Good morning. I'm Jason Fairclough. I run metals mining research for Bank of America and EMEA. On behalf of myself and my new colleague, down in Australia, Kate, very pleased to introduce our next company, which is Rio Tinto. Representing Rio Tinto, we have Simon Trott. We previously hosted Simon at the conference, but this is his first time as CEO. Thanks for being here, Simon. Welcome. Simon's chosen a hybrid format, we'll have a few slides just to set the scene, we'll have a fireside chat. Let's jump into it.
Thank you very much, Jason. A pleasure to be here in Miami. Thank you for allowing me to migrate out of the other room where I've been for the last few years. Rio's got a winning formula to be the most valued metals and mining business, and I'll talk a little bit about that today. First I wanted to start with safety as our number one priority. Since this time last year, we have had three devastating fatalities at sites across our business, and we hold our colleagues and all those impacted by these tragedies in our thoughts. As a leadership team, we are focused on resetting our safety culture and strengthening accountability at every level.
I'll start here because nothing is more important than making sure our people go home safely at the end of every day. Nine months into this role and 26 years with Rio Tinto, I've got a clear conviction around what sets us apart. The formula has four strategic pillars, which combined will deliver leading growth and returns. First, the right assets in the right commodities. We've simplified our business to focus on three world-class product groups, each with large, low-cost, long-life assets focused on structurally attractive commodities: copper, aluminum and lithium, and iron ore. These commodities are driven by the two structural demand drivers of our time, the energy transition and the growth of AI. Secondly, operational excellence.
Stronger cost discipline, a sharper operating model, and simplifying how we work is structurally improving Rio's performance, translating into a 4% compound annual reduction in unit costs through to 2030. World-class projects like Oyu Tolgoi in Mongolia and Simandou in Guinea show we can deliver at scale in complex environments. Our advanced in-flight projects underpin the 20% production growth we expect by 2030. Finally, capital discipline. A strong balance sheet, disciplined capital allocation, and a clear and consistent shareholder returns policy have allowed us to maintain a 10-year payout, 60% of underlying earnings. Let's dive into each of these strategic pillars, starting with our assets. In iron ore, we're the number 1 global producer with assets in Australia, Guinea, and Canada. The best growth options across the mid and high-grade iron ore markets. In aluminum, we are the number 1 integrated Western producer.
Media headlines may focus elsewhere, but aluminum has actually been the best performing base metal over the last 12 months and also year-to-date, with prices up 23% this year. In lithium, we have incredible assets and the largest tier 1 pipeline in an industry that is forecast to more than double over the next decade. In copper, we are growing now, delivering 11% production growth year-on-year in 2025, with a further 13% through to 2030. This is visible and permitted. When you combine these essential factors, quality assets, scale, and cost position, they translate into strong EBITDA margins across each of our businesses. If you want exposure to the largest trends shaping the future, the energy transition and AI, this is the portfolio to own. In an industry like ours, I believe in the diversified model.
At Rio Tinto, we are optimizing it to ensure we unlock our business' full potential. Three outstanding businesses and a lean corporate center that allocates capital, supported by central delivery only where there is a synergy from our diversified scale. Since becoming CEO, my focus has been on making Rio stronger, sharper, and simpler. Some examples. On simplify, we've reduced senior roles by around a fifth and shifted decision-making and accountability as close to the point of impact. This drives a faster cadence, tighter cost control, and improved capital productivity and stronger safety. This has resulted in $650 million in annualized productivity benefits to date, with significantly more to come. As an example, last week, I was talking with a team about changes they are making to a group standard that applies across our operations.
They reduced that standard from 185 pages to just 7. People have absolute clarity on what they need to do. It removes layers of bureaucracy, and site leaders can concentrate on what truly matters. We're now embedding these changes into our management operating system to drive sustainable performance improvements. On deliver, we've made a strong start with a 9% year-on-year uplift in production in the first quarter. The successful ramp up of Oyu Tolgoi is a key contributor, a project on track to become the world's fourth largest copper mine by 2030. Across the business, we're using learnings from Simandou to drive lower capital requirements and faster execution. On release, we're ensuring every dollar works harder and drives higher shareholder returns. When I became CEO, I made a commitment to unlock capital.
We're well advanced in doing so for borates, actively scoping options in TiO2, and conducting a disciplined review of potential infrastructure options. Every asset must justify its spot in the portfolio. We are progressing opportunities in 2026 to release up to $5 billion of cash from the total program of $5 billion-$10 billion, and I'll update that further at the half year. Our increased portfolio diversification across the 3 product groups is a real strength. The right assets in the right commodities. The contribution from copper and aluminum has increased 2 and a half times, sorry, 2 times from 2020. Announced growth through to the end of this decade further diversifies our earnings base. Finally, capital discipline is the bedrock of our diversified model.
