembered the two fatalities on our scope. It was also a moment to recognize the years of dedication that went into reaching first ore.
I do want to pay tribute to my colleagues Mark and Bold and their teams. Building strong partnerships with the Government of Guinea, our industrial partners, and local communities has been essential. While the first ore shipment departed this week, there is still a lot of work ahead of us. Construction activities on our scope are 60% complete, with major work still required across the mine, rail, and port. Sales are expected to be five to 10 million tons next year. Once full commissioning is complete, we expect a 30-month ramp-up to full production. Turning to the near term, the biggest value driver is operational performance. Our Pilbara operations were impacted by four cyclones in the first quarter. The production impact was around 13 million tons. We challenged ourselves to recover half of that loss. Since these events, our Pilbara operations have bounced back and are achieving record rates.
With constraints in the ports for most of half-one, strong mine performance created a surplus stock position, allowing the system to run for a period at full capacity. We've also focused on costs, with $100 million removed since September to offset cyclone impacts. With the system running at 360 million tons per annum, combined with these savings, we have demonstrated our operating costs drop below $22 per ton, aligned with our midterm guidance. This shows the value of delivering the replacement mines and Rhodes Ridge so that we can sustain higher volumes and achieve lower unit costs. In the meantime, we will continue a relentless focus on productivity. Beyond the ongoing focus at site level, we are targeting three levers at the system level: increasing ore body efficiency, unlocking system flow, and simplifying our organization and processes. There is a clear opportunity to do more with less.
Next year, productivity will offset depletion-related headwinds, meaning cost guidance will be similar to this year, adjusted for inflation and effects. I'm going to end on safety and sustainability. Our most valuable asset are our people. Nothing is more important than making sure they go home safe. While we have seen an improvement in key safety metrics, our safety journey is never complete. Partnership with our host communities is also essential. In the Pilbara, we signed a co-management agreement with the Puutu Kunti Kurrama and Pinikura peoples earlier this year. In the last week, we have also signed updated agreements with the Nyiyaparli people and the Yinhawangka people. While these milestones represent considerable progress, challenges remain, and we continue to engage to resolve these. We're also reducing our impact. In the Pilbara, we will disturb less land, return more waste to pits, and decrease our surface water discharge.
This also reduces our operating and closure costs. At Simandou, we have worked alongside local stakeholders to minimize impacts, including redesigning the mine, realigning the infrastructure to avoid critical habitats. This is about mining being done in the right way. Next year, global sales guidance is 343-366 million tons on a 100% basis. This includes 323-338 million tons for the Pilbara. In the midterm, our capacity is 425-440 million tons. In closing, going back to core convictions, we have the right assets in the right industry: a global portfolio with unmatched scale and superior optionality for both volume and grade. We will become the most valued iron ore business by allocating our capital with discipline and a relentless focus on safety, sustainability, and performance. Thank you. I'd like to introduce my colleague, Jérôme.
Thank you, Matt. Good morning, good evening to you all.
I'm Jérôme Pécresse, and I'm very happy to be here today to present to you the aluminum and lithium businesses and the work of our teams. In aluminum, I started the journey more than two years ago. As you will see, in 2025, we crossed important steps, both in Atlantic and Pacific. We faced unique market volatility, but we performed nevertheless. At Rio Tinto, we have a great aluminum business. The product group now includes lithium, the logic being that aluminum and lithium are the two businesses within Rio Tinto with the biggest processing content. We will try to apply to Rio Tinto Lithium some of the recipes that are proving successful for aluminum. While putting these two businesses together, we'll keep a streamlined leadership structure and stay lean, moving from two operational pools of activities to three, with an almost unchanged senior leadership structure at the product group level.
Moving now to aluminum, Rio Tinto owns the most profitable integrated aluminum business in the western world. Our strategy in that business is unchanged, and you can see it on that slide with its five pillars. But the first reason why we can implement this strategy successfully is our own competitive positioning, driven by progress on our operational excellence journey. It starts with the safety of our people and contractors. We have been stable on that front in 2025 at good levels, but with a remarkably low severity of incidents. Our operations performed well in 2025, with great operational stability for our aluminum smelters, with the second consecutive record year for bauxite production, and with efficient cost discipline. Our fixed cost will come down in 2025 versus 2024, despite higher production.
In terms of production, this performance will allow us to be above the upper end of the revised bauxite production guidance, to grow to the midpoint of the range for alumina, and to be around the high end for aluminum. We also progressed our targets on project execution, as you can see on this slide, and the same discipline applies to the way we spend capital in our Atlantic and in our Pacific operations. Back now to operational excellence. Operational excellence in aluminum is nothing more than the fruit of our frontline labor every day of the work they do. It is a sum of micro and macro actions that enable us to improve our performance and manage our risks. First, at the root of this journey are decades of accumulated experience and expertise from all the companies that formed today Rio Tinto Aluminium.
Second, is the effort that has been engaged to empower people on site, to develop their skills in problem-solving, to develop their ability to anticipate and to fix issues at the point of impact. Third, and I would say most importantly, the frame of all this is our capacity, especially in aluminum smelters, to compare all our operations with each other. We operate 13 smelters in the world, and to be able to define for each performance indicator at each smelter what best looks like, and then to draw a clear multi-year roadmap on improving each of these KPIs to ultimately reach best-in-class across the board. This is what you can see sketched on the bottom right on this slide, but we go into much more granularity. We look deep at each value lever, and we track execution progress on an ongoing basis as part of our management operating system.
All of these will now be demultiplied by our digital initiatives. This operational excellence foundation and this stability were also at the core of being able to react with agility to the volatility created this year by U.S. tariffs. And that was achieved thanks to integrated operational and commercial efforts. Over time, the U.S. market premium has moved to a level which today broadly reflects the 50% tariff. But we also acted. We mitigated some impacts, for instance, by being flexible on the destination of our Canadian aluminum production, moving some volumes when economically sensible from the U.S. market to European markets. I think it's also important to note that these market movements in the U.S. have strongly reinforced the strategic logic of our Matalco acquisition in secondary aluminum. Matalco is a strong beneficiary of the current context, with higher utilization rates and higher margins.
