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Rio Tinto Group(NYSE: RIO)
Q2 2024 Earnings Call
Jul 31, 2024, 9:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Tom Gallop -- Head of Investor Relations
Hello, again, to everyone in the room, and now welcome to those online to Rio Tinto's 2024 half year results presentation. My name is Tom Gallop, and I'm the acting head of investor relations. We'll follow the normal proceedings today. Jakob and Peter will take you through introductory remarks for about 30 minutes, and we'll follow that with Q&A.
And with that, Jakob, over to you.
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Jakob Stausholm -- Chief Executive Officer
Good morning, and thank you, Tom. I also want to thank Brendan for a wonderful welcome to country. I acknowledge the Gadigal people of the Eora Nation on whose traditional lands we are gathered today. And I pay my respects to elders, past and present.
I extend that respect to all indigenous people across the globe. I acknowledge the important role that continues to play within communities and our business. It's great to be in Sydney today, the first time Peter and I have reported our results from Australia. It's an excellent opportunity to highlight the strength of our Australian operations, which are powerful drivers of our performance.
The foundation for much of that strength can be traced long back, back to Sir Rod Carnegie, the former chief executive of CRA. Sir Rod, very sadly, passed away on 14th of July, and I want to recognize the impact he had on our business. He was a remarkable leader and a true pioneer of our industry. When you look at Rio Tinto, you can see a clear and consistent story.
We are profitable and we are growing, growing because we are improving the performance of our assets, growing organically because we are investing with discipline in projects that will create significant value, not just in one or two decades' time, but also in the near term. And this growth is supported by strategic M&A. We're executing this growth through a relentless focus on our four objectives. They are enabling us to unlock value and find solutions to even the most complex challenges.
There has already been a step change in our road to best operator. This is, among others, clear in our bauxite business where the safe production system has helped deliver a 10% boost to production in the first half. Meanwhile, we have taken large and incremental steps to be decarbonized while delivering materials for the energy transition. This includes securing competitively priced renewable power for our assets.
And we are hitting milestones as we excel in development. Simandou in Guinea received a full sanctioning earlier this month, a major moment for the largest greenfield mining and infrastructure project in the world. We cannot operate unless we bring the local communities along with us, and we want communities to benefit from our operations as we grow. That's why I emphasize the importance of having a deep social license and working in partnership.
For example, partnering with the Ngarluma Aboriginal Corporation. Together, we are progressing a solar farm to supply our Pilbara assets. Ultimately, delivering our objectives in the right way will benefit our shareholders, too. By striving for impeccable ESG and a strong social license, we can unlock even more business opportunities.
We're solving complex challenges and executing profitable growth with the support of governments, customers and communities. This is the meaning of our purpose of finding better ways to provide the materials the world needs. Our financials show we have a strong base from which to grow production further. In the first half, we delivered robust underlying earnings of $4.8 billion, a 1% increase year on year.
Copper equivalent production has grown 2% and is accelerating. I'll elaborate on that future growth later. As we step up capital expenditure to deliver our big projects, we are securing the profitability of our business well into the future. We are achieving this while maintaining a strong balance sheet and attractive returns to shareholders.
Once again, we will hand back $2.9 billion, a 50% dividend payout, in line with our policy. This is not just a growing half year result. This is stable, reliable growth. We are confident executing significant projects while building value.
Peter will now go into more details. Thank you.
Peter Cunningham -- Chief Financial Officer
Thanks, Jakob. It's great to be here in Sydney to present our interims. We now have good stability at most of our assets. We're strengthening our core business segments, creating value and options for the future, and have real momentum across the group.
We're also solving some of our hardest challenges. For instance, the Simandou project where investment is now proceeding at pace, and the competitive power solutions announced for Boyne and NZAS. We'll add 170,000 tonnes of aluminum metal or 5% to our portfolio when the transaction throughout our partners' interests complete. Our Pilbara operations are very consistent, delivering production above the five-year average in the first half.
And the underground copper mine at Oyu Tolgoi continues to ramp up, in line with our long-term plan and will drive considerable free cash flow expansion over the next few years. And we saw a step change in bauxite production and a very stable performance at our smelters. The safe production system is delivering results and unlocking value. Three sites set best throughput rates over a 90-day period during the half, and more on that later.
But we can still realize much more from our existing assets through productivity improvements. Kennecott remains the biggest challenge, but also a real opportunity to unlock value. So, turning to the numbers. All in all, it was a very consistent financial performance.
On a net-net basis, underlying EBITDA increased 3% to $12.1 billion, with our aluminum and copper divisions more than offsetting the lower, but still impressive performance from iron ore. Cash flow from operations was stable at $7.1 billion, and free cash flow of $2.8 billion reflected the rise in capital expenditure to $4 billion as we're investing growth to deliver enhanced future earnings. Following payment of the 2023 final dividend and receipt of $400 million from our Simfer JV partner, CIOH, we ended the half with net debt of $5.1 billion. Overall, we delivered a healthy return on capital employed of 19% on underlying earnings of $5.8 billion.
And as Jakob said, we've maintained our practice of paying out at 50% of the interims for the ordinary dividend, equating to $2.9 billion. Now unusually, movements in commodity prices were not a significant driver of our financials. The Platts 62% iron ore index dropped 3%. LME copper rose 4% and LME aluminum was up 1% compared with the first half of 2023.
The prices we're currently seeing reflect a global economy which is not firing on all cylinders. Construction in all major markets is soft, although for different reasons. Interest rates in the west and overcapacity still being managed down in China. Steel demand from the Chinese property sector is now down by as much as 30% from its peak in 2020.
However, manufacturing in China is strong with the energy transition at the heart of growth. The energy transition sectors accounted for nearly a third of Chinese GDP growth in 2023, and strong growth has continued in the first half of 2024. Other drivers are performing OK. So, in summary, prices were below the average of the last 10 years when adjusted for inflation.
Focusing on iron ore, if we look back over the last five years, consensus has underestimated the price by about $22 a tonne on a one-year forward look at an average of $39 a tonne on a two-year forward. And over the last three years, iron ore has averaged around $120 a tonne, trading in a range of around $20 per tonne either side, highlighting the market's resilience. And if we look at the drivers, firstly, there's been a steepening of the cost curve with broad-based inflation affecting supply. And the impact of this is heightened for the higher cost marginal producers, which has limited their ability to supply economically in this price environment.
Secondly, the market has underestimated global iron ore consumption. This is partly due to China's steel production outperforming expectations, supported by exports and a shift to non-property sectors, also due to scrap supply being less than predicted. Turning now to the EBITDA movement. Overall, we've seen more modest variances this half, reflecting the consistent performance of our assets.
In aggregate, commodity prices and currency movements offset each other. Likewise, lower market linked prices for raw materials like caustic, pitch and coke together with lower energy costs, offset the impact of 3.5% general inflation on our cost base. In copper equivalent terms, our production was up 2%, a very positive outcome. But when it comes to the bridge, the fact that we had lower iron ore sales in the period, our highest margin business means the increase in our productive capacity has not yet flowed through to earnings.