Growth is governed by a strict financial framework, rigorously applied hurdle rates, around $10 billion annual CapEx over the midterm, and active portfolio review to recycle capital into higher returns. With a 60% dividend payout sustained over the past 10 years, as EBITDA grows 40%-50% through to 2030, the dividend stream also increases. We operate with a strong balance sheet anchored on a single A rating. Any surplus capital above our investment hurdles and balance sheet anchor gets returned. Bringing this all together, we have a winning formula for growth and returns, leading positions in iron ore, aluminum, copper and lithium. No one else in the sector has this combination. Exposed to the right demand catalysts with growth coming through at the right time. Our focus is to run it harder, turn it into stronger cash flow, higher returns, and a more resilient business.
All of which is underpinned by strong capital discipline, ensuring shareholders benefit from increased cash generation and capital release. This is how we're becoming the most valued metals and mining business. Thank you.
Thank you.
You're double teaming on me.
Oh, it's okay. We need 2 of us.
Fair enough.
Keep up.
Let's ease things off gently, Simon, and talk about a subject that's probably pretty close to your heart. For my tenure on sales side, you've spoken about the 360 million ton per annum target out of Pilbara iron ore. Let's talk about iron ore. How do you think about value over volume?
There's a formula. Former CEO of our iron ore business used to talk to me about the five Ps. Every time I'd see him, they'd say, "Five Ps, Simon. Preparation prevents piss poor performance." I think in iron ore, we've got probably the three Ds now, which has really meant iron ore has been resilient, a lot more resilient than many commentators, some of which are close to here, have predicted.
We're the bulls. We're the bulls in the market.
Depletion is one.
You know, when you look forward and you think about the growth that's happened over the last 10 years, we actually need about the same capacity to come on to replace depletion that's happening in the industry. Part of which is mines getting to the end of life, part of which is also the second D around declining grades. At the same time, disruptions that occurred on the supply side has meant iron ore has been far more resilient than most commentators predicted. It's incredible strategic advantage to us to have an enormous cash generation that we're able to deploy both for shareholder returns as well as for investing in projects.
When you look across our portfolio, IOC, Simandou, and the Pilbara, we've got really good growth options to take our midterm guidance to around 425-440 million tons. That's across all of those assets in terms of sales. Simandou, we commissioned that in the start of this year and about a 30-month ramp up for that to come to market. Similarly in the Pilbara, we've got the replacement projects that we're well progressed on as we recapitalize the business, and we turn to Rhodes Ridge to really support the tonnage in the Pilbara. We've got the infrastructure in place. What we haven't had in place is the mine capacity.
Yeah. Okay. As you went through the discussion with merger talks with your friends at Glencore, did you rethink about what you could do with producing and selling iron ore? Were there any ideas that came out of that you're looking to implement?
I think one of the things I really wanted to do coming into this chair is make sure we set a really clear base case, that we set out and explore all opportunities to add value to that. The discussions with Glencore, you certainly learn things about them, you certainly learn things about yourself. One of the things, I think just the value of having a stronger commercial front end in a world that is more volatile. Bob Batarseh's somewhere here, and we'll be, I think talking to you, Jason, tomorrow, so you should hammer him about how we're thinking about that, in terms of developing up a stronger front end.
Okay, great. Let's move from Australia to Simandou and talk about that asset. The market is worried that this extra supply coming online will see downside to the iron ore prices and put pressure on that. How do you think about iron ore pricing in environment with Simandou coming online?
Steel production in China continues to be strong. We'll have another year, north of 1 billion tons. At the same time, as some of those trends I talked about earlier around the three Ds, means that we're gonna need the iron ore units out of Simandou, particularly those higher grade units as the steel industry continues to reduce emissions. Simandou will come onto the market. The market's gonna need those units. It's a tremendous advantage for us to be well-diversified across high grade, mid-grade, and low grade, as well as geographically diverse across our business, Canada, Australia, and Guinea. The other point I'd make is, you know, Simandou, it's a really complex environment.
The ability to bring that project on and the amount that we're learning from the consortia that building Simandou, the pace and scale of that development, and applying those to some of our other projects, and taking those learnings is certainly helping us in terms of capital intensity. We've got to replenish our pipeline. You've got to be able to build projects if you want a sustainable business.
Let's switch directions. We're gonna go to copper. Maybe we'll just walk through a couple of the key producing assets. We'll start with Mongolia. I think you've spent about 15 years now pouring huge capital into a hole in the middle of the Gobi Desert called Oyu Tolgoi. It's finally coming good. How do you think about the near term for the asset? Is there longer term optionality here as well?