In 2025, we continue to work to improve the positioning of our business for the future. This has been the case for our Pacific operations. Together, these operations represent 40% of our asset base, and they provide a commensurate contribution to our profitability. Two years ago, we engaged ourselves on a path to restore the competitiveness and the sustainability of these assets from a footprint and also from an environmental standpoint. You can see on this slide the many milestones that have been achieved. In this frame, we announced months ago that our Tomago smelter in Australia, which is the largest in the country, was beginning consultation with its employees on its future. This consultation process has since then been completed, and conversations with federal and New South Wales governments continue towards, hopefully, a positive outcome.
In parallel, on the right side, we have continued to develop with a few important steps. Elysis technology reached a critical milestone a few weeks ago with the successful startup of the first 450,000-ampere industrial-size pot. This is a major achievement. And our greenfield projects in Finland and India continue to progress towards decision steps. So, in summary for aluminum, I would say the following: our integrated value chain is proving its relevance every day. We lead our industry in margins and in technical performance. We have a clear roadmap to the full potential of all our assets. We are performing operationally and financially and on track to our 2030 return on capital target that we announced in Quebec last year to many of you. We want to be the most relevant partners to governments, to communities, to customers, and to the leading global OEMs in the world.
And the latter, with the global OEMs, is even more possible today that lithium is part of our portfolio. Where I will start for lithium, after only a few months in charge of that business, is the following convictions. One, we have acquired a company which has all the assets to be a global leader in a growing market. Second, this market is strong. It will remain strong, as Vivek explained. Third, we have the right teams. We have the right long-term reserves. We have the right assets at the right place, positioned at the bottom end of the cost curve. And we mastered the DLE technology. Fourth, there is a strong track record in delivering lithium projects by the lithium team, which is now being reinforced by Rio Tinto's large project capabilities.
In that business, we'll focus only on a few priorities, with one true North Star in mind, which is return on capital on the investment we make. And we will take a phased approach to our development, as I'm going to explain. As you can see, in lithium, we have today a production capacity of 75,000 tons. The absolute focus of the team in the years to come will be to deliver the in-flight projects on time and on budget towards 200,000 tons by 2028. The committed projects which will allow us to reach that capacity reside in Argentina and in Canada. The team will focus in the years to come to deliver this on time and within the budget envelope. And we plan this to represent a CapEx spending of around $1 billion per year for the next three years.
Beyond these committed projects, we own the best portfolio of lithium development assets in the Western world. We'll take a disciplined approach to their development, learning and improving capital intensity from one project to the next, optimizing to one single DLE technology, and defining one simple, unique, standardized project execution framework. That work has started. We will leverage, at the same time, infrastructure in Argentina across our assets, aiming to get cost down to create the most profitable lithium production cluster in the world. This execution model that we are working on will allow us, after 2028, to develop further projects in Argentina, in Canada, with one single spodumene mine feeding our Bécancour hydroxide facility, and in Chile, depending on the results on our studies.
As you can see on this slide, we target to halve the capital intensity from current levels, shorten execution cycle, while moving production costs even more to the bottom of the cost curve. This will allow to generate returns of at least 15% on every single project. So, to conclude, we have a world-class lithium business and growth pipeline. And I want to leave you with two important thoughts. The first is my optimism on the potential of Rio Tinto Lithium. We should be, by the end of the decade, a 200,000-ton production capacity business at a 50% EBITDA margin. And second, a strong stance of operative focus to execute towards this, don't be dispersed on things which are not priorities, and be able then to grow the business further in a highly disciplined manner to capture market growth.
We are convinced that market growth will be sustained and substantial. Next week, we'll be very happy to meet many of you in Argentina to deep dive on this lithium topic. Thank you. Now, my pleasure to invite Katie to talk about copper.
Thanks, Jérôme. Good morning. Good evening. Oh, I'm going to wait for the words to follow me. Too much multitasking. When I stood here a year ago, I was still relatively new to Rio Tinto and to copper. Twelve months on, in what has been a significant year for the copper industry, I'm really proud of what the team has delivered and confident in where we're heading. Let me start with the fundamentals. Safety is our first priority. We've now reduced injury frequency rate for the third year in a row. That's not luck.
It's the collective impact of clearer accountability, our safe production system, and a real drive for operational excellence across our sites. For 2025, today, we've lifted our full-year production guidance again. That's been driven by record growth at Oyu Tolgoi and a strong year at Escondida. At the same time, we've lowered our unit cost guidance, reflecting disciplined cost control and better-than-expected byproduct revenues, with gold production above 600,000 ounces this year and next. The result? Higher returns on capital, now at 12%, five times the free cash flow, and EBITDA of $3.1 billion at the half-year, with a stronger second half expected. As Simon said, the OT underground project is now complete. Our focus is shifting to productivity, particularly accelerating development in Panel 2 North. At Kennecott, stabilization work is progressing well, and we've started the work that will extend the mine life beyond 2040.
Nuton, our bio-leaching technology, continues to deliver encouraging early results. I'll come back to that later. As we look to the future, the actions we're taking today give us a more resilient and diversified copper business, providing a strong platform to profitably grow, targeting one million tons of copper a year and beyond. Let me turn to Mongolia. Higher grades, higher recoveries, higher underground volumes. All of that means we're delivering record production at OT, and our safety performance remains industry-leading. With the underground material handling system and all major infrastructure now in place, 2025 will be our first year of positive free cash flow. From there, we expect mid-teens production growth in 2026 and remain firmly on track to ramp up to an average of 500,000 tons a year between 2028 and 2036.
