for personal use only - asx · 2012-11-29 · this presentation has been prepared by rio tinto plc...

Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707

Registered in Australia Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia ABN 96 004 458 404

ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000

29 November 2012

Attached is a presentation given by Tom Albanese, chief executive, Guy Elliott, chief financial officer, Sam Walsh, chief executive, Iron Ore, and Alan Davies, chief executive, Diamonds and Minerals, at the Rio Tinto investor seminar held in Sydney today. Yours faithfully Stephen Consedine Company Secretary

For

per

sona

l use

onl

y

Cape Lambert, Western Australia

Investor seminarSydney

29 November 2012

For

per

sona

l use

onl

y

©2012, Rio Tinto, All Rights Reserved

Cautionary statement

This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and consisting of the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions.

Forward-Looking StatementsThis presentation includes forward-looking statements. All statements other than statements of historical facts included in thispresentation, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industryresults, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding Rio Tinto’s present and future business strategies and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause Rio Tinto’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors identified in Rio Tinto's most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this presentation. Except as required by applicable regulations or by law, Rio Tinto does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed its historical published earnings per share.

2

For

per

sona

l use

onl

y

Shanghai, China

Tom Albanese

3

Chief executiveFor

per

sona

l use

onl

y


Agenda4

Introduction, outlook and strategy Tom Albanese

Capital allocation and performance Guy Elliott

Iron Ore Sam Walsh

Break

Other product groups Tom Albanese

Diamonds & Minerals Alan Davies

Summary Tom Albanese

Q & A

For

per

sona

l use

onl

y


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 Oct-12

All injuryfrequency rate

Lost time injuryfrequency rate

Injury frequency rates 2003 – Oct 2012Per 200,000 hours worked

5

Safety remains our core value

Testing safety equipment

For

per

sona

l use

onl

y


Overview

• Short term outlook remains uncertain and volatile

• Focus on balance sheet discipline and single A credit rating

• Strong operational performance under tough conditions

• Taking decisive actions to compress costs and optimise returns

• Long term industry fundamentals remain attractive

• Rio Tinto is well positioned

• Strategy is unchanged – large, long life, cost competitive assets

• Disciplined and rigorous capital allocation and prioritisation

• Allocating capital to projects with highest returns in the most attractive sectors

6

For

per

sona

l use

onl

y


• Continued uncertainty in Europe and United States

• Expected fourth quarter pick-up in China− fixed asset investment continues

to strengthen− leading indices are improving

• Chinese leadership transition underway

• Markets expected to remain volatile

Short term market volatility but Chinese indicators are more positive

7

Source: Bloomberg, GK Dragonomics Research

US New private housing starts(Thousands of Units)

400500600700800900

1000

Rebound in infrastructure spending in ChinaFixed asset investment by sector, nominal, 3 month average

For

per

sona

l use

onl

y


• ~2 billion additional people to urbanise by 2030

• Global steel consumption expected to grow by 2 per cent per annum

• China to remain the key driver until mid-2020s

• India and South East Asian economies more than offset flat and then falling consumption in China

• Consumption-led growth will benefit TiO2 and Aluminium

Global commodity demand trajectoriesIndex (2012 = 100)

8

The long term demand outlookremains attractive

Source: Rio Tinto analysis

100

120

140

160

180

200

2012 2015 2018 2021 2024 2027 2030

Aluminium - Primary Copper - PrimaryHard coking coal Iron oreThermal coal TiO2F

or p

erso

nal u

se o

nly


• Cost escalation and rising capital intensity will increase pressure on marginal project returns

• Scarcity of highly skilled labour, access to financing

• Rising threat of resource nationalism

• Recent high profile project deferrals

The industry supply responseis increasingly challenged

9

Source: Brook Hunt – a Wood Mackenzie company

Disruption rates expected to continue% of planned copper production

Sovereign riskCopper supply location (%)

012345678

2004 2005 2006 2007 2008 2009 2010 2011

For

per

sona

l use

onl

y


Within this context, our fundamentalstrategy is consistent and unchanged

• To maximise total shareholder return by sustainably finding, developing, mining and processing natural resources

• Invest in and operate large, long term, cost competitive mines and assets

• Allocate capital to the highest return opportunities

• Investments driven by the attractiveness of commodity sectors, and the quality of each opportunity

10

Total cost position• Operating costs and sustaining capital• Capital intensity of growth

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0.00 1.00 2.00 3.004.00 5.00 6.00 7.008.00 9.0010.00

