Rio Tinto Second Quarter Production Results

Rio Tinto Chief Executive Jakob Stausholm, said: “The global economy, in particular China, recovered strongly and we are intensely focused on servicing our customers with as much product as we can. However, we faced some challenges in the first half notably at our Pilbara operations, which were impacted by replacement mine tie-ins and materially higher rainfall. Heightened COVID-19 constraints, which resulted in numerous travel restrictions, added further pressure on the business and limited our ability to access additional people, particularly in Western Australia and Mongolia, in order to deliver operational improvements or maintenance initiatives and accelerate projects.

 

“Safety is our first priority and our performance in this area remains robust in challenging conditions. However, as identified shortly after my appointment, operationally we are not where we want to be. Our first half performance has reaffirmed my belief that we have identified the right priorities to strengthen the business: to become the best operator, strive for impeccable ESG credentials, excel in development and secure a strong social licence. We have made initial progress against our priorities, but a large volume of work remains to make Rio Tinto even stronger, so we can continue to deliver superior returns to shareholders, invest in sustaining and growing our portfolio, and make a broader contribution to society.”

 

Production*		Q2 2021	vs Q2 2020		vs Q1 2021		H1 2021	vs H1 2020
Pilbara iron ore shipments (100% basis)	Mt	76.3	-12	%	-2	%	154.1	-3	%
Pilbara iron ore production (100% basis)	Mt	75.9	-9	%	-1	%	152.3	-5	%
Bauxite	Mt	13.7	-6	%	+1	%	27.3	-4	%
Aluminium	kt	816	+4	%	+2	%	1,619	+3	%
Mined copper	kt	115.5	-13	%	-4	%	236.1	-11	%
Titanium dioxide slag	kt	298	+14	%	+7	%	577	+4	%
IOC iron ore pellets and concentrate	Mt	2.7	-2	%	+16	%	5.1	-5	%

 

 *Rio Tinto share unless otherwise stated

 

Q2 Operational update

 

• Our colleague Nico Swart was tragically killed in a shooting incident whilst driving to work at Richards Bay Minerals (RBM) in South Africa on 24 May. Our sympathies are with Nico's family and we are offering ongoing support to his family, friends and colleagues.

• We continue to prioritise the safety of our people and communities as some regions experience a resurgence of COVID-19. We have exceeded 30 months without a fatality on site but our all injury frequency rate (AIFR) of 0.39 has seen a slight increase versus the second quarter of 2020 (0.37), and prior quarter (0.35), which underlines that there is no room for complacency.

 

• We expect iron ore shipments to be at the low end of the guidance range which remains subject to COVID-19 disruptions, tie-in and ramp up of brownfield replacement mines and management of cultural heritage. Mined copper and bauxite production is expected to be at the low end of the guidance range. Full year titanium dioxide slag production guidance has been removed as a result of risks around the timing of resumption of operations at RBM in South Africa, due to an escalation in the security situation. We are working with the local and federal governments and police to ensure we can safely resume operations.

 

• Pilbara iron ore production of 75.9 million tonnes (100% basis) was 9% lower than the second quarter of 2020 due to above average rainfall in the West Pilbara, shutdowns to enable replacement mines to be tied in, processing plant availability, and cultural heritage management. Shipments of 76.3 million tonnes (100% basis) were 12% lower than the second quarter of 2020 with some additional drawdown of inventories. Ongoing COVID-19 restrictions and a tight labour market have further impacted our ability to access experienced contractors and particular skill sets.

 

• Bauxite production of 13.7 million tonnes was 6% lower than the second quarter of 2020 due to ongoing system instability following severe wet weather in Eastern Australia in the first quarter.

• Aluminium production of 0.8 million tonnes was 4% higher than the second quarter of 2020, underpinned by the ISAL smelter in Iceland and the Becancour smelter in Quebec operating at full capacity, and the Kitimat smelter in British Columbia nearing completion of its pot relining cycle.

• Mined copper production of 115.5 thousand tonnes was 13% lower than the second quarter of 2020, with lower recoveries and throughput at Escondida as a result of the prolonged impact of COVID-19, and a planned relocation of the in-pit crusher at Kennecott in April. On 31 May, an anticipated slope failure occurred in the south east wall of the Bingham Canyon pit at Kennecott. There were no injuries or damage to equipment as the slide was accurately predicted by our geotechnical experts. Mining in the affected area restarted progressively in June. No ore has been sterilised and we expect to recover the material from the slide which is largely copper bearing ore. Mining rates will however be slower due to the size distribution of the material, and therefore some high-grade production scheduled for late 2021 will be deferred to 2022.

 

• Titanium dioxide slag production of 298 thousand tonnes was 14% higher than the second quarter of 2020 due to consistent production at the Fer et Titane (RTFT) metallurgical complex in Quebec. Following weeks of violent disruptions, our RBM operations have been significantly hampered. As a result, we have declared force majeure, with all operations curtailed.

