Rio Tinto Group (RIO) Q2 2015 Earnings Report, Transcript and Summary

Good morning and welcome to you all, to Rio Tinto’s 2015 interim results. If I could add my thanks to John's for you all coming in this morning. Having commuted here this morning, I know what you went through, and I am most appreciative. I'm hoping that our CFO, Chris Lynch, joins us from Melbourne. I haven't seen him on the screen yet. The industry is facing a highly challenging environment. And against this backdrop, I believe we've delivered a very robust set of results. We continue to focus on running Rio Tinto efficiently, and we're continuing to improve the business, not just for today, but for the long term strengthen and success of our business and importantly, to deliver industry leading returns throughout the cycles. Today, you'll see how our combination of Tier 1 assets, our operating and commercial excellence, and capital discipline has allowed us to protect margins and to maintain significant returns to you, our shareholders. The strong position that we are in today is a result of relentless effort of all of my colleagues, over the past 2.5 years, and I truly thank them for their support. I've got a number here today, that I'd like to especially thank. For some time it's been apparent that the economic environment has been adjusting to what people are calling the new norm, or the new normal. When I joined Rio Tinto way back in 1991, China accounted for just 4% of global GDP. Since then, some 400 people - million people have moved in China, from urban - to the urban areas from the rural areas. And, the total size of the economy has grown six-fold, to more than $16 trillion, in 2014, equivalent to 17% of global GDP; so from 6% to 17%. Inevitably, the rate and nature of the growth is changing and it's becoming less commodity intensive and more consumer focused. But let's be clear, in the new normal, we'll see continued economic growth from this larger base, including the ongoing increase in the long-term demand for all of our commodities. Since 2008, developed markets in both Europe and the USA, have been through some pretty difficult periods. But we do, now, begin to be seeing the signs of recovery. And we're starting to sense the potential from emerging market economies, including India and Indonesia, where capital intensity of the use of our commodities and the end products, is showing significant potential. The economic environment has been challenging, particularly for commodities, with some prices falling to levels not seen since 2009. But this cyclical weakness will pass as the momentum of global economic growth picks up, and commodity markets rebalance. Importantly, the companies that thrive will be those that are the most productive and efficient operators, and we are; and those who remain at the bottom of the cost curve, which we will. Chris will go through, in a moment, the results in detail, but let me first point out a few of the highlights. Today, we're reporting underlying earnings of $2.9 billion. Our cost-saving initiatives, along with positive currency movements, and lower energy costs, have offset almost 40% of the $3.6 billion of price decline. Importantly, we've generated $4.4 billion of cash, which, yes, is 19% lower than the first half of last year, primarily due to lower commodity prices, but bolstered by our impressive cash costs improvements, our tight management of working capital and lower taxes. Already this - in this half, we've returned over $3 billion to shareholders, through the 2014 final dividend and our commitment to the buyback program. We've continued to work on reducing cost, and we'll talk about this more shortly. We've reduced our capital expenditure, by $1.4 billion, to $2.5 billion for the half, but without our compromising our growth. We've completed two major projects in the half, the Pilbara, and the Kitimat. We've also announced the signing of the underground development plan at Oyu Tolgoi, which provides the pathway for progressing this exciting project. Our balance sheet remains robust, which is critical in this volatile environment, and provides a strong base, which secures returns to you, our shareholders. This year, in the total year, we'll return over $6 billion. We finished 2014 with our balance sheet in exceptionally strong position, and committed to returning $2 billion through the buyback. And, in the first half, we completed share repurchases of $1 billion, including the $400 million in an off-market buyback, in Australia. We paid our 2014 final dividend of $2.2 billion, in April and, today, we've announced a 12% increase in the interim dividend. If you take currency into account, in pound sterling, this translates to an interim dividend increase of 21%. And as an Aussie, I'm delighted to say that in Australian dollars, it's a 41% increase; I can't take all the credit for that. All this is a demonstration of our aim to deliver industry-leading and sustainable returns to our shareholders through the cycle. Now, let me hand over to Chris.