Tier 1

Lower cost

Higher cost

Higher expandability

Lower expandability

Grow and protectFocus of new

investment

Improve,divestor close

Identify expansion

options

Optionality/ expandability/life extension

Implement operating

enhancements

For

per

sona

l use

onl

y


We are taking constant steps to improve the quality of the portfolio

11

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

Tier 1

Cash cows

Total cost position

Leveraged plays

Lower costHigher cost

Higher expandability

Lower expandability

Optionality

Marginal assets

Iron oreDiamonds & MineralsCopper

Aluminium Bubble size represents medium, high and very high value (Rio Tinto share)

EnergyUnder review

Divested

For

per

sona

l use

onl

y


A clear and consistent strategy

• The long term demand outlook remains attractive

• Post GFC effects continue to drive short term market uncertainty and volatility

• Increasingly delayed industry supply side response

• Rio Tinto’s fundamental strategy remains unchanged

• Allocating capital to those projects offering the highest returns

• Targeting investment in the most attractive sectors

• Constantly improving the portfolio in line with our strategy

12

For

per

sona

l use

onl

y

Guy Elliott

13

Chief financial officer


For

per

sona

l use

onl

y


• Prudent balance sheet and single A credit rating in a volatile environment

• Progressive dividend provides sustainable long term returns to shareholders

• Disciplined and rigorous approach to capital allocation

• Investment programme focused on highest quality opportunities

• Return surplus cash to shareholders

Balancing value adding investment with returnsto shareholders and a prudent balance sheet

14

Cash returns to shareholders

Progressive dividend

increased by 34%

at FY 2011

$7 billionbuy-back

completed

Prudentbalance

sheetmanagement

SingleA creditrating

Average borrowing maturity

of 9 years

Disciplined investment

in highest value opportunities

$10 billion of high returning

growth

Cash from operations and divestment proceeds

For

per

sona

l use

onl

y


Risk Management Committee; Board

Macro-economic

15

Distinctive strategic investment themes and standard evaluation criteria drive our investment approach

NPV Value enhancement

Price assumptions

Asset• Large, long life, low cost• Export markets

Board / Exco

Set evaluation criteria

Economics and Business Evaluation teams

Set ranking criteria

Board / Exco

Jurisdiction

Discount rate assumptions

Project evaluation guidelines

IRR/ROI, EBITDA marginWhere are the highest returns?

Level of payback in first five yearsWhen do we realise the return?

What risks are involved?

• Competitive advantage• Market structure

Sector “sieves”• Market size, demand• Performance

Developinvestmentthemes

For

per

sona

l use

onl

y

©2012, Rio Tinto, All Rights Reserved 16

Our capital allocation process ensures we are making good decisions

Develop investment themes

Set evaluation criteria

Set ranking criteria

Opportunity development

Projectreviewand ranking

Investment Committee

Board

Final decision

For

per

sona

l use

onl

y


0

2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012F 2013F 2014F 2015F

Sustaining Pilbara - sustaining mines

Pilbara - historical Approved Pilbara growth

Approved other growth Unapproved Pilbara

• Capex programme managed within boundaries of single A credit rating

• Average sustaining capex reduction of >$1 billion in 2013

• $1 billion reduction to Pilbara investment• Further flexibility in Pilbara growth

programme decisions• No new major project approvals in the

near term• Three significant projects in three

commodities coming on line within the next 12 months:− Yarwun 2 currently ramping up− Oyu Tolgoi phase 1− Pilbara 290 expansion

Capital expenditureUS$bn

17

Capital expenditure is being prioritised on the highest quality projects

For

per

sona

l use

onl

y


Strong returns from key approved growth projects

18

Project

Approved capex($bn)

Capex remaining

($bn)*%

complete IRREBITDA Margin

Pilbara 290 9.7 5.8 40% >15% >40%

Pilbara 360 5.5 5.1 <10% >15% >40%

Oyu Tolgoi Ph 1 6.2 0.2 97% >15% >40%

Kitimat 3.3 2.4 34% >15% 30-40%

Note: IRR presented using internal assumptions for volumes and cost and consensus estimates for foreign exchange and commodity prices (as at 23 November 2012). EBITDA Margin is average margin of total asset in the five years following project completion. Both IRR and EBITDA Margin presented as a range only and may vary according to commodity price outcomes and other variables.