 

• Production of pellets and concentrate at Iron Ore Company of Canada (IOC) was 2% lower than the second quarter of 2020 due to labour and equipment availability issues impacting product feed. Force majeure declared in April following the fire at the port has been lifted.

• On 17 June, Peter Cunningham was appointed as Chief Financial Officer with immediate effect. Peter also joined the Rio Tinto Board as an executive director at the same time. On 7 July, we announced the appointment of Isabelle Deschamps who will join on 25 October as Chief Legal Officer & External Affairs, succeeding Barbara Levi.

 

• On 4 June, we announced the appointment of Ben Wyatt as a non-executive director of the Rio Tinto Board. Mr Wyatt, an Australian citizen, and former Treasurer and Aboriginal Affairs Minister in the Western Australian Government, will join the Board on 1 September 2021.

 

• In the second quarter, we entered into four partnerships to progress our work to decarbonise our value chain. These include one with the Australian Renewable Energy Agency (ARENA) to study whether hydrogen can replace natural gas in alumina refineries to reduce emissions, and one with POSCO to jointly explore, develop and demonstrate technologies to transition to a low-carbon emission steel value chain.

 

 

Production guidance

Rio Tinto share, unless otherwise stated	2020 Actuals	H1 2021 Actuals	2021
Pilbara iron ore (shipments, 100% basis) (Mt)	331	154	325 to 3401
Bauxite (Mt)	56	27	56 to 592
Alumina (Mt)	8.0	4.0	7.8 to 8.2
Aluminium (Mt)	3.2	1.6	3.1 to 3.3
Mined copper (kt)	528	236	500 to 5502
Refined copper (kt)	155	111	210 to 250
Diamonds (M carats)3	3.7	1.9	3.0 to 3.8
Titanium dioxide slag (Mt)	1.1	0.6	N/A4
IOC iron ore pellets and concentrate (Mt)	10.4	5.1	10.5 to 12.0
Boric oxide equivalent (Mt)	0.5	0.3	~0.5

 

¹ At the low end of the range and remains subject to COVID-19 disruptions, risks around tie-in of new mines and management of cultural heritage.

² At the low end of the range.

³ Diamonds 2021 guidance and actuals are for Diavik only for comparability, following Argyle closure in 2020. Unadjusted Diamonds production for 2020 was 14.7 million carats, including both Diavik and Argyle operations.

⁴ Full year titanium dioxide slag production guidance has been removed as a result of risks around the timing of resumption of operations due to an escalation in the security situation at our Richards Bay Minerals operation in South Africa.

 

Operating costs • Pilbara iron ore 2021 unit cost guidance is now $18.0-$18.5 per tonne (previously $16.7-17.7). This is an underlying cost increase of around A$0.3 billion (100% basis) relative to prior guidance or 4%. The change reflects price escalation of key input costs (diesel and labour), costs related to mine heritage management, and COVID-19 related costs (YTD actual ~A$100m; no COVID-19 costs included in previous guidance). Operating cost guidance is based on A$:US$ exchange rate of 0.77 (unchanged). • Copper C1 unit cost guidance for 2021 is unchanged at 60-75 US cents/lb.

 

^• We will continue to monitor government-imposed restrictions related to COVID-19, and any other potential COVID-19 related disruptions. Restrictions on movement and availability of people can impact our ability to execute planned maintenance and deliver or accelerate projects.

^• Iron ore shipments and bauxite production guidance remain subject to weather and market conditions. We expect iron ore shipments to be at the low end of the guidance range which remains subject to tie-in and ramp up of brownfield replacement mines, and ongoing cultural heritage management. Progress has been made on tying in approximately 90 million tonnes of replacement mine capacity at existing hubs in Robe Valley, West Angelas and Western Turner Syncline Phase 2. Replacement projects remain on track for completion in 2021, and Gudai-Darri is set to ramp up during 2022. The tight labour market in Western Australia has limited our access to experienced contractors and specific skill sets.

^• The full impact on our Pilbara iron ore operations, mine developments and heritage approach from the reform of the Aboriginal Heritage Act 1972 (WA) remains unknown. We continue to engage with Traditional Owners regarding current and proposed plans for mining activities and work through development scenarios, 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.

 

EBITDA Sensitivities: previously published for 2020, next update on 28 July 2021

	Average price/rate for 2020	($m) impact on full year 2020 underlying EBITDA of 10% price/rate change
Copper	281c/lb	370
Aluminium	$1,702/t	577
Gold	$1,770/oz	62
Pilbara iron ore (FOB)*	$98.9/dmt	2,318
A$	0.69US$	617
C$	0.75US$	201
Oil (Brent)	$42/bbl	85

*FOB based on monthly freight-adjusted 62% iron fines CFR

Note: The sensitivities give the estimated effect on underlying EBITDA, assuming that each individual price or exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and movements in exchange rates can affect movements in commodity prices and vice versa. The exchange rate sensitivities include the effect on operating costs but exclude the effect of revaluation of foreign currency working capital. Please use them with care.