This year, we've successfully commissioned the conveyor to surface, Primary Crusher 2, and Ball Mill 5, which means we're now operating as a fully integrated mine. There's still a lot of development work ahead, so productivity and cost discipline will be absolutely central. Three metrics we're focused on next year are increasing the Panel 2 North undercut rate, driving a 5% improvement in workforce productivity, and continuing to lift concentrator recoveries, already up from 82% in 2024 to 85% in the first half and targeting 87% next year. On the Oyu Tolgoi joint venture license area, although we've pivoted to accelerate development of Panel 2 South, we continue to preserve sequencing optionality. In 2026, production will come from Panel 0 and Panel 2 North, but the timing of the Oyu Tolgoi license transfer is important to maintain the optimal development sequence.
So we'll continue to work closely with Entrée and the government of Mongolia to achieve license transfer and a long-term resolution. Turning to Oyu Tolgoi, this has been a year of transformation. Geotechnical constraints remain, but are being successfully managed. We're unloading the pit around the faults, and by the second half of 2027, we'll begin accessing higher-grade ore in Slice 2, which will reduce our reliance on lower-grade stockpiles. The return to stability is showing up clearly in the numbers. Milled ore up 12% versus 2023, and smelter online time up 6%, with our smelter shutdown completed safely, on time, and below budget. We expect Oyu Tolgoi to be cash flow neutral in 2025 before returning to growth in 2026. Productivity remains a major focus. We've already lowered fixed costs, including by a 10% reduction in salaried workforce.
In 2026, we're targeting further gains by accelerating underground development, improving truck utilization, and lifting smelter online time again. The underground ramp-up is progressing, with first sustaining production from the North Rim shafts expected in Q1 2026. With grades around five times higher than the open pit, this adds roughly 250,000 tons of copper through to 2033. And with work now underway on APEX, the life of mine extension, our long-term conviction in Kennecott remains very strong. Stepping back, our producing assets are only part of the story. We also have a global portfolio of projects with a diverse range of partners that underpins our long-term growth plan.
We refreshed our strategy this year, which reinforced our commitment to grow in copper, first by maximizing our value from existing operations, where a key milestone in 2026 will be supporting the selection of the next major growth investment at Escondida as the copper grades begin to decline, but also by advancing and actively managing our broader project pipeline, where we are working hard to accelerate schedules, lower capital intensity, and find the right partners. Let me dive into the details. In Australia, the Winu team have moved into full feasibility studies, which we aim to finish next year. Our joint venture with Sumitomo Metal Mining has now closed at an implied valuation of $1.2 billion, and we've submitted our environmental review to the Australian regulator with full written support from our Traditional Owners. In the U.S., Resolution Copper remains an attractive opportunity.
With FAST-41 designation and copper now listed as a critical mineral by the USGS, policy support for the land exchange has strengthened despite ongoing litigation at the district court level. I remain optimistic. The case for this exceptional ore body has never been stronger. At La Granja, our partner FQM is making good progress with drilling and geological modeling, and we expect feasibility studies to complete in 2028. In Chile, our Nuevo Cobre partnership with Codelco is gaining momentum with ore body knowledge studies and a major 200 drill hole campaign underway. This is a strategically important partnership in one of Chile's most prospective districts, with clear synergies with Codelco's neighboring San Antonio property. Turning to Nuton, our bio-leaching technology, I'm delighted to share an exciting update. Can we have the video, please?
The world needs more copper.
While copper supply exists, it takes, on average, almost 18 years to go from discovery and bring that mine into production. That's where Nuton, a Rio Tinto venture, comes in. Nuton has developed breakthrough technology that combines the power of nature and innovation to unlock copper faster and cleaner. At Johnson Camp in Arizona, we produced our first cathode at industrial scale using Nuton technology, going from concept to copper in just 18 months. We have an ambition to deliver the lightest carbon footprint copper in the industry, and we're committed to measurable positive impacts across water, energy, land, materials, and society. We simplify the mine-to-market supply chain with copper produced directly at the mine site, without the need for a concentrator, smelter, or tailings. We've designed a standardized modular brick system, a technology package. That package integrates biology with chemistry, engineering, and digital tools.
Together with our commercial expertise and our partnerships, we can replicate that technology package rapidly across the industry. Nuton offers a distinct competitive advantage. We can produce more copper rapidly for less. Bio-leaching is not new. How Nuton does it is.
And here it is over there, a sample of the first copper cathode produced using our Nuton technology. It came from our leach pad in Arizona that you saw on the video. And in 2026, we'll further validate the technology through a second trial, also at Johnson Camp, testing an ore type with different characteristics. Nuton technology has huge potential, producing copper faster with higher recovery rates than traditional leaching and unlocking copper from hard-to-leach ores like primary sulfides. This is a major milestone on the journey to realizing that potential. To wrap up, 2025 has been a pivotal year. We're on track for record production.
We've raised guidance twice, and we've lowered our C1 cost guidance. Returns on capital are up, and OT is cash flow positive. In 2026, we expect another year of progress with around 10% production growth from our operated assets. Greater stability at Kennecott sets us up for a step change in production and strengthens the mine life extension case. At OT, momentum continues with ramp-up in Panel 2 North and accelerated development in Panel 2 South. And we continue to work closely with the government of Mongolia to unlock the full potential of this world-class resource. We'll also further validate Nuton whilst continuing to produce copper. And across our portfolio of growth options, we'll work hard to turn projects into concrete investments with attractive returns. We have a strong set of organic options, deep operating and technical capability across jurisdictions and mining methods, and a scalable technology advantage through Nuton.
This is a business with meaningful optionality where our ambition is clear: to profitably drive copper production to 1 million tons a year this decade. Thank you. I'll now hand back to Simon to close us out.