* Excludes unapproved capex. ** Rio Tinto Share

For

per

sona

l use

onl

y


Shaping the portfolio in line with our strategy

• Capturing value from assets that no longer fit our strategy− >20 divestments worth a total of $12bn completed since 2008− Various strategic review and divestment processes underway

• Further divestments to come, expect substantial cash proceeds over next 12+ months

19

Divestments in 2012 and assets announced as under review

Alcan Cable, Specialty Aluminas, ZAC

Non-core aluminium and coal assets; not “large” or “long life”

Diamonds business Insufficient scale in context of broader Rio Tinto portfolio

Pacific Aluminium Non core

Palabora Mining Non core

For

per

sona

l use

onl

y


• Aim to maintain a single A credit rating

• Long term and smooth debt maturity profile− Weighted average maturity of over

nine years− $5.5 billion of bonds issued in

2012 with a weighted average maturity of around 12 years and coupon of 3.6%

− $1.7 billion of bonds falling due over next 15 months

• Approximately two thirds of gross debt at fixed interest rates

Prudent balance sheet management20

130 June 2012 maturity profile adjusted for $3 billion bond issue August 2012 and $0.5 billion bond maturity September 2012

Proforma gross debt maturity profile at 30 June 20121

US$bn

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

For

per

sona

l use

onl

y


Further significant cost reductions planned21

Source: IPA

Cash cost reduction targetUS$bn, base year = 2012

Australian capital cost inflation2000 = 100

90

100

110

120

130

140

150

160

170

180

190

Australian CPI

Typical Mine + Mineral Processing Facility -

Australia (IPA)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2013 2014

2013 savings 2014 savings

Cost reductions are pre-tax, real terms at constant FX

For

per

sona

l use

onl

y


A disciplined approach to capital allocation

• Prudent balance sheet and single A credit rating in a volatile environment

• Clearly defined approach to capital allocation

• Investment programme focused on the highest quality opportunities

• Substantial reductions in capital plan; further flexibility available

• Progressive dividend provides sustainable long term returns to shareholders

• Return surplus cash to shareholders

• Shaping the portfolio in line with our strategy

• Strong operational performance with further significant cost reductions planned

22

For

per

sona

l use

onl

y

Pilbara, Western Australia

Sam Walsh

23

Chief executive Iron OreFor

per

sona

l use

onl

y


Chinese peak steel production and iron ore requirements in 2030

24

Robust Chinese steel demand growth to peakat around 1 billion tonnes

Infrastructure and buildings decline as proportion of Chinese steel demand

Source: Rio Tinto Source: Rio Tinto

0

200

400

600

800

1000

1200

1400

1600

0

200

400

600

800

1000

1200

2000 2010 2020 2030 2040 2050Iro

n or

e re

quire

men

t (M

t)

Ste

el a

nd S

crap

(Mt)

Crude Steel ProductionScrap GenerationIron Ore Requirement (RHS)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2020 2030

Machinery TransportationWhite and Metal Goods Residential BuildingsCommercial Buildings Industrial BuildingsInfrastructureF

or p

erso

nal u

se o

nly


0200400600800

1000

Announced for 2008-10 Completed by Q4 2010

Certain Probable Possible Rio Tinto Other

Announced and completed iron ore production capacity (global)(million tonnes)

• Announcements from others do not necessarily translate to supply capacity− Competition for labour with oil/ gas− Reduced sources of project

financing− Protracted approvals processes− Shortage of specialist mining skills− Difficulty working in remote

locations

• High cost Chinese domestic supply required to meet demand in the short to medium term

There continues to be significant constraint to the development of new iron ore supply

25

Source: UNCTAD, Rio Tinto analysis

0

200

400

600

800

1000

Announced for 2012-14 Completed by Q3 2012For

per

sona

l use

onl

y


Implied Chinese domestic production and spot prices

26

Chinese domestic iron ore productionis highly price sensitive

Chinese domestic private cost curve – 2012$/dmt CFR

Source: Platts, CU Steel, China National Bureau of Statistics, Rio Tinto analysis.

277367 397 382

276

40

60

80

100

120

140

160

180

100

150

200

250

300

350

400

450

2009 2010 2011 H1 2012 Aug-Sep12

$/dmt,CFR

Mt/annualised

Implied Chinese domestic iron ore productionPlatts 62% Fe price (RH axis)Custeel domestic fines price (RH axis)

0

20

40

60

80

100

120

140

160

180

200

220

240

260

0 50 100 150 200 250 300 350Mtpa

$/dmt CFR

Cumula

Aug-Sept 2012

H1 2012

For

per

sona

l use

onl

y


2012 (Jan-Oct) – actual shipmentsby pricing mechanism

27

Commercially and technically attuned to the needs of customers

2012 (Jan-Oct) – percentageof products by market

Monthly32%

Qtr Lagged33%

Qtr Actual22%

Spot13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China Japan Korea Taiwan India Europe NorthAmerica

PBF PBL RVF RVL HIY Conc. PelletsFor

per

sona

l use

onl

y


80

90

100

110

120

130

140

150

160

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Maintaining iron ore sales and marketingsector leadership

• Matching customers with the right product has led to increased value• 2012 PBF spot sales are on average, more than $2/dmt higher than the prevailing

market price (relative to Platts 62% Fe)• Integrated marketing and operations has led to more efficient loading at ports

28

Platts IODEX Iron ore fines 62% Fe($/dmt CFR)