Turning to cash costs. We achieved broadly flat period on period outcomes, except in the Pilbara and TiO2. Higher iron ore unit costs were driven by input price escalation and lower volumes. And we also saw fixed cost inefficiencies at our TiO2 business, again, mainly volume-led from weak market conditions.
Overall, these pushed EBITDA down by some $400 million. With our iron ore volume set to rebound and our active focus on cost management, we would expect a more positive cost performance in the second half. Now there were some one-off factors in 2023 such as the smelter shut and conveyor breakdown at Kennecott, the forest fires at IOC and the Kitimat restart. In addition, exploration and evaluation expense to the P&L was $200 million higher last year, as Simandou costs were not being capitalized.
In comparison, this half year has been very clean. So, all in all, this brings us to a strong underlying EBITDA of $12.1 billion, a 3% rise. Turning now to our cash generation. As ever, this half, there were a number of factors impacting the conversion of EBITDA to cash.
Some are one-offs. Some are seasonal. But overall, it was a very consistent strong performance. An increase in working capital of $700 million was mainly driven by movements in non-trade payables.
Now these included a drawdown of royalties in taxes as prices fell from late 2023, along with seasonal movements in amounts due to our JV partners. We'd expect most of this to reverse in the second half. If I look at our working capital rises over the last five years, the main driver has been inventory. Now we've taken some decisions actively to increase inventory, for instance, around $400 million of iron ore held port-side in China, and around $900 million in our Pilbara supply chain, increasing overall system resilience.
However, the biggest driver has been the flow-through of inflation through cost to inventory over the period. We certainly have opportunities to reduce the capital invested in inventory, but a substantial proportion of the increase does reflect market drivers. On to product group performance. Iron ore had a robust half, although EBITDA was down 10% with some pricing impact, higher costs, as mentioned earlier, and lower shipments, which were still above the five-year average for the first half.
And we're on track for another 5 million tonnes from SPS with 10 million tonne benefit in this year and last, delivering significant incremental value. Unit costs were at the top end of our guidance in the half with shipments weighted to the second half. Meanwhile, replacement mines are advancing with construction of Western Range now 70% complete. The performance of the aluminum business was strong, and we're well-positioned to take full advantage of better markets.
The 38% increase in EBITDA was driven by growing bauxite and aluminum production and margin expansion as prices improved and input costs declined. Our copper business saw EBITDA rise by 67%, driven by LME prices, the rising output from the Oyu Tolgoi underground mine and the restart of the Kennecott smelter following completion of the major rebuild last year. As I mentioned earlier, Kennecott remains a key focus as recent changes to the mine plan to manage geotechnical risk have delayed access to higher grade ore in the pit. The team is currently reworking the plan, and we'd expect to update the market in our third quarter report.
Lastly, minerals. As I said, volumes were significantly down at our TiO2 business, reflecting weak market conditions. We saw a recovery at IOC with a further pickup in volumes expected in the second half. And on lithium, the Rincon starter plant is on track for first tonnes by year-end, and we expect to complete the feasibility study for full-scale operations in the third quarter.
Moving to the safe production system. This is now being deployed at 26 assets, and we're deepening maturity at the initial sites. It's simply how we do business. The early investments in the cultural journey is beginning to show results.
We set best throughput rates over a 90-day period across three assets during the half, Weipa, Tom Price, and Robe Valley. Using the Kaizen process, ideas from frontline team members helped increase plant feed rates at the Amrun bauxite mine at Weipa by 9% and reduced scheduled lost time by nearly 10 days per year. Moving on to capital allocation. Now you've seen this slide before many times.
The key message today is nothing has changed with strict discipline remaining paramount. Sustaining capital, high-returning replacement projects, and decarbonization remain our priorities with about $7 billion of spend per year, unchanged from previous guidance. That's followed by the ordinary dividend and then compelling growth. Our guidance for growth capex is also unchanged at $3 billion.
Now as I have said many times before, we will remain very disciplined. Our investments in growth are highly dependent on the timing of commitments, but most importantly, by our ability to generate value. Over the next few years, we will see the contribution from our growth projects take off, with Oyu Tolgoi underground ramping up significantly. For next year, it will become free cash flow positive as we complete the key infrastructure investments, building up to the resilience of our cash flows.
Simandou is advancing at pace. As you can see from these images, the team is making impressive progress. At the end of May, we achieved nearly 9 million hours with a simpler workforce of nearly 9,000, more than 80% of whom are Guineans. We're ramping rapidly up with more than 20,000 supporting the entire project when you're factoring contractors and those working for WPS, and this is set to peak at 50,000.
In June, we announced the completion of 327 bridge piles on our 70-kilometer rail-spur, and these were completed six months ahead of schedule, forming the foundations of five bridges with a total length of 1.7 kilometers. The team achieved this operating safely, 24 hours a day, seven days a week. In summary, our scope and WSC scope are on track. First ore at the Simfer mine gate remains on track for 2025, together with the 30-month ramp-up of 60 million tonnes per annum.
Turning now to Simandou's capital expenditure. The majority of the full Simfer scope would impact our free cash flow under construction with $5.1 billion of capex for the mine and $3.5 billion for the TSV port and rail-spur, reflected against free cash flow. Meanwhile, the cash contributions from CIOH are a financing activity, and therefore, fall outside our free cash flow. However, as the mine ramps up from 2025, it will become a significant cash contributor.
We saw $900 million invested in 2023, of which $500 million was our share and $400 million has now been refunded by CIOH. In 2024, our share of expenditure remains at about $2 billion. Now as is typical of large capital projects, this has started quite slowly with just $400 million invested in the first half. Now that we've received the funds from our partner, including a further $575 million in July, I'd expect to see the cash flow spend rise quickly.
In fact, just earlier this month, together with CIOH, we made our initial funding for investments into the WCS managed port and rail infrastructure, where our Chinese partners are making impressive progress. Finally, the dividend, in line with our usual practice, we've declared a 50% payout for the interim, which equates to $2.9 billion, consistent with our now eight-year-old shareholder returns policy. It's been another period in which we've proven that our financial strength, we can decarbonize, reinvest for growth, and continue to pay attractive dividends through the cycle. With that, let me hand back to Jakob.
Jakob Stausholm -- Chief Executive Officer
Yes. Thank you, Peter. When I tell you our growth is accelerating, I can say that with a level of certainty because the ingredients are already in place. There has been a step change in production, particularly from aluminum, while iron ore is proving resilient.
There's a clear link between improved performance and the rollout of the safe production system, which is empowering our frontline employees to problem-solve. We're now getting real value out of SPS, and we will see more improvement as we deepen its maturity at existing sites. We're only at the foothill of this mountain, and there's so much more to come. Pilbara iron ore is on track for midterm capacity of 345 million to 360 million tonnes a year.
