Rio Tinto Chief Executive J-S Jacques said “We delivered a strong performance, particularly in iron ore and bauxite, demonstrating the underlying resilience of our business and ability to adapt in difficult conditions. Our iron ore assets are performing well in a strong pricing environment and we are on track to meet our 2020 iron ore guidance. Despite various COVID-19 related challenges, all our assets have continued to operate, with our first priority to protect the health and safety of all our employees and communities.

“Our focus is to maintain a business as usual approach with many safeguards at a very unusual time. Our operational teams are continuing to run our assets safely so we can continue to contribute to local and national economies and serve our customers. We remain even more committed to our relationship with communities, following the Juukan Gorge events in the Pilbara, and we are engaging extensively with Traditional Owners around our operations and across Australia.

“We are executing our value over volume strategy to drive performance, productivity and free cash flow per share. We will remain agile and ready to adapt to the changing operating and macro environment.”

Production*
Q2 2020 vs Q2 2019 vs Q1 2020 H1 2020 vs H1 2019
Pilbara iron ore shipments (100% basis)Mt 86.7 +1% +19% 159.6 +3%
Pilbara iron ore production (100% basis)Mt 83.2 +4% +7% 161.1 +3%
Bauxite Mt 14.6 +9% +5% 28.4 +8%
Aluminium kt 785 -2% 0% 1,568 -2%
Mined Copper kt 132.8 -3% 0% 265.7 -5%
Titanium dioxide slag kt 262 -13% -10% 555 -7 %
IOC iron ore pellets and concentrate Mt 2.8 +9 % +8 % 5.3 +6%

*Rio Tinto share unless otherwise stated.

