Rio Tinto(US:RIO)2023-02-22 14:53Financial Data and Key Metrics Changes - The company reported underlying earnings of $13.3 billion, free cash flow of $9 billion, and a return on capital employed of 25% for 2022 [11][24][25] - Underlying EBITDA decreased by 30% to $26 billion, reflecting lower commodity prices and rising cost inflation [24][21] - The company declared an $8 billion full-year ordinary dividend, representing a 60% payout ratio, marking the second-largest ordinary dividend in its history [11][44] Business Line Data and Key Metrics Changes - The Pilbara iron ore business finished 2022 with strong momentum, achieving its best fourth-quarter production ever [22] - Aluminum faced significant challenges, with EBITDA margins compressing from 41% in the first half to 15% in the second half due to market pressures [29] - The copper production is expected to rise to between 650,000 and 710,000 tonnes in 2023, increasing to around 1 million tonnes once Oyu Tolgoi reaches full capacity [38] Market Data and Key Metrics Changes - Realized iron ore prices dropped by 22%, copper prices fell by 19%, and aluminum prices decreased by 25% in 2022 [19][20] - Global iron ore demand contracted, particularly in China, due to a worsening property market and COVID restrictions impacting steel demand [19] - Commodity prices have found support in recent months, with low global base metal inventories and a shift in China's policy towards pro-growth [31] Company Strategy and Development Direction - The company is focused on decarbonization and investing in materials essential for the energy transition, such as copper and lithium [18][68] - Significant investments were made in sustaining capital and growth projects, including the acquisition of TRQ and Rincon [15][42] - The company aims to improve asset health and performance while stabilizing production levels through a systematic approach to operational improvements [32][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty in the global economy due to high inflation and tight monetary policy but noted some positive signs in commodity prices and demand [31] - The company is committed to a long-term strategy that includes continuous improvement in safety and operational performance [12][64] - Management expressed confidence in the progress made in Mongolia and the potential of the Oyu Tolgoi project [36][82] Other Important Information - The company achieved a fatality-free year in 2022, building on previous years' safety performance [12] - The acquisition of Turquoise Hill Resources was completed, doubling the company's attributable volumes of copper and gold from Oyu Tolgoi [48] - The company is actively engaging with communities and stakeholders to rebuild trust and improve relationships [14][15] Q&A Session Summary Question: How does the company manage science success and risk in its portfolio? - The company has appointed a Chief Scientist to strengthen its research and development efforts and is confident in the potential of its projects [74][76] Question: Why was there a modest shift in the dividend distribution in 2022? - The company maintained its policy of a 60% payout ratio and focused on compelling growth opportunities while managing leverage [79][108] Question: How does the company view its investment in Mongolia given geopolitical risks? - Management expressed comfort in investing in Mongolia, citing recent project financing approvals as a vote of confidence [82] Question: What is the current status of the underground mining operations at Oyu Tolgoi? - The company is in the early stages of mining in Panel 0 and is closely monitoring cave behavior to ensure safe operations [88][102]