 

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.

 

 

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, most notably in Australia, Canada and Mongolia. Capital expenditure remains unchanged at around $7.5 billion each year from 2021 to 2023.

^• Exploration and evaluation operating expense in the first half of 2021 was $324 million, $44 million (16%) higher than the first half of 2020, with continued progress in Australia, and ramp up of activities in Europe and North America, with some delays in South America due to COVID-19 restrictions.

 

Pilbara replacement projects

^• At Gudai-Darri, mining has commenced with more than nine million cubic metres of pre-stripping completed in June. Labour shortages have impacted both steel fabrication and site construction activities. First ore in the crusher is expected in 2021, although commissioning is later than originally planned. The project is expected to ramp up in early 2022, consistent with previous guidance.

^• First ore at West Angelas (C, D) was achieved in June with load commissioning expected later in the year following delays related to heritage management. First ore at Robe Valley (Mesa B, C, H) and Western Turner Syncline Phase 2 is still expected in 2021, consistent with previous guidance.

 

Oyu Tolgoi underground project¹

Technical progress

^• Project progress has been significantly affected by heightened COVID-19 constraints in Mongolia. To comply with COVID-19 restrictions, site manning levels were less than 25% of planned requirements. Despite these restrictions, as the Material Handling System 1 had been ahead of the definitive estimate schedule, it is now 90% complete with technical criteria achieved to support undercut commencement, subject to the ongoing impacts of COVID-19 and satisfactory resolution of the non-technical undercut criteria.

^• In the quarter, there was very little progress on the Conveyor to Surface Decline, with no progress on the majority of other planned works including shafts 3 and 4. However, recent easing of quarantine constraints and increasing workforce vaccination rates on site has supported gradual improvements in site resourcing. The impact of the additional restrictions experienced in the first half is ongoing and still to be determined.

^• Contractual commitments to future works such as Material Handling System 2 and concentrator upgrades have been delayed pending approval by the Oyu Tolgoi board as part of the increased budget to complete the project.

^• An update on panels 1 and 2 will be provided when the work to understand potential flow on impacts is complete, particularly from shafts 3 and 4 delays.

Other updates  

^• Following the Presidential election, engagements continue and the negotiation team is in the process of remobilising to continue formal discussions with the Government of Mongolia. All stakeholders remain committed to moving the project forward and ensuring a long-term solution to the issues under discussion. As previously reported, a number of additional milestones need to be met in order to ensure that the project can commence caving operations (undercut) including: key regulatory milestones including registration of the updated Resources and Reserves and acceptance of the updated Feasibility Study (OTFS20) by the relevant governmental agencies of Mongolia; project budget uplift in line with the definitive estimate to be approved by the Oyu Tolgoi board; funding plan in line with the Heads of Agreement signed in ^April between Rio Tinto and Turquoise Hill Resources (TRQ) to be approved by the Oyu Tolgoi Board; and milestones for the power solution.

 

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, works have resumed at full capacity and the tunnel boring excavation is now 74% complete, having achieved a total of 5,660 metres. The project is scheduled to complete in the second half of 2022, subject to there being no further COVID-19 delays.

^• At the Resolution Copper project in Arizona, we are continuing to work with the US Forest Service to review the Final Environmental Impact Statement (EIS) and draft Record of Decision. Mine studies continue to progress in parallel.

^• At the Winu project in Western Australia, we continue to actively engage with the Traditional Owners and we plan to commence discussions on the initial scope and mine design, also in consultation with the Western Australian Environmental Protection Authority, with sanction now targeted for next year and first production in 2025 partly due to COVID-19 constraints. Drilling, fieldwork and study activities continue to progress.

^• At the Simandou iron ore project in Guinea, we are reviewing results from the technical optimisation of the infrastructure studies, and product test sample analysis is now underway. A new office was established in Conakry in the second quarter as we expand our in-country team.

^• The feasibility study at the Jadar lithium-borate project in Serbia is progressing to plan and on track to be complete by the end of 2021. An investment decision is scheduled for this year, subject to permitting and other approvals.

¹ Project 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 will 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 and still to be determined.

 

 

Sustainability highlights

 

We continue to advance our sustainability agenda. On 30 April, we released updated information in relation to our global tailings facilities to align with the requirements of the Global Industry Standard for Tailings Management (GISTM). The latest disclosure builds on previously disclosed information on each of our global tailings facilities released in June 2019.

 

On 10 June, the Informal Working Group of the Taskforce on Nature-related Financial Disclosures (TNFD) launched a framework – that we contributed to and endorsed . The framework will help organisations like ours build a complete picture of environmental risks and opportunities. The TNFD framework will help businesses report and act on evolving nature-related risks.