Q2 Operational update
•We continue to prioritise the health and safety of our employees and communities during this turbulent period. We achieved an all injury frequency rate of 0.37 for the first half of 2020, trending positively compared with a rate of 0.42 in 2019. We have now fully embedded our rigorous COVID-19 health and hygiene controls as we adapt to the new operating conditions. Our operational sites and offices are moving ahead with the implementation of fit for purpose COVID-19 screening as an additional measure to protect our people and communities.
•We remain even more committed to our relationship with communities, following the Juukan Gorge events in the Pilbara. We are engaging extensively with Traditional Owners, including the Puutu Kunti Kurrama and Pinikura people, and indigenous leaders in the Pilbara and across Australia. On 19 June 2020, we announced a board-led review of our heritage management processes within Iron Ore to be completed by October 2020. We will also contribute to the Inquiry by the Joint Standing Committee on Northern Australia that will report to the Senate and we will continue to support the West Australian government’s planned reform of the Aboriginal Heritage Act 1972 (WA).
•Overall, we achieved a robust production performance with volumes up 1% compared with the second quarter of 2019 on a copper equivalent basis despite significant global challenges, restrictions related to COVID-19 and the impact of the earthquake at Kennecott, Utah.
•Pilbara iron ore shipments of 86.7 million tonnes (100% basis) were 1% higher than the second quarter of 2019 despite the impact of COVID-19 related operational controls. With 1.7 million tonnes of port sales in the second quarter, we continue to grow our portside business steadily, looking to better serve our existing customers and open opportunities to sell to new customers who do not participate in the seaborne market.
•Bauxite production of 14.6 million tonnes, 9% higher than the second quarter of 2019, continued the first quarter trend following the successful ramp-up of Amrun in 2019, and higher production at the non-managed CBG joint venture in Guinea reflecting good progress on the ramp-up of the expansion.
•Aluminium production of 0.8 million tonnes in the second quarter was 2% lower than the second quarter of 2019 primarily due to pot relining at Kitimat, the decision to operate the ISAL smelter at 85% capacity and the curtailment of the fourth pot line at our New Zealand Aluminium Smelter (NZAS) in April 2020 due to COVID-19 impacts.
•On 9 July 2020, we annoucned the wind-down of operations and eventual closure of NZAS following the conclusion of the strategic review.
•Second quarter mined copper was 3% lower than the same period of 2019 due to lower head grade at Kennecott. Second quarter refined copper was 67% lower than the same period of 2019 due to the impact from the 5.7 magnitude earthquake in the first quarter resulting in an unplanned flash converting furnace rebuild at Kennecott, in addition to the planned 45-day smelter shutdown in May/June.
•On 29 June 2020, we announced an agreement with Turquoise Hill Resources and the Government of Mongolia on the preferred domestic power solution for Oyu Tolgoi that paves the way for the Government to fund and construct a State Owned Power Plant at Tavan Tolgoi. Parties will work towards finalising a Power Purchase Agreement by March 2021.
•The new Oyu Tolgoi mine design announced on 3 July 2020, confirms that the caving method of mining remains valid. We are targeting first sustainable production between October 2022 to June 2023 and development capital of $6.6 to $7.1 billion based on the updated mine design of Panel 0. Material contained in pillars retained on either side of Panel 0 have been reclassified from Ore Reserves to Mineral Resources. Part of the material contained in these pillars is expected to be recoverable at a later stage following additional studies which are currently underway.
•Titanium dioxide slag production of 262 thousand tonnes was 13% lower than the second quarter of 2019 partly due to COVID-19 restrictions in Quebec and South Africa.
•Production of pellets and concentrate at the Iron Ore Company of Canada (IOC) was 9% higher than the same period of 2019 with continued focus on concentrate feed to match market demand.
•Governments are gradually lifting restrictions on the movement of goods and people as part of their COVID-19 recovery plans. However, some restrictions remain in place or are being reintroduced. As a result, there continues to be an impact on projects in general although to a lesser degree than earlier in the year.
•Capital expenditure is expected to be around $6 billion in 2020 (previously $5 to $6 billion) due to an appreciation in our major operating currencies against the US dollar since the first quarter and a reduced impact of COVID-19 on both sustaining and development expenditure. Capital expenditure for 2021 and 2022 is expected to be around $7 billion per year (previously $6.5 billion). This includes spend from 2020 that has been re-phased as a result of COVID-19 restrictions. Further details can be found in the Investments, growth and development projects section below.
•We made a final payment of US$1.0 billion in Australian income tax in June 2020 with respect to 2019 profits

COVID-19 Our markets In China, conditions have improved through the second quarter and appear to be stabilising. While employment and trade uncertainties remain, the construction and infrastructure sectors are performing well; house prices and stock markets are also recovering, lending support to consumer confidence. The United States and Europe have started to re-open and recover. A second wave of infections remains a key threat for advanced economies. • China’s demand for iron ore continues while the recovery in Japan and Europe is yet to begin meaningfully and is likely to be subdued when it does. • The automotive sector is showing initial signs of recovery from a very low base, supporting demand for aluminium value-added products (VAP). • There has been limited impact on bauxite demand to date. • China’s copper concentrate market remains favourable; however, the US market is weaker. COVID-19 related supply disruptions are between 3 to 4% of annual copper supply currently, in addition to normal industry supply disruptions, and could increase further.

Average realised prices achieved for our major commodities

Units H1 19 FY 19 Q1 20 Q2 20 H1 20

Pilbara iron ore FOB, $/wmt 78.5 79.0 77.3 79.6 78.5
Pilbara iron ore FOB, $/dmt 85.3 85.9 84.0 86.5 85.4
Aluminium Metal $/t 2,174 2,132 2,014 1,715 1,849
Copper US cents per pound 282.0 275.0 260.5 240.1 250.0
IOC pellets $/wmt 141.4 137.1 116.6 117.6 117.0

