Slide 1: 2017 full year results
2017 full year results 7 February 2018 London
Slide 2: Cautionary statements
2 Cautionary statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document, including but not limited to
Slide 3: Supporting statements
3 Supporting statements Ore Reserves (slide 30) Reserve grade for Oyu Tolgoi Underground – Hugo Dummett North and Hugo Dummett North Extension. Probable Ore Reserves for Hugo Dummett North and Hugo Dummett North Extension (499 Mt at 1.66% Cu, 0.35g/t Au) were released to the market in the 2016 Rio T
Slide 4: J-S Jacques, Chief executive
J-S Jacques Chief executive
Slide 5: Our strategy is delivering
5 Our strategy is delivering Cash returns to shareholders of $9.7 billion declared for 2017 - Highest ever full year dividend of $5.2 billion (290 US cents per share) - Additional share buy-back of $1.0 billion to be completed in 2018 EBITDA of $18.6 billion, margin of 44% Reshaping the portfo
Slide 6: Strong results delivered in 2017
6 Strong results delivered in 2017 Robust financial performance Disciplined capital allocation Positioning for the long-term EBITDA of $18.6 billion Full year 2017 dividend of $5.2 billion Silvergrass iron ore mine commissioned in Q4 2017 Operating cash flow of $13.9 billion Share buy-backs declared
Slide 7: Safety and health come first
7 Safety and health come first Continuing history of improvement Fatality at Kennecott in October Focusing on fatality elimination – Rio Tinto ICMM (23 companies) 2.78 1.5 million CRM verifications in 2017 Reducing injuries – Targeted hazard elimination campaigns All injury frequency rate per 200,00
Slide 8: Superior returns from world-class assets
8 Superior returns from world-class assets Iron Ore Aluminium Copper & Diamonds Energy & Minerals 68% 35% 39% 36% Margins Pilbara operations FOB Integrated operations EBITDA margin EBITDA margin EBITDA margin EBITDA margin Cash flows from operations Cash flows from operations Cash flows from operati
Slide 9: Chris Lynch, Chief financial officer
Chris Lynch Chief financial officer
Slide 10: Robust demand drove stronger prices in 2017
10 Robust demand drove stronger prices in 2017 Iron Ore Aluminium 1 1 0.5 0.5 2015 2016 2017 2015 2016 2017 Iron ore (FOB) 2015 avg 2016 avg 2017 avg Aluminium (LME + MW Premium) 2015 avg 2016 avg 2017 avg Copper Hard Coking Coal 3 2.5 2 1 1.5 1 0.5 0.5 2015 2016 2017 2015 2016 2017 Copper 2015 avg
Slide 11: Outperforming in key commodities
11 Outperforming in key commodities Rio Tinto Iron Ore EBITDA performance EBITDA 58% relativity to margin (%) Platts 62% index Iron Ore EBITDA FOB margin increases to 68% 70% 0% Significant spread between high and low quality iron ores 60% -10% 50% -20% Steelmakers targeting high-grade / low-impurit
Slide 12: Higher prices driving increased earnings
12 Higher prices driving increased earnings Underlying earnings 2016 vs 2017 $ billion (post tax) 10 4.1 0.4 9 8.5 0.1 8.6 (0.3) (0.2) 8 (0.4) (0.1) (0.1) Total cost reductions1 of 7 $0.4bn post-tax or $0.6bn pre-tax 6 5.1 5 4 3 2 1 0 FY2016 Price Exchange Energy & Flexed FY16 Volumes Cash cost Esco
Slide 13: $2 billion cost-out programme completed
13 $2 billion cost-out programme completed Pre-tax operating cash cost improvements Reduction vs. 2012 ($ billion) 0.6 8.3 $8.3 billion cost savings achieved since 1 Jan 2013 1.6 $2.2 billion cost savings across 2016/17 1.3 – Achieved target six months ahead of schedule 1.5 – Offsetting raw material
Slide 14: Focus now on delivering mine to market productivity
