Strong Foundation for Growth, Decarbonisation and Shareholder Returns slide image

Strong Foundation for Growth, Decarbonisation and Shareholder Returns

Copper Higher prices, volume impacted by COVID-19 Underlying EBITDA 2021 vs 2020 $ million 4,500 3,000 2,084 2,190 4,089 (1) (101) (83) (1) (68) (22) (29) 3,969 1,500 2020 underlying Price Exchange rates Energy Inflation EBITDA Flexed 2020 underlying EBITDA Volumes & Mix Cash costs One-offs Other 2021 underlying EBITDA At $4.0 billion, underlying EBITDA was up 90%, with margins rising to 59%, driven by the strong recovery in prices and an improved smelter performance at Kennecott in the US. The improvement in our financial performance was primarily attributable to strong market conditions, with the copper price driven higher by renewed speculative interest, declining LME stocks, a weaker US dollar and COVID-related supply constraints. We also benefited from higher sales volumes of refined metal at Kennecott and temporarily higher gold grades at Oyu Tolgoi in Mongolia. These compensated for lower volumes at Escondida in Chile, where ongoing preventive measures in response to COVID-19 continued to impact workforce availability. Our average realised copper price increased by 50% to 424 US cents per pound, even before taking into account the provisional pricing benefit to revenues of $246 million in 2021, while the benchmark gold price rose just 2% to $1,799 per ounce. - We incurred additional costs related to our response to COVID-19, higher energy costs and higher unit costs at Escondida due to lower concentrator throughput. We generated $2.6 billion in net cash from our operating activities, a 168% increase on 2020, from the same drivers as underlying EBITDA and a $0.8 billion increase in dividends from our 30% equity holding in Escondida to $1.4 billion, partly offset by a $0.4 billion tax payment in Mongolia. Free cash flow of $1.3 billion reflected the higher operating cash flow and high level of capital investment ($1.3 billion), mainly relating to the ongoing development of the Oyu Tolgoi underground project, where we have a 34% effective interest but fully consolidate on the basis of management control. Our copper unit costs, at 82 cents per pound in 2021, were 26% lower than in 2020, but marginally above guidance of 75 to 80 cents per pound. Lower throughput and grades at Escondida and higher royalties, in line with stronger prices, at Kennecott and Oyu Tolgoi were offset by higher production of copper and, in particular, gold at Oyu Tolgoi, driven by higher grades. Rio Tinto ©2022, Rio Tinto, All Rights Reserved 55
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