RTIO PBF spot sales (relative to Platts 62% Fe)(c/dmtu)

80

90

100

110

120

130

140

150

160

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12 -5

0

5

10

15

20

For

per

sona

l use

onl

y


• Final commissioning of CEP phase 1 to 22 Mt/a

• On track for phase 2 to 23.3 Mt/a in 2013

• Consistently high quality products with the lowest phosphorus in the industry

• High grade resource base in excess of 2 billion tonnes1, with an extensive drill programme

• Options for expansion to 50 Mt/a through sequential mine developments available for study

IOC has a pipeline of high grade growth options to meet market demand

29

High grade concentrate stockpiles Sept Iles, Quebec

1Note: Meas = 202Mt @ 39.3 %Fe, Ind = 754Mt @ 38.2 %Fe, Inf = 1,417Mt @ 37.8 %FeSource: Rio Tinto Annual Report 2010

IOC concentrate capacity(Mt/a)

Current 2013 New mine studies

2223.3

50

For

per

sona

l use

onl

y


Rio Tinto Operations

Mesa A

Mesa J

Mt Tom Price

Western Range

Marandoo

Koodaideri

Rio Tinto near-term next generation mines

Carajas50km

Pilbara50km

Rio Tinto & JV tenure

Tier one assets within a globally significant Pilbara resource base

30

Hope Downs 4

Hope Downs 1

Yandicoogina

West Angelas

Channar

Eastern Range

Paraburdoo

Silvergrass

Nammuldi

Brockman 4

Western Turner Syncline

Brockman 2

Caliwingina

For

per

sona

l use

onl

y


0

25

50

75

100

125

150

175

200

225

250

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Resource, reserves and production1

(million tonnes)

31

Resources and reserves growth and drilling effort ahead of production growth

Planned resource development drilling(kilometres)

1 Resource and Reserves in dry tonnes, reported on a 100% basis and Resources exclusive of Reserves. Details of the Mineral Resources Resource and Ore Reserves from 2001 to 2011 are found in the Rio Tinto Annual Reports

Resource InferredIndicatedMeasured

Reserves:

ProbableProved

Production(RHS)

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

For

per

sona

l use

onl

y


0

10

20

30

40

50

60

70

Q1 Q2 Q3 Q4

2010 2011 2012 Capacity

• New nameplate capacity at 237Mt/a− Operations Centre assists deep

system visibility, significantly advancing performance

− Q3 2012 a record productionquarter – 62.9Mt, a 5.2% increaseon Q3 2011

− Shipping remains strong− Closing in on the rail bottleneck

• Continue to build mine stocks in preparation for expansion infrastructure being delivered

Pilbara production(Mt/qtr)

32

Rerated 237Mt/a nameplate capacity as a result of deep system visibility

Source: Rio Tinto

For

per

sona

l use

onl

y


35

40

45

50

55

60

Mar‐11

Apr‐1

1May‐11

Jun‐11

Jul‐1

1Au

g‐11

Sep‐11

Oct‐1

1No

v‐11

Dec‐11

Jan‐12

Feb‐12

Mar‐12

Apr‐1

2May‐12

Jun‐12

Jul‐1

2Au

g‐12

Sep‐12

Oct‐1

2No

v‐12

TC Heidi, Iggy & Lua

25.2

12.58.3

18.822.8

25.2

31.2 31.135.4

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012

()

Mesa J/K Mesa A Warramboo

• Our last major expansion took the integrated system to 220 Mt/a

• Low capex debottlenecking has also assisted capacity gains

• Operational improvements are continuing to stretch the system,for example:− Robe Valley system performance− Car Dumper rates ~ 3%

improvement− Shiploader rates ~ 4%

improvement

Constant system analysis informsa programme of improvement

33

Robe Valley Production(Tonnes (Mt))

Average of a Dampier shiploader throughput(Mtpa, 90 day moving average)

Annualised Rate post de-bottlenecking & 6th consist commissioning

For

per

sona

l use

onl

y


• Technology and automation will continue to drive business success

• Improving sophistication of real time data and progressive cultural change are keys to success

• Substantial benefits will accrue− Cost savings – eg recruiting 900

fewer people− Managing increasing business

complexity− Anticipating problem areas

• Phase II of our Operations Centre will unlock further value across our network

Our Mine of the Future is turning competitive advantage into real business value

34

For

per

sona

l use

onl

y


Remaining focused on cash costs management35

Pilbara cash operating unit cost*(2006 = 100)

Unit cost shown on the graph is Rio Tinto share of Hamersley Iron and Robe River calculated from cash costs for Hamersley Iron and Robe River. Excludes royalties, shipping costs, and in 2006 real terms