This is subject, of course, to the delivery of the next tranches of replacement mines as we previously have set out. We're comfortable delivering production growth of around 3% from 2024 to 2028. This growth path is already embedded in our portfolio from our existing assets and organically from major projects in execution. And we are growing in confidence that we can execute these projects well.
Oyu Tolgoi is ramping up to deliver half a million tonnes a year of copper from 2028 to 2036. At Simandou, we are on track for first iron ore production at the end of next year, ramping up to 60 million tonnes for block three and four. Simandou is vast, complex, and difficult to deliver, but we are progressing at pace. And while we do not depend on M&A to grow, strategic acquisitions have added value to our portfolio.
We moved quickly to close the Matalco joint venture for half a year. Now we have been able to tap into the growing market for recycled aluminum. The ingredients for further growth are there, and they're coming together through our focus on the four objectives. We are achieving this while delivering attractive shareholder returns and maintaining a strong balance sheet.
There's real momentum across Rio, and we are at an inflection point in our growth. First, we stabilized the Pilbara iron ore business, in part by using the safe production system to spark a process of continuous improvement. Now we are replicating this step change in performance across the product groups. In aluminum, we expect bauxite production toward the top end of guidance for the year, thanks to improvements at sites such as Weipa, as Peter already had mentioned.
Those of you joining the site visit to the Saguenay in September will hear more about how we are improving asset health, with investments such as the AP60 project and diversifying our offer through Matalco. Aluminum has a great future. Production is stable and growing, while the price environment is becoming more attractive. Next, copper progress at our Tolgoi underground has been exceptional, and we expect to complete our spend on the project by the end of '25 as planned.
The conveyor to surface is now 97% complete, and commissioning is expected in September. The conveyor is critical to ramp up production. So, it's really a turning point now to our copper business. Minerals is also at an inflection point as projects into new phases and soon you will see the results.
In March, I visited Rincon 3,000-hour lithium starter plant at 3,900 meters above sea level in Argentina. I saw how the team is laying the groundwork for first production by the end of this year. They are leveraging the BLE technology to advance the project in a sustainable way, developing methods and improving processes while considering environmental impacts. Lithium will soon change the shape of our portfolio.
I believe, in the future, we can produce this critical mineral in Argentina and in Serbia. I've been encouraged by the change in conversation around the Jadar lithium project. 10 days ago, I was in Belgrade at the Serbian Critical Raw Materials Summit where governments, customers, and European leaders endorsed the project. Jadar has huge potential as part of Europe's electrical vehicle value chain.
Of course, we have experienced challenges this year, and we still have more improvements to make across the business. But that means just that there are more opportunities to be realized. So, with our operations improving and some of our major value-creating projects just around the corner, you can expect a bigger step-up in production across Rio Tinto. As we grow in these materials, we are creating the building blocks for the global energy transition.
Decarbonization is at the heart of our strategy, both in terms of supporting the transition and in terms of reducing our own carbon footprint. There has been real momentum in the first half. Our targets are ambitious, but we are on track to half our emission by 2030. We are delivering abatement projects in a technically and economically disciplined way, implementing commercial solutions to reduce emissions as soon as we can while investing in innovation required to reach net zero for the longer term.
We are repowering our operations with renewable energy, including in Queensland, where we are working hard to create the conditions which deliver a competitive solution for our Pacific operations aluminum business. Earlier this year, we signed two PPAs that make us Australia's largest offtake, our wind and solar generation. It was amazing to celebrate this milestone with the team at Boyne Smelter. But this is only the first step in transitioning these assets, and more is required to position them as internationally competitive, as Australia is transitioned to its renewable energy future.
We cannot solve all problems alone. That's why we are working in partnership with governments, customers, peers, and communities to understand how we can better deliver projects that meet our shared climate ambitions. In the Pilbara, we're working closely with traditional owners to progress two solar projects. In New Zealand, we work with stakeholders, including the government to secure a 20-year renewable energy deal that extends the life of the NZA smelter, supporting jobs and communities on the South Island.
And we expect to soon own 100% of this great business. We're also driving technological breakthroughs that will have impact for our industry and beyond. We're collaborating on projects such as Elysis, potentially transforming decades-old industrial processes. We are now proving we can scale up technology by installing 10 smelting pots at\ Arvida in Quebec.
We're also very excited about Nuton, our bioleaching technology that represents opportunities to add copper volume in a more sustainable way. And we are finding ways to decarbonize our value chains, for example, building a new reaseach and development facility in Western Australia to pilot BioIron, a potential solution for greener steel making using our Pilbara ores. We are moving at pace with a largely value-accretive portfolio of projects and opportunities to truly transition our assets for a sustainable future. Yes, we still have a long way to go.
The challenge is large, technical, complex, and requires us and society to move even more quickly. But by working together, we can achieve our ambitions. There's huge value already embedded in Rio Tinto. We're profitable and our production is growing.
This is set to accelerate over the next few years. And through technology and partnership, we are finding solutions to the real complex challenges, including decarbonization. Ultimately, we're deeply driven by our purpose, finding better ways to provide the materials the world needs. This is delivering profitable growth today and in the future.
Thank you.
Tom Gallop -- Head of Investor Relations
Thank you, Jakob and Peter. We now move to the Q&A session. Also available in the room to answer questions is Mark Davies, Chief Technical Officer. Please limit yourself to one question and one follow-up so we can cover as many people as possible.
We will start with two questions from the room. Please wait for the microphone before speaking and then two questions from online. Please tell us your name and which organization you represent before you ask your question. OK.
First question.
Paul Young -- Golden Sachs -- Analyst
Paul Young from Golden Sachs, Jakob, Mark, and Peter, A couple of questions on the copper growth and options there. Can I start with Kennecott? Peter, you mentioned that this is a big challenge with a big opportunity at the moment. It seems to be two steps forward, one step back at Kennecott. Got the geotech issues now, which is obviously not the first time we've experienced this.
Can you just talk through, first of all, the $1.1 billion second pushback, which is due to be completed in 2026? Can we talk about how the geotech issues impact that spend profile and then the access to that higher grade material? And really what we're waiting for is that production uplift from Kennecott. Thank you.
Jakob Stausholm -- Chief Executive Officer
Yeah. Paul, thanks. I'm there at Kennecott every year. I was there a couple of months ago.
It's a massive asset. It's the world's biggest man-made pit and so geotech is just a given. And therefore, you have to think about the future and understand that there will be some uncertainty on this road I'm very excited about the integrated site for a couple of reasons. First of all, the underground is going to deliver a lot of high-grade material.
Secondly, we do believe and absolutely convinced we have world-class experience in geotech there. We will continue, from time to time, to have geotech issues, but we know how to handle it. We have a plan for how to unload the pressure where the biggest geotech issues are now. But right now, we are reconfiguring the exact mine plan.
So, the pushback's high grade, but I can't give you exactly a timeline for the production plan right now.
Paul Young -- Golden Sachs -- Analyst
OK. And maybe another question, actually, on other copper growth options. And can I talk about OT expansion versus resolution? First of all, resolution, we know nine circuit courts have gone in your favor. There will be an appeal.