Thanks, Sam. It's great to be back here in Melbourne. As Sam has already said, these are very challenging times, but our people have continued to deliver with further operating cost savings, capital discipline and cash generation. Let's have a look at our performance in the first half of this year in more detail. The impact of declining prices on our earnings was significant with a reduction of $3.6 billion partly offset by exchange rates and lower input prices, resulting in fixed earnings of $2.4 billion. However, the continued focus within the business on reducing our operating costs, and exploration and evaluation costs, have made a meaningful impact with $641 million of savings in this half, which led to underlying earnings of just over $2.9 billion. There was a modest benefit from higher volumes, which we expect to continue in the second half of the year as we ramp up our completed infrastructure project in the Pilbara, and increase output from the modernized and expanded Kitimat smelter. Underlying earnings were $2.9 billion for the first half. Net earnings were $806 million, $2.1 billion below underlying due to impairments and non-cash exchange movements. This compared with $4.4 billion of net earnings in the same period last year. Impairments of $421 million booked in the period related mainly to the carrying value of energy resources of Australia. This was flagged on June 11, following a decision made by the ERA Board not to proceed with the final feasibility study of the Ranger 3 Deeps' project. As we have seen in prior periods, there was a major impact from the weakening of the Australian and Canadian dollars during the half. This decline gave rise to non-cash exchange losses on US dollar-denominated debt in non-US dollar functional currency companies. Our overall US dollar debt and cash flow is unaffected by these exchange movements. Other exclusions from underlying earnings included restructuring costs and an increase in the provision for closed operations, predominantly the Holden mine site in North America. As we have said, this is a challenging environment with price declines in nearly all of our key commodities. The excellent work from each of the product groups around controlling costs and increasing productivity has, to some extent, offset the impact of prices. This has resulted in robust product Group earnings and cash flows in a highly volatile environment. In iron ore, price alone would have accounted for a $3.2 billion reduction in underlying earnings. However, Andrew Harding and his team have reduced costs by $244 million, which, coupled with increased volumes and a favorable movement in the Australian dollar, has partially offset this impact. Iron ore has therefore delivered an operating FOB EBITDA margin of over 60%. Underlying earnings of the iron ore group, of $2.1 billion, were well below the $4.7 billion achieved in the half one last year. Our aluminum business continues to go from strength to strength. A 2% increase in the average realized price during the period, combined with the lower Australian and Canadian dollars, and a continued focus on costs, has led to a more than doubling of underlying earnings to $793 million, up from $373 million this time last year. Cash flows of $1.6 billion and integrated operations EBITDA margins of 35% are a significant increase on the same time last year. Adverse prices impacted the underlying earnings of the copper and coal businesses, which you'll recall, were combined earlier this year. This combination has created additional opportunities to improve costs and productivity, and the product group achieved total savings of $150 million in the first half. Underlying earnings decreased to $393 million during this half. However, operating EBITDA margins rose to 36%, which is an impressive achievement in a declining price environment. Our Australian coal mines are amongst the lowest cost in the industry and continue to generate positive cash flows. Our diamonds and minerals product group delivered underlying earnings in line with the prior year, despite actively curtailing production volumes to match softer markets. The business continues to be managed for cash with cash flows of $306 million, which is significantly above the earnings level of $75 million. Our focus on maintaining a sound balance sheet is fundamental to the business. We believe that this provides robustness against volatility; security of returns through the cycle and a readiness to take advantage of opportunities as they arise. Our net debt increased from $12.5 billion at the end of 2014, to $13.7 billion at the end of June. This is following the payment of $2.2 billion for our final 2014 dividend, and $1 billion of share buybacks. As at the end of the half, we bought back AUD560 million worth of Rio Tinto limited shares in our off-market buyback, which equated to $425 million, following the closure of that program in April. Our on-market Rio Tinto plc program continues and during the first half of the year saw a $600 million of shares bought back. During July, a further $190 million of Rio Tinto plc shares were bought back. On a pro forma basis, as presented at our full-year results, the net debt has increased by $187 million although the gearing ratio has increased to 21%, due to impairments and the non-cash impact of the lower Australian dollar on the translation of our Australian assets and liabilities into US dollar functional currency. At June 30, our cash balance stood at $11.2 billion, but was reduced during July following the early repurchase of $1.2 billion of bonds, which were due to mature in 2016. And we have a further $500 million in bonds maturing later in the year, which we expect to repay with cash. We remain at the bottom of our target of net gearing range of 20% to 30%. We've seen a $1 billion reduction in our cash flows from operations during the half, due to the impact of reduced commodity prices. Reduced costs helped to offset some of the significant impact from price declines, along with lower taxes and royalties, favorable exchange rates and a release of working capital. Overall, our Group EBITDA margin was 38%, a reduction of only 1% from full-year 2014. Working capital continues to be an area of focus, as we seek increased efficiency throughout the business. Inventories and other receivables have improved by over $1 billion, and although this is partly due to benefits from price and currency, it also reflects the results of actions taken across all our businesses to reduce our trade working capital. Usually, we see a cash outflow in working capital in the first half as several payments, including employee bonuses are weighted towards the start of the year. In the first half of the last two years, there was an average cash outflow of approximately $700 million. In this current period we've been able to reverse this trend. The cash inflow of $30 million we have achieved in the first half of this year is therefore quite a significant achievement. The release of working capital from inventories and receivables has been offset by a reduction in payables, mostly the consequence of the lower capital and operating expenditures. Overall, this is a good outcome. We'll continue to manage working capital closely, particularly in this area of trade working capital. We started this year with a cost saving target of $750 million. In the first half we've achieved $641 million: $551 million of operating cash cost reductions and about $90 million from reduced exploration and evaluation, which brings us to 85% of the full-year target. We're now increasing our full-year 2015 target to $1 billion. Our cost reductions have been achieved across the business, with copper and coal delivering about $1.9 billion; and iron ore and aluminum each delivering around $1 billion, since the program began in 2013. The early and decisive actions, which we have taken, have put the business in a sound position and the culture of cost management continues. Alongside reducing operating costs and improving productivity, we have also improved capital efficiency. We've been able to continue delivering our growth plans, whilst lowering the overall capital cost. Earlier this year we announced a target capital spend of under $7 billion compared to $8 billion in 2014. In the first six months of the year we spent $2.5 billion. We now expect full-year capital expenditure to be around $5.5 billion for 2015, less than $6 billion in 2016 and around $7 billion in 2017. In the next two years annual sustaining capital expenditure is estimated to be at around the $2.5 billion mark. We'll approve only the best projects in our portfolio with IRRs generally in excess of 15%. In closing, I want to take one further look at our capital allocation framework, which should by now be very familiar to most of you. In the first half of 2015, we generated $4.4 billion of operating cash flow. Our first allocation of capital is made to necessary sustaining capital, which in this period was $1.2 billion. Next comes the primary contract with our shareholders, the progressive dividend, which was $2.2 billion in April. Growth capital was $1.2 billion, which leads to an overall increase of $187 million in debt on a pro forma basis. As you can see, careful management of cash remains at the core of what we do, ensuring the stability of long-term shareholder returns. And with that, I'll hand back to Sam.