OT, amazing ore body. I must say, I'm pleased that that CapEx is behind us, we've got the production growth coming through, it's obviously a really good spot for us to be in as copper prices obviously fairly are robust. You know, this isn't growth out in the 2030s. This is growth that's coming through, coming through today. Ongoing discussions with Mongolian government on a whole range of factors, the shareholder interest loans, the taxation. We'll continue to have those discussions. An asset that I think the team's done a really good job in terms of making sure we've got optionality as we look at panel one, panel two, accessing to the Entrée leases.
We'll make decisions around that. Our focus at the moment is to bring that up to the 500,000 tons that we've committed to 2028 3 to the mid-2030s. That's the immediate focus, and we'll continue to drive towards that. Ramp-up's going well. The asset's performing as we expect.
Okay, let's come over to the U.S. We're here.
Right.
Kennecott. Some people would call this an iconic asset. Some people would describe it in different ways. How does Rio Tinto think about it? Are the best years behind it?
Kennecott as well. You know, 40%-50% production growth through to 2028. An asset that we're really pleased to have in the portfolio. Copper plus a smelter in the U.S., it's an asset that sits very well in the portfolio. Obviously, a lot of heritage there with Rio Tinto. First production from the underground skarn at the end of last year. We're doing work on how to extend the life of Kennecott to make sure that it keeps delivering for the future. Obviously gives us a significant strategic card in the U.S.
While we're talking about the U.S., let's talk about Resolution. A few former CEOs have told me it's coming sooner than you think, Jason. I think for the last 20 years, it's been 10 years away from production.
Depends on your timing, Jason, on your base case.
How far are we away from FID?
Really material news recently on Resolution, with the Ninth Circuit ruling that came down a few months ago. That then has cleared the land exchange which has occurred. We're now progressing the drilling. The next stage for Resolution is to make sure that we get down to the ore body. It's one of the learnings from OT, is really making sure that we have full oversight of the ore body, geotech, we can design the mine. That's the near-term focus as part of the pathway to bringing that asset sort of mid-2030s into production. Resolution will be a phenomenal mine. We need to make sure we get the settings right for its development.
Just on FID, is this a go, no-go, or is this a staged approach still in terms of committing capital?
Staged approach still. As I say, the first thing we need to do is get down and really drill the ore body, to make sure that we understand all of the parameters of that ore body to then take the next decision.
Okay. Good.
Simon, you mentioned in your opening remarks that aluminum had been the best performing commodity year to date. Rio's got the Canadian assets, which are some of the low cost. They're supported by hydro.
Carbon. You benefit from the premium into there. How do you think about unlocking full value from those assets? They're sort of hidden away as a discount in the Rio portfolio, some would argue. How do you think about aluminum in the portfolio?
I mean, the slide I showed earlier, the contribution of copper and aluminum, two times since 2020. If you run a diversified model, you gotta be diversified. aluminum assets in Canada, We produce around three, we've got capacity for around about three gigawatts of energy in aluminum. Now, at a time of rising energy costs, that's all hydro in Canada, that's all owned dams. To be able to replace that hydro system now, well, you wouldn't be able to do it.
At a time when energy costs are rising and we've got that self-generated capacity, and obviously we can monetize that through the aluminum business, and hence you're seeing the EBITDA returns from that business increase a 3-point bump on the rate sheet for that business. Aluminum performing well, and a commodity that we want to continue to participate in.
We'll talk about lithium a bit now. Spot lithium, you know, more than double since the, since you guys did your deal. Ex-post, that looks pretty tasty, pretty well-timed. We had a great site visit down to Argentina last year. I guess, are you pleased with the acquisition? How do we think about the decision points for that business from a capital allocation point of view over the next 5, 10 years?
I think you start with the structural drivers, electrification, AI, and lithium plays really well into that together with aluminum and copper. It positions the portfolio well. Certainly having those lithium assets as part of our portfolio strength strengthens it. You gotta have the right assets, and we'll see lithium prices be volatile. As you say, significant expansion in lithium prices recently, but it's growing extremely fast. Industries that are growing fast like that, you'll get capacity come on, and so you will see some volatility on the price side. Our focus is on that medium and longer term.
As you saw at the site visits, we've got incredible existing assets there, and a clear path to build out to 200,000 tons of capacity by 2028. You know, our objective is around that five to get unit cost down to $5 a ton, get capital intensity down to about that $30,000 a ton. If you can get to those sort of numbers, depending on your view of prices, it's a very solid. EBITDA will be a great contributor to the group going forward.
When's your next decision on a project for lithium?
The Rincon 3,000's ramping up at the same time as we'll focus on the Rincon project. Phoenix, you know, will come in towards the end of, in the second half of this year, and then a stage-wide step out of that build to the 200,000 tons.