14 Focus now on delivering mine to market productivity Post-tax mine to market (M2M) productivity programme ($ billion) 0.7 Volumes 0.2 (0.2) 0.5 0.02 0.1 (0.1) Cost 0.5 487 487 411 0.4 0.4 Cost and volumes Tax (notional 30%) Cost and volumes Adjustments* Iron ore volumes 2017 M2M (post-tax) adjustm
Slide 15: Productivity programme delivering $5 billion of additional free cash flow by 2021
15 Productivity programme delivering $5 billion of additional free cash flow by 2021 Post-tax mine to market (M2M) productivity programme ($ billion) $0.4 billion mine to market free cash flow delivered in 2017 Headwinds from raw material inputs Cumulative 2017 and 2018 mine to market 0.6 forecast o
Slide 16: Disciplined capital allocation
16 Disciplined capital allocation Essential 1 sustaining capex Further cash Compelling Ordinary returns to 2 dividends shareholders growth Iterative 3 cycle of Debt management ©2018, Rio Tinto, All Rights Reserved
Slide 17: Sustaining capital and compelling growth
17 Sustaining capital and compelling growth Capital expenditure profile Maintained sustaining capital guidance of $2.0 to $2.5 $ billion billion per year, including: ~6.0 ~6.0 – Iron Ore sustaining capex of ~$1 billion per year ~5.5 Pilbara replacement capital includes Koodaideri 4.5 development fro
Slide 18: Strong balance sheet
18 Strong balance sheet Net debt Adjusted net debt of $7 billion reflecting: ($ billion) – $1.9 billion outstanding from Sept-2017 buy-back 9.6 – $1.2 billion tax payment in 2018 based on 2017 profits Strong balance sheet: 1.2 7.0 – Provides stable foundation against any market 1.9 volatility – Supp
Slide 19: Disciplined allocation of strong cash flow in 2017
19 Disciplined allocation of strong cash flow in 2017 Cash flow 2017 $8.2 billion (49)% of cash generated in 2017 ($ billion) allocated to shareholder returns ($ billion) 2.7 16.7 13.9 0.1 2.0 $1.2 billion 5.9* Total cash from asset allocated to disposals of $2.8bn Australian tax 2.5 payment $1.9 bi
Slide 20: Application of the returns policy
20 Application of the returns policy Capital return considerations Comments Underlying earnings up 69% to $8.6 billion Results for 2017 Operating cash flow of $13.9 billion Commissioned Silvergrass, focused on Amrun and Oyu Tolgoi Long term growth prospects Ongoing exploration and evaluation program
Slide 21: Delivering superior returns for shareholders
21 Delivering superior returns for shareholders Cash returns paid to shareholders in 2017 Final 2016 dividend paid of 125 US cents per share, and ($ billion)* record 2017 interim dividend of 110 US cents per share, Paid Paid $4.2 billion in total paid to shareholders Paid 0.6 Share buy-back of
Slide 22: Delivering superior returns for shareholders
22 Delivering superior returns for shareholders 2017 returns declared to shareholders Record full year 2017 dividend declared of $5.2 billion or ($ billion) 290 US cents per share, including final 2017 dividend declared of 180 US cents per share 1.0 $2.5bn from Coal Additional share buy-back of $1.0
Slide 23: J-S Jacques, Chief executive
RioTinto J-S Jacques Chief executive
Slide 24: Global macro indicators remain supportive
24 Global macro indicators remain supportive PMIs remain elevated Global growth momentum remains healthy 65 US growth supported by record high consumer confidence and healthy 60 manufacturing and investment 55 EU performing better than expectations on stronger manufacturing and Index consumer confid
Slide 25: Impact of China policy changes on steel capacity
25 Impact of China policy changes on steel capacity Supply-side reform steel capacity cuts by province (excluding IFs) Cuts of 58 Mtpa of steel capacity in 2017 and 2018 ‒ ~5% of total Chinese steel capacity Hebei 34 Mtpa ‒ In addition to induction furnace (IF) capacity Others 8 Mtpa closures of >10