Thanks, Chris. Over the course of the first half, we improved our safety as measured by all-injury frequency rate. However, tragically, we've had three fatalities: one at our operation at QMM in Madagascar; one at our Canadian titanium dioxide business; and one at our coal operations in South Africa. And our thoughts and prayers are with their family and their friends. Fatalities just have to be eliminated and everybody in the Company is working to achieve this. As you know, a culture of our safety and integrity is central to Rio Tinto. A well-run operation is a safe operation and forms a core part of our commitment to all of our stakeholders. There's no substitute for Tier 1 assets. Across our commodities, we have a portfolio of leading assets, providing robust margins and cash flows. Others who own or develop third or fourth-quartile assets on a highly-geared balance sheet may do okay when prices are high, but it's extremely challenging for them in the long term, and particularly in today's environment. Well-run Tier 1 assets backed by a sound balance sheet is the only strategy that can create sustainable shareholder returns. As you can see from this chart, our Pilbara assets have returned an average EBITDA margin of 62% over the past 14 years. But the volatility of returns for a high-cost producer is totally different. When prices fall, what really counts is asset quality, the cost position and efficiency. We continue to see marginal supply exiting the market. At the outset of the year, Chris and I talked about 85 million tonnes of exits with a further 80 million tonnes at risk of exiting. Some of the at-risk tonnes are being withdrawn and the volume exiting the market this year will be higher; we're estimating around 120 million tonnes, with a further 45 million tonnes still at risk. This half, our iron ore assets and the team running them have again demonstrated their exceptional capability. During the half we've increased production in the Pilbara, compared to the same time last year, despite late cyclones, which saw us lose 7 million tonnes in shipments. The operations benefited from the weaker Australian dollar and lower energy costs, but also management delivered a significant cost savings of $244 million for the half, taking the cumulative cost savings to almost $1 billion since the beginning of 2013. This business continues to deliver an FOB EBITDA margin in excess of 60% in the first half. It's a remarkable outcome, considering there's been a near-50% decline in the average index price. Even with the impediment of weather that I've just talked about, our Pilbara assets still remain the lowest cost producer delivered into China with C1 cash costs of $16.20 per tonne. However, at today's currency and energy prices, this is $15.20 a tonne. It's a stunning achievement from Andrew Harding and his team and there's more to come. Operating and commercial excellence is a core skill for Rio Tinto and critical for success in this environment. So, let's look at a few examples of this from across the group. Achieving maximum efficiency from our equipment and infrastructure allows us to simplify our processes and lower unit costs; and this can be seen in reducing iron ore re-handling in the Pilbara, or redesigning our rail car unloading system at Kennecott to handle tolling. As well as efficiency saving, we also look for ways to increase production through incremental improvements in the way that we use our assets and this allows us to get additional throughput without additional equipment. For example, increasing the conveyor speed at Gove, our bauxite operation in Northern Territory, and fitting dovetails to the trucks at Oyu Tolgoi in Mongolia, these have both contributed to improvements in utilization and throughput. We remain committed to investing in technology, which has delivered some spectacular results and provides a competitive advantage in lowering costs and delivering productivity improvements. Our highly sophisticated autonomous trucks demonstrate the value of our technology. Having achieved production at best cost, our aim is then to sell the product at the best price. Our iron ore sales continue to achieve a price premium over the index, demonstrating the deep capability in our marketing team. In aluminum, our focus on value-added products has reduced the need for some of our customers to re-melt material, and this has delivered additional average product premiums of $259 a tonne. In every area of our business, we look for continual improvement: greater efficiency, lower cost and higher prices. I personally believe that there are always opportunities to improve a business. The Group has a pipeline of exceptional near-term projects. The 360 infrastructure project in Pilbara is largely complete, which will enable us to deliver global sales in line with the guidance of 340 million tonnes for iron ore in the full year. To optimize the value of our 360 infrastructure, our future Pilbara investment will be focused on maintaining the quality of the Pilbara product. Turning to aluminum, with the modernized and expanded Kitimat smelter pouring its first hot metal in this half, 80% of our smelters are now in a first cost curve - first quarter of the cost curve, and the product group has an exciting outlook. Kitimat will continue to ramp up over the coming months. In bauxite we have the high quality and large-scale resource at South of the Embley. We anticipate completing a feasibility study by the end of 2015. Our aluminum product group, it is a truly world-class business. In May we announced the signing of the underground plan at Oyu Tolgoi. We're now carrying out a refresh to the feasibility study. We're finalizing the project financing, as well as obtaining the necessary permits. Along with our increase in our share of copper metal from Grasberg, we'll see a significant increase in future volumes of our copper product group in the years to come. So, let me summarize before moving to Q&A. Today, we have delivered a robust set of results, notwithstanding the challenging environment. Most of all, we have continued to deliver on our commitments to our shareholders. These results are based on a world-class asset portfolio. When you look at our EBITDA margins, the quality and longevity of our resources and reserves, the potential for expansion/growth, our assets will generate sustainable returns for decades to come. Our skills of operating excellence and technical marketing place us ideally to maximize the value of our asset base. And prudent investment means that capital expenditure, of just $2.5 billion for the half, that we continue to deliver quality growth projects. Our balance sheet is strong with low net debt of $13.7 billion and gearing, as Chris mentioned, of 21%, ideally suited to the current economic environment and providing protection for our shareholders. Every dollar of our spend must be spent wisely, and with our suite of Tier 1 assets, strong financial position, our consistent margins, and our operating and marketing capability, we believe we have all the levers in place to protect our cash flow generation. During 2015, we'll return over $6 billion to our shareholders. There is a clear focus in everything that we do to manage Rio Tinto well, not just for today but for the long term strength and success of our business, but most of all to deliver industry-leading shareholder returns throughout the cycle. So, I'll just return to my chair and I'll pass over to you for questions. Rob Clifford, you have a contract with me that you'll be the first question. It's tradition. I hope I haven't put you on the spot. I'd hate to do that. Perhaps if people can mention their name and their affiliation, and we'll take three questions here and then move to three questions from the phone. Rob, you're in the hot seat.

Thanks, Sam. Rob Clifford, Deutsche Bank. I’d like to think we honor our contracts. So, I have two questions. One is six months ago you said you had a very personal goal to ensure that, come February next year, you give the Board options with the balance sheet, including potential for another buyback. Given the decline in commodity prices, do you still think that target is achievable for February next year? And the second question is just on growth going forward. The breakthrough in OT was very positive. Is that something you can now fast-track, in terms of getting the approvals through? And given the hiatus there, it seems that the card should have been ready to throw down and get the approval through fairly quickly.

Okay. Look, they're two good questions. Let me answer the second one, and I'll pass the question about our capital returns to Chris in a moment. In relation to growth, a number of people have asked me about this, asked in terms of all the build versus buy; asked in terms of, well, can you sustain the growth? As I mentioned during my comments if you look at the way that we're delivering projects, in terms of much greater focus; weakening Aussie and Canadian dollars; reduced energy costs and gas costs; and, quite frankly, reduced contractor costs and input costs, we are seeing that we're able to maintain our growth. Of course, key projects for us are the 360 project; the OT underground, as you mentioned; and South of the Embley. But we have other projects that are in the pipeline. Alan has the Diavik A21 diamond project, but he also has Zulti South titanium dioxide project. There are a range of creep and other growth projects across the business. And, of course, as Chris mentioned with his wheel, I think he calls it his washing machine, I prefer a wheel, but with that chart it shows that our primary focus is on sustaining CapEx and the progressive dividend. We'll then look to how we invest in the future and any need to pay down further debt and need for further shareholder returns, which brings us to the second part of your question. Chris, perhaps if you could pick up from there.

Okay. Thanks, Sam and thanks, Rob, for the question. Look, I think that capital allocation framework is important to consider in this process. We do look at sustaining capital first up. We look at the dividend, the progressive dividend; we then look to growth; and we look to the balance sheet capacity, and that is a function really of debt. And, when you get to balance sheet capacity, we talk about maintaining a net gearing ratio in the 20% to 30% range. Now, in a volatile market like this, in a challenging market like this, the more you can stay in the bottom end of that gearing range the better. And then you go to consider further returns to the shareholders. But in our case, as I think everyone's well aware, we make these decisions at the Board level in February, and that'll be the next opportunity for the conversation with the Board about exactly what the returns will be for subsequent periods. So we think about it in terms of sustaining capital; dividend; growth CapEx; balance sheet capacity; and then the desire, opportunity, or whatever, for further returns to shareholders. And that's the flow of the debate. As I said, that'll be addressed in February Board decisions and announcements.

Thanks, Chris. Another question in the room. Why don't we take this one here? You'll all get a chance, so don't feel left out.

He's sat in the front; he gets an advantage through that.