Feasibility study was due to be completed end of last year. But we're edging toward and nudging toward potentially an FID on resolution at some stage, I would think, in the next 12 months. And then you've got OT, which is running fantastically well. It's pretty clear in the site visit last year that you've got the potential to add a third milling line at some point.
I would have thought rolling the project team now into a third milling line. It just makes a lot of sense from a brownfields perspective. I know Bold's view on this. He's pretty upbeat about pushing even further OT.
So, how do you rank future options? And maybe the market is not thinking about like a resolution greenfields versus another expansion, a mining -- a mill expansion in OT?
Jakob Stausholm -- Chief Executive Officer
Yeah. I actually don't necessarily rank them too much because we want to optimize OT. And as soon as we get progress, approvals with resolution, we want to move forward. But resolution is complex.
We are making progress on the ground in consultation with First Nations people. And as you rightly say so, we keep on winning in the courtroom. We were not the one who wanted to be in the courtroom. But every time it goes to the courtroom, we win.
Unfortunately, others keep on appealing, so it takes a while. I'm absolutely convinced the U.S. needs this, and it will happen. But the question is when.
We don't have a firm timeline about that. I think I can say, and Mark is here today because when the questions get really difficult, we'll send it to him. But I really believe that Mark's team have grown a lot, the major projects team. They can deliver this project when we can start executing it.
And quite frankly, it has no impact if we could do more at Tolgoi. You made some really good observations when you visited Tolgoi. We have discussed it a lot ever since. We will try to push the boundary.
But right now at Oyu Tolgoi, we just want to get the conveyor to surface up and running because that will really accelerate the profile. Thank you.
Tom Gallop -- Head of Investor Relations
James?
James Redfern -- Bank of America Merrill Lynch -- Analyst
Thank you. James Redfern from Bank of America. Two questions, please. Jakob, I think you made some comments earlier that in terms of any potential M&A that the potential synergies need to exceed the potential premium paid, which is often quite difficult.
I mean if we take tech resources, for example, as in the press a couple of weeks ago, market capped $25 billion, a 30% premium would be $7.5 billion. So, could you potentially extract synergies exceeding $7.5 billion in that case? And I've got a follow-up. Thank you.
Jakob Stausholm -- Chief Executive Officer
Yes, that's a tough one, isn't it? The reality is -- and I have spent my career in a number of different industries and in some industries, you have a high percentage of synergies. In some industries, you have a smaller percentage. My experience is that here in mining, it's not often that you have a high percentage of synergies compared to the enterprise value. And that's why it's quite difficult actually to pay high premiums.
There are exceptional cases, but they have to be exceptional. And yes, we're not afraid of M&A. We could look at things, and we wouldn't mind having more cover. But we also try to avoid being procyclical.
And it's a fairly hot market out there. So, it's not easy to make a copper acquisition working right now.
James Redfern -- Bank of America Merrill Lynch -- Analyst
And just a follow-up, please. Can you make some comments around the DLC? We recently reviewed the DCL structuring, decided it was more costly to kind of the DLC. So, I'm wondering, does the DLC limit Rio's ability to undertake a scrip-based M&A given that the DLC shares are trading at 18% discount to Rio Limited. Thanks.
Jakob Stausholm -- Chief Executive Officer
Yeah. Thank you. Good question. We've got a new shareholder in plc, who has done some research and mentioned that further value could be unlocked from the company.
And obviously, we are very aligned on that. So, we immediately did a deep dive on is it still viable. Our DLC, Peter and his team have done a lot of work, so I'll hand over to him to give you a full analysis and our conclusion. But I'd just like to say we can absolutely do scrip deals out of the DLC.
It's a little bit more complex actually, we got optionality. We can buy from the DLC. We can buy it from the plc, from the Limited. We can do a lot.
That is absolutely not an excuse for M&A, but the M&A, of course, have to make sense in itself, Peter?
Peter Cunningham -- Chief Financial Officer
Jakob, thanks. I mean, really, just four points to make on the DLC. I mean, one, absolutely, we've reviewed all our view on what would be the costs of unifying the DLC, in particular, the DLC and the Limited. And the tax costs would be in the mid-single-digit billions of dollars.
And we've actually had that reviewed with one of the big four firms just to validate our assumptions, so that is the first important point. I think the second thing is that when you think about how this would actually happen in practice, our view is probably you get down to a blend of the two share prices that would form after unification. And clearly, at the moment, it's a 77-23 DLC with 77 being held through plc of international investors. That is an awful lot of investors to come through in unification.
At the moment, it's about 15% of our shareholders based in Australia, who would be enjoying the franking benefits that underpin that premium that we see in the market. I think the third thing we're sort of thoughtful on is long-term franking. I mean, after unification, 100% of your dividends have to be franked for shareholders to benefit. And so when you think of our shareholder returns policy at 40% to 60% through the cycle and paying out at 60% over the last eight years, that means 60% of our earnings have to be in Australia to have the capacity to keep on fully franking.
So, if you look at our growth, a lot of it is not in Australia at this moment in time. So, again, you don't know how that will play through, but it's an important part of the equation. And I think finally, just to echo Jakob's points, I mean, the DLC works for us, and we do have the ability around M&A and around raising capital. So, I think that for all the reasons we don't see, the positives to offset those other variables that I've talked to.
Thanks.
James Redfern -- Bank of America Merrill Lynch -- Analyst
Thank you.
Jakob Stausholm -- Chief Executive Officer
Thanks, James. We'll take one question from online, please.
Questions & Answers:
Operator
Thank you. [Operator instructions] Please stand by while we compile the Q&A roster. Our first question comes from Lyndon Fagan from JPMorgan. Please go ahead.
Lyndon Fagan -- JPMorgan Chase and Company -- Analyst
Good morning, and thanks very much. Look, my first question is just on the next tranche of Pilbara replacement mines. Looks like we're still waiting on FID for a lot of these. I'm just wondering if you can give a bit more color on what's holding all of this up.
Are we a little bit behind schedule here at all? And really my follow-up is just while we're talking about the DLC, any update on the Chinalco stake and asset swap idea? I'm guessing it's a great opportunity to do a buyback in the U.K. at the moment, if you could. So, yes, just any color on that. Thanks.
Peter Cunningham -- Chief Financial Officer
Thanks, Lyndon. I'll certainly take the first one. In terms of the projects in the Pilbara, I mean the program remains pretty much absolutely in line with what we talked about late last year in the site visit in the Pilbara and at the Capital Markets Day. So, we do have Western Range right now, 70% complete.
And then we've got four major projects completing in that '26, '27, and '28 period. Now clearly, all of those are subject to the timings around approvals, and that's the key sort of variable in delivering that. But at the moment, broadly, that plan remains on track.
Lyndon Fagan -- JPMorgan Chase and Company -- Analyst
Peter, like, what's holding them up?
Peter Cunningham -- Chief Financial Officer
So, they're actually going through the approvals process of traditional owner engagement and then engaging into the permitting process.
