2022 production guidance

¹Pilbara shipments guidance remains subject to risks around commissioning and ramp-up of new mines and management of cultural heritage.

²Reflects 100% ownership of Diavik (previously 60%) from 1st November 2021.

³Iron Ore Company of Canada. 

•     Iron ore shipments and bauxite production guidance remain subject to weather and market conditions.

•     Our guidance assumes development of the pandemic does not lead to government-imposed restrictions and widespread protracted cases related to new highly contagious variants with high severity, which could result in a significant number of our production critical workforce and contractor base being unable to work due to illness and/or isolation requirements. This risk extends to prolonged interruption of service from a key partner or supplier which could lead to severely constrained operational activity of a key asset or project. This risk is exacerbated globally by tight labour markets and supply chain delays.

•     Pilbara shipments guidance remains subject to commissioning and ramp-up of new mines and management of cultural heritage, including any impacts from the recent changes to the Aboriginal Heritage Act 1972 (WA). We support the strengthening of Aboriginal heritage protection in Western Australia and continue to engage with Traditional Owners regarding current and proposed plans for mining activities, adjusting mine plans where required. Given the quality of our resource, we retain a range of development options in the Pilbara, subject to heritage and environmental approvals.

Investments, growth and development projects

•     We continue to proactively manage COVID-19 and prioritise work across critical projects, as challenges associated with interstate and international border access continue, impacting the availability and movement of people and goods, most notably in Australia and Mongolia. Mitigation plans are in place however there are some delays with the delivery of equipment to sites and access to key personnel.

•     Exploration and evaluation expense in 2021 was $726 million, $101 million (16%) higher than 2020, with ramp-up of activities in Australia, Europe and Western Africa.

Pilbara mine projects

•     Commissioning and ramp-up of Pilbara growth and brownfield mine replacement projects has been impacted by ongoing COVID-19 restrictions, including labour access and supply chain quality issues. The latter has been exacerbated by an inability to conduct pre-delivery quality assurance and control at international steel and equipment manufacturers due to limitations on travel.

•     Mining and operational readiness activities are progressing at the Gudai-Darri mine and the railway is operational. The first train was loaded from the mobile crushing and screening facilities in December. First production from the main plant is now expected in the second quarter of 2022, subject to the continuing impacts of COVID-19.

•     The Western Turner Syncline Phase 2 project achieved first ore in October, in line with previous guidance. At Robe Valley, the autonomous mining truck fleet has been commissioned. Since achieving first ore in August, ongoing wet plant construction and commissioning challenges are impacting production ramp-up.

Oyu Tolgoi underground project¹

Technical progress

•     The project is technically and operationally ready for undercut commencement, despite continued COVID-19 constraints in Mongolia. Site accommodation and staffing levels improved in the quarter to between 60% and 70% of planned requirements. The impact on project costs of the additional restrictions related to COVID-19 to the end of December 2021 is estimated to be $175 million. The project has achieved the conveyor to surface decline breakthrough and completed construction of Materials Handling System 1 with commissioning expected to be completed in the coming weeks.

•     Shaft 4 sinking activities recommenced in October, with advancement now at 148 metres below ground level. Shaft 3 readiness works continue, with sinking commencement expected by the end of the first quarter of 2022, despite some disruptions following an unplanned failure on one of the sinking brake systems. The delay to the commissioning of shafts 3 and 4 is still expected to be approximately nine months per prior guidance based on known COVID-19 impacts to date. Panel 1 and 2 studies will be ongoing throughout 2022.

Other updates 

•     Negotiations with the Government of Mongolia are constructive and making positive progress. All key stakeholders have stated that they remain committed to moving the project forward and reaching a long-term solution to the items under discussion.

•     In December, the updated Resources and Reserves were registered in Mongolia in accordance with Mongolian regulations and approval from Mongolian authorities of the 2022 Annual Mine Plan was received. The updated Feasibility Study (OTFS20) has been submitted to the relevant governmental agencies of Mongolia.

•     As a result of COVID-19 impacts and outstanding non-technical undercut criteria, first sustainable production will be no earlier than January 2023, subject to the timing of commencement of the undercut. The full impact on the cost of the integrated project is subject to further analysis once we have clarity on the timeline around the completion of the undercut criteria and ongoing COVID-19 restrictions.