Thanks, Katie and the team. And thank you, of course, to each of you for listening in. And we will go to Q&A in just a moment. And conscious of the time in some jurisdictions, we'll push straight through. But that brings a conclusion to the presentations. And perhaps to close, I want to finish with saying how proud I am to lead this company, a 150-year-old company. And this morning, you've heard a clear commitment from us around delivering enhanced shareholder returns. And already, you can see our intent: stronger, sharper, and simpler.
And this means having the right assets in the right commodities, delivering $650 million in productivity benefits and savings in our first few months, and we're targeting significantly more, releasing $5-$10 billion in cash from our asset base. And we're focused on delivering the 3% CAGR growth through to 2030 with the capital discipline to grow in a sustainable way, all while maintaining a strong social license. And when you put this all together, this sets Rio firmly on the path to becoming the most valued metals and mining business. So I know we've covered a lot of ground today, and I look forward to your questions. And perhaps I'll hand back to you, Rachel.
Thank you. Thank you, Simon, and to the whole team. So we'll now open the Q&A. For those here in the room, please raise your hand. Already doing.
We'll bring a microphone to you. For those online, the operator will unmute you. To the operator now, please, could you kindly remind our participants online how to enter the queue to ask a question?
Dear participant, just a reminder, if you would like to ask a question over the phone, please press *11 on your telephone keypad. If you would like to withdraw your question, please press *11 again. Thank you.
We will ask everyone to limit themselves to one question with one follow-up. Let's start here in the room, and we'll go with two, and then we go with two on the line. We'll start here. Thank you, Christine.
Thank you, Dominic O'Kane, JPMorgan. On the $5-$10 billion value released from assets, could we maybe unpack that a little bit? Are there specific assets that you have in focus?
Is it driven by Commodity Group? And then, in addition to that, what do you intend to do with the proceeds of that value unlock?
So maybe we'll start with principles. What we want to do is make sure that we have as efficient as possible capital structure. And we're really focusing our efforts on where we can move the needle. So we obviously announced the strategic reviews of RTIT and Borates, and that's included in the number. We also have a really significant footprint right around the world: infrastructure, land, and obviously the mining and processing assets. Peter gave an example earlier. And that example around $500 million is an infrastructure asset we need access to, but we don't need to own on our own balance sheet. And so that'll comprise a component of it.
As always, we'll continue to look at our capital base and make sure we're the right asset, we're the right owner for all of those assets. And so that'll also make up a component of it as well. Anything you wanted to add, Pete?
Nope. Things are very clear.
And just on the proceeds, how you intend to use the proceeds?
So we've obviously announced our capital plans. We've announced today a reduction to less than $10 billion for that. I guess you're shaped by your experiences. And I'm probably of the view that you've got to continue to have a really strong balance sheet. In a diverse model, I think that's absolutely right because then you've got flexibility to manage through the cycle. And so with that capital program, having a strong balance sheet, ultimately, it flows to shareholders.
Thank you. Here at the front. Thanks.
Thank you.
This is Alain Gabriel from Morgan Stanley. Simon, you talked about the $650 million in OPEX cuts, and you talked about significantly more to come. Which businesses do you see present you the biggest opportunities for these cost cuts, and which businesses do you feel you've fallen behind some of your peers? Thank you.
One of the things I've been really pleased about in the last few months is the way that the teams come together. It's a full company effort. I don't know programs like this are successful without really that engagement right across the leadership group. I see it coming from all the areas.
One of the things that we are doing that I would highlight is just going through every asset and looking at what is the full potential for this asset out in the medium term and what's the work we've got to do today to make sure that we're really delivering against it, and so happy with the way that that's come together. Obviously, three months, $650 million is a good run rate, and we're continuing to be really focused on driving it, and probably the other point I would just add to the end of that answer, my intention is to explain the intent and then to update you as we deliver.
Thank you, and a follow-up to Dominic's question on the $5-$10 billion. Part of your envelope is minority asset sales.
Do you have any specific assets in mind you're looking at, and is that an elegant way to recalibrate your portfolio away from commodities you like the least?
I think we should always be looking at our portfolio, and you've seen that in the announcements we've made in the last few months, and so that's what that's signaling. Nothing to announce today, but we're looking at all of our holdings.
Thank you.
Okay. Hold the mic there, but we will go to online now. Two questions, please, operator.
Thank you. Now we're going to take our first question. Just give us a moment. The question comes from Rahul Anand from Morgan Stanley. Your line is open. Please ask a question.
Hi, Simon, Peter and team, thanks for the call. Simon, congratulations on the new role. In terms of my question today, let's perhaps change tack and go to lithium.
Lithium growth to 2028. I note that that number used to be 225,000 tons per annum. It now sits at 200,000 tons per annum. Jadar was supposed to be in 2029. I presume Galaxy is one that's potentially out. But can you perhaps let us know what's driving that decrease in production into 2028? And I'll come back with a follow-up. Thanks.
Yeah, sure. And I'll get Jérôme to add to the specifics in a moment. Maybe just to talk to the high level, we've got fantastic lithium assets, as I think Jérôme articulated really well. We've got the best undeveloped lithium assets in the business, and we have a clear path through to that 200,000 tons by 2028. And that will be a fantastic business for us. On the other projects, we'll continue to assess them based on the market fundamentals as those businesses come up to sanction.
But I think with the work around capital intensity and the projections in the market, lithium will grow to be a really significant business for us. But Jérôme, do you want to talk to the specifics?
As you said, Simon, it's a drive to more focus and a sense of constraint. I mean, we don't want to spend capital everywhere. We want to succeed to 200,000 tons. The impact, obviously, of Jadar being placed in care and maintenance. On your comment on Galaxy, what I said during the presentation is we'll open one mine in Quebec to feed our Bécancour hydroxide facility. We are currently studying if that mine is Whabouchi or Galaxy. That will take us probably a few months. And the outcome of that study is not yet finished. So for the time being, we are minimizing spending on the two mines.