 

In June, we released our 2020 Statement on Modern Slavery, highlighting the concrete steps we are taking to identify and address modern slavery risks throughout our global business and supply chains. It is our fifth report in line with UK legislation and the first time we have reported under the new Australian legislation.

 

In the first half we launched the Everyday Respect initiative, to improve how we prevent and respond to sexual harassment, bullying and racism at work. A number of employee listening sessions have been held to date, led by an independent consultant.

 

Communities & Social Performance (CSP)

 

We have continued to focus on rebuilding relationships in the Pilbara and beyond and to re-establish best practice in communities and social performance. We acknowledge we still have a long way to go. An area of focus has been early discussions about the modernisation of agreements and listening to and understanding Traditional Owner perspectives and concerns. In line with a commitment we made in March, by the end of September, we intend to release additional disclosures on the progress of Communities and Social Performance actions as part of our efforts to increase transparency in our approach to cultural heritage.

 

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

 

In the second quarter, we recognised a year since the destruction of the Juukan Gorge rock shelters. We reflected on the magnitude of what was lost by our actions, and that the hurt we have caused will never be forgotten. Positive discussions are progressing between Puutu Kunti Kurrama and Pinikura (PKKP) leadership and Rio Tinto Iron Ore on a co-management of country approach. Going forward, a key focus will be to jointly determine an appropriate remedy for the destruction of Juukan Gorge, with discussions to progress in the coming months. This follows the completion of some rehabilitation works around Juukan Gorge.

 

The Wintawari Guruma Aboriginal Corporation (WGAC) recently made a submission to the Joint Standing Committee on Northern Australia in relation to management of heritage at the Marandoo mine in the 1990s. Communication continues with WGAC, we have apologised to WGAC for our past actions at Marandoo and are committed to meeting with them again to discuss these issues, and agreement modernisation, at a time when they are ready to re-engage with us.

 

Cultural heritage management

The first phase of the Integrated Heritage Management Process to manage cultural heritage is now complete. Known sites of cultural significance have been re-assessed and mine plans adjusted or measures taken to avoid disturbance, and we increased buffer zones in some cases.

 

Our communities expertise

We are focused on building social performance capability and competency and have continued to expand our CSP Area of Expertise, with more than 300 CSP professionals working on 60 sites in 35 countries (compared with 250 CSP professionals in 2020).

 

We also further developed our internal capability with the delivery of a new co-developed cultural awareness training via immersive virtual reality. We are on track to have 90% of our 14,000 Pilbara iron ore employees complete this training by mid-August 2021.

 

The $50 million investment to attract, retain and grow Indigenous professionals and leaders has enabled us to nearly triple the number of Indigenous leaders in Rio Tinto over the past 12 months to 19 through internal promotion and recruitment, ahead of the original target. The 2021 target has been revised to 50 Indigenous leaders.

 

Indigenous Advisory Group

In line with our commitment to establish an Indigenous Advisory Group (IAG), the terms of reference are under active development to ensure the group can help us manage policies and positions that are important to Indigenous Australia and our broader business. Further consultation with Traditional Owners and Indigenous leaders is planned for the third quarter.

 

Other key community initiatives in the quarter

On 18 June, we commemorated 20 years of our Western Cape Communities Co-Existence Agreement (WCCCA) with Traditional Owners at the official opening of the new Western Cape Communities Trust building in Weipa, Queensland. The Land Use Agreement, which was signed on 14 March 2001, was developed in consultation with 11 Traditional Owner Groups in the region. The WCCCA agreement was one of the first Indigenous Land Use Agreements between a mining company and Traditional Owners in Australia. Since 2002, 206 local Aboriginal persons have successfully completed their traineeships with Rio Tinto.

 

We acknowledge Traditional Owner calls for further action on increased opportunities for Aboriginal businesses. This is a high priority for us and we are working to improve our approach to Indigenous Business Development in Western Australia and beyond. In the first half of 2021, we have increased procurement with Indigenous vendors by around 40% compared with the first half of 2020. The Indigenous Business Development strategy is expected to be finalised in July and engagement with Pilbara Aboriginal Businesses has commenced.

 

Climate change and our value chain

 

We progressed initiatives in the second quarter in line with our commitment to being part of the transition to a low-carbon future, decarbonise our business and value chain, and progress our scope 1 and 2 targets, and scope 3 goals.

 

Decarbonisation initiatives

• On 20 April, we announ ced that ELYSIS, our joint venture with Alcoa, had selected our Alma smelter in Saguenay-Lac-Saint-Jean, Quebec, for the first installation and demonstration of its inert anode technology at a commercial size of 450 kiloamperes (kA), and on 29 June, we announced the start of construction of the first prototype cells. This will build on ongoing work at the nearby ELYSIS Industrial Research and Development Centre. The 450 kA cells at Alma will be supported by investments of C$20 million from the Government of Quebec and C$20 million from the Government of Canada.