•     Other milestones that need to be met in order to ensure that the project can commence caving operations (undercut) include: approval of the project investment uplift to $6.75 billion, approval of the funding plan and extension of the current power supply arrangements until an agreed long term stable and reliable power solution can be fully implemented.

Other key projects and exploration and evaluation

•     The Zulti South project in South Africa remains on full suspension.

•     At the Kemano hydropower tunnel project in British Columbia, Canada, the tunnel boring machine is being dismantled and removed following breakthrough in October. Although COVID-19 continues to affect the workforce, project completion remains on schedule for the second half of 2022.

•     At the Resolution Copper project in Arizona, we continue to work with the US Forest Service to secure approval of the Final Environmental Impact Statement (EIS). In parallel, mine studies and engagement with the Native American tribes and local communities continue to progress.

•     At the Winu project in Western Australia, there has been progress towards securing consent from the Traditional Owners to the Project Agreement in advance of submitting the necessary environmental and regulatory approvals. Drilling, fieldwork and study activities continue to progress to schedule.

•     At the Simandou iron ore project in Guinea, we continue to engage with key stakeholders in-country including the Government of Guinea. We remain committed to an inclusive partnership, seeking mutual and sustainable benefits by developing our project in line with international social and environmental standards. A new drilling programme has commenced, and expressions of interest are being sourced for construction and early development works expected to be carried out in 2022.

•     At the Jadar lithium-borate project in Serbia, as a result of delays in the approval of the Exploitation Field Licence (EFL), which is a prerequisite to publish the Environmental Impact Assessment (EIA) and commence the consultation process, we are revising development timelines. Based on current estimates and subject to receiving all relevant approvals, permits and licences, first saleable production is expected to be no earlier than 2027 (previously 2026). The Feasibility Study and the EIA Studies are progressing. We fully understand the concerns amongst some Serbian stakeholders about environmental impacts and we will continue to engage to demonstrate the project has developed mitigation solutions in the project plan.

•     Energy Resources of Australia (ERA) has previously indicated to the market that it has identified cost and schedule overruns in executing the mine closure plan that is expected to be significant relative to the findings of the Ranger Project Area closure feasibility study.

¹Project baseline reporting has been updated following endorsement of the definitive estimate by Rio Tinto Board and Turquoise Hill Resources (pending Oyu Tolgoi board approval).

The definitive estimate assumed COVID-19 restrictions in 2021 that were no more stringent than those experienced in September 2020 and noted that should COVID-19 constraints continue beyond 2021 or should the COVID-19 situation escalate further in 2021 leading to tougher restrictions, additional costs and schedule impacts would arise. Since the definitive estimate, at the end of 2020, Mongolia implemented additional restrictions in response to community transmission cases, and in March 2021 the first cases of COVID-19 were identified at Oyu Tolgoi resulting in temporary site shutdown, quarantine measures and further travel and movement restrictions. The impact of these additional restrictions, which have continued throughout this period and are beyond those experienced in September 2020, is ongoing. To date, the impact on projects costs of the additional restrictions experienced to the end of December 2021 is estimated to be $175 million. Additional costs and schedule impacts continue to be incurred and the final impact is still to be determined.

Sustainability highlights

We continue to advance our sustainability agenda. We are now a member of The Dow Jones Sustainability™ World Index, which comprises global sustainability leaders as identified by S&P Global, representing the top 10% of the largest 2,500 companies in the S&P Global Broad Market Index based on ESG dimensions.

On 9 November, we announced a partnership with RESOLVE, a Washington-based non profit organisation, to launch Regeneration, a start-up that will use the re-mining and processing of waste from legacy mine sites to support rehabilitation activities and restore natural environments. We will make an equity investment of $2 million and analyse our portfolio to identify potential opportunities for the first Regeneration project.

On 23 October, we announced a partnership with BHP and Fortescue Metals Group to fund innovative, industry-first learning programmes as part of a continued commitment towards mining sector workplaces that are free from sexual harassment, bullying and racism. The partnership will fund and contribute to the design, development and implementation of new social awareness education packages for deployment through a range of education providers such as Technical and further education (TAFE), Registered Training Organisations, universities and high schools.

On 19 December, we called for Expressions of Interest from Western Australian manufacturers to build 100 rail cars for our Pilbara operations. We will initially purchase 50 rail cars from the successful supplier, followed by an ongoing commitment of 10 rail cars a year for the next five years. This will help grow the local rail car manufacturing industry and support local jobs.

