At the heart of our approach is a portfolio of world-class assets – from our Pilbara iron ore business, to our Queensland bauxite ore reserves, our Canadian aluminium smelters and our global suite of copper mines. These are multi-decade assets that deliver attractive returns throughout the cycle, while providing material opportunities for growth over the long term.We use a clear strategic framework to
assess our existing assets and new opportunities – taking into account the industry attractiveness and the competitive advantage of each asset, and its capacity to deliver strong and stable returns.
In 2016, we:
- Invested US$1.3 billion in compelling growth opportunities.
- Announced an increase to our Pilbara iron ore reserves in Western Australia.
- Agreed the sale of our aluminium smelter and hydroelectric facilities at Lochaber in Scotland.
- Signed a non-binding agreement to sell our interest in the Simandou project in Guinea.
- Completed the sales of our Mount Pleasant thermal coal assets and of our interest in the Bengalla coal joint venture.
Safety is our number one priority and is core to everything we do. A well-run operation is a safe operation.
We seek to generate value at all stages of the value chain – from mine through tomarket. We prioritise value over volume in all of our operating and investment decisions. We have delivered substantial cost savings over recent years and this remains a key focus area.
Beyond this, we continue to increase the productivity of our existing assets, as a substantial and low-risk source of incremental returns.
We have established a leading position in the development and use of technology and innovation – allowing us to deliver more tonnes more cheaply and with less risk. As the industry faces increasingly complex geological, environmental and cost pressures, our technology advantage will be an increasingly important value driver.
Our commercial activities ensure we reap the maximum value from each of our businesses. Our marketing teams work hand-in-hand with our operations, so that our resource management is fully aligned to the market.
Over the years we have leveraged our understanding of customer needs to create new markets for our products, including high-temperature Weipa bauxite, and champagne and pink diamonds.We deploy industry-leading capabilities in supply chain optimisation and a variety of logistics solutions across the Group – and have in-house centres of excellence for value-in-use analysis, pricing and contracting strategies. Together, these activities allow us to manage risk and capture value in all market conditions.
In 2016, we:
- Completed more than 1.3 million safety critical control verifications in our critical risk management programme.
- Committed to generating US$5.0 billion of additional free cash flow over the next five years from mine-to-market productivity improvements.
- Achieved a further US$1.6 billion of operating cash cost reductions, as part of our target of US$2.0 billion over 2016 and 2017.
- Strengthened our organisational structure, by adjusting our product groups to better align our assets with the business strategy, help drive further efficiencies and optimise performance.
- Appointed executives responsible for Health, Safety & Environment and Growth & Innovation to our Executive Committee.
As our industry evolves, new capabilities will be required and we must attract, develop and retain the right people to meet this challenge. We are strengthening our technical and commercial capabilities in particular, and establishing centres of excellence around these areas. Beyond this, we are committed to building a diverse and inclusive workforce at all levels of the organisation.
In 2016, we:
- Appointed a Human Resources Group executive to our Executive Committee.
- Announced we would be doubling our annual graduate intake.
As a global company, the environment in which we operate is becoming more complex. In order to secure access to new resources, while managing the unique risk profiles of our businesses across the globe, we must partner with a range of external stakeholders. These include our customers, suppliers, investors,
governments and local communities.
Partnerships are relevant at all stages of the value chain andmining life cycle – from exploration, through to operations, marketing and mine closure. Successful partnerships enable us to secure and maintain our licence to operate and are a key long-term success factor for our industry.
In 2016, we:
- Extended our Channar Mining joint venture in Australia’s Pilbara region and agreed to supply up to 70 million tonnes of iron ore to Sinosteel Corporation over the next five years.
- Marked 50 years since our first contracted iron ore shipment left the Pilbara, destined for a customer in Japan.
- Appointed a Corporate Relations Group executive to our Executive Committee, strengthening our focus on external & internal stakeholder engagement.
We adopt a consistent and disciplined approach to capital allocation. Our first allocation is to sustaining capital. Secondly we fund dividends for our shareholders. Finally, we assess the best use of the remaining capital between compelling growth, debt reduction and further cash returns to shareholders. At each stage, we apply stringent governance and assessment criteria to ensure that every dollar is spent in the right way.
In 2016, we adhered to our disciplined capital allocation framework, resulting in: sustaining capital of US$1.7 billion, dividends of US$2.7 billion, reduced net debt by US$4.2 billion and compelling growth capital of US$1.3 billion.