 

• In May, we signed a charter agreement with Singapore's ship management company Eastern Pacific Shipping (EPS) for three liquefied natural gas (LNG) dual-fuel Newcastlemax bulk carriers, to further reduce our scope 3 shipping emissions. The delivery of the ships will commence from the second half of 2023.

 

• On 12 May, we announ c ed the Charge On Innovation Challenge, along with other Founding Patrons: BHP and Vale, and in partnership with Australia's Mining Equipment, Technology and Services (METS) industry body Austmine. The Challenge is a global competition for technology innovators to develop new concepts for large-scale haul truck electrification systems to help significantly cut emissions from surface mine operations and unlock safety, productivity, and operational improvements.

 

• On 16 June, we announ c ed a partnership with the Australian Renewable Energy Agency (ARENA) to study whether hydrogen can replace natural gas in alumina refineries to reduce emissions. We will conduct a A$1.2 million feasibility study, equally funded with ARENA through a A$580,000 grant, into using clean hydrogen to replace natural gas in the calcination process of refining at the Yarwun alumina refinery in Gladstone.

 

• On 23 June, we announ ced a Memorandum of Understanding (MoU) with Schneider Electric to develop a circular and sustainable market ecosystem for both companies and their customers. The partnership will draw on Schneider Electric's Energy as a Service expertise to evaluate the use of innovative solutions, including microgrids, to supply energy from low-carbon sources, and artificial intelligence and advanced analytics to help meet sustainability goals at Rio Tinto sites and throughout its supply chain.

 

• On 8 July, we announced a MoU with POSCO, the largest steel producer in South Korea and one of the world's leading steel producers, to jointly explore, develop and demonstrate technologies to transition to a low-carbon emission steel value chain.

 

Product stewardship initiatives

• On 3 May, we announced our ISAL smelter in Iceland has been certified by the Aluminium Stewardship Initiative (ASI) for meeting the highest internationally recognised standards for responsible aluminium production.

 

• On 25 May, we announced a MoU with InoBat, a European battery technology and manufacturing company, to work together to accelerate the establishment of a “cradle to cradle” battery manufacturing and recycling value chain in Serbia.

 

• On 27 May, we announ ced a partnership with CompTech to bring a new generation of aluminium alloys to the market for use in advanced technologies such as electric vehicles and 5G antennas.

 

• On 17 June, we announced the commencement of operations at a new commercial scale demonstration plant to produce high-quality scandium oxide at our Rio Tinto Fer et Titane (RTFT) metallurgical complex in Sorel-Tracy, Quebec. Commissioning work is now being undertaken as production ramps up to a capacity of three tonnes of scandium oxide per year. RTFT is already considering the potential for further investments to add additional modules in line with market demand.

 

 

 

Our markets

 

We expect continued global recovery with most key indicators of economic activity back to pre COVID-19 levels. This follows supportive government policies and vaccine deployment success. We remain watchful of risks, in particular variant infection and vaccination rates.

 

• Rising inflation is primarily being driven by the current imbalances in supply and demand, as industry producers adjust activity following some disruption.

• China's economic growth is becoming more balanced on fading stimulus-related demand and tightening credit conditions. Consumption and non-real estate demand has continued to recover.

• Consumer confidence is rising in the United States as COVID-19 restrictions are reduced. Consumer demand is expected to rotate from goods towards services while supply gradually responds to stronger activity. Housing market growth is slowing from the peak in starts in the fourth quarter of 2020 and first quarter of 2021, albeit settling at a historically strong level.

• Economic indicators in Europe show a strong recovery is already underway, however some countries' reopening plans are at risk with the variant surge.

• The iron ore price has remained resilient on a surge in demand while supply has struggled to keep pace. China's steel demand is up 5% year on year in the first half, with the construction and automotive sectors performing strongly. Consumption was also robust across the rest of the world, with demand recovering +15% in 2021 versus 2020. The major iron ore producers' supply continues to lag expectations, while high cost supply balances the overall market. Meanwhile, scrap is recovering from the lows in the first half of 2020, with global scrap consumption in the first half of 2021 set to rise 18% year on year as crude steel output and scrap availability improves.

• The aluminium price has continued to be supported in tight physical markets with elevated LME and premia, and strong demand in global semis (+8% in 2021 versus 2020).

• Copper prices have continued to rally driven by multi-year weakness in supply growth (at ~1% year on year) and strong demand recovery in China and the rest of the world. Investor positions challenged all-time highs, although have since retreated from the first quarter peak.