And again, I think it's a reasonable capital decision to open one mine, not two, but it's too early to say which one is going to be.
I'm going to highlight the key point on the 225 versus the 200, which is we're only doing the projects that are in train, effectively, and one spodumene mine in Canada. That's it until that period.
Got it. Thanks for that clarification, Peter. Look, as a follow-up, I'll stick to lithium. Now, you've obviously talked about future growth, and that's going to be market and return dependent. So I guess if I ask that question in the opposite way, what lithium price in the long run do you need for that 15% IRR on your brine projects?
So the 15% in the presentation was just based on consensus. I guess the point we're making is we've got a clear path to the 200.
As each of the other projects come up, we'll assess it based on the market fundamentals at the time. Demand in general, I'd say, has tracked in line or probably slightly better than our projections, particularly on grid storage, and it's the supply side that we need to test as those projects come to fruition.
Thank you.
That's helpful. Thank you very much, team. Pass it on.
Thank you, operator. We'll take one more from the line, please.
Yes, of course. Just give me a moment, and now we're going to take our next question that comes from the line of Rob Stein from Macquarie. Your line is open. Please ask a question.
Hi, Simon. Thanks for the opportunity to ask a question online.
Very quickly, just no clear mention of the DLC or any actions being taken to address that, given that we're six months on from the resolution last AGM. Looking at the presentation and the integration of Simandou into the product plans and the structure of the business, it looks like any type of asset swap for that asset might be off the cards. Can you just give us a bit of an indication of what you might be looking at in terms of closing that DLC spread and anything that you can do to enable buybacks?
Yeah, sure. Thanks, Rob, for that question. On the DLC, I don't have anything to add to. I think that was pretty well covered as part of the process leading to the resolution earlier this year.
In terms of the Chinalco shareholding, I would say we're actively working with Chinalco around solutions around that constraint and what that would look like. It's going to take time. My view is we continue to work at it. There'll be a moment in time that we'll open when we can manage our way and put a solution in place to give us the flexibility on both sides of the DLC. But we're actively working, but nothing at this stage.
And sorry, just as a follow-up to that, would you see any action or ability to raise the share price getting above Codelco's entry points being conducive to that type of negotiation or that type of settlement that you could do with them to enable buybacks in the future?
That could be part of the solution. Absolutely.
Thank you.
Fantastic. We'll start straight here on the floor. Thanks.
Hey, Simon.
It's Jason Fairclough, Bank of America. So it's a great organic growth story. I kind of took note that the third thing out of your mouth as you were introducing yourself was the phrase M&A. So how do we think about inorganic growth? Have you got a different approach and a different mandate to your predecessor?
So one of the things moving into the role that we did is we got the team to go back over 30 years of cash flow and look at where did all the money come from and where did all the money go. And the point around that I would make is we have added enormous value to this organization. We were able to work with others and unlock synergies where we brought something to the table.
And so I'm not going to talk to M&A speculation and other things, Jason, but our focus is always around what do we bring and what synergies do we liberate. And that applies to things we'll do organically, and that applies to things that we'll do inorganically and continue to do. I think Matt today talked about in the iron ore business over a period of time how we're continuing to put in place ways of improving that business, whether it's things like Rhodes Ridge, Texas East that was touched upon today, but improving that business where there are synergies and where we bring something to the table.
Okay. Thank you.
Let's just go to the right. A bit easier.
Ephrem Ravi from Citi. On the CapEx slide, up to $11 billion for the next two years and up to $10 billion.
If you add up from a bottom-up, I mean, three and a half maintenance, about three replacement, and not that many projects, maybe a billion for lithium. So I mean, feasibly, it could be somewhere between eight and nine. What kind of gives you sort of caution for bringing down that number further to definitely below $10 billion or maybe even $9 billion on the CapEx side?
We've always really reserved about $3 billion for growth. We've got the options that we see maturing through the portfolio. Whether those are ready in time, we'll see. But they will only compete for that capital based on the returns that we see from them. If we don't have the projects that we like, yes, we'll spend less. But at the moment, we see that as less than $10 billion.
And a follow-up on the lithium.
Beyond 2028, obviously, depending on the market conditions, but given the 150 million that you're taking out from rationalizing non-core projects, would any of the lithium projects or studies be part of that option that could not be materialized because of that 280 million, sorry, beyond 200 million?
So I think the key action has been we put Jadar and care and maintenance. Absolutely clear. For the other projects, I mean, I think, as sort of Jérôme said, we're standing back from those. I'm really going through now to make sure that we've got the lowest capital cost sort of way of developing in a very systematic way the brine. So there's nothing else. I mean, I think the assets that we bought under the Arcadium acquisition and the options in Chile are absolutely world-leading.
It's just absolutely getting the right sort of development at the right capital cost is the core focus.
Thank you.
Thank you. Let's go up here. Oh, now I'm making it complicated. Christine, could you kindly help to move the microphone? Thank you. Thank you. Yep.
RBC, Ben Davis. Quick question on Nuton. Obviously, it's early days, but have you, in terms of what expected cash costs for that type of business when it does commercialize, any sense of that versus where we are today? Okay.
You should be standing next to the copper cathode.
Well, yes. 20 kilos of copper sitting on an easel, and I'm going to stand over here. No, I think it is early days. So I think in terms of the exact kind of cost profile, it's difficult to be concrete.
However, what I would say is, and actually, I think what the 18 months that it's taken us to go from starting this trial to having a piece of cathode there shows is that Nuton's a really powerful technology for kind of breathing new life into older sites. Because the Johnson Camp site that we're at in Arizona is an older mine, an SX-EW facility that was unused for some time that we've managed to kind of restart up in really a short time frame. And for me, that's one of the reasons why this is such exciting technology. I think there's also a lot of application on greenfields discoveries as well.
