Rio Tinto : Fourth Quarter Operations Review 2022

Notice to ASX/LSE

Rio Tinto releases fourth quarter production results

17 January 2023

Rio Tinto Chief Executive Jakob Stausholm, said: "We were fatality free for the fourth consecutive year, as we continue to put safety at the forefront of everything we do. A number of operational records were achieved in the second half across the Pilbara iron ore mine and rail system. Deployment of our Safe Production System resulted in improved performance at those sites and overall production was higher versus 2021 across all commodities, with the exception of aluminium and alumina.

"The acquisition of Turquoise Hill Resources strengthens our copper portfolio and demonstrates our ability to allocate capital with discipline to grow in materials the world needs for the energy transition and delivering long- term value for our shareholders. Copper guidance has been increased accordingly. We continue to invest in future growth, progressing the Rincon lithium project in Argentina and are working with our partners to progress the Simandou project in Guinea.

"We continue to work hard to transform our culture and invest in genuine partnerships. I am proud that we have reached new agreements with the Yindjibarndi and Puutu Kunti Kurrama and Pinikura peoples in Australia, and the Pekuakamiulnuatsh First Nation in Canada.

"In line with our new purpose of finding better ways to provide the materials the world needs, we will continue to progress our four objectives and strategy to strengthen the business, which will lead to profitable growth and continue to deliver attractive shareholder returns."

		Q4	vs Q4	vs Q3	Full Year	vs Full Year
Production*		2022	2021	2022	2022	2021
Pilbara iron ore shipments (100% basis)	Mt	87.3	+4%	+5%	321.6	0%
Pilbara iron ore production (100% basis)	Mt	89.5	+6%	+6%	324.1	+1%
Bauxite	Mt	13.2	+1%	-4%	54.6	+1%
Aluminium	kt	783	+3%	+3%	3,009	-4%
Mined copper	kt	131	-1%	-5%	521	+6%
Titanium dioxide slag	kt	323	+42%	+4%	1,200	+18%
IOC** iron ore pellets and concentrate	Mt	2.5	+1%	-9%	10.3	+6%

*Rio Tinto share unless otherwise stated **Iron Ore Company of Canada

2022 operational highlights and other key announcements

• We continue to prioritise the safety, health and wellbeing of our workforce and communities where we operate. We experienced our fourth consecutive year with no fatalities at our managed operations, and continue to work hard with our partners to achieve the same results at our non-managed assets and marine operations.
• Pilbara operations produced 324.1 million tonnes (100% basis) in 2022, 1% higher than 2021. Shipments were 321.6 million tonnes (100% basis), in line with 2021. Performance improvements continued across the system and we achieved record second half performance across the mine and rail system. We expect Gudai-Darri to reach its nameplate capacity on a sustained basis during 2023.
• Bauxite production of 54.6 million tonnes was 1% higher than 2021, despite equipment reliability issues at Weipa and Gove in Australia.
• Aluminium production of 3.0 million tonnes was 4% lower than 2021 due to reduced output at our Kitimat smelter in British Columbia, Canada and Boyne smelter in Queensland, Australia. The rate of pot restarts at Kitimat picked up in the fourth quarter and Boyne smelter cell recovery efforts continued. Recovery at both smelters is progressing with full ramp-up expected to be completed during the course of 2023. All of our other aluminium smelters continued to demonstrate stable performance.