 

Average realised prices achieved for our major commodities

	Units	H1 21	Q2 21	Q1 21	H1 20	FY 20
Pilbara iron ore	FOB, $/wmt	154.9	168.6	141.3	78.5	91.0
Pilbara iron ore	FOB, $/dmt	168.4	183.2	153.6	85.4	98.9
Aluminium*	Metal $/t	2,626	2,820	2,421	1,849	1,946
Copper**	US cents per pound	415	442	390	250.0	283.0
IOC pellets	$/wmt	218.3	247.3	192.7	117.0	127.6

*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 the first half by $202 million (first half 2020 negative impact of $26 million).

 

COVID-19

Our number one priority remains the safety, health and well-being of our employees, contractors, their families and the communities where we operate. Since COVID-19 started, we have implemented a range of preventive measures to keep our people safe, in accordance with government guidance. As a company, we also benefited from our host governments recognising mining as an essential business, and allowing us to continue operating and delivering products to our customers. This meant people remained employed, suppliers had our business, and taxes and royalties continued to be paid. In the second quarter there has been a resurgence of the virus, including second and third waves in regions where we have assets and offices including Mongolia, India, the Americas and South Africa.

 

• In Mongolia, the situation has been very difficult as cases surged in Ulaanbaatar and at Oyu Tolgoi site. We continue to work closely with the Government of Mongolia and health authorities, and apply the strictest measures, including quarantine and testing for all employees before access to site. The vaccination programme is progressing well.

• India was affected by a second wave in the second quarter. The Delhi region, where our office and most of our people are located, was severely impacted. Our business resilience team in India together with central teams worked to ensure the health and safety of our people by securing medical services and equipment to the extent possible. We continue our partnership with the Charities Aid Foundation (CAF) to provide healthcare essentials, including oxygen supplies, to support the communities that we work in.

• South Africa is experiencing an aggressive third wave. Increased restrictions are now in place to control a surge of infections. The majority of our workforce are working remotely.

• With the outbreaks across Australia, we are closely monitoring State border closures and applying site access controls and travel management protocols.

Full details of initiatives taken to date can be found on our website .

 

 

IRON ORE

Rio Tinto share of production (Million tonnes)	Q2 2021	vs Q2 2020		vs Q1 2021		H1 2021	vs H1 2020
Pilbara Blend and SP10 Lump1	18.3	-4	%	+1	%	36.3	-3	%
Pilbara Blend and SP10 Fines1	28.8	-7	%	+2	%	57.0	-3	%
Robe Valley Lump	1.2	-8	%	-7	%	2.5	-10	%
Robe Valley Fines	1.9	-37	%	-15	%	4.1	-24	%
Yandicoogina Fines (HIY)	13.4	-10	%	-1	%	26.9	-7	%
Total Pilbara production	63.5	-8	%	–	%	126.9	-5	%
Total Pilbara production (100% basis)	75.9	-9	%	-1	%	152.3	-5	%

 

Rio Tinto share of shipments (Million tonnes)	Q2 2021	vs Q2 2020		vs Q1 2021		H1 2021	vs H1 2020
Pilbara Blend Lump	12.8	-23	%	–	%	25.7	-17	%
Pilbara Blend Fines	27.8	-16	%	-3	%	56.4	-6	%
Robe Valley Lump	0.9	-16	%	-9	%	2.0	-13	%
Robe Valley Fines	2.2	-27	%	-9	%	4.6	-19	%
Yandicoogina Fines (HIY)	13.6	-12	%	-4	%	27.9	-2	%
SP10 Lump1	3.7	+270	%	+41	%	6.4	+217	%
SP10 Fines1	2.8	+76	%	-4	%	5.7	+113	%
Total Pilbara shipments2	64.0	-11	%	-1	%	128.6	-3	%
Total Pilbara shipments (100% basis)2	76.3	-12	%	-2	%	154.1	-3	%
Total Pilbara Shipments (consolidated basis)2, 3	65.6	-11	%	-1	%	132.1	-3	%

 

1 SP10 includes other lower grade products.

2 Shipments includes material shipped from the Pilbara to our portside trading facility in China which may not be sold onwards by the group in the same period.

3 While Rio Tinto has a 53% net beneficial interest in Robe River Iron Associates, it recognises 65% of the assets, liabilities, sales revenues and expenses in its accounts (as 30% is held through a 60% owned subsidiary and 35% is held through a 100% owned subsidiary). The consolidated basis sales reported here include Robe River Iron Associates on a 65% basis to enable comparison with revenue reported in the financial statements. 

 

Pilbara operations

Pilbara operations produced 152.3 million tonnes (Rio Tinto share 126.9 million tonnes) in the first half of 2021, 5% lower than the first half of 2020 due to above average rainfall, shutdowns to enable replacement mines to be tied in, processing plant availability and cultural heritage management. Ongoing COVID-19 restrictions and a tight labour market have further impacted our ability to access experienced contractors and particular skill sets.