Our assets
During the COVID-19 pandemic, we have implemented strict protocols globally across the business. These measures are in line with government guidance and directives, and advice from leading medical experts and international health organisations on best practice to keep our employees, contractors and partners healthy and safe. These range from physical distancing to travel restrictions, roster changes and team splits, to flexible working arrangements, rapid screening and personal hygiene controls.
While uncertainties continue to exist in our business environment, we are focused on our underlying resilience and ability to adapt in a fast-moving environment. Key updates are outlined below and full details of initiatives taken to date can be found on our website.
Operations and Workforce
• With the de-escalation of health restrictions in Western Australia, we are progressing the return to normal rosters at our Iron Ore operations, construction and exploration projects. We expect this transition to be completed by August 2020.
• Our office-based employees are beginning to return to offices in regions where permitted. In most cases, employees are returning to offices in alternate teams to reduce the risk of widespread transmission and ensure business continuity.
• We have introduced screening programmes across sites as a control to stop the spread of COVID-19. For the Pilbara fly-in-fly-out workforce, we have conducted more than 50,000 checks through facilities we established at Perth and regional airports as an enhanced control for employees boarding flights to site.
• At our copper assets in Mongolia and the US, our teams have used virtual technology to overcome some challenges related to COVID-19 travel restrictions. At our Oyu Tolgoi underground project in Mongolia, the use of virtual reality glasses has helped gain access to global experts to support project progression during construction and commissioning stages.
• At Richards Bay Minerals (RBM), furnaces are gradually ramping up production following easing of restrictions in South Africa. However, we are managing the situation carefully in the challenging South African environment.
Products
• In the second quarter, we continued to focus on the optimisation of IOC product mix to match market demand, moving from pellet to concentrate.
• In aluminium, in response to market conditions we have reduced the proportion of primary metal being produced as VAP, which represented 40% of primary metal sold in the first half of 2020 (first half 2019: 54%).

Production guidance
Rio Tinto share, unless otherwise stated
2019 Actuals H1 2020 (YTD) 2020
Pilbara iron ore (shipments, 100% basis) (Mt) 327 159.6 324 to 334
Bauxite (Mt) 55 28.4 55 to 58
Alumina (Mt) 7.7 4.0 7.8 to 8.2
Aluminium (Mt) 3.2 1.6 3.1 to 3.3
Mined copper (kt) 577 265.7 475 to 520
Refined copper (kt) 260 74.1 165 to 205
Diamonds (M carats) 17 7.7 12 to 14
Titanium dioxide slag (Mt) 1.2 0.6 Lower end of 1.2 to 1.4
IOC iron ore pellets and concentrate (Mt) 10.5 5.3 10.5 to 12.0
Boric oxide equivalent (Mt) 0.5 0.26 ~0.5