Because, of course, the other thing about Nuton is it's good for leaching ores that have things like high arsenic content, but also places where you don't have water, you don't have as much energy available, and you don't want to build concentrator smelter refinery type infrastructure. So it's a long-winded way of saying we think it should be cheaper. That's kind of the it should have an economic advantage both in terms of the sort of limited facilities required, but also then being more effective in terms of recovery rates and being able also to process ores that can't be attacked in other ways.
And just to follow up on that, I mean, just would it be possible to give a sense of how widely trialed this is being at other assets and how quickly to scale post the second trial, Katie?
Yeah.
So I think I should say this is great news, but these trial periods are actually a number of years rather than a number of months. And it will take us about three years to really determine the sort of ultimate recovery rates that we see from this first industrial scale trial. So this is the first industrial scale trial. We then can also conduct another one on the same site, but with different ore, which is a great synergy, right? That obviously cuts timelines and actually cost as well somewhat. And then I think you saw when I showed the map, we've got a number of different partnerships where we have partners who are very keen to deploy Nuton technology at their sites. So we're working towards different commercial arrangements with all of those. And of course, we're also looking at our sites as well.
Escondida is a place that we would like to see this working as well.
Thank you, Katie. So we will go to the line now. Please, operator.
And now we're going to take our next question. And it comes from the line of Glyn Lawcock from Barrenjoey. Your line is open. Please ask a question.
Good morning, Simon. Simon, I just wonder if you could maybe shed a little bit more color around the 4% per annum unit cost reduction. I mean, you've got 3% volume growth on the other side of that. But I would have thought the cost guidance of $650 million out to only 2.5% of your controllable cost base. So is there a dollar million number that you could sort of put around that 4% per annum cost reduction target out to the end of the decade?
Thank you, Glyn. Thank you for staying up.
And so part of it you've got in terms of the volume growth there, Glyn. We've announced the 650 today. We're obviously chasing significantly more beyond that, but I don't have a dollar number for you. And part of that, Glyn, is making sure that we do the right work. We're talking to the 650 because that's what we've delivered. We're putting in place the machinery behind to really go after significantly more, but quite deliberately. Not putting a target out there today because we'll update you as we deliver. And there's a few components to that where we will not compromise, learning the lessons from the past, particularly around asset integrity and maintenance and making sure we continue to do the work that we need to do to have a sustainable and continuous improvement mindset as we go forward.
So that's some of what sits behind and why we're not doing a specific number for you, Glyn.
Simon, can I just follow up then? I mean, even if you took the 3% volume growth, that's three quarters of the four. 1% per annum, that should be around, what, 300-400 million per annum? So you're still looking at a $2 billion number. Does that math work?
As you say, Glyn, there's plenty more to come.
All right. Thanks, Simon.
Thanks, Simon.
We'll take another call from the line, please, operator.
Just give me a moment. And the next question comes from the line of Richard Hatch from Berenberg. Your line is open. Please ask your question.
Yes, thanks very much for the time. I'm just interested about your thoughts on the multiple of this business.
So companies with iron ore exposure of over 50% of EBITDA have generally trended lower in their multiples versus, say, growth businesses, growth commodities like copper. So do you think that changes now that you're talking about an iron ore market that gets tighter into the longer term, or do you think that you have to rather grow your lithium, your copper exposure, growth commodities to try and push your multiple higher? Thanks.
Thanks for your question. And iron ore is a fantastic business for us. And I think we've talked today around we see it continuing to be a fantastic business for us in the future. And there has been a number of things that continually get either underestimated or overestimated, and that's led to prices much higher than most analysts' predictions, really, when you look back over an extended period.
I thought the chart in Matt's presentation was really striking. You look at the capital that was required to deliver the iron ore to be able to feed urbanization in China. Effectively, you're talking about the same amount of iron ore that is still needed. It's just now it's needed to replace depletion. The other point I would make on that slide, just to draw your attention to, on the left-hand side is the capital profile. The wedge of capital you needed to bring that supply in, and then that has gradually trailed off to where there's not a significant investment in the industry. On your broader point around the relativities between, I think through the cycle, there's always different points of that cycle where particular commodities are valued in a different way on the forward projection.
And that's exactly why the model that we're running with a real strong focus across those four commodities is absolutely the right model because that gives us flexibility through the cycle to be able to invest in a really capital-disciplined way.
Okay. Thanks. And then the follow-up is just on aluminum volumes. So with AP60 ramping, should we expect that 3.25 to 3.45 to push up to more like 3.6, or is that too much of a bullish direction? Go on. Talk to that, Jérôme.
It's a bit too much because AP60, as you know, is ramping up, and we are on plan. Come on. We are on plan for first metal towards the end of the first quarter of next year. But AP60 is ramping up to replace Arvida, which is shutting down.
So we'll do a bit better in 2027 as AP60 is in full ramp-up, but in 2026, it's just a ramp-down, ramp-up story.
Thanks.
Fantastic. We'll stay back here in the room. We'll start here, and then I will go on that side, I promise. Thank you.
Thanks very much. It's Patrick Mann from Investec. Maybe just a follow-up there on the iron ore. So taking your point that a lot of these projects are depletion and lower grade and replacing, just to take it one step further, how confident are you in that sort of shape of the cost curve, the steepness of it that keeps the market? Because I suppose there's a scenario here where the low-cost producers replace the higher-cost production, and you could have overall the same volume clearing, but at a lower market price, right?
So do you still see, I think it was 100 smaller companies from 20 different countries, whatever the statistic was, do you think that that cost support keeps the cost curve favorable for lower-cost producers like yourselves? Thanks.
And it's a great question because I think that cost curve and the shape of that cost curve is one of the striking things about the last few years because not only the players that we've talked about before being in that range, and obviously inflation across the industry tends to hit high cost proportionally more, but also the fact that even some of the majors where they're now doing third-party sales, etc., have announced being up in that sort of higher cost range as well.