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• On 1 December, wecommissionedthe second tunnel (T2) to carry water into the Kemano Powerhouse in British Columbia, marking the end of the Kemano T2 hydropower project. The new, 16-kilometre tunnel produced its first megawatt of electricity in July 2022 after construction was completed in May 2022. Both T1 and T2 are now operating together, ensuring the long-term reliability of the power supply for our aluminium smelter in Kitimat and neighbouring communities.
• Mined copper production of 521 thousand tonnes was 6% higher than 2021 due to higher grades at Kennecott and Escondida, partly offset by lower grades and recoveries at Oyu Tolgoi as a result of planned mine sequencing. Unplanned maintenance was required at Kennecott in the fourth quarter of 2022 in our anode furnaces leading to extended downtime and continued poor anode production, likely to result in weak cathode production in the first quarter of 2023. Refined copper production at Kennecott will continue to be challenged due to the smelter and refinery performance, until we undertake the largest rebuild in nine years which is planned for the second quarter of 2023 and is expected to take approximately three months.
• On 16 December, wecompletedthe acquisition of Turquoise Hill Resources Ltd for a consideration of approximately $3.1 billion1, simplifying ownership of the world-class Oyu Tolgoi mine in Mongolia, significantly strengthening Rio Tinto's copper portfolio, and demonstrating our long-term commitment to the project and Mongolia. We now hold a 66% direct interest in the Oyu Tolgoi project with the remaining 34% owned by the Government of Mongolia through Erdenes Oyu Tolgoi. Cash consideration of approximately $2.9 billion was paid in December 2022. Oyu Tolgoi production for 2022 remains on a 33.52% Rio Tinto share basis.
• Titanium dioxide slag production of 1,200 thousand tonnes was 18% higher than 2021, due to community disruptions at Richards Bay Minerals (RBM) in South Africa in 2021, and continued improved performance of operations at Rio Tinto Fer et Titane (RTFT), Canada. Production constraints related to nationwide electrical power loadshedding at RBM were experienced in the fourth quarter.
• Iron Ore Company of Canada (IOC) production of pellets and concentrate was 6% higher than 2021. Successful deployment of the Rio Tinto Safe Production System (SPS) at the concentrator was completed in the year, with record performance metrics achieved in the year, including monthly records for concentrate production and total material moved in the second quarter. Planning for SPS deployment at the pellet plant commenced in December.
• We achieved our SPS deployment target for 2022 with 30 deployments across 16 sites. Roll-outs are ongoing to continuously improve safety, strengthen employee engagement and sustainably lift operational performance across our global portfolio.
• As reported in the first half, higher rates of inflation have increased our closure liabilities with an impact to underlying earnings. This resulted in increased charges for the year of approximately $1.3 billion pre-tax within underlying earnings (first half 2022: $0.4 billion) compared with 2021, including a $1.1 billion full year increase in amortisation of discount (first half 2022: $0.3 billion), with the remainder impacting Underlying
  EBITDA.
• As part of the agreement reached with the Australian Taxation Office (ATO) in July, we paid the ATO additional tax of A$613 million for the period from 2010 to 2021 in August 2022.
• The sale of a royalty on an area including the Cortez mine operational area, a direct wholly-owned subsidiary of Royal Gold Inc., for $525 million in cash, was settled in August. This amount will be recorded in 'Sales of financial assets' in the group cash flow statement and is therefore not included in Free cash flow.
• The sale of our wholly owned Roughrider uranium development completed in October for total consideration of $150 million, including $80 million in cash, will be recorded in 'Disposal of subsidiaries' in the group cash flow statement and is therefore not included in Free cash flow.

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• On 30 November, we provided a detailed update at ourInvestor Seminaron execution of our strategy and evolution of our culture, including SPS and decarbonisation activities, to strengthen the business, grow in a decarbonising world and continue to deliver attractive shareholder returns. Capital expenditure to decarbonise our assets of an estimated $7.5 billion to 2030 is being prioritised and phased. This remains subject to Traditional Owner and other stakeholder engagement, regulatory approvals and technology developments. New long-term power contracts will also be required for the aluminium business to meet targets. Our incremental operating expenditure on building new teams and energy efficiency initiatives remains around $200 million per annum in addition to Research and Development investment.
• On 19 December, weannouncedthe appointment of Kaisa Hietala as a non-executive director to the Rio Tinto Board, commencing 1 March 2023. Ms Hietala, a Finnish citizen, played a central role in the commercial transformation of Neste, the world's largest and most profitable producer of renewable products, as Executive Vice President of Renewable Products. She serves on the Boards of Exxon Mobil and Smurfit Kappa Group, and is Chair of the Board at Tracegrow, a private Finnish sustainable fertilisers company.
• All figures in this report are unaudited. All currency figures in this report are US dollars, and comments refer to Rio Tinto's share of production, unless otherwise stated.

1Based on a value of C$43.00 per share and a USD/CAD FX rate of 1.3618 as of 15 December 2022 and includes amounts we expect to pay in 2023.