Myles Allsop, UBS. Just a couple of questions; one following up from the previous question. If it was February today when you got 21% net gearing, you've got less than $6 billion of CapEx next year, when iron ore prices are $55, would you be recommending to the Board that you should sustain the buyback? And then the second question is around iron ore and the prioritizing volume over price, or price over volume, can you envisage any situation where you would start to pull back on the growth in the Pilbara, or consider closing IOC? Obviously, IOC is making some EBITDA today; it's not making much cash flow if iron ore is at $45, would you be prepared to make that bold decision?

Let me kick your first question into the long grass, but it was a good solid attempt to try and put me on the line. In relation to iron ore, I know it's a difficult market and I know that I've got a few noisy competitors. The truth of the matter is it's a global market. Supply and demand is global, and we've got to be very focused on what's in the best interest for our shareholders. I mentioned during my presentation that we're expecting that during this year 120 million tonnes of capacity will come off with a further 45 million tonnes that have got the wobbles. If you look at what we're expecting in terms of supply to come on, including our share, that's actually 110 million tonnes. Now, a lot of things will happen during the rest of this year and who knows where sentiment will actually go. But if you look at the basic numbers, if you look at our forecast, which a lot of work and effort has gone into, we believe that the market is fundamentally in balance. Now, we invest for the long term. We're not investing for what's happening right now. On behalf of you, we've been investing in our iron ore over the past 10 years. We now have the infrastructure in place, and we're bringing on brownfield mine expansions. With a unit cost of $16.20 a tonne, or converted to today's exchange rate and energy costs, $15.20 a tonne, compared to an iron ore price of $55 a tonne, we're doing okay. The margin is all right. And for me, sitting here today thinking that I'm going to sacrifice that margin, so that someone else somewhere in the world can bring capacity back on, to me, it just doesn't make sense. Now, what I did say, and perhaps it was in code, thoughtfully it helps me with my words, what I did say is that our future investment in the Pilbara is going to be focused on maintaining the quality of the Pilbara blend. I did not say that our focus is going to be on bringing on capacity beyond 360. That's been our position for quite some time. It's actually what physically drives us. Pilbara blend is an important product. It's the largest product in the seaborne trade market and provides a foundation for the burden of the blast furnaces. That's important for us to not only maintain the quality and integrity of that, but also to ensure that we meet customers' needs, because they need a sustainably strong, reliable, consistent base to run their operations. They don't want to be continually tweaking and jerking their systems round, because they don't have that reliability built in. It's a fantastic business and it's a business that we continue to nurture and improve, and as I mentioned, Andrew Harding and team is doing a great job. In relation to IOC, also there we're seeing a strong focus on improving that business in terms of its cost, in terms of its throughput. And Kelly Sanders, the President, Managing Director of that operation, has actually moved his headquarters from Montreal up to Labrador City, so he can physically be on the ground and physically ensure that we're taking every step possible to optimize that business. One more question in the room then we'll move to cyberspace. Yes, perhaps, we'll come to you, in the middle.

Thanks, Sam. It’s James Gurry from Credit Suisse. Just a follow-up on Myles' question. Can you confirm that the 350 million tonne target for 2017 for the Pilbara is still valid? And secondly, just on; I'm thinking about the portfolio, clearly iron ore is in the bottom quartile, 80% of the aluminum smelters are in the bottom quartile as well, and that's where you need to be. Can you talk about the copper portfolio and how you see that developing over the medium term, because I think we would've thought that OT might have got going a little bit quicker, in terms of the underground development now that the agreement is finalized?

Our guidance for iron ore for 2017 has not changed. We're focusing on 350 million tonnes there, for the Pilbara operations. In relation to copper, look I think we all would've loved if OT underground had kicked off earlier. In fact, as you know, we had kicked it off and then had to pause the project. What was more important was that we ensured that the investment framework was absolutely sound for the future. This is a 50-year plus project, it was worth spending 10 minutes, sorry, whatever it took, to get it right, and not to destroy value in the process. As I have mentioned during my comments, I'm very, very focused on shareholder value. I'm not about ticking boxes. I'm not about doing something, because it's on somebody's list, or it's been reported in the media, or whatever. I'll do it, because it delivers shareholder value. I believe it because it's the right thing to do for shareholders. Putting a very solid and strong foundation for that business for the future was incredibly important; we now have that platform in place. Yes, we need to reconfirm the feasibility study. Yes, we need to reconfirm the project finance. Yes, we still have permits and licensing to complete. But the projects' got momentum. It's moving and, at the right time, the project will come into our evaluation committee, our investment committee and the Board. And it'll be a good project. Copper. Copper's going to be tough going forward. There aren't enough projects that are coming on stream. Our projects are tough, because the ore bodies are complex; they're deeper ore bodies, lower grade in a number of cases, and the approval cycle is extended. I jumped for joy when our people successfully received approval of the land swap at Resolution in Arizona, as a result of an act that went through Congress and President Obama signed. They then said, well, it's probably going to take six to eight years to get environmental approvals. That's beyond my imagination. I'm sure they'll do a very thorough job. But it's beyond my imagination and, of course, people are working to improve that and to short circuit. And I saw some correspondence reports during the week to say that the American Government recognizes the criticality of resource development and the need to streamline processes. I'm not suggesting for a moment that we bypass any proper approvals; that's not where I'm coming from. But I just - if you look at the lead time and the added value for the process, I can't quite see how it could take six to eight years. Beyond that, of course, we have the La Granja project which is currently - well has been under study and re-scoping. But whether you look at us, or whether you look at our competitors, it is seriously tough bringing on these future projects. And, well, if you step back from it, it bodes well for copper industry; it means that we will see copper moving into short supply going forward. Can we have a question from thin air, from the phones?

Question comes from Lyndon Fagan from JPMorgan. Please go ahead. Your line is now open.

Thanks very much. Sam, a couple of questions. The first one is on the South of Embley. Can you perhaps give us an update on how you're thinking on the scope of that project? Initially, you talked about a 22.5 million tonne mine. But with all this additional Malaysian supply, does that influence the way you're thinking about bringing on that project? And perhaps if you could give us some color on how you're thinking about the bauxite market going forward? And then I guess the next question is on iron ore, whether you could give us a bit more detail around Silvergrass and the delays there. Obviously, you've done a good job managing the depletion, or deferring the ultimate depletion. But when we think about sustaining mines, is it still a new 50 million tonne operation every five years, or has it been worked on to improve that outcome? Thanks.

