Robert Stein: Thank you. So just a quick question on Guinea. So the obvious dissolution of the government there the other day, the project is still awaiting some approvals but is by all accounts progressing well. What do you think the major risk is to Simandou off the back of that dissolution of government. Is it that the approvals get delayed, the project gets delayed? Is it that the project continues on, but there is a renegotiation of the financial terms with the government? What are the major risks that you see there?
Jakob Stausholm: I don’t think so. The President is – the President and he wants and the government wants now, the government dissolved. They all want to progress Simandou. What we have been awaiting has been some approvals in China, and that is progressing according to schedule. So I don’t think that it should lead to delay. I cannot give you 100% guarantees, but that was what I was saying in my presentation. We have actually operated in 50 years in Guinea with continuous production, despite many changes in government.
Robert Stein: And just to follow up the closed border. Will that change how technical staff can come to the project and work on the project? Or is that largely absent for your workforce.
Menno Sanderse: Border restrictions, et cetera, is there any impact on our operations?
Robert Stein: That’s right.
Menno Sanderse: Here’s the question.
Jakob Stausholm: You might know more than I know, but I’m not aware of that. No.
Robert Stein: No. Thank you.
Menno Sanderse: Right. Let’s go back in the room, Grant and Liam, and then we’ll come back that way.
Grant Sporre: Hi, it’s Grant Sporre from Bloomberg Intelligence. It’s just a follow-up, really on a question that’s been asked. In terms of your sort of closure costs going forward. Are you planning to exclude them from underlying earnings going forward? And the reason I’m asking is just strikes me as it’s now become sort of business as usual for at least for the next few years. So should it actually be excluded?
Peter Cunningham: So the answer is we don’t. For our ongoing assets, we do exclude them. For closed assets that have been closed, and most of them are legacy assets. We exclude them if they’re material. So we – it’s for most of our assets, the closure cost in the year, the accumulation of the provision goes through the income statement.
Grant Sporre: Okay, so just so I understand, I know it’s a technical point. You basically provisioned for it, and that’s why you can exclude it.
Peter Cunningham: Yes, correct.
Grant Sporre: Okay, got it.
Peter Cunningham: So when you think about the $1 billion of cash flow, there’s two components. There’s projects we’re working on now, but there is also continuous rehabilitation work we’re doing around all our assets that is part of that $1 billion. So all of that cash flow is part of our operating cash flow, so the $15.2 billion of operating cash flow is after that cash flow that we spend.
Jakob Stausholm: So every time we sell a tonne of iron ore, we take a few cents and provide it for a rainy day when we have so we habilitated.
Grant Sporre: Great. Thank you.
Liam Fitzpatrick: Good morning. Liam Fitzpatrick, Deutsche Bank. First question just on the downstream aluminium strategy, is this Matalco deal, is this like a one and done? Or could we see more on that front? Because particularly on the green premiums theme, it seems like you probably have to go further downstream or back downstream, so would that be something that you’d look at?
Jakob Stausholm: Well, first of all I may say that Matalco is not a standstill. I expect Matalco to grow a lot. It is already North America’s biggest. I do think that it’s not that we could, of course, go in and do recyclable in Australia, but it’s just a tiny market compared to North America. So we need to be in markets where we have primary aluminium and where they scale. So it’s not that there’s a lot of other options, but I do think that we have really good growth opportunities Matalco. I’m going there in ten days time, and I can’t wait to see how we want to grow the market. I like us to deepen that, because it’s a given that there will be more growth in secondary than in primary in the future.
Liam Fitzpatrick: I know there’s the history with the Alcan acquisition and the disposals, but would you consider moving back downstream into extrusions and areas like that?
Jakob Stausholm: Look, let us digest the Matalco first.
Liam Fitzpatrick: And the quick follow-up is on ADA [ph], there seemed to be some positive murmurs recently. What’s the state of play at the moment?
Jakob Stausholm: Yes. So in Davos, I met with President Vučić, and we had a very constructive meeting, and he went out to the press afterwards and said that he wants to see the project focus. So I’m very happy with that. I need to work with the government of Serbia but he’s still to appoint the government because there was an election in December. So as soon as a new government has been appointed, we expect to engage with them on seeing how we can progress the project.
Menno Sanderse: Let’s go back to the line for two more questions. So we’ve got about 10 minutes. So let’s speed it up a little bit so we can get through everybody please.
Operator: The next question comes from the line of Glyn Lawcock from Barrenjoey. Your line is open. Please ask your question.
Glyn Lawcock: Good morning, Jakob.
Jakob Stausholm: Good morning.
Glyn Lawcock: Maybe just drill down a little bit more into lithium, if I could. You said earlier, you want to be – you want strong ore bodies where Rio can use its technology. I mean, when you say we’ve been through a bubble, which I guess we all agree with. But just when you look at the lithium industry, like you’ve got upstream, you’ve got downstream. Where do you think the value lies in the industry now? Just your thoughts on how the industry is evolving and where you see the best value? Thanks.