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2023 guidance

	2022	2022
Rio Tinto share, unless otherwise stated	Guidance	Actuals	2023
Pilbara iron ore (shipments, 100% basis) (Mt)	320 to 3351	322	320 to 335
Bauxite (Mt)	54 to 57	55	54 to 57
Alumina (Mt)	7.6 to 7.8	7.5	7.7 to 8.0
Aluminium (Mt)	3.0 to 3.1	3.0	3.1 to 3.3
Mined copper (kt)	500 to 575	521	650 to 7102
Refined copper (kt)	190 to 220	209	180 to 210
Diamonds (M carats)	4.5 to 5.0	4.7	3.0 to 3.8
Titanium dioxide slag (Mt)	1.1 to 1.4	1.2	1.1 to 1.4
IOC3 iron ore pellets and concentrate (Mt)	10.0 to 11.0	10.3	10.5 to 11.5
Boric oxide equivalent (Mt)	~0.5	0.5	~0.5

1At the low end of range.

2Oyu Tolgoi production for 2022 remains on a 33.52% Rio Tinto share basis. Subsequent to Rio Tinto's acquisition of Turquoise Hill Resources which completed on 16 December, 2023 mined copper guidance now includes Oyu Tolgoi on a 100% consolidated basis and continues to reflect our 30% share of Escondida.

3Iron Ore Company of Canada continues to be reported at Rio Tinto share.

• 2023 production guidance is unchanged since November 2022 with the exception of mined copper. On a Rio Tinto share basis, mined copper production guidance changed from 550 to 600 thousand tonnes to 600 to 655 thousand tonnes. This reflects our increased ownership in Oyu Tolgoi from 33% to 66%. Our headline production guidance of 650 to 710 thousand tonnes now includes 100% of Oyu Tolgoi, in line with the consolidation of Oyu Tolgoi in Consolidated sales revenue and Underlying EBITDA in our group financial statements.
• Iron ore shipments and bauxite production guidance remain subject to weather and market conditions. Pilbara shipments guidance remains subject to progressing the ramp-up of shipments from new mines and management of cultural heritage.

Operating costs

• Our 2022 Pilbara iron ore unit cash costs are likely to end up slightly above the top end of our $19.5-21.0 per tonne guidance range, primarily due to inflation, diesel prices and labour costs.
• Guidance for 2023 Pilbara iron ore unit cash costs is unchanged at $21.0 to $22.5 per tonne, based on A$:US$ exchange rate of 0.70.
• Guidance for 2023 copper C1 unit costs is unchanged at 160 to 180 US cents/lb.
• Working capital has stabilised but remains somewhat elevated with commodity price volatility, higher raw material prices and global supply chain pressures.

Aluminium modelling

As reported in the first half of 2022, to assist with modelling of aluminium operating costs during a volatile price environment for raw materials we provide the following breakdown and sensitivities for the alumina and aluminium metal segments (Primary Metal and Pacific Aluminium). This excludes the effect of intra and inter segment eliminations on group profit. Higher raw material prices are also increasing inventory balances.

Alumina refining

Production cash cost (%)	FY 21	H1 22	H2 22	FY 22
Bauxite	39	32	30	31
Conversion	34	33	32	32
Caustic	14	22	24	23
Energy	13	13	14	14
Total	100	100	100	100

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					FY 22
	H1 21	H2 21	H1 22	H2 22	Annual cost
Input costs (nominal)	sensitivity impact on
Index price	Index price	Index price	Index price	underlying EBITDA
Caustic soda1 ($/t)	274	535	675	595	$10m per $10/t
Natural gas2 ($/mmbtu)	2.85	4.59	6.02	7.01	$4m per $0.10/GJ
Brent oil ($/bbl)	64.6	76.3	105.9	93.8	$2m per $10/bbl
1North East Asia FOB | 2Henry Hub

Aluminum smelting

Production cash cost (%)	FY 21	H1 22	H2 22	FY 22
Alumina	41	42	39	41
Power	21	20	19	19
Conversion	21	17	17	17
Carbon	15	19	23	21
Materials	2	2	2	2
Total	100	100	100	100

					FY 22
	H1 21	H2 21	H1 22	H2 22	Annual cost
Input costs (nominal)	sensitivity impact on
Index price	Index price	Index price	Index price	underlying EBITDA
Alumina1 ($/t)	288	369	395	328	$64m per $10/t
Petroleum coke2 ($/t)	373	491	695	719	$11m per $10/t
Coal tar pitch3 ($/t)	748	818	1,103	1,476	$2m per $10/t

1LME Australia | 2US Gulf FOB | 3North America FOB

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