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

FY2006

1H2007

2H2007

1H2008

2H2008

1H2009

2H2009

1H2010

2H2010

1H2011

2H2011

1H2012

AUD cost USD cost

• Inflationary pressures persist but signs of easing

• We continue with a strong focus on controlling AUD cash operating unit costs

• 2012 first half costs adversely impacted by weather, as is typically the case

• Increased costs H1 primarily due to manning in preparation for expansion

For

per

sona

l use

onl

y


0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

140

H109 H209 H110 H210 H111 H211 H112

RTIO ($US/t) BHP ($US/t) FMG ($US/t)RTIO % BHP % FMG %

• 2012 EBITDA has been impacted by lower sales prices

• Relative to our competitors our performance remains higher

• 1H 2012 cash cost: US$24.50/tonne

• The Pilbara operations continue to generate strong margins

• Our Pilbara cash operating cost position will decline as we expand, with all key infrastructure in place.

WA IO – EBITDA per tonne(US$/t and %)

36

Leading EBITDA performance in the Western Australia iron ore industry

Source: Rio Tinto ; BHPB; and FMG lodged financial statementsNote: RTIO results exclude Dampier Salt and RT Marine Tonnage based on attributed shipments (adjusted for Robe River at 65% as per financial resultsResults as reported

For

per

sona

l use

onl

y


0

50

100

150

200

250

0 500 1,000 1,500 2,000 2,500

FMG Pilbara Vale

BHP Pilbara RTIO assets

Mtpa

$/wmt CFR

Cumulative capacity

2012 Industry cost curve($/wmt CFR North China)

37

Our assets will continue to be well- positioned on the contestable market cost curve

2020 Industry cost curve($/wmt CFR North China)

Source: Rio Tinto, CRU, AMENote: Includes shipping, royalties and sustaining capital expenditure and is adjusted for inflation and FX

0

50

100

150

200

250

0 500 1,000 1,500 2,000 2,500

FMG Pilbara Vale

BHP Pilbara RTIO assets

Mtpa

$/wmt CFR

Cumulative capacity

RT Pilbara

IOC

Simandou

IOC

RT Pilbara

For

per

sona

l use

onl

y


30

20

10

10

20

30

40

0%

50%

100%

150%

200%

250%

Budget Additional months

We have demonstrated superior performancein delivering projects

38

Western Australian construction projects performance(Cost (% of budget))

Source: Rio Tinto, Pit Crew Management Consulting

RTIO projects Non RTIOprojects

Over budgetbehind schedule

Under budgetahead ofschedule

Mo

nth

s o

ver

bu

dg

et

New Cape Lambert stockpile yardsF

or p

erso

nal u

se o

nly

©2012, Rio Tinto, All Rights Reserved 39

US$1 billion saving for 360 Mt/aexpansion programme

Note: Timing refers to first production

Yandicoogina

2012 2013 2014 2015

BS4 (II)

Sustaining

Growth

Warramboo

WA -Dep ELegend• Not yet approved• Underway• Deleted

HD4

Marandoo

WTS (II)

WA- Dep B

WTS (I) Nammuldi

BS4 (III)

Silvergrass

Koodaideri (I)$1bn

For

per

sona

l use

onl

y


200

220

240

260

280

300

320

340

360

380

2010 2011 2012 2013 2014 2015 2016 2017

Rio Tinto Pilbara iron ore shipping capacity (100% basis)(Mt/a)

40

All “first ore” commitments remain well on-track

Source: Rio Tinto

Aver

age

Annu

alis

edM

tpa

290 First Ore

4Q

1H

340 First Ore

360 First Ore

4Q

For

per

sona

l use

onl

y


200225250275300325350375400425

2010 2011 2012 2013 2014 2015 2016 2017

200225250275300325350375400425

2010 2011 2012 2013 2014 2015 2016 2017

High value optionality of large mine capital vs. low cost incremental system gains

41

Source: Rio Tinto

All growth mines developed(Average Annualised (Mtpa))

Fewer growth mines developed(Average Annualised (Mtpa))

Achievable opportunity 360 Programme (FS) shipped tonnes Port capacity

For

per

sona

l use

onl

y


• Major productivity opportunities exist with volume, capital and labour, with low cost gains, eg− Implement control logic adjustments

and blending control at Brockman 4 (II) plant to provide ~3Mt/a increase

− The 7 Mile rail yard optimisation will deliver ~1Mt/a

− Parker Point reclaimer project expected to deliver ~3Mt/a

− Sustaining capital reduction target of 10-15%

• Achievable through extending our technology- enabled operating model

A robust productivity platform will facilitate growth up to and beyond nameplate capacities

42

For

per

sona

l use

onl

y


Summary

• Ramping supply and customer engagement to meet continuing steel mill customer demand from China and other emerging markets