Communities & Social Performance (CSP)

At the end of 2021 the relationship between Puutu Kunti Kurrama and Pinikura (PKKP) leadership and Rio Tinto Iron Ore is constructive and considered. The ongoing rehabilitation works at Juukan Gorge are on schedule and have the active involvement of the appointed Puutu Kunti Kurrama (PKK) committee members.  An agreement on a co-management of country approach and an appropriate remedy for the destruction of Juukan Gorge is substantially progressed. Together we are charting new territory, and this takes time, but we are moving forward on a model which is respectful and looks to provide certainty of protection for cultural heritage and mining.

On 17 October, we welcomed the Joint Standing Committee on Northern Australia's final report into the destruction of the rock shelters at Juukan Gorge. We continue to work closely with Traditional Owners to build trusted relationships and better understand and protect their cultural heritage.

On 17 October, we announced a new three-year partnership with Telethon aimed at improving the health and well-being of children in Western Australia. The partnership, which follows $4 million contribution in 2020, will provide $4 million contribution each year to 2023, to support research into mental health and juvenile diabetes.

At Resolution Copper in Arizona, we partnered with Stantec and White Mountain Apache community members to provide 64 hydro panels on the Fort Apache Reservation, and we are planning installation programs in other Native American communities. The panels will provide a new source of clean drinking water through an innovative, renewable technology that uses solar energy.

Key highlights in Australia from the quarter are outlined below, with further information available on our website. 

Agreement modernisation

Discussions with Pilbara Traditional Owners to modernise existing agreements continued in the fourth quarter. Heads of Agreements (HoA), or similar, are being drafted with two Traditional Owner Groups. The HoA include principles and approaches to co-management of country over the life of mine cycle and partnership arrangements to broaden benefits arising from mining. Engagement protocols to guide the modernisation discussions have been executed or endorsed with five Traditional Owner Groups.

Cultural heritage management

Pilbara Iron Ore continues to apply the Integrated Heritage Management Process (IHMP). Known sites of cultural significance continue to be re-assessed and mine plans adjusted or measures taken to avoid disturbance. This includes increased buffer zones and blast management plans to reduce vibration risk. To date, we have reviewed 2,205 heritage sites across different planning horizons. Lessons learned and best practice are shared and replicated, as appropriate, across Rio Tinto.

Australian Advisory Group (AAG)

Work to develop the AAG is progressing with the terms of reference finalised. The AAG is on track to commence in the first quarter of 2022 and will be comprised of a minimum of 60% Aboriginal or Torres Strait Islander membership, with an Indigenous Australian Chairperson.

Aboriginal Heritage Act 1972 (WA)

We support the strengthening of Aboriginal heritage protection in Western Australia. We continue to collaborate with Traditional Owners, incorporating heritage and social surroundings information into mine designs, new developments and our IHMP systems.

Climate change and our value chain

We progressed initiatives in the fourth quarter in line with our pathway to decarbonise our business and actively develop technologies that will enable our customers and our customers' customers to decarbonise.

•     On 26 October, we announced a partnership with Carbfix to implement a technology for capturing carbon and permanently storing it underground at our ISAL aluminium smelter in Iceland. Under a Memorandum of Understanding (MoU), Carbfix will use Rio Tinto's land surrounding the ISAL smelter for onshore CO₂ injection in the world's first carbon mineral storage hub, the Coda Terminal. Liquified CO₂ will be imported by ship from industrial sites across North Europe for storage. The partnership follows an investment earlier in October in Carbon Capture Inc., a climate tech start-up that focuses on developing modular Direct Air Capture units powered by renewable energy and with the potential to remove significant amounts of CO₂  from the atmosphere for permanent underground storage.

•     On 27 October, we announced a partnership with the U.S. Geological Survey (USGS), the science agency for the US Department of the Interior, to provide a clearer picture of the potential for critical mineral resources beneath the Continental Divide near Montana's Boulder Batholith. The USGS will fly airborne geophysical surveys in areas of interest with support from Rio Tinto during 2022 as part of its Earth Mapping Resources Initiative.