Okay. Right.
Earlier this year, Simon, the discussions with Glencore ultimately led to the decision not to proceed with that bid. What are the key things that were learned during that process that you can talk to us about?
I mean, the Glencore transaction's been around for a while. I wanted to have a detailed look and do detailed due diligence as part of the U.K. Takeover Code. It's hard to have a cup of tea within the U.K. without it being public. You know, I was certainly aware that it was gonna be public. That's the right thing for us to do. We should have a look. We should do detailed due diligence. That's what we did. We couldn't come to a transaction that made sense for Rio Tinto shareholders, hence the decision to walk away.
Putting aside the price there, what were some of the complementary aspects between the businesses?
A few thesis, investment thesis I wanted to test, our project capability, their pipeline, their marketing capability, across the combined assets. So they were part of, as part of the discussions. Ultimately, we couldn't get there.
Okay. Got it. A key pushback that we often hear on Rio is that there's not enough copper growth options. You've told us that in the second half of the year, you're going to come to the market and tell us more about your copper business. What kind of things can we expect? What are the key assets you're talking to when we talk about Rio's copper growth?
If you segment our copper business, we've got great existing assets that have got growth coming through. We talked about KUC and OT. We've got good greenfield project options, Resolution Copper we've touched on, together with projects like Winu in Australia. Smaller but great jurisdiction, an area we know really well, with some exploration upside, as well as future projects like Nuevo Cobre. I think we've got a good mix of organic growth options, both from existing brownfields that are lower risk through to longer-dated options, and that'll give us growth. I talked earlier about the growth that we're gonna continue to see coming through to 2030, but we've obviously got options to extend that well out into the 2030s.
Is all of that to say you don't need the inorganic? You're happy with the organic?
I think we're in a great spot. As we touched on on the start, having an organic cash machine like the iron ore business actually puts us in a different place compared to others without because it allows us both to drive shareholder returns and growth at the same time.
Okay, let's do a couple questions from the floor. Anybody have a question? Okay, let me ask one more just to keep things going a little bit. I mean, one thing that's come up in a few investor meetings is, this sort of debate on the whole big miner business model, and you're kind of scratching the surface a little bit here, Simon, but, you're a believer, I think, right?
I think the diversified model is the right model if it's, if it's run right.
What do you think the diversified model is good for, and what do you think it's bad at?
I think through the cycle, it positions you the best both to drive your own organic options, and take a advantage of whatever options come. Obviously as well, it allows you to get synergies where you have that scale. The key is, though, you gotta have a lean corporate center, and you've got to be clear around where you're delivering synergy benefits from scale. One of the things we've done has been pushing decision-making back to the asset. That's about making decisions as close as possible to their point of impact, and then being really clear where at a corporate level we've got some synergy benefit, you know, in procurement, capital allocation, those aspects.
What do you think about the argument about the valuation disconnect between diversified miners and pure plays?
I think at any point of the cycle, you can isolate particular bits of the business and say, "These could be valued more if they were standalone." It comes with disadvantages. You've got a project pipeline, you can't fund it. Through the cycle at different price points, you can always come to a different view around that. My belief is through the cycle, the diversified model will win in our industry, because of those benefits I've talked about.
Okay. Let's try the floor one more time. Anybody feeling like an extrovert, or I can cold call some friends? All right, we've got one here. Let's get one from the sage of the front row.
Thank you. Talking about the growth in the metals and the change in the political environment around the world today.
Do you see any lessening of restrictions as it relates to permitting or at least the red tape relating to permitting? Do you think that with the movement away from globalization, that some of the Western countries, and I won't name two or three that I think or should, will become more receptive to projects?
It's exactly the right question. It's something we look at and think about a lot across all the jurisdictions in which we operate. I mean, one of the reasons on the supply side that is restricted, has been just how long it takes to get projects permitting, and that's true across most regions. To your question, are we seeing that change? I think you're seeing a far greater focus from governments than we really have seen for decades around where their materials come from and around supply. I think that will translate. From our perspective, we wanna see permitting efficient and effective. Effective in terms of protecting environment, cultural heritage, the other aspects, but it has to be efficient as well.
We're able to progress things rapidly and not have things go around in circles without really any benefit at the end of the day. Some jurisdictions, I think you are seeing it change. Argentina may be an example. There's some other jurisdictions you'd say it's continuing to get harder and harder. I think it depends on the jurisdiction. Ultimately, capital in our industry is competitive around the world. If you have an efficient and effective permitting system, you're gonna see more projects in your country.
Okay. Let's wind it up there. Could you join with me, please, in thanking Simon for his presentation?
Thanks, guys. Thank you very much.