Okay, well, why don't I handle the South of the Embley and, Chris, if you could comment on iron ore, which will be a change? South of the Embley, our basic scope for volume hasn't actually changed. However, we are looking at the capital aspects of the project. And I've flagged this to you for a number of times that in line with the comments I have made earlier about impact of a weakening Aussie dollar, energy prices, input prices, contractor prices and so on, the aluminum group and the projects group have been looking for how we, in fact, optimize that project. In terms of demand, we are working on the basis that, yes, volume that has been curtailed in Indonesia, and volume from Malaysia will be part of the equation. And clearly, we take that into account in terms of our analysis of demand. But we are seeing progressive shortages in bauxite in China, and we're talking to a number of people there who are very interested in setting up new refineries based around Weipa bauxite. That, clearly, provides an opportunity market wise for the project. But also, given that bauxite is not bauxite, bauxite differs depending on the supplied source, it actually enables us to have a very strong market base. I was going to say captive market, but nothing is captive in 2015. But it enables us to have a very strong market base for that project going forward. Of course, in terms of costs and in terms of proximity to that market, we're particularly well placed. Chris, perhaps if you could cover off on iron ore, and how Silvergrass, and the brownfield expansions all come together?

Okay, Sam. And I guess the oddity of this is that you're not talking about it, rather and I am. I guess I do get to talk about this quite a bit on the one on ones, but - given Mr. iron ore and all that type of stuff. So anyway, Andrew and the team were able to develop a more brownfield response to the capital expansions - of the capacity expansions, and that resulted in a significant reduction in the capital expenditure part. Clearly though, it puts a little bit more pressure on managing the quality through the Pilbara blend for the 62% iron and the like. So I think we're going to see Silvergrass, we fully expect it will come in for the final approval processes and those types of things during 2016. I wouldn't be at all surprised if that's the earlier part of 2016, but that's not determined as yet. And when we get there, it will be primarily worrying about the maintaining that quality issue and making sure that that's in as good a shape as we can get it for the process going forward. So Silvergrass will come in 2106 and it will be done in that path. But the brownfield path was largely designed about, could we get to the same sort of capacity at a lower capital expenditure rate? That carries with it other challenges of course. But that's been successfully deployed and the guys have done a really good job on that. Elsewhere, you then come back to, okay, how efficiently can you deploy that capital? The major projects team have also been doing a lot of work now about getting - making sure that we've done the necessary work in advance to ensure that we get the absolute best answer on the actual spend. Then you apply it into a market that's got a much, much more competitive tension involved in it, so we can get a very competitive bid. And then you realize that you're also spending money; in that case, it's going to be in largely a lot of Aussie dollar-denominated spend and the currency is in our favor there as well. So, there's an opportunity here now that we've got a path now through. We've had a brownfield process to date. We've got a couple of these, Silvergrass is one; [indiscernible] can come later. But the processes are in place now for - it's almost time for Silvergrass to come. So it's well heralded, it's well prepared and I would expect we'll see it in somewhere during 2016.

Thanks, Chris. Another question from the phone lines.

The next question comes from Clarke Wilkins from Citi. Please go ahead. Your line is now open.

Thanks for the question. Just in regards to Silvergrass, I think you could perhaps be a bit over 20 million tonnes, so if you maintain the target for 350 in 2017, basically, from the brownfield expansion, does that inherently mean we're getting debottlenecking capacity beyond the 360? And what scope is there to really push the capacity infrastructure in the Pilbara? Next question just in regards to the CapEx reductions, how much of that reduction for 2015 and 2016 is currency versus delayed projects, versus just a cooling environment. I don't know whether you can provide a breakdown on that? And what does that mean for projects like Silvergrass and South of Embley, etc.

Well let me just add some color on Silvergrass. What we're seeing there is that Silvergrass would supplement/replace some of the brownfield projects that we've brought on. But the driver - the primary driver for it is, as I've mentioned, to retain the integrity and the quality of the Pilbara blend. It is a very source - very important source of iron ore for our customers. And maintaining the blend through 2030 and beyond is an important element of our iron ore strategy. Debottlenecking, as I mentioned during my comments, I personally believe that there's always room to improve the business. I'm sure Andrew and his team will be looking at, well, how can we improve the business? However, I would comment that the primary driver for it relates to quality of the Pilbara blend, not to drive further tonnes through the system. In relation to capital, Chris, why don't you make some comments about that?

Yes. Well, Clarke, if you think about the area of the further work that we're doing vis-a-vis scoping, and the competitive tensions between those, you'd probably get about 45% of the reduction. Elsewhere, the currency comes through. And if you just look at the Australian dollar, by way of example, it's effectively a 25% reduction in the Australian dollar over the last 12 or so months. But roughly, there's quite a bit in the front-end, and there's quite a bit in that competitive bid. It's a big part of the overall total.

Thanks, Chris. Do we have one more --?

Sorry, the remainder - sorry, could I just maybe touch, the remainder is where we've got some minor deferral-type processes underway. But that's - in the main, we're achieving all of our growth ambitions with what we're doing.

Thanks, Chris. One more question from the phone, and we'll move back to the room. We will come back to the phone after three questions in the room.

Next question comes from Andrew Driscoll from CLSA. Please go ahead. Your line is now open.

A very strong result. But when I look at the earnings bridge, I'm surprised that energy and inflation only contributed a $79 million uplift to first half earnings, given crude prices were down about 50%, year on year, in the first half. Can you talk a little bit about that, and whether we can expect more benefits to flow through perhaps, as inventory's being worked through? Thank you.

Chris, if you could pick up on this. I would indicate that in our press release, we have showed the sensitivity of a movement in input costs and currency, and what have you. But Chris, why don't you pick up on that?

Yes. Well, it is - it's one that will require a bit of work to get through, to hone down to an exact number. But the key issues really are around how much inventory of - as the price falls, we get a bit of a lag with regard to how it goes through into the cost structure. That's one issue. Second one is, a lot of our energy inputs are self-generated in many cases. If you take the smelting system by way of example, we generate 50% of our own energy there, and a lot of hydropower there as well. So not all of our energy's obviously in the oil sector. But if you look at it on a full-year basis from where we are today, at about the $60 mark, it's roughly about in the mid $80s for an overall impact on the cost structure, in terms of about $80 million, if it was to vary by about 10% off the current levels of pricing. So clearly, it takes some time to work its way through, but - which is a good thing, because I think the oil prices are probably here for - well, they look pretty solid at these sort of levels. So we look to take advantage of that. We don't count it in our cost reductions as such. We put it to the side with the prices, when we take account of the reduction in our commodity prices. We also don't give ourselves credit for our lower oil input cost.

Okay. Thanks, Chris. Let's move back to the room, with a question towards the back there.

Hi, Sam. Dominic O'Kane, JPMorgan. Two questions. On the CapEx guidance, again, for the yet to approve. Could you maybe just give a breakdown of the specific CapEx for individual projects yet to be approved? And then, secondly, on cost savings. First half, you did $0.6 billion of cost savings; second half, guiding to $400 million. How should we think about 2016? Are you all the way through your cost saving program, or do you think there's more to come?