Lyndon Fagan -- JPMorgan Chase and Company -- Analyst
Thanks.
Jakob Stausholm -- Chief Executive Officer
So, on buyback, right now, it actually works quite well. You can look at the balance of -- we have ramped up investments. We are paying out, every year, 60% of our earnings. And we are remaining with a very strong balance sheet, and we are not seeing growth in that, so it works.
But you're right, you could argue that it would be good to make buybacks, particularly in plc. Although you probably have seen that, that's the valuation difference between Limited and plc have narrowed somewhat and there are reasons why there is a difference with the franking credits. I've always said I was going to discuss it with Chinalco, but my priorities when I discussed this six months ago was about Simandou and we made great progress with Chinalco in the meantime, not least having settled all amounts and received, like, what was it, $575 million here in July. So, that is behind ourselves, but that discussion is ahead of us.
So, I'll take note of it. I certainly haven't forgotten it. There are still opportunities there. Thank you.
Operator
Thank you. I will now pass back to the room.
Jakob Stausholm -- Chief Executive Officer
Rob?
Rob Stein -- Macquarie Research -- Analyst
Sorry, Rob Stein from Macquarie. Just a little bit more about Simandou. Can you give us a feel for how quickly the ramp-up will be across '26? We know the '25 first ore, but doubts about whether that's going to be fully railed and it's going to be hitting any sizable capacity in '25. But '26, I guess, is the key.
Can you give us a feel for how rapid that lift will be?
Mark Davies -- Chief Technical Officer
Yeah, sure. So, in '25, we expect to have first ore at the mine gate. And actually, the initial crushers either on the water just landed in Guinea now to start processing that first ore. And our rail is on schedule to complete at the end of '25.
And so then you've obviously got to ramp up the rail system, which will be the first quarter of '26 would be the ramping up of the rail system. And the initial year or so will go out through the WCS port, which would be capped at 60 million tonnes of capacity. But obviously, there's a ramp-up profile that would go with that. Those details, obviously, CTG, which is a joint venture that will run that infrastructure.
We're standing up that joint venture now in terms of hiring people and putting it in place. And we'll have to work through what that ramp-up profile of the WCS port looks like. But that's that gist of it. The rail will be completed at the end of '25, ramp up first quarter of '26, and then there will be a ramp-up during '26.
And then our book comes online early '27.
Rob Stein -- Macquarie Research -- Analyst
And just maybe just one on returns across the portfolio. On the sort of segment view, you had your ROCE of each asset. Iron ore stands out, the others less so. Do you have any ROCE sort of threshold across the portfolio around what you need for an asset to be Rio Tinto quality? And similarly, are there assets currently in the portfolio that are underperforming? I mean, I could name a few, but I'm interested in how you would view it and what you're going to do to improve that.
Jakob Stausholm -- Chief Executive Officer
Yeah, I want to pass it on to Peter, but I get a little bit excited so I have to start a bit. First of all, if you look over the last 10 years, the return on capital employed on aluminum has not been high. But please look carefully at our results here. The operational performance of aluminum is really, really improving.
And the price environment is also improving. So, the average profitability in the first six months of the year is not fantastic, but it's gone like this. And therefore, because it goes without saying a product group should have double-digit return on capital employed, absolutely. And you can see aluminum getting there.
Minerals is there. And you can also see copper getting there because we are just at the inflection point. When we get the conveyor, so servers running in the third quarter, we are really going to produce much more from OT. So, that's the kind of things I would ask you to look through.
But Peter, do we have underperforming assets in the portfolio?
Peter Cunningham -- Chief Financial Officer
Jakob, I think you put it very well. So, there certainly are some. I mean, some is just market driven. I mean, if you look at some of the markets around the minerals, it's just really very tough.
I mean, very correlated with the sort of construction cycle at this moment in time. That's just tough businesses. But you just look at those businesses in terms of their position in the industry, and they're leading businesses in scale and the capabilities we have. So, I think you've just got to be very careful of kind of cyclical changes when businesses actually have a lot of competitive advantage for them when markets improve.
So, certainly, to me, it's about actually looking at this as glass half-full of having opportunity to drive more returns from the asset base. That's how we regard it.
Jakob Stausholm -- Chief Executive Officer
And maybe if I can take one because it's so obvious. You know that we have PacAl for sale under my previous CEOs. And we didn't sell it. And I'm actually happy about that because look at it, how we take them asset by asset.
I think we have created a great asset in New Zealand. I can't wait. Later this week, I'll fly to New Zealand and meet the team and meet key stakeholders because we thought, does it have a future? And now we have found a partnership there. We have found a decent power contract, and we can see a very profitable future.
And then on top of that, Sumitomo has left, so we own 100% of that asset. So, slowly but surely, assets that were marginal, we are actually turning them into becoming decent. I hope and I believe, because we are really making a lot of progress on Boyne Smelter as well, and that's how we go about it. You can say IOC is very, very unstable, but actually, it's quite profitable.
We just need to get more stability into it. And it's a bit the same thing with Kennecott, but I don't want to go over that again because Paul has already put it into pieces. But it is really that trick-up slowly but surely taking these assets. And when you get the best out of them, they're actually very profitable.
Rob Stein -- Macquarie Research -- Analyst
So, sorry, just to maybe flesh out something just a little bit more. When you look at the SPS and you think about how the impact of that is on returns, ROCE, is there an internal target that you guys are looking to around -- are you expecting a 500 basis point improvement across different assets? How should we think about it in terms of production costs?
Jakob Stausholm -- Chief Executive Officer
Yeah. And then it comes from me who has been a CFO for many years. I'm just not going to stop there. We completely burned our fingers when we implemented the so-called mine-to-market and talked about $5 billion and we didn't achieve that.
This is not about financial numbers. This is about changing practices, changing work cultures, doing things differently. And the things that I really focus on -- I was in Amrun. Amrun is a great project, but it hasn't really performed at its best.
And in June, it consistently performed above the nameplate. And that's what I'm really looking at. Can we run our assets at nameplate, close to nameplate in this case, higher than nameplate? It's very difficult to just put it down to one number, because against what?
Tom Gallop -- Head of Investor Relations
Glyn?
Glyn Lawcock -- Barrenjoey -- Analyst
Thanks. Glyn Lawcock with Barrenjoey. Jakob, it's probably a little bit for you. But if I think back over the last six months, 12 months and today, you said you've got 3% compound growth to '28.
Is that sufficient in a company? I mean, I know it's off a big base. You're a big company. And you said earlier, you're not afraid of M&A. So, it's still large-scale M&A off the agenda for you?
Jakob Stausholm -- Chief Executive Officer
Well, it has to make sense. But the reason why it was absolutely off the table when I started as CEO was that we had a lot of work to do in terms of recovering social license, in terms of shaping up some of our capabilities, etc. We're in a different place today. So, it's not that kind of completely given.