Whereas historically, we'd probably model them as a block down on the left-hand side. Actually, you've now got to bifurcate between different sources of ore as well. And so all of that goes to cost support on the right-hand side of that cost curve. And you can see it a little bit in the market over the last year. As prices have dipped down, you're seeing some of those tons actually respond really quickly and providing that price support.
Tony Robson, Global Mining Research. Thank you. Aluminum, 5% increase in return on invested capital at five years seems a gutsy call simply because of the nature of the industry. We've seen presentations in years past promising more, difficult to deliver. Again, no criticism, really. I think that's what the industry is.
Of that 5%, how much is due to asset change, like Yarwun curtailment, Tomago likely closure, and how much is to cost cutting? Because I assume AP60 won't make much difference over five years. Thank you.
Maybe Peter, I'll ask for some detail. I guess one of the things that we're very mindful of is doing the work and having real conviction around what are the commodities we really want to invest in at the same time as we do the things within our control, which is what we've talked about today around simplifying, around streamlining, around driving real focus and discipline within our business. And so that's self-help and obviously doing the work to make sure we invest in the right commodities. But do you want to add to the detail on the?
Yeah.
Tony, I mean, I think the thing that underpins it is all the work that's been done about the full potential of that business, looking at every technical parameter right around our assets and saying, "How good can we get?", and Jérôme and the team have just done a fantastic job at developing that and executing against that over time. Now, as well as that, there certainly is some sort of upgrading of the portfolio with AP60 coming on rather than replacing the Arvida tons. That certainly is an upgrade, but I mean, this is fundamentally about the hard work of how do you really make returns in a business like that, and it's just being absolutely at the top of your game on the technical parameters of the business.
I think we've done this A20.
It's a bit hard to explain and to model, but the negative impact of ROCE on just being a bit lower in terms of smelter stability is huge. I think it's just a lot of rigor every day on every parameter in every smelter because the minute you start to deviate in the smelter on the production line, you have to put more CapEx, you have to put more cost, you lose production, and your AC comes down. So we are, I would say, very well on track, Peter, on the five points improvement target. But there is a bit of the cost control. As I say, fixed cost will be down in 2025 while production is going up. There is capital discipline. We are spending better in the business, but the major impact is the few million tons of bauxite production that we get every year by better operation.
This kind of stability index of the smelter, which is hard to correlate to ROCE, but it makes a big difference.
Yeah.
Okay. All the way over to that side, please.
Yeah. Great. Myles Allsop at UBS. Maybe Simandou, we haven't really talked about yet. Could you give us a sense as to what production is? Obviously, you're guiding sales, but there's going to be quite a big build through the kind of supply chain. Where we are with the transshipping port, just so we can get a sense as to what tons we can expect in 2027, 2028. I mean, you say 30 months, but I suspect there's quite a big step up in 2027 if the transshipping port is done.
Yeah. A few points on this, and Matt, please add. As we've said, there'll be a few months of commissioning while we've had the opening.
It's what I would phrase, probably ceremonial tons for this year. And we've still got some works to do in terms of commissioning. And from that point, it's the 30 months. It is a bit lumpy, but the 30 months is what we foresee in terms of the ramp-up there. It's a good point you make in terms of the build of ROM stocks and stockpiles together with, obviously, just the shipping time to market, particularly China. We will do the tertiary crushing. And so there is a bit of a build that sits behind that in terms of working inventory. And so we're giving the sales number. Similarly, I guess the other aspect at Simandou that's important to highlight is just the quality of the ore body there means where we're actually building roads and things, often that is iron ore. And so we're stockpiling that.
And so some of that goes into the numbers for next year and will come through in 2027 and 2028. Do you want to add anything, Matt?
Just a few points to give a little bit more color. So if we think about first ore, basically we've got some mobile crushing facilities, and then we've loaded that manually onto the trains. If we look to next year, the constraint predominantly is the track and the rolling stock. And as Simon mentioned, we are building inventory in the mine. So we'll be at around three million tons at the end of this year, and that will grow to around 20 at the end of the following year. And I guess when I sort of look at the work we have to do on site, we still have work in the mine, rail, and port.
In the mine, it's moving from mobile crushing and manually loading trains to the fixed primary crushing infrastructure and then the train loadout as well. But as I mentioned, sort of the key constraint is really around the ramp-up of the track and the rolling stock as well.
Just to follow up on that as well, should we assume that blocks one and two can ship the same amount as you, or could they, in theory, do more? If the constraints around the rail, I presume it's 50-50 then.
Look, we'll work through that as we work through the rail as well. Certainly, what we're focused on is our blocks three and four. And I guess to get back to the key point, when we look at the project and what's been achieved, everything is tracking either on schedule or ahead of schedule.
And that's where we're really going to have our focus.
Exactly.
Thank you. Down the front.
Thanks. Good morning. It's Matt Greene from Goldman Sachs. Peter, perhaps one for you. I just want to dig into your comments on monetizing infrastructure. There's a huge amount of valuable infrastructure in this company. And we could argue, I guess, whether the market fully values that. So how are you determining right now what infrastructure Rio Tinto should or should not own?
Do you want to make any comments there?
Yeah, sure. I mean, part of it is looking where we need access to infrastructure, but we may not need to own it. So we're not looking, for example, at the rail and port in the Pilbara because that's core to our competitive advantages. And so we're not looking at assets like that.
We have got assets, power station, land, wharves, desal plants as examples where we need access to it. We may not need the full capacity of it where we can liberate value.
And it really is about value, Matt. I mean, that's about going through each asset and being opportunistic about releasing that value where we can see that value equation working for us. It's very important.
And you mentioned in your presentation it's about $500,000 on one infrastructure asset. Do you have a sort of target range in that $5-$10 billion that could be infrastructure related?