Jakob Stausholm: It’s a very good question, Glyn. Thank you. I think it’s fair to say that the Western world hasn’t yet entirely solved its supply chain, which is not lithium, its batteries. And how are you going to build the future supply chains. And we can see that we kind of could be part of that puzzle, and it is emerging. But I think it’s also pretty clear that most countries that has lithium in the ground would like to have or will only accept that to be extracted if there’s also the processing happening there. And therefore, our presence in lithium is likely to be both mining and processing. But I have to say after you have produced battery-grade lithium whether it’s what is called carbonate or hydroxide, it doesn’t matter, but then it stops for us.
We’re not going to go into cathode and anode production, et cetera. So we’re quite clear about what our role can play. But I think the supply chains are still to be defined, and we are just slowly but surely progressing it but I already answered that question.
Glyn Lawcock: Yes. And Jakob, just maybe a follow-up to that. Price formation is obviously key when trying to work out what the value is of a lithium asset. The two or the recent bubble how do you make you think about the price formation now? Are you reconsidering what you think prices should be?
Jakob Stausholm: Not really because when we took the investment decisions on for example, Rincon, that was before the big bubble. That was probably the same price as you have today and in any case we work with some long-term prices, in a way, the way I would think about it is we are a big company compared to many of the other lithium players and we can probably better take the volatility. And I think lithium prices are bound to be volatile in the future. What really matters to us is what’s going to be the average price over the next decade. If you know that, I’d like to know it but we feel that there could be a decent business case here.
Glyn Lawcock: Okay. And then if I could, just with my second question, asked about just China. There seems to be some concerns on growth on the ground. I mean I realize we just come out of Chinese New Year, but is there anything you’re hearing any observations from your large team on the ground on the state of the Chinese economy that gives you concern for this year?
Jakob Stausholm: Yes, Glyn, it’s really sad you can’t see me wearing a very red tie today, Happy New Year; it’s a year the dragon. That should be a good indicator for the year to come. Look, I am not an expert in everything in Chinese economy. But the Chinese economy that we are seeing, and that’s obviously the very physical part of the Chinese economy is growing. And we feel quite comfortable about that. I thought the slide that Peter is showing is super good. I was actually trying to nick that slide because I think it just shows that, yes, there are issues in property, but the infrastructure and some of the industries like automotive is outpacing that. And net-net the Chinese economy is growing.
Glyn Lawcock: Okay. Thanks very much.
Menno Sanderse: Now I have one more question from the line, and then we’ll take another two here.
Operator: Yes, of course. And now we’re going to take our next question, and it comes from line of Myles Allsop from UBS. Your line is open. Please ask your question.
Myles Allsop: Hi. This is me I think. So its Myles. So just on lithium, could you give us a bit of an update on Rincon how much you spend? And when you’re hoping to get to FID? What is needed to get to FID? How credible is that as a project in the pipeline? It’s my first question.
Jakob Stausholm: I’m leaving that question to Peter because I’m going to Rincon in 10 days time. So I reserve my judgment.
Peter Cunningham: And I’ve been there. So Myles, I think we’re spending on the lithium, the 3000 project. And the capital costs are as disclosed first production end of this year. So that’s all on track. Otherwise, its studies for the bigger more expanded case which we’re working through in parallel with that development of the 3000. So still to be determined exactly scale and capital costs of what that looks like. But we have said, we think this is competitive at industry benchmarks.
Menno Sanderse: And Page 15 Myles of the project table for the Rincon [ph] 3000 numbers.
Myles Allsop: Okay, thank you. Maybe as a kind of follow-up just on kind of iron ore and medium term so production you’re still talking about capacity, 345 to 360. I mean, we haven’t talked about value over volume in iron ore. I mean obviously, there is a concern out there that the market will move into surplus. I mean how are you thinking today around sort of managing the Pilbara production medium, long-term in a potentially softer survival [ph] price environment with your kind of more marginal SP10 volumes and so on? And should we kind of plan for Rio to be more disciplined in the future or to just push ahead as Simandou ramps up?
Jakob Stausholm: Yes. So, look, you never hear me talking about value or volumes. We are here to serve customers, but we should be disciplined and we should be very disciplined. And everything we develop is at the very low end of the cost curve. And we have now had a number of years with high iron ore prices. And the beauty of that is that there’s actually quite a lot of production that has come in at a very high cost. And that means that there is much more support from the cost curve at higher prices than there were some years back. So I actually feel we are in a very good position with the iron ore market.
Myles Allsop: Okay. Thank you.
Menno Sanderse: Matt, please. And then Alex and then we’ll wrap it up.