We can do it. As another question I got earlier, I just want to say it's not easy to justify big premiums, and we are definitely not in the M&A game in order to be bigger. We are only in the M&A game if we can create shareholder value.
Glyn Lawcock -- Barrenjoey -- Analyst
And can I follow up then? On the lithium market, you talked about copper and things are expensive heated. But lithium, I think if you look back 6, 12 months ago, supply has been more than we thought. Demand's probably been a bit weaker. Just as you said earlier, it's just the cyclicality that we're going through.
Or is there something structural? Just share your thoughts on how you're seeing it because you said 10 to 15 years --
Jakob Stausholm -- Chief Executive Officer
No, and that's a very good point. I mean, first of all, we are focusing on -- we're coming to an important investment decision of the full-scale Rincon. And hopefully, we can progress Jadar. And then we already are well in.
But we could look at all the lithium assets. We have a great exploration portfolio and lithium is actually something you can take from exploration to production much, much faster than, for example, copper. But we could also look at other assets. It's fair to say that it's certainly cheaper than a year ago.
And in a way, it doesn't really matter what the lithium price is for us in the short term. We really have to think about what's going to be the average price over the next 10, 15, 20 years. I think it's fairly given that the world will need lithium, because you do need lithium for at least high-performance batteries and the world needs more batteries. So, the fundamentals is going our way, but it has to come down to individual assets.
If we should build up a portfolio of assets like Jadar and Rincon, Jadar and Rincon can become real Tier 1 asset. That's where we are at our best. Thank you.
Tom Gallop -- Head of Investor Relations
Rahul?
Rahul Anand -- Morgan Stanley -- Analyst
Thank you. Rahul Anand, Morgan Stanley. Perhaps I'll start off with one for you, Peter. I just want to focus a bit on the cash generation in the business.
So, you talked about building inventories, and I understand you've been trying to stabilize the business in terms of production, performance, etc. But if I look at since calendar year '21, calendar year '21 had a working capital build of about $1 billion, '22 was $400 million, then you had a $900 million build last year, and we started the year with another $700 million build. When do we see the second half actually give us back some of that cash? Are we at the right level now? Are we going to continue down this trajectory? That's the first one.
Peter Cunningham -- Chief Financial Officer
Rahul, that's a very good question. I mean, I think what we saw in the first half is what I would -- it's just seasonal. I mean, it was mostly, as I said, sort of non-trade. It was those aspects like royalties and taxes and JV partner payments.
They just come and go during the year. So, they are sort of noise in the overall sort of long run, if you like. If you look at most of what's happened since 2021, it has been inventory. Most of it has been cost driven.
I mean, if you look at the raw materials going to aluminum, they're still much higher than they were back in 2020, 2021 and the same for a lot of other inputs to the business. And a lot of the costs, I mean, costs have gone up in the industry. It's pretty much the same for us and to others. And that directly flows from the cost base into the inventory to be then realized into cash flow.
Now having said all of that, we are carrying still some excess in some areas. That we would not like to say as sort of normalized. So, Kennecott is still working down its inventory levels because of the smelter shut last year. It's actually got to concentrate to map inventories that will be worked off for the rest of this year.
So, even though mine production is lower, Kennecott's cash flows this year will actually be pretty solid, because we're just smelting the intermediate products. Other areas, we're still working down. We've kept on producing in TiO2. We've got six furnaces at Sorel and three working at RBM, even though the market is pretty tough.
And again, that's so we're ready for a turnaround in the market and are well supplied. So, there are some areas that we're certainly -- it's more than sort of inventory we're carrying than usual. But we would expect that to be worked out of the system at the right time.
Rahul Anand -- Morgan Stanley -- Analyst
So, stable levels of inventory from here on?
Peter Cunningham -- Chief Financial Officer
I think the inventory will not go up from here. It's really stabilized.
Rahul Anand -- Morgan Stanley -- Analyst
OK. Perfect. One then perhaps for Jakob. Jakob, we talk about the strategy a bit in terms of copper and otherwise, and you've obviously fleshed out that it's hard to find a good copper deal.
But if we talk about Argentina, specifically the ROGI, it looks like it's getting passed. And you've had a peer, as well, pull the trigger on one of their early stage transactions. Now you've got an investment in Rincon, which you're probably going to expand on. But there are opportunities in Argentina still.
You've got one in terms of McEwan as well. How do you think about the market? Does that open a new frontier for you to perhaps get into a bit more greenfield and add value along those lines?
Jakob Stausholm -- Chief Executive Officer
Yes. Thank you. You're asking a very good question. Can I just, first of all, compliment you for drilling Peter a little bit on the working capital? We are very, very aligned on this.
But to your question, I think fundamentally, Rio Tinto would like to invest more in Latin America, particularly, Chile and Argentina. And you've seen what we have in Chile with the Nuevo Cobre. It's very, very interesting. We are very happy.
I've been in Los Azules with McEwen. Rincon, the economics of Rincon is much stronger after the new law has been passed through Senate, so it is interesting. But I will say to you, and I have lived in Argentina. There are still risks.
Sowe are cautious, but I'm excited about the opportunities in Latin America. Thank you.
Rahul Anand -- Morgan Stanley -- Analyst
Thank you.
Tom Gallop -- Head of Investor Relations
Can I just see if there's another question online?
Operator
There's no further questions lined up at the moment. [Operator instructions]
Tom Gallop -- Head of Investor Relations
Paul?
Unknown speaker -- -- Analyst
So, here we are in New South Wales. So, we haven't talked about Tomago, Tomago smelter, which is a big chunk of our electricity consumption. So, you think you're making progress with Boyne for solution. Where do you think Tomago sits in that? And conscious that the kind of clock's ticking in terms of current power agreements.
Jakob Stausholm -- Chief Executive Officer
I mean Tomago is just much more difficult. That's very clear. But I will say to you what Mark's team is doing right now is building amazing skills because there's no one who has the skills on how do you actually deliver from renewable electricity to an aluminum smelter other than if you have a hydropower or a nuclear plant next door. And that had to be built first.
And what we are learning at Boyne Smelter is absolutely amazing, but you can answer it yourself. Are you going to fix Tomago as well?
Mark Davies -- Chief Technical Officer
Well, as you said, yes, Jakob, it is actually quite a lot harder. I mean, one of the things that we are trying to do, is if you think about an aluminum smelter, it's not a very flexible one, but it's big. And if you can make it more flexible, that creates lots of optionality. And that's really what we've utilized at BSL to work toward a solution.
And actually, it's what worked in New Zealand as well. Being able to help the grid in times of need is a source of value for the grid,and how you get compensated for that is core to unlocking it. So, we're working through the options, but we're not anywhere near there yet, and it's a lot harder.
Jakob Stausholm -- Chief Executive Officer
It's a good point, this thing. It's very, very important for the grid with an aluminum smelter, and you can read very positive newspapers from New Zealand over the last 10 days that we are helping New Zealand because they don't have enough water in the reservoir. But rest assured, that is also economically attractive for us. So, it's a real win-win.