No, I think when you look across our asset base and the amount of infrastructure we carry, we're not constrained, if you like, by what we could do. But it's actually how much where we see value and just working systematically through that over time.
That's the constraint.
Thank you. We'll actually move to one more online question, please, operator.
And now we're going to take the question from the line of Lachlan Shaw from UBS. Your line is open. Please ask your question.
Good morning, Simon, Peter, and team. Thanks very much for the session. Just the first question is on lithium. So if I look at the presentation pack, you're sort of laying out the case for the market to be about 4.5 million tons LCE in 2035. And you look at the multiple waves of projects coming in the portfolio, and you're getting to about 4.5, 450, 500,000 tons a year LCE, so roughly 10-11% market share. Is there a target there? Given how the industry is evolving, it's still pretty early in the overall evolution of the lithium industry.
How do you think about the market structure in lithium as it moves forward?
So probably a few points. What we're really focused on is making sure we build as strong a business as possible. We don't have a particular market share target, but obviously having the assets we've got with the Arcadium transaction, which are right down on the low end of the cost curve, puts us in a really good place. What we are doing is, as those projects come through the stage gates, looking really hard at the market and the forward projections, particularly against our thinking around that. I guess that's one of the luxuries of having a number of different projects and options coming through because we can assess that at the time that we need to deploy capital. Jérôme's outlined the picture through to around about 200,000 tons.
Obviously, in parallel, we'll bring those projects forward and assess them against the market fundamentals at that point. Do you want to add anything, Jérôme?
I think you're right, Simon. It's not about market share. It's about having the best cost per tonne of the industry, which means that the bulk of what we'll develop will be Brian's assets with the LE technology. We're working on water usage and possibilities of reinjections, but that's the bulk of what we'll do. We care about being on the kind of left side of the cost curve that will allow us to go through times where the market is going to be volatile and difficult and to generate very substantial return where the market's going to be good in terms of price. We don't have a market share target.
We want to have a relationship with the leading global and Chinese OEMs and focus on Brian's assets towards the lowest part of the cost curve.
Making money, not tons.
Thank you.
That was quite a headline of a slide, isn't it? Next year.
Great. Thank you so much. We'll move back to the room, please.
It's Liam Fitzpatrick from Deutsche Bank. First question, you mentioned wanting to be the most valuable mining company, and I appreciate these are interlinked, but what do you mean by that? Is it market cap and size, or is it multiple?
Most value to you, most value to the communities in which we operate, most value to our employees. One of the reasons, the clear ambition that we want to put there around that is because it does lend itself to multiple things.
And if you look at the resource business, that's what you've got to have. Social license for a business like ours, where we're going to be in places for decades, most value to the communities isn't necessarily your financial numbers. It's how we engage. It's how we work together with those communities. And so that's one of the things we're trying to capture with that statement, but particularly most valued to our shareholders because ultimately it's about returns to them.
And then perhaps a quick follow-up on the iron ore market. Both you and Vale have made, I think, convincing arguments around depletion. But is that something that comes in from the end of the decade, or do you see that as sufficient to offset the growth that is coming into the market over the next one to three years?
It's something that's in the market now.
A bit over 1.5 billion tons of iron ore every year in terms of that contestable market. Some of those assets have been in place for a long time. We've been talking about it for a few years in the Pilbara. Obviously, you're seeing a bit more commentary around it from other suppliers as well. But it's quite striking on that graph when you think of the iron ore that was needed to fuel that growth in China, and you're now looking at the iron ore that's needed just to stand still.
Thank you.
Thanks. It's Michael Sacha from Barclays. I just wanted to ask on non-core asset sales. Beyond borates and titanium, are you actively looking at any other material non-core asset sales, or is that it? Everything else will come from infrastructure sales.
They're the ones we've announced because that's the ones we had real confidence. But I guess there's a philosophical point here as well. We should always be looking across our asset portfolio. And an example, I think it was two years ago, in terms of our salt business, $50 million, we sold the southernmost site. I can imagine the analysts around the room was very close to that in your models for that particular asset. But we should always be looking at our capital base and trying to liberate ways and thinking about ways we can liberate value from that base.
Okay. And then just, I guess, follow-up was on M&A in copper in particular. Just looking at your organic pipeline, it does look there are certain risks around the project. Some of them look somewhat subscale, you could say. And the industry is consolidating.
I just wanted to ask, is larger scale M&A something you're actively evaluating?
So probably two points on this one. The reason we've been so clear around project execution being part of our strategy is because you've got to be able to execute your organic growth options. We've obviously had the projects group in place for some time now. And I touched on today some of the benefits that we really are seeing from having that project capability in place over a number of years and developing up that capability. The other point I'd make is we've got great organic options. You look across the three product groups, each of them has organic growth options that we're able to pursue. And then in terms of adding to that inorganically, we'll continue to assess that where we bring something to the table.
Thank you. Christine, thank you. Thank you.
Alan Spence from BNP Paribas. IOC, what does it need to achieve to retain its place in the portfolio? It's an asset that's had several downgrades over the last few years, and at least externally, it feels that the getting back to nameplate capacity is a bit of a perpetual medium-term target.
So Matt's talked today about the 20-23. We need to improve. We need to improve the asset. I think Matt touched on it today. Leveraging some of the skills in the Pilbara, that was one of the drivers for putting Simandou, IOC, and the Pilbara together. But we need to improve the asset. If we're not able to improve the asset, then it probably invites other questions down the track.
All right. Thank you.
Anyone further? Fantastic. Then thank you so much. Perhaps some final.
Thank you all. Thank you online.
Simon.
Look forward to engaging you in the coming months and years.
Fantastic.
Thank you.
So we say, yeah.
Well done.
So we will now say goodbye to our online audience. Thank you so much. And ask those in the room to please join us in the Hasslett Room, which is on the ground floor where you came in, for some light refreshments and further discussions with our team. Thank you so much.