• First- class asset optionality of a resource-rich Pilbara precinct and the ability to balance large capital mine spend with low cost incremental system gains

• Reaping competitive advantage from innovation in technology and automation, including a rated capacity increased by 7Mt/a through productivity improvements

• Continuing as the Pilbara’s lowest cost, most productive producer

• The demonstrated leader in expansion projects;− Reducing capital spend by $1 billion and holding capital intensity at early

US$150’s− New expansion target of 290Mt/a, 340Mt/a and 360Mt/a− Providing early expansion tonnes at 340Mt/a by 4Q 2014

43

For

per

sona

l use

onl

y


Investor seminar - BreakSydney

29 November 2012

For

per

sona

l use

onl

y

Tom Albanese

45

Chief executive

Oyu Tolgoi, Mongolia

For

per

sona

l use

onl

y


• Earnings impacted by lower prices, a high Australian dollar, and high input costs

• Cost per tonne to build new thermal coal capacity now more expensive in Australia than rest of world

• Focus is on pulling short term productivity levers to boost earnings:− first quartile equipment

performance− procurement− labour cost/productivity

• Significant cost compression in 2013• Coal project options in Australia

under review

Energy: challenging market and cost position46

Source: “Opportunity at Risk: Regaining our competitive edge in minerals resources”, commissioned by and prepared for the Minerals Council of Australia, Port Jackson Partners September 2012

Capital spend to build new thermalcoal capacityUS$ per tonne of capacity

7361

ROW Australia

106

174

ROW Australia

2007 2011/12

For

per

sona

l use

onl

y


Coal• Mozambique: − Significant exploration activity in Moatize Basin− Resource and infrastructure studies progressing

with industry & Government

Uranium• Promising exploration programme in the highly

prospective Athabasca basin following 2012 acquisition of Hathor

• Exploration decline commenced at ERA to prove up and extend underground uranium resource at Ranger

• Active exploration of new satellite resource (Z20) at Rössing. Further development of growth projects dependent on market conditions

Divestments• US$227 million net gain on sale of Extract and

Kalahari interests• US$50 million from sale of Riversdale Holdings

(74% shareholder in ZAC)

Energy portfolio maintains long term optionality47

Roughrider Project, Saskatchewan

Benga Mine, Mozambique

For

per

sona

l use

onl

y


• $366m sustainable EBITDA improvements since 2011

• Annual business improvement run-rate exceeding $250 million

• Accelerating and increasing cost reduction − Further reductions in SG&A− Productivity improvements

• Revenue improvement from production creep, value added product and bauxite

• Yarwun 2 and Kitimat to deliver EBITDA improvement

• Portfolio management

Rio Tinto Alcan on track to deliver over $1.6 billion of EBITDA improvement by end of 2015

48

*As at September 2012

Business improvement by source%

Total transformation$ millions

0

500

1000

1500

2000

2011 2012* 2013 2014 2015

Actual Business improvement Growth

51%

17%

16%

16%

CostsCreepValue Added ProductBauxite

For

per

sona

l use

onl

y


• Binding power agreement with Inner Mongolia signed− All lines energised and commissioning

commenced week of November 12th

• Project 97% complete

• Sales contracts for 75% of concentratein place

• Transitioning to 90% Mongolian operations workforce

Countdown to first commercial production at Oyu Tolgoi

49

Event Timeline

First ore through SAG mill January 2013

First concentrate production 1 month post commissioning

Commercial production(30 days at 70%)

May – June 2013

For

per

sona

l use

onl

y

Alan Davies

50

Chief executive, Diamonds & MineralsFor

per

sona

l use

onl

y


• Portfolio of industry leading businesses

• Global macro-trends are driving mid-late cycle demand growth

• TiO2 poised to become a significant contributor to Group earnings over the coming decade

• Strong underlying position in minerals, with significant optionality to grow

• Well placed to supply the growing Asian salt market

• Diamonds strategic review progressing

• Simandou is changing the way mining projects are delivered in Africa

A leader in our markets and well placedto capture value from the economic cycle

51

Richards Bay Minerals, South Africa

For

per

sona

l use

onl

y


A portfolio of industry leading assets52

• #1 producer of TiO2 feedstocks

• Mines in South Africa, Canada, Madagascar with significant expansion potential

• Portfolio optimised through technology and expertise

• #2 producer of refined borates

• Tier one mine in California with expansion optionality

• Jadar lithium-borate project in Serbia

• Potash JV in Saskatchewan

• #3 rough diamond producer &leader in coloureds

• Mines in Aus, Canada, Zimbabwe

• Project in India• Strategic review

underway

• #1 exporter of solar salt

• JV between Rio Tinto (68%), Marubeni (22%), Sojitz(10%)

• 3 mines in Western Australia

• Largest untapped iron ore deposit

• High grade (65-66% Fe)