 

Sustained wet weather had an estimated impact of around 3 million tonnes in the first half. Consistent and above average rainfall impacted mine operations, particularly at West Pilbara and Robe Valley operations. The recorded rainfall days were 30% and 70% above the five year average at Paraburdoo and Karratha respectively, while rainfall at Pannawonica was 60% above the five year average.

 

The impact from shutdowns to enable replacement mines to be tied in at Western Turner Syncline and Robe Valley, and reduced processing plant availability, particularly at Yandicoogina, is estimated to be 4 million tonnes in the first half. Execution of shutdowns was also impacted by labour shortages due to COVID-19 restrictions and high labour demand.

 

We continue to prioritise engagement with Traditional Owners and cultural heritage management in daily site operations. To date, 2021 production has been reduced by around 2 million tonnes as mine plans have been amended, and buffers and exclusion zones have been incorporated to protect areas of high cultural significance. Mine plan changes have also resulted in increased production of SP-10.

 

Blast management plans have been developed to create smaller, higher controlled blasts to minimise vibration and protect heritage sites (approximately 11% of blasts in the first half), which has had some impact on mining productivity and materials handling. Going forward this will remain a risk factor, however we are adapting mine practices and improving productivity.

 

Mine production risks remain in the second half, as we complete construction and commissioning of Gudai-Darri, our first new hub in over five years, and ramp up production from replacement mines. The increased tightness in Western Australia's labour market continues, in particular shortages of roles relating to structural, mechanical, electrical and instrumentation disciplines, which is amplified by ongoing COVID-19 travel restrictions. Despite these impacts, all projects are expected to achieve first ore in the period previously disclosed, although completion in 2021 is slightly later than planned.

 

First half shipments of 154.1 million tonnes (Rio Tinto share 128.6 million tonnes) were 3% lower than the first half of 2020 with some additional drawdown of inventories. Full year iron ore shipments guidance is expected to be at the low end of the range and remains subject to COVID-19 disruptions, tie-in and ramp up of replacement mines and cultural heritage management.

 

In June we successfully completed a planned five week maintenance shut at one of our four port terminals, East Intercourse Island (EII), slightly ahead of plan. During the shut we replaced four 'apron feeders' below the rail car dumper that were around 50 years old.

 

Approximately 12% of sales in the first half were priced by reference to the prior quarter's average index lagged by one month. The remainder was sold either on current quarter average, current month average or on the spot market. Approximately 29% of sales in the first half were made on a free on board (FOB) basis, with the remainder sold including freight.

 

Achieved average pricing in the first half of 2021 was $154.9 per wet metric tonne on an FOB basis (equivalent to $168.4 per dry metric tonne, at 8% moisture assumption). This compares to the average first half price for the monthly average Platts index for 62% iron fines converted to an FOB basis of $172.6 per dry metric tonne.

 

On 22 June, we announ c ed the deployment of the world's first fully autonomous water trucks at Gudai-Darri. The three new water trucks will join a fleet of Caterpillar heavy mobile equipment including autonomous haul trucks and production drills, and will be primarily used for dust suppression on site. The trucks will enhance productivity by enabling mine operations to digitally track water consumption and reduce waste.

 

China Portside Trading

We continue to significantly increase port sales in China, with 5.4 million tonnes of sales in the first half of 2021 (3.6 million tonnes in the second quarter), doubling 2020's volumes. In the second quarter, we surpassed 10 million tonnes since the programme commenced and completed the first bonded sale to a steel mill in Indonesia ex Zhanjiang port. Our portside operation handles product from our operations in the Pilbara and in Canada as well as third party product, and provides blending and screening capabilities. Approximately 85% of products sold were either blended or screened in Chinese ports in the first half of 2021.

 

 

ALUMINIUM

Rio Tinto share of production ('000 tonnes)	Q2 2021		vs Q2 2020		vs Q1 2021		H1 2021		vs H1 2020
Bauxite	13,699		-6	%	+1	%	27,264		-4	%
Bauxite third party shipments	9,493		-11	%	+5	%	18,517		-8	%
Alumina	2,012		+1	%	-1	%	4,047		+1	%
Aluminium	816		+4	%	+2	%	1,619		+3	%

 

Bauxite

Second quarter bauxite production of 13.7 million tonnes was 6% lower than the second quarter of 2020 due to ongoing system instability following severe wet weather in Eastern Australia in the first quarter. The same period of 2020 had strong production due to deferrals of planned shutdowns from COVID-19 restrictions.

 

The non-managed CBG joint venture in Guinea experienced shipping constraints, which was partly offset by higher production from the Porto Trombetas (MRN) joint venture in Brazil.

 

Alumina

Alumina production in the second quarter of 2.0 million tonnes was 1% higher than the corresponding period of 2020, reflecting strong operational performance at the refineries. Production was 1% lower than the first quarter of 2021, primarily due to a planned refinery shutdown at Yarwun during the quarter.