Okay. Let me handle the second question. Chris, if you can handle the CapEx question in a minute. I'm not sure that Chris is going to be all that helpful for you, but it was worth asking the question. In relation to cost reduction, look, you need to recognize that we've reduced our costs by $5.5 billion over the past 2.5 years, and it is getting tougher. When I took over, I made the comment that I want the organization to act as owners; I want the organization to spend every dollar as if it was their own. And there's been real momentum with that. People have picked it up, despite the fact that some people out there thought it was rather comical. That change in philosophy, running the business for cash, tightening up your systems, ensuring that everything you do is very tightly looked at through an aura of, does this actually add value to shareholders? Or is this something that we're doing because it's a nice thing to do, or somebody's project, or what have you? And we've seen the reductions flow through, not only in relation to cost reduction, but also in capital, in sustaining CapEx. 2.5 years ago when I sat here and talked to you, we were talking about $5 billion of sustaining CapEx. Today, we're spending $2.5 billion. My head office, it was 600 people. It's now 250 people. And everything that used to happen, happens. Now, people are working a bit harder. But it's a focus right through the business, and the leadership has been from the top, with my ExCo team and I, and we're seeing that flow through. It is getting harder. Hence, the reduction in run rate that we're expecting in the second half of 2015. Clearly, I do expect that there will be further improvements next year, and, quite frankly, that's coming through from the businesses. When we set the original target to take $3 billion out of the business, that was a top down target, no question. As we've developed the subsequent targets, they've come from the businesses themselves, recognizing, very realistically, the condition in the market; wanting to be ahead of that, which I believe we are. But also, recognizing the incredibly strong capability of the business to deliver improvements, to deliver continuous improvements right across the board; not just in operating costs, but also in capital, in working capital, in price. I gave some examples during my presentation that the marketing people are working through. This is a highly focused organization. It's a winning team. Morale is incredibly high. People feel good about working for us. The momentum that's there, it's incredible. At times, I've got to hang onto my chair, because we're moving forward at a significant rate of knots. People can feel the benefit of everything that we're doing. They're truly delivering. 34% of our employees own shares through the share savings scheme. Now, yes, I wish it was 100%, but 34%, like you, are shareholders in the company. They bet their savings; they bet their money on us. I think it's a pretty good bet, quite frankly. But you've got momentum, you've got real buy-in to what we're doing. Chris, why don't you not answer the question about the CapEx breakdown/

Not a problem, Sam. No, I will tell you that we talk about for a project to be listed as approved, it has to be approved. That's a fairly binary thing, it either is or it isn't; and it's something that goes through the Board. So probably if you think about the forward look here now, with what we're expecting to come through in the near term, clearly, the iron ore program is well-documented and well-rehearsed and so on. But, at this stage, Silvergrass is not approved, by way of example. South of Embley is in the very final stages of preparation, but, at this stage, it's not approved for the totality of the project. There may be smaller items approved for completion of various preparation work, but that's it. Oyu Tolgoi underground is in very advanced stages of refreshment of the feasibility study and the like, but the final approval for that has not yet gone through. So that's the way it's calculated and there's a line through all of these numbers for all of those type projects. But they'll come as they're ready and they'll come. Once they're in that approved status, then we'll change their color. But that sustaining capital block on the bottom is pretty solid, but ill-defined; it's an expectation of about what we'll spend. So there's still moving pieces in this. But, in simple terms, it's either approved by the Board or it's not and it's a point in time answer to that question.

Thanks very much for that, Chris. I should add to Chris' comments, he's a bit modest. Chris created and chairs our Evaluation Committee, which is a precursor to projects coming on to the Investment Committee Board. And let me say, he drives that committee with great energy, focus and drive to ensure that only the best projects are actually going to get approved. It also allows an opportunity to actually kick projects back for more work when the projects aren't physically ready. The Evaluation Committee involves the middle-level subject matter experts in the organization and ensures that Chris and Greg Lilleyman, who runs our Technology and Innovation Group, have the ability to deeply question, I guess, the fundamental basis of projects and the detail, as to the thinking across the entire spectrum, not only the project scoping and the project construction, but also the commercial factors associated with that. Okay, do we have another question in the room? Look let me try this side of the room. We'll come back, we've still got time.

Hi. This is Ben McEwen, CIBC, just two questions please. The first is your uranium business continues to deliver negative earnings. How long is the Group prepared to absorb those negative earnings for? And then the second question is Simandou capital expenditure increased year-on-year, only marginally but how should we think about Simandou in the context of the current iron ore market? Thanks

Those are two good questions and Alan Davies, who runs both of those operations is sitting here in the front row. I'm sure you two over a cup of coffee could talk more about it. But in relation to uranium, we, following a decision from ERA, Energy Resources Australia, issued a press release to say that we did not support further development of the Ranger 3 Deeps' underground operation at ERA. At the same time, we've indicated that we will provide a conditional loan to ERA to complete the rehabilitation. I forget the exact figures, but I think the business has spent some $350 million to date on rehab. And it's important that for our responsibility, our community and government responsibility is that we adhere to ensuring that that work is completed. We don't believe that the ERA project will be progressed. Of course, the ERA Board needs to explore further options and further options could be an alternative development plan. It could relate to Jabiluka. Time will tell with that. At the moment, we'll continue through 2018 to process the low grade stockpile. Then, clearly, through 2025, we would complete the rehabilitation work. Yes, there's a possibility of an extension to the lease. We're not really working on the basis that that will come to pass. The project is highly controversial in Australia. We see nuclear power here as a solid underpinning of power production. In Australia, there is only one very small nuclear plant, which is basically a prototype plant, and it's something that, as I say, is controversial. Rossing Uranium, Alan and his team are working hard there to improve the cost bases there. It's quite an old operation. There are clearly opportunities there to improve practice, improve the way that we're processing uranium there. There will be an uptick in uranium prices. The question is when and how long until you'll expect them. It's interesting, even with the cutbacks in Japan, we're still receiving some orders for uranium from Japan, which in a way is counter-intuitive. But it's also showing that the nuclear companies there are expecting that there'll be a need to bring back nuclear reactors in Japan that actually meet all the safety standards and all of the changes that have come through. Meanwhile, we're seeing in China and elsewhere commitment to further nuclear power stations. And even here in the UK, there's a commitment to another nuclear power station. In relation to Simandou, our task there is as the next step to complete the bankable feasibility study. And unfortunately, that has been delayed as a result of the Ebola virus. That's limited the ability for us to get potential contractors in to refine their numbers, their quotations to complete work on infrastructure, rail and the mine. As you're aware, we have announced that we are focused on the mine and we'll third party source the infrastructure, the rail and port. And however, we need to oversee that work and we need to ensure that it will meet our needs. The work is currently underway, under bankable feasibility study. Discussions are underway with the Government. The investment framework, that Alan negotiated, set a deadline for completion of the bankable feasibility study of July 18. We've passed that date. But clearly, the Ebola virus has been a force majeure event and we need to tick the box in relation to that. I'm optimistic that will, in fact, happen. The next decision point is when we complete the bankable feasibility study and, obviously, the numbers and volumes and exactly how it would actually come to pass. I'm not going to cross that bridge until we actually get to that bridge. The first task is actually to complete the BFS. Let's move - one more question in the room; here, right in the front row.