•     On 28 October, we announced the signing of a MoU with BlueScope to research and design low-emissions processes for the steel value chain, including iron ore processing, iron and steelmaking and related technologies. The companies will work together to explore low-carbon steelmaking pathways using Pilbara iron ores, including the use of clean hydrogen to replace coking coal at BlueScope's Port Kembla Steelworks.

•     On 4 November, we announced ELYSIS successfully produced aluminium without any direct greenhouse emissions at its Industrial Research and Development Center in Saguenay, Canada. Work is now focused on accelerating the scale-up of the ELYSIS technology towards the demonstration of even larger commercial-size cells in 2023.     

•     On 16 November, we announced an investment in Inobat Auto, a European-based battery technology and manufacturing company. This investment will support the completion of InoBat's research and development centre and pilot battery line in Voderady, Slovakia. The investment follows a MoU signed in May, outlining an intention to work together to progress the establishment of a "cradle-to-cradle" electric vehicle battery value chain in Serbia.

•     On 10 December, we announced the launch of the construction of the the solar and wind power plant at QIT Madagascar Minerals (QMM) ilmenite mine operations in Fort Dauphin, in southern Madagascar. The renewable energy project plays a key role in implementing QMM's 'sustainable mine' concept and enabling Rio Tinto operations in Madagascar to reach carbon neutrality by 2023.

•     On 11 January, we announced the purchase of four battery-electric trains for use in the Pilbara, Western Australia. Production is due to commence in 2023 ahead of initial trials in the Pilbara in early 2024. The locomotives will be recharged at purpose-built charging stations at the port or mine. They will also be capable of generating additional energy while in transit through a regenerative braking system which takes energy from the train and uses it to recharge the onboard batteries.

Our markets

Market dynamics were broadly positive throughout 2021 for most commodities, lifting a number of prices to cyclical highs. Fiscal and monetary support and successful vaccine campaigns were key contributors to strong demand growth that ultimately stretched global supply chains to their limits and created challenging conditions for many of the world's producers. We are encouraged by growth prospects in the coming year but remain vigilant in relation to potential disruption from new COVID-19 variants and geopolitical tensions.

•     China is transitioning from tightening to easing policies following a slowdown in the last quarter of 2021, with mild pro-growth measures in place to support property, infrastructure and consumption. We expect China to continue to finetune its policies to balance multiple priorities.           

•     In the United States, activity momentum eased toward year end amid concerns over the latest COVID-19 variant and persistent supply chain constraints. Peak recovery has likely passed implying GDP growth will slow, but solid fundamentals remain in place. Household debt has fallen to the lowest since 2000, supply shortages are expected to ease and inventory restocking should support growth.

•     Economic activity in the eurozone weakened significantly in late 2021, and the current level of restrictions suggest a slower than expected start to 2022, especially for the service-based economies.

•     China's crude steel production and iron ore imports were stable year on year, with steel production exceeding 1 billion tonnes for a second time, despite numerous steel mill operating restrictions and a slowing property sector. Steel consumption and production rates in China decelerated significantly during the fourth quarter of 2021 however, iron ore seaborne supply improved, resulting in a ~30% decline in iron ore prices in the fourth quarter versus the prior quarter. Meanwhile, the steel and iron ore demand recovery in developed and other emerging economies maintained its momentum and global crude steel production grew by an estimated 6% year on year - by one of its largest absolute annual increments in history - to a record total of almost 2 billion tonnes in 2021.

•     Aluminium prices experienced volatility during the quarter but recovered to just over $2,800/t at the end of 2021, driven by extensive power-related smelting curtailments in Europe. Physical markets remained tight amid firm demand and lower inventory levels, resulting in regional market premia recovering by the end of the year in both the United States and Europe.

•     Copper prices ended the year at 440c/lb, down 45c/lb from record levels reached in May 2021. Demand remained sound throughout 2021, whilst supply faced multiple headwinds including COVID-19, shipping disruptions and other factors. Exchange inventories declined over the course of 2021 and ended the year at less than 200kt.

•     Global electric vehicle (EV) sales more than doubled in 2021 due to wider availability of EV models, government subsidies and falling production costs (battery prices). Lithium production was unable to maintain the same pace as demand and prices ended the year up 150%.

Average realised prices achieved for our major commodities

*LME plus all-in premiums (product and market)

**Average realised price for all units sold. Realised price does not include the impact of the provisional pricing adjustments, which positively impacted revenues in 2021 by $246 million (2020 positive impact of $182 million).