• Lowest quartile cost producer

• Unique development partnership

Titanium dioxide Minerals Diamonds Salt Simandou

For

per

sona

l use

onl

y


Pigment apparent consumption Kg of pigment, GDP per capita (2001 – 2011)

53

Titanium dioxide to follow a similar development path to steel

TiO2 demand developmentMillion tonnes, pigment (LHS), crude steel (RHS)

Source: Rio Tinto, TZ Minerals International Source: Rio Tinto, World Steel Association

Steel –1991

Steel –2011

0

200

400

600

800

1000

1200

1400

1600

1800

2000

0

2

4

6

8

10

12

14

16

18

2001 2011 2020 2030 2040 2050

Developing EconomiesChinaDeveloped economiesWorld steel production (RHS)

China(2040)

For

per

sona

l use

onl

y


• 3 new operations the size of RBM will need to be brought online by 2020 to satisfy demand projections

• Slow industry supply-side response

• Some market softness in 2013 expected – coincides with two furnace rebuilds

• RBM acquisition provides control of tier 1, highly cash generative asset

• Potential to further expand mining and refining capacity by up to 50%

• Strong resource position to capture further demand upside

TiO2 supply and demand growthMillions TiO2 units

54

Rio Tinto Iron and Titanium has optionsto participate in market growth

Source: Rio Tinto

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Online supply Committed projectsDemand Rio Tinto growth optionsF

or p

erso

nal u

se o

nly


Co-products add significant portfolio value

• Leveraging technology to create valuable products instead of waste

• Co-products include high purity iron, steel, metal powders, zircon and rutile.

• Provides greater flexibility to respond to changing market environment

• Co-products account for nearly 50% of revenues for the last five years

• Steady increase in value projected

55

RTIT revenue by product lineUS$, billions, 100% basis

0

0.5

1

1.5

2

2.5

2007 2008 2009 2010 2011

Co-product revenue TiO2 feedstock revenue

For

per

sona

l use

onl

y


• Replacing long-term price contracts

• Exposure to prices potentially up to 300% higher than those under long term contracts

• Inventory overhang for zircon and high grade feedstocks putting pressure on short term pricing

• Zircon is produced as a non-discretionary by-product of TiO2

• Medium to long term industry fundamentals remain robust, underpinning titanium dioxide business

• Leveraging marketing experience

Outlook continues to be strong with some short term oversupply in high grade feedstock

56

Source: Rio Tinto

Price progression estimates from TZMI and brokersUS$ nominal

TiO2 contract volumes split 2011 – 2015‘000 TiO2 units

0

1000

2000

3000

2005 2007 2009 2011 2013

Rutile TiO2 slags Zircon

0500

1000150020002500

2011 2012 2013 2014 2015

Longer-term pricing Shorter-term pricingFor

per

sona

l use

onl

y


Supplying borates to high growth end users57

Global refined borate demand driversCumulative kmt boric oxide B2O3 equivalent

Industry demand for 5 Mol1 products5 Mol industry equivalent industry, B203 kmt

Industry demand for boric acid productsBoric acid industry equivalent industry, B203 kmt

• High growth in refined borates driven by rising environmental and productivity standards

• Product strategy focussing on supplying the high quality products to high demand end users

• Short term tightness in sodium borates industry, mid to long term upside in boric acid

*CAGR from 2012 – 2020Source: Rio Tinto

15 Mol is the primary sodium borate product sold by RTM

5.4%

6.1%

5.2%

CAGR*

0200400600800

100012001400

Urbanisation Energy Efficiency Agriculture

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total 5 mol supply Total 5 mol equivalent demand

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total BA supply Total BA equivalent demandFor

per

sona

l use

onl

y


• Tier 1 orebody at Boron, California• Consistent quality and reliability• Flexible production responsive to

market demand • Leveraging upside pricing potential • Incremental capacity expansions• MDDK* introduces a new process− Supports efficient mine utilisation− Optimise product mix− Low capital intensity

• Strategic options for development from Jadar

Strategic optionality built into theborates business

58

Source: Rio Tinto

Global refined borate share of sales2010, %

Rio Tinto productionB203 kmt

RTM, 33.6%

Eti, 38.7%SVM, 6.5%

SAM, 6.2%

Bor, 3.4%China, 10.5%

Other, 1.1%

• MDDK – Modified Direct Dissolving of KerniteFor

per

sona

l use

onl

y


Expansion into complementary sectors59

Jadar Lithium-Borate, Serbia Potash, Saskatchewan

• 2 high value product streams from one mine• Expansion of global borate sales• Potential to supply 20% lithium market• Currently in pre-feasibility phase