Good morning. It’s Menno with Morgan Stanley. Two short questions. One is on the new normal that you talked about. In the inside of the press release, the company still talks about 1 billion tonnes of production in steel by 2030 in China. Has the composition of that production changed in any way, given the new normal, i.e., domestic down, more exports? And do you see other repercussions of this, what I would argue probably faster move to the new normal than most expected? And secondly, which is on maintenance CapEx. Clearly, $2.5 billion is an absolutely excellent number for the next two years. But it appears quite low, given the new size of this business over a cycle, say 10 years. So is the increase in CapEx guidance in 2017 towards $7 billion, a reflection of an increase in the underlying maintenance CapEx? And maybe, Chris, if that's not the case, can you give us some idea what the real sustaining maintenance CapEx level's going to be over a five to eight-year cycle?

Well let me, in fact, have Chris answer the second question in a moment. But in relation to the new normal, I think the world is still trying to work out exactly what Xi Jinping mentioned when he announced the term. But I think importantly it's a journey rather than necessarily an end point. And it's recognizing the fact that post to global financial crisis, the market dynamics have actually changed. If you thought that the industry goes through cycles and you return to where you came from, I think the new normal is actually signifying that the return probably won't be to the point that you left before prices started declining. I think that's a function of everything. We're seeing, across the board, that costs are reducing; efficiency is improving; people are expecting greater value for less; and so on. And I think that we'll see that across commodities as well. Still be a healthy place to be, but not the heady heights that we hit. In relation to our 1 billion tonnes by 2030, tes, we are holding that. I think the greatest difference between us and other forecasters, I think there's alignment in relation to the domestic demand. I think export is, as you point out, the area where there's the greatest difference. We look at exports of finished steel product, but we also look at export of elaborate manufacturers and capital equipment and so on, and it's that where we're seeing that we differ from other forecasters. But we're continuing - well, let me assure you that our economics department has come under great focus, thanks to all your articles and those of the press and what have you. They're holding the line, they've done quite a bit of research and analysis and they feel confident that that 1 billion tonne figure will continue to hold. Now, if you step back from it, to achieve 1 billion tonnes of crude steel production by 2030, that's 1% growth a year. I think we'll be all right there. Now, Chris, why don't you answer the question about CapEx?

Thanks, Menno. I think the data that we've tabled is fine for the three-year window that we're talking about and we've got a pretty good line of sight to the rough nature of the activity that's going to be required in that mix. If you went to any given business and asked what’s their sustaining capital would be next year, or the year after, at this stage, they're probably got a list that could be as much as 50 items long. And the time they actually get there to execute against that in the period, when it finally arrives, they'll probably do 20 or 25 of those. Others will displace some of the others. And others of them will just drop off, because they're just not necessary at that time, or whatever. So you've got all that, that's very much a moving feast. So when we talk about sustaining capital, in terms of that capital expenditure allocation process, it's very much an aggregate that's got some business judgment in it. It's got some form in it in terms of how much is necessary at any given time to spend. I think inherent in your question is the fact that in the longer haul, if you just take any existing asset or implementation, you will have an expectation that the need to spend sustaining money on it, would increase; or sustaining activities would go up as anything aged or grade declined, and the like. So, in the short term, I think we do benefit slightly from the fact that there's been a fair bit of recent expenditure. So by a way of example, if you take the Kitimat smelter as a standalone issue, we shouldn't need to spend a hell of a lot of sustaining capital on that in the near term. If you go to the refineries at Gladstone, you'd probably get the opposite case there, where it's a bit like your grandmother's axe, where she's had four new handles and a new blade every 25 years, sort of thing. So that's the sort of process that works there. So in the longer term, it's the activity level should be expected to rise. Offsetting that, and all the while, will be the degree to which we can maintain people's intent about making sure that that money's spent efficiently and learning from experience curves and productivity gains that allow you to reduce it in other areas. So some of the maintenance practices that are happening now with mobile equipment fleets, mean that we need less trucks to do the same amount of work. That's an important part; it has a sustaining capital manifestation very closely. But we are getting to the point where we're asking the question now, are we making sure we're spending enough to sustain that existing installed capacity, because if you cut to the chase, that installed asset base is a real powerhouse of this Company and the growth facilities that will come, will take their place in that portfolio. But the engine room that's there now has to be sustained. And so I think we're at a fairly balanced level here now. I think there's the odd business here and there is asking for a little bit more of that. But in the main, I think we're in a pretty well-controlled position. But I think your question is valid. And then there's obviously the other issue that comes to play, is what will it cost? The same unit of work today, is much, much cheaper than the same unit of work was three years ago. That's a function of competitive tension; it's a function of coming off the super-hot market; but it's a function of the currencies, depending on where you're spending the money. So a lot of moving parts; very comfortable with the numbers for the - that we've published and disclosed, and we'll see where that goes into the longer haul. But it's a significant ongoing challenge for us.

Thanks very much, Chris. Let's move to the phone lines for the next three questions.

[Operator Instructions] The next question comes from Peter O'Connor, Shore & Partners. Please go ahead.

Hi, Sam. Congratulations on a great result. Just a question on the energy portfolio. It's a portfolio that Rio has been long for many decades, both in coal and uranium. Following up on your further risk amounts of uranium, just where do you see energy in the portfolio going forward? And also with a sense of what's been happening in the headlines lately a bit out of the US that Obama's announced, a lot of media in Australia are pushing back on energy, particularly coal-fired. And does that change your view of the mix going forward or does it change the business model going forward? And my second question; just an observation. The sales mix had some interesting changes this half. Percentage of revenue to China and Japan were down about 2% each and in North America including the US and Canada up about 3%. Is there something subliminal in that or is that just a half-on-half variation that I should ignore?