Tom Gallop -- Head of Investor Relations
Tim?
Tim Gerrard -- Janus Henderson -- Analyst
Thank you. Tim Gerrard, Janus Henderson. Just a couple of questions, kind of maybe related maybe for Mark in SPS and maybe talk a little bit about Iron Ore Company of Canada, when those programs might start there and why they haven't started to date. And very difficult asset to decarbonize, so just sort of the decarbonization of Iron Ore Company of Canada, the first question.
Mark Davies -- Chief Technical Officer
OK. So, on SPS, it actually has started at IOC, but there is a process to ramp up. And if you look across our business, I think we're at 26 of the 39 assets we've deployed SPS at to some level, and 15 of them have it across the full value chain. So, one of the keys to success is actually buy-in and getting people really trying to utilize it as their tool for improvement to really own it.
I was actually at IOC for a month and a half ago and sort of followed the shift starts all the way through to the department. I spent the day following people in the field. And it is starting to make an impact, but we've got a fair way to go to say the least. And actually, the thing is SPS, at the minute, is focused on sort of operational excellence.
How do I have a great shift start, how do I engage my frontline? But we actually have to also ramp up our ability to do mine planning better, the way that we do asset management better. But we're working on all of those things with IOC. Now jumping over to decarbonizing. Decarbonizing, obviously, is hard.
The positive is that you're in a region with lots of hydroelectricity. So, if you can figure out ways to use electricity rather than fuel, oil, or coal, all the better. And we are installing, actually, electric boilers, as we speak, as a first step to help decarbonize there. Our Technology Ventures Fund has invested in a company called Aymium which creates designer bio-trials, and that's also an option that we're exploring at IOC.
Tim Gerrard -- Janus Henderson -- Analyst
But by the sound of it, nothing happening quickly there to decarbonize significantly.
Mark Davies -- Chief Technical Officer
Look, I think all quick decarbonization will be switching to renewables. That's the one thing that you can do today that's quick. And to the extent that you're already buying electricity, you can do that. Everything else is not quick.
Like everything else, you're developing new process technology. Capital is inherently slower.
Tim Gerrard -- Janus Henderson -- Analyst
And a quick follow-up on Winu. Are you still drilling there? And maybe a couple of comments on the progress with the indigenous negotiations. But the main question on Winu is, is it a scale that's potentially of a lot of interest to you? Or is it really one of these things you're looking for a path to exit?
Mark Davies -- Chief Technical Officer
So, I'll answer the first bit and I'll leave it to my esteemed colleagues on the second bit. But we're no longer drilling. We've been actually focused on working our way through the Traditional Owner engagement and the permitting process, and I think that's going very well. So, I think the Traditional Owners are very comfortable.
We've signed appropriate agreements and so it's literally just now going through the permitting process.
Jakob Stausholm -- Chief Executive Officer
And we have a project. The question is just how big it is, and we want to learn about this, and we need to have a pathway forward with the Traditional Owners, not that we have much resistance, but the Traditional Owners, in that part of the world, is just not used to mining. So, you need to make them comfortable with what we're doing. And then when we have a project that has the consent, we'll have to see the scale of it.
There is a lot of copper, but we still haven't necessarily found the full, say, regional play there. Time will tell, but we're not spending too much money at it at the moment, and we are progressing it very well.
Tom Gallop -- Head of Investor Relations
Kaan?
Kaan Peker -- RBC Capital Markets -- Analyst
Thank you. Kaan Peker from RBC. Just going back on Jakob's or comment. He mentioned that he expects lithium to change the shape of the portfolio.
So, I just wanted to get an understanding of what percentage is it EBITDA production that you'd classify as a change to the portfolio.
Jakob Stausholm -- Chief Executive Officer
Yes, maybe it was a bit of a bold statement, but it's a fact that the only new material that we will start producing this year is lithium, OK? So, that changed the portfolio. Of course, it doesn't materially change at this point in time. But my point is just I hope and believe that Rincon starter will be followed by a Rincon full scale, will be followed by Jadar. And we actually have some good progress on exploration.
And if we might also add in a few other assets, then suddenly, we have something of scale, something that is sizable at the group level. Maybe not as big as our iron ore business, but it's difficult to match that one, but something that actually will provide meaningful diversification. And this is important, don't forget, I mean we supply almost any industrial player with aluminum. We are, by far, the biggest Western producer of aluminum.
And all those customers, automakers, they're screaming us, "Can't you also sell us lithium?" So, our value proposition to customers are changing.
Kaan Peker -- RBC Capital Markets -- Analyst
Sure. Maybe just adding on to that. Just on the infrastructure around Argentina, particularly around DLE. It seems like cost of power and, obviously, water is key.
So, what do you see as sort of the key infrastructure that's required to eventually commercialize DLE in Argentina?
Jakob Stausholm -- Chief Executive Officer
Yes. First of all, I just don't think you have an alternative. The way you have done it in the past in Latin America with ponds takes up a lot of land. And you can do that if it's small scale, but if you want to have lithium extraction in that scale, you're going to destroy the Andes, unless you find another technological solution.
And in my view, DLE is the way forward, ideally with reinjection as well because then you basically have no nature footprint other than your plan. So, it's kind of like I just think that's the future-proof way of doing it. And right here in Australia, we're doing an awful lot. Maybe, Mark, you want to comment on it.
Our research facilities in Bundoora, in Melbourne is leading edge on this. And there are only very few players who actually can produce DLE right now. And the game is exactly what you're saying. It's not about lithium.
There's plenty of lithium. It's about you only have so many liters of water. How can you, with that water, extract most lithium. Anything to add?
Mark Davies -- Chief Technical Officer
Look, Jakob, you covered it well. But I would say, for Argentina, and particularly for Rincon, we have a 130 kV power line that we only need to add five or six kilometers to get to site. And there's a 400 kV line that runs Argentina to Chile, actually, over the site. And that part has some of the world's biggest solar farms today.
So, there is a lot of -- the energy, I don't think is a constraint, certainly for Rincon. And I think, as Jakob said, optimizing the water, that's actually a potential competitive advantage because the water is limited. And you can always go to full-on reverse osmosis and just recycle the brine, but that obviously costs you a lot of money. So, how you actually produce lithium with the least possible fresh water for that washing stage is a real opportunity that we see we can bring unique competitive advantage.
Kaan Peker -- RBC Capital Markets -- Analyst
Would you mind if I just squeeze one following? It was continuing on with Lyndon's question around the replacement mines in the Pilbara. It seems like Greater Nammuldi was a little bit delayed because of indigenous approvals. Just wondering, that's 2028. Now does that sort of inhibit the Pilbara pushing ahead with -- or stretching their mine production given that mine is constrained with approvals, I suppose, depending on a couple of replacement mines?
Mark Davies -- Chief Technical Officer
Yeah. So, look, Greater Nammuldi is the heritage. We have had some heritage delays. And the key thing is there's a main whole road there for Greater Nammuldi that we need to build.