• Developement JV in premier potash basin• Synergies with borates businesses• Exploration targeting a tier one resource

suitable for solution mining – initial results promising

• Proximity to available infrastructure, including Rio Tinto owned Kitimat port

For

per

sona

l use

onl

y


• Three operations in Western Australia with a combined capacity in excess of 10Mtpa with ability to expand to meet demand growth

• Synergies with the iron ore business• Demand growth driven by Chinese

imports to fuel automotive, construction and electronic sectors

• Potential for incremental expansion in response to demand growth in China

• Lower energy costs compared with China domestic well salt competitors

• ~75% 2013 pricing contracts completed

Dampier Salt1 – the world’s largest exporterof salt

60

1Rio Tinto 68%, Marubeni 22%, Sojitz 10%Source: Rio Tinto

Asian salt demandMillion tonnes

Chinese salt importsMillion tonnes

-

40

80

120

160

2010 2014 2018 2022 2026 2030

Vietnam Phillipines Malaysia IndonesiaTaiwan South Korea Japan China

1.62.7

4.15

2009 2010 2011 2012F

CAGR33%

3%

0%0%0%8%

10%

16%

CAGR

For

per

sona

l use

onl

y


• Strong industry fundamentalsdriving price− Lack of significant discoveries and

long development lead times− Late cycle demand development

being led by China and India

• Continuing to invest in growth options− Argyle underground moving

forward, Crusher 1 to be commissioned early Q1 2013

− Open pit mining at Diavikcomplete, underground mining from all three pipes underway

− Bunder project in pre-feasibility

Diamonds are well positioned forprofitable growth

61

Courageous Spirit, inaugural Bunder diamond jewellery collection

For

per

sona

l use

onl

y


Sierra Leone

Liberia

Faranah

Beyla

Mamou

Conakry

Forécariah

Ile Coastal Plain Mamou Range Eastern Plateau Region MineKabak

Guinea

• Largest known undeveloped iron ore deposit in the world

• Progressive development of railway, mine and port

• First shipment of ore by mid-2015

• Project is advancing against clear milestones agreed with the Government of Guinea

• Investment will be phased in line with:− Finalisation of Investment

Agreement− Finalisation of partner and project

financing strategy − Government approvals for work on

the ground

Simandou, a tier one iron ore projectin a world class province

62

New airstrips

Pre-stripping (Oueleba main)

Camps & logistic centresInfrastructure corridorMarine Offload FacilityStockyard earthworks

Potential phased ore delivery Proposed rail line

West rail (multiple fronts)East rail (multiple fronts)

Access Road and Causeway

Progressive delivery of the Simandou project

For

per

sona

l use

onl

y


• Partnership underpins development strategy and risk management approach

• Local and sustainable development− Cross-sector partnerships to

encourage economic diversification

− Capacity development and training to build skills and institutions

• Infrastructure creates a key lever for regional economic development

A project of this magnitude requires a unique approach to development

63

Drill pads, Simandou,Guinea

For

per

sona

l use

onl

y


• Simandou infrastructure declared a Project of National Interest for Guinea by Presidential Decree

• Scope and location of rail and port approved

• Construction of the pioneering marine offload facility underway

• Proceeding with preparatory works such as roads along corridor and to the mine, logistic centres and construction camps

• Engineering progressing towards a Bankable Feasibility Study

• Completion of Social Impact and Environment Assessment

Phased development and ramp up64

Road development between Farannahand Kissidougou

Ground clearing work at the port

For

per

sona

l use

onl

y


• Entering a new phase of demand growth for commodities

• Global shift in wealth and demographic profiles driving demand for our products

• Assets provide exposure to different economic drivers and later-cycle inflection points

• Maximising shareholder value through a diverse portfolio of world class, long life, expandable assets operating as sector leaders

• Generating options to participate in market demand growth

• Developing a tier 1 iron ore project in Guinea

Diamonds and Minerals poised to becomea significant contributor to the Group

65

Rehabilitated land at Richards Bay Minerals,South Africa

For

per

sona

l use

onl

y

Shanghai, China

Tom Albanese

66

Chief executiveFor

per

sona

l use

onl

y


Executing our strategy

• Long term industry fundamentals remain attractive

• Rio Tinto’s strategy remains unchanged – large, long life, low cost assets

• Disciplined and rigorous capital allocation and prioritisation

• Optimisation of capital expenditure; further flexibility available

• Strong operational performance with further significant cost reductions planned

• Material cash proceeds to be delivered through ongoing portfolio optimisation

• Technology and innovation delivers substantial value

• Focused on maximising total shareholder return

67

For

per

sona

l use

onl

y


Investor seminarSydney

29 November 2012

For

per

sona

l use

onl

y

for personal use only - asx · 2012-11-29 · this presentation has been prepared by rio tinto plc...

Documents