In relation to the second question, Chris, if you could help me with that in a moment. I don't think there's any particular driver to it, but Chris may be able to help us with exchange or something that's moved there. In relation to the energy business, I think I mentioned it at the first half that - sorry, the results in February that we've been fairly arbitrary in terms of the re-jigging of the energy group into the copper group; copper and coal and into Alan's group, so diamonds and minerals. And that was really to pull out the product group overhead. The group's done a great job of pulling $800 million of costs out. But running the business for cash, quite frankly, I couldn't see the benefit of continuing to have it carrying also the overhead of the product group. And I think that decision has been proven to be very sound in terms of how Alan and how Jean-Sebastien Jacques has been able to absorb those businesses, in addition to their current operations, with a very minimal change in the overheads and significant reductions in cost. That was physically important. In relation to climate change, in relation to greenhouse gas, that is an important issue for us. And if you look at our greenhouse gas performance over the past five years on an intensity basis, we've reduced our greenhouse gas by 16%. Clearly, we have further targets to improve it. And yes, that is a combination of things. It's a combination of energy efficiency. It's a combination of technology. It's the fact that we have closed or divested of high-energy businesses - high-greenhouse producing businesses. So we are very focused on the comments that President Obama and other world leaders are making on this topic and I suspect that there'll be further comments coming out of COP21 in December in Paris. In relation to our coal business, we do produce cleaner coal there than elsewhere in the world. Coal is going to continue to be part of the energy equation probably for the next 50 years. And clearly, there is no substitute for coal in the mix in terms of power production at the moment. Yes, there are a number of alternatives that are coming along, but they're going to need to substantially reduce both their capital cost and their operating costs to be truly attractive to the market. We continue to run both of those businesses; the coal and the uranium business for cash. We continue to be very focused on the market opportunities in improving the price, for example, through the Hunter Valley blend work that Jean-Sebastien and the team are working on, and other initiatives to further improve those businesses. In relation to sales mix, Chris, I'm not sure if you have a ready answer on that?

No real idea, in terms of based in fact. I think when I thought about it, given the little bit of think time I've had there, and we will get the guys to have a look at it overnight here in Australia, Peter, and we can feed that back in via the website perhaps. But as I've been thinking about it here while Sam's been answering that question, gripping though the answer was to the question, I have been trying to think about it separately. I reckon the only way that that could occur - it's possible that there's a difference in the - if you take aluminum, by way of example, we're not shipping much of that into China, as you can expect. So - and it had a price increase. Where if you compared a lot of the product going into China had price decreases, there's probably a little bit of that in there, but I don't want to take that as a factual answer. It's just in my mind.

To help you, Chris, Peter Cunningham is nodding and Peter is our control, so that's helpful.

Okay, we'll take that. We'll have a look at that overnight and see if we can improve on that answer, but I think that might be part of it.

Okay.

All right, thank you. Do we have another question from the phone?

I have no more questions over the phone.

Okay, we're back in the room and there are a number of you that - Heath?

Heath Jansen from Citi. Two questions. One just any updates on divestments? Obviously you're probably not going to give us any specifics, but are you assuming anything in the second half in terms of a monetary amount to come through in terms of divestments? And then second question in terms of just your capital allocation. Obviously, you're putting up a 15% IRR target, is that pre/post tax? Is that really high enough, given what can go wrong in mining? Doesn't seem like - a lot can go right. Shouldn't you be upping that? And then secondly, would it be right to assume that you're running a lower IRR for buying back your own stock? Because it seems like your allocation of capital is still for growth not growth per share. I'm just wondering how you're balancing that off, given that obviously you've been here for four or five years and the share price has continued to go down, and it has to alter those capital deployment decisions?

Thanks for those questions, which I will ask to Chris. These are well and truly up his alley and, Chris, I'll look forward to a gripping answer.

Always got to be careful. Okay, first thing is we never plan on any divestment proceeds until we have sold something, and as soon as anything would be sold in any sort of market, we would probably tell you. So and that's about as much as we ever talk about with regards to divestments, or any sort of particular issue in that regard. So there's - that's as much as there is there. Vis-a-vis the IRR conversations and the like, the 15% is a - that's an internal guide, it's - many projects are significantly above that. There are others that are below it that don't qualify for expenditure, or don't get through the approval process on that basis. And some of those might be kicked back for more work; some of them might need more time; some of them might need a lot more - a different response to enable them to have a better path through such that they can generate a better MPV and IRR under a different configuration. The conversation regarding the - ultimately, the buyback conversation, vis-a-vis IRR of a project and the like is, if you do want to value a buyback in that regard, I think the best way that we look at that is to say, what is the return on what we see as the future cash flow stream of those? What's the value of that future cash flow stream that we can see coming from our business as we see it? And one of the things that most of the market really takes account of, we spoke about it a bit earlier, was that any unapproved projects, for instance, are not valued by the market generally, in a market like this, there's - at least until they're approved, and even then there's a delay often in how much value is ascribed to them. So we look at that on the basis about our view of the cash flows and the like, we also look at buybacks on the basis of returns to shareholders and what part will that play in it. So for instance, we're not trying to pick a precise day on which to buy the stock in the moment - in the current buyback. We're basically doing a daily position in the market and accepting the market price. But it's - there's nuances where you could attack that, try and pick tops and bottoms and the like, and we don't think we want to get into that territory. So it's a conversation that's there, it's something, it's analyzed and the like, it's more - there are a raft of factors that kick into that buyback or other form of return decision. In the main, we wouldn't - we would look to be able to do all of those things. So when I talk about that allocation framework, it's not meant to say well you go, sustain a capital dividend is fine and then you go growth capital balance sheet further returns. You can go around that cycle multiple times, if you want, and if you have the capacity. So I think there's a question there about - you might ask the question, should I be doing more capital returns at this point in time? Everyone will come up with their own answer on that side. It'll be a function about what is our overall capacity, be it by internally generated funds, or be it by balance sheet capacity for growth, balance sheet debt repayment, or further returns.

Okay, look unfortunately I think that we have run out of time. I think it's been an incredibly good session, in terms of your engagement and the questions. I'll be around for a coffee as well Alan, and Hugo Bague, and Debra Valentine to answer any questions that we haven't covered, as well as the IR and media team. Again, if I could thank you for being here, I know what you've gone through to get here this morning. To those that are on the line, thank you for your patience; I know it's not always easy looking into cyberspace wondering what on earth is going on, on the other side of the world. But I think it's been a good session. Look, it's a good story whichever way you look at it. I think we've delivered robust returns in a very challenging environment. We have committed today to continue with the progressive dividend; to increase the dividend by 12% in the first half, which follows through in UK sterling 21%; Aussie dollars 40%. I think that's a pretty good effort. And we have, as Chris has been discussing, we have committed to continue with the buyback. Also, implicit in all of this is our commitment to growth, $5.5 billion of CapEx this year, around $6 billion next year and around $7 billion in 2017. We recognize the importance of growth; we also recognize that it needs to be in the context of market forces. But thanks again for being here and I hope you'll join us for a cup of tea or coffee. Thank you.