We are absolutely sitting down with the Traditional Owners, and seeing how we can progress that. We're just flagging, at this stage, it's a risk to Greater Nammuldi.
Tom Gallop -- Head of Investor Relations
Lachlan?
Lachlan Shaw -- UBS -- Analyst
Thank you. Lachlan Shaw, UBS. A couple, maybe to start just on iron ore. So, the medium-term guidance, just to pick up from Kaan's question, medium-term guidance of 345 million to 360 million, can you just remind us of what the depletion looks like from '25 to '28? And then just when the four replacement projects, when you're hoping they'll be at nameplate run rate?
Mark Davies -- Chief Technical Officer
So I think, depletion, it's about 90 million tonnes over the period to then. And they had about 120 million tonnes of capacity in all those mines. So, I think those were the numbers we talked about when the visit to the Pilbara in October, and they're still the right numbers, Lachlan.
Lachlan Shaw -- UBS -- Analyst
So, just to clarify, is that a straight line? Or does that vary over that time?
Mark Davies -- Chief Technical Officer
So, they come in on various states, I think, in the '27 and '28 period. The dates we put, I think they're still exactly the same when we set them out. I think Simon had some slides he put up in Capital Markets Day. They're still the right same dates.
I mean, as Mark flagged, it's just that uncertainty on the Nammuldi. They're ramping up over those. I think, the dates, we gave a first ore for those dates. If you look, I mean, how we've ramped up Gudai-Darri, I mean it was done within 12 months.
Lachlan Shaw -- UBS -- Analyst
OK. Understood. Maybe second question, a little broader and that's the experience around permitting in WA. You've got a situation where the state EPA and the federal EPA is starting to maybe get a little more forthright in terms of conditions on permitting approvals and operations.
What's your experience there? And how do you think about that dynamic in terms of the sort of medium and long-term mine plans and how you progress and sustain that production?
Jakob Stausholm -- Chief Executive Officer
You're hitting on all the right things that are the constraining factors. I just think the team in Perth is doing an amazing job on engaging with the Traditional Owners. That is the critical part, and that is the critical part for any iron ore producer. And then you're talking about a new legislation on nature.
And you might have seen in newspapers, there has been some discussions around that topic. Look, we are very aligned with the government. We have signed up to ICMM's statements around being nature-positive by 2030. So, our commitment, independent of whether there's a law or not, we will deliver toward that.
But we have made comments about that the current draft of the law is simply not practical. And it's been very difficult to engage with the relevant ministry, and that's why we are putting in writing our concerns. We think we have an obligation, being part of society to make those points, but it's more about the efficiency of the law. We are totally aligned with the intent.
And we just want to be sure the law achieves its intent.
Tom Gallop -- Head of Investor Relations
OK. We've got time for one more question.
Unknown speaker -- -- Analyst
Graham Cartwright, HRFS. I guess, going back a few years to listen to Hugh Morgan talk about expansion of Olympic Dam being constrained by uranium. I guess one thing we've seen in the last few years is that restoration of growth nuclear and more countries coming on board. I don't expect you to comment in detail.
Feel free if you want to. You had a bit of a shock last week at ERA. I guess that was a deep, potentially profitable, source of uranium in the future if you got approvals as you've made clear. And Rio's waxed and waned over the last 20 years in uranium.
Where does that fit in your thought process in the next decade or two given that decarbonization?
Jakob Stausholm -- Chief Executive Officer
Yeah. Thank you. Interestingly enough, after the Second World War, the British government asked Rio Tinto to go and look for uranium. And within 10 years, we were the world's largest producer of uranium.
It's been very, very good business for Rio. It has not been a fantastic business lately. And you saw us going out of Namibia. We sold Roughrider last year.
It was not because we didn't like uranium that we sold Roughrider. We always look for is it a Tier 1 deposit. And it's not, and we could get good money for it. So, it was, in my view, a very good divestment.
Now Jabiluka, not only is the Mirarr people against it, but it's in a world heritage area. I mean, you just don't mine there. And I'm not sure it's that profitable. For me, it's a clear-cut thing, and I'm happy that we finally have taken all the noise out, because that noise is only about minority shareholders of EIA trying to get a little bit of extortion here.
So, look, for me, it's a clear-cut thing. Jabiluka will never be mined. And then you talk about uranium. Yes, there is a future for uranium, but you have to take a step back here first.
It's for every society to decide whether you want nuclear or not. Interesting enough, I come from Europe. My neighboring country from Denmark is Germany. They don't want nuclear.
France wants nuclear. It's a societal choice. Our position as Rio Tinto, we need to decarbonize. That means we use all sources that doesn't have carbonization.
There can be solar, wind, hydro or it could be nuclear. So, we are totally open toward that. But if the world starts doing more nuclear, you're talking 20 years down the road before you really get the consumption. It takes forever to get permit and to construct these things.
So, it's not that there is a huge demand for uranium right now. That might be two or three decades down the road. So, it's not an urgent thing from our perspective. Thank you.
Unknown speaker -- -- Analyst
And I guess a supplementary question on the DLC. When you've looked at that split and you referenced the 60% of earnings. You've got a 77-23 split. Is there an index balance that goes into that, that you have to maintain certain balances, you wouldn't want to get past 60-40, London, Australia or -- and I'm just sort of thinking about how your buyback might perceive if you get certain opportunities?
Jakob Stausholm -- Chief Executive Officer
Look, we are acutely aware that we have an absolutely amazing business here in Australia. We wouldn't mind balancing it toward having a heavier share on the Limited. Unfortunately, it just doesn't make economic sense to make unification. The DLC structure is very efficient.
But it doesn't mean that we can't rebalance it. And should we do rebalancing it, we would move it in that direction.
Tom Gallop -- Head of Investor Relations
Thank you. We've reached the end of our time for the Q&A. Thanks, everyone, for joining online and in the room. Hopefully, those in the room can join us for lunch after this.
Jakob, did you want anything, last words?
Jakob Stausholm -- Chief Executive Officer
No. Thank you. It's really great to be here in Sydney today and good to see you. Let's make sure we keep the dialogue, and we will nurture our British stakeholders a little bit later today.
So, great to be here. Thank you.
Duration: 0 minutes
Call participants:
Tom Gallop -- Head of Investor Relations
Jakob Stausholm -- Chief Executive Officer
Peter Cunningham -- Chief Financial Officer
Paul Young -- Golden Sachs -- Analyst
James Redfern -- Bank of America Merrill Lynch -- Analyst
Lyndon Fagan -- JPMorgan Chase and Company -- Analyst
Rob Stein -- Macquarie Research -- Analyst
Mark Davies -- Chief Technical Officer
Glyn Lawcock -- Barrenjoey -- Analyst
Rahul Anand -- Morgan Stanley -- Analyst
Unknown speaker -- -- Analyst
Tim Gerrard -- Janus Henderson -- Analyst
Kaan Peker -- RBC Capital Markets -- Analyst
Lachlan Shaw -- UBS -- Analyst
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