 

Aluminium

Second quarter aluminium production of 0.8 million tonnes was 4% higher than the same period of 2020, underpinned by the ISAL smelter in Iceland and Becancour smelter in Quebec operating at full capacity, and the Kitimat smelter in British Columbia nearing completion of its pot relining cycle. The Saguenay smelters had a strong performance in the second quarter, with stable performance maintained across the remaining portfolio.

 

Average realised aluminium prices including premiums for value-added products (VAP) increased 42% to $2,626 per tonne in the first half of 2021 (first half 2020: $1,849 per tonne). The LME price increased by 41% to $2,245 per tonne (first half 2020: $1,595), whilst the mid-west premium duty paid improved 28% to $318 per tonne in the first half of 2021 (first half 2020: $249 per tonne). Our VAP sales improved to 50% of primary metal sold in the first half of 2021 (first half 2020: 40%). Product premiums for VAP sales remained steady, averaging $207 per tonne of VAP sold (first half 2020: $208 per tonne).

 

We are closely monitoring the impact of global chip shortages on the automotive industry, and so far strong demand in other sectors has offset any impact on overall demand for aluminium.

 

 

  COPPER

 

Rio Tinto share of production ('000 tonnes)	Q2 2021	vs Q2 2020		vs Q1 2021		H1 2021	vs H1 2020
Mined copper
Kennecott	33.7	-8	%	+2	%	67.0	-6	%
Escondida	69.5	-17	%	-4	%	141.6	-17	%
Oyu Tolgoi	12.3	+1	%	-19	%	27.5	+15	%
Refined copper
Kennecott	36.9	+411	%	-18	%	82.1	+144	%
Escondida	15.3	-22	%	+10	%	29.3	-28	%

 

Kennecott

Mined copper production was 8% lower than the same quarter of 2020, due to a planned relocation of the in-pit crusher in April and a slope failure in May.

 

The successful relocation of the crusher to a new area outside of the pit is a significant milestone as it enables access to additional ore and reduces the risk of a potential geotechnical event on key mine infrastructure.

 

On 31 May, an anticipated slope failure occurred in the south east wall of the Bingham Canyon pit. There were no injuries or damage to equipment as the slope deformation was methodically tracked since May 2020 and the timing of the slide was accurately predicted by our best-in-class slope monitoring systems and geotechnical team.

 

Mining in the affected area restarted progressively in June using remote equipment. No ore has been sterilised and much of the fallen material is copper bearing ore which is being mined. Mining rates are expected to be slower due to the size distribution of the fallen material, and we therefore expect that some high-grade production scheduled for late 2021 will be deferred to 2022.

 

With the transition to the south wall largely complete, copper head grades have started to increase as expected averaging 0.48% in the second quarter (compared to 0.41% in the same period of 2020 and 0.38% in the prior quarter). While we will continue the transition to higher grade material, grades are now expected to increase at a slower pace than previously forecast for the remainder of 2021, as a result of the slope failure.

 

Refined copper production was 411% higher than the same quarter of 2020 driven by solid smelter performance, while production in the same period of 2020 was negatively impacted by the earthquake in March 2020 and the planned major shutdown that commenced in May 2020.

 

Escondida

Mined copper production was 17% lower than the same quarter of 2020, mainly due to 8% lower concentrator throughput (351 thousand tonnes per day in the second quarter of 2021 versus 381 thousand tonnes per day in the second quarter of 2020), 4% lower grade in ore feed to concentrators and 34% lower recoverable copper in ore stacked for leaching. This was as a result of ongoing preventive measures in response to the resurgence of COVID-19 in the region, which has continued to impact workforce availability. Refined copper production was 22% lower than the corresponding period in 2020 due to lower material stacked.

 

Oyu Tolgoi

Mined copper production from the open pit was 1% higher than the same quarter of 2020 with higher head grades and copper recovery, partly offset by lower manning levels due to COVID-19.

 

Second quarter shipments have been affected by Chinese border restrictions due to increased cases of COVID-19 in Mongolia. Force majeure declared on shipments from 30 March remains in place, as we continue to work closely with the Mongolian and Chinese authorities and our customers to manage the risk of supply chain disruptions. Cross-border concentrate shipments into China have resumed with some measures in place to transport greater volumes in a safe and efficient manner, however uncertainty continues to exist with the COVID-19 resurgence in Mongolia. Safety is our first priority and strict measures are in place to protect our people.

 

Provisional pricing

At 30 June 2021, the Group had an estimated 185 million pounds of copper sales that were provisionally priced at 434 cents per pound. This compares with 260 million pounds of open shipments at 31 December 2020, provisionally priced at 336 cents per pound. Provisional pricing adjustments positively impacted revenues in the first half by $202 million (first half 2020 negative impact of $26 million). This includes mark to market adjustments in respect of shipments open at the period end and final adjustments in respect of shipments for which the price was settled during the period.