• Production guidance remains unchanged across all commodities from the First Quarter Operations Review.
• We will continue to monitor and adjust production levels and product mix to meet customer requirements in 2020, in line with our value over volume strategy, government imposed restrictions related to COVID-19, and any other potential COVID-19 related disruptions.
Operating costs
• Pilbara iron ore 2020 unit cost guidance is expected to be within the previous guidance of $14 to $15 per tonne, including unplanned one-off COVID-19 costs of $0.50 per tonne mostly incurred in the first half of 2020, relating to controls such as cleaning, screening, additional flights, and roster changes. The guidance is based on an Australian dollar exchange rate of $0.67.
• Copper C1 unit cost guidance in 2020 remains unchanged at 120-135 US cents/lb.
Investments, growth and development projects
• Governments are gradually lifting restrictions on the movement of goods and people as part of their COVID-19 recovery plans. Nevertheless, the pace is controlled and some restrictions remain in place or are being reintroduced. This continues to have an impact on projects in general although to a lesser degree than earlier in the year.
• Capital expenditure is expected to be around $6 billion in 2020 (previously $5 to $6 billion) due to an appreciation in our major operating currencies against the US dollar since the first quarter and a reduced impact of COVID-19 on both sustaining and development expenditure. Our focus is to complete as much of the original planned sustaining expenditure as possible in the second half to enhance the resilience of our asset base. Capital expenditure for 2021 and 2022 is expected to be around $7 billion per year (previously $6.5 billion). This includes spend from 2020 that has been re-phased as a result of COVID-19 restrictions.
• Exploration and evaluation spend in the second quarter was $136 million ($280 million in the first half of 2020), 16% lower than the second quarter of 2019, and 5% lower than the first quarter of 2020.
Pilbara replacement projects
• Project teams continue to actively manage the impacts of COVID-19 with the implementation of project response plans. Recovery efforts are underway including a transition back to the usual three weeks on, one week off project rosters in the Pilbara.
• Supply chain issues are being managed and construction continues to progress despite necessary roster changes, social distancing and travel restrictions.
• The Koodaideri project is progressing with production ramp-up still expected to occur in early 2022. The primary crusher surge bin was delivered to site in May 2020, representing the first significant structural component for the processing plant.
• First ore from the Robe River Joint Venture sustaining production projects (West Angelas C&D and Mesa B, C and H at Robe Valley) is still expected in 2021. All primary approvals for Mesa H have now been received.
Oyu Tolgoi underground project
• Work continues to progress despite international travel restrictions issued by the Government of Mongolia to manage the risk of COVID-19 transmission.
• Underground lateral development continues to achieve high productivity with average monthly rates above 1,800 equivalent metres (eqm) in April, May and June.
• Shafts 3 and 4 remain on care and maintenance with no effective progress for the quarter and non-critical surface construction work areas have now also been placed on care and maintenance. Limited night shift work has recommenced on critical underground handling infrastructure, with the material handling system currently progressing at approximately 40% of planned rates.
• The new mine design announced on 3 July 2020, confirms that the caving method of mining remains valid and that the underground schedule and costs currently remain within the ranges previously disclosed. We are targeting first sustainable production between October 2022 to June 2023 and development capital of $6.6 to $7.1 billion based on the updated mine design of Panel 0.1
• Material contained in pillars retained on either side of Panel 0 have been reclassified from Ore Reserves to Mineral Resources. Part of the material contained in these pillars is expected to be recoverable at a later stage following additional studies which are currently underway.
• The definitive estimate of cost and schedule for Panel 0 is still expected in the second half of 2020.

Other key projects and exploration and evaluation
• Phase one of the south wall pushback project at Kennecott remains on track, despite disruptions from the 5.7 magnitude earthquake in the first quarter, with access to higher grades expected from 2021.
• The Zulti South project in South Africa remains on full suspension due to security and community issues.
• The Kemano hydropower tunnel project is targeting a re-start of tunnel excavation works in the third quarter of 2020.
• We are continuing our study programme at the Resolution Copper project in Arizona, USA despite COVID-19 disruptions. The study commenced underground characterisation of the ore body following Board approval in April 2020. Sinking of Shaft 9 continues on schedule and on budget, reaching a depth of 1,906m out of 2,086m total at the end of June.
• At our Winu project in Western Australia, drilling and fieldwork activities continue with strong health protocols in place to prevent the transmission of COVID-19. Restrictions are beginning to ease, allowing people movements and access to sites. We continue to see potential to develop the Paterson into a broader opportunity through both our own exploration and joint ventures in the region.
• The Simandou iron ore project (Blocks 3 and 4) in Guinea is progressing as we collaborate with our partners to optimise the programme. A scope of work has been prepared to enable selected China-based design institutes to update the infrastructure elements of the project including the design of its designated trans-Guinean rail line and to assess shipping methods.
1 The level of accuracy of these estimates is preliminary in nature and subject to a range of variables, in line with previous guidance. The confidence level of these estimates is at a level associated with a Pre-Feasibility Study, and further work is required between now and the second half of 2020 to refine the mine design options and study them to a level of confidence and accuracy associated with Feasibility Study quality estimates.
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. To allow production numbers to be compared on a like-for-like basis, production from asset divestments completed in 2019 is excluded from Rio Tinto share of production data.

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