Slide 26: Impact of China policy changes on aluminium capacity
26 Impact of China policy changes on aluminium capacity Supply-side reform aluminium capacity cuts by province 3.8 Mtpa of illegal capacity removed in 2017 and 2018 ‒ ~9% of total Chinese aluminium capacity Xinjiang Inner ‒ Potential for some restarts 0.9 Mtpa Mongolia 0.4 Mtpa 0.7 Mtpa of capacity
Slide 27: Our product quality is delivering a significant competitive advantage
27 Our product quality is delivering a significant competitive advantage in commodities with strong demand Our premium products …have a significant Our 62% iron ore High-quality, Our copper growth High quality niche and High quality, low carbon benefits from structural expandable bauxite profile is
Slide 28: Developing a flexible value over volume iron ore system
28 Developing a flexible value over volume iron ore system Future system capacity Q4 2017 shipments of 90 Mt shows flexibility and potential of system Mine capacity of ~360 Mt/a, with full Silvergrass ramp-up and productivity creep Building excess rail capacity to provide for flexibility and sprint
Slide 29: Delivering $5 billion of additional free cash flow from productivity
29 Delivering $5 billion of additional free cash flow from productivity Mine to market …with a focus on …delivering $5 billion of additional free productivity… Marketing four levers… cash flow Best practice Mining Infrastructure Asset Productivity Partnering with management Processing Opportunity ou
Slide 30: High-return growth
30 High-return growth Significant portfolio Longer-term Amrun Oyu Tolgoi Underground opportunities growth opportunities Creating seaborne bauxite Largest and highest quality Pilbara iron ore, Queensland bauxite, Extensive exploration and evaluation market, high-grade, expandable copper development i
Slide 31: Strategy will deliver value through the cycle
31 Strategy will deliver value through the cycle Superior cash generation World-class assets Operating excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth ©2018, Rio Tinto, All Rights Res
Slide 32: Continuing to deliver superior returns
32 Continuing to deliver superior returns Cash returns to shareholders of $9.7 billion declared for 2017 Operating cash flow of $13.9 billion Reshaping the portfolio with divestments completed of $2.7 billion Invested $2.5 billion in high-return growth Delivered $0.4 billion free cash flow
Slide 33: Appendix
RioTinto Appendix
Slide 34: Prices generally higher in 2017
34 Prices generally higher in 2017 Underlying earnings 2016 vs 2017 $ million (post tax) 10,000 4,107 Iron ore Aluminium* Copper Other coal Met. coal Minerals Diamonds Uranium Other, net 8,000 2,500 1,933 2,000 6,000 1,500 989 5,100 1,000 479 500 311 292 4,000 71 71 0 (7) (32) -500 2,000 0 2016 Pric
Slide 35: Lower coal sales offset by strong sales in iron ore, RTIT and aluminium
35 Lower coal sales offset by strong sales in iron ore, RTIT and aluminium Underlying earnings 2016 vs 2017 $ million (post tax) 10,000 4,107 95 8,548 114 (294) 56 55* 8,000 (125) (240) 21 21 6,000 5,100 (6) (17) (24) 4,000 (87) 2,000 0 2016 Price Exchange Energy Inflation Flexed Volumes underlying
Slide 36: Iron Ore: our low-cost advantage has been sustained over many years
36 Iron Ore: our low-cost advantage has been sustained over many years Pilbara cash unit cost 2017 cash unit cost of $13.4/t (2% lower than $13.7/t in 2016) $ per tonne Focus remains on maintaining consistently attractive FOB EBITDA margins (68% in 2017) 20.4 – ~10% increase in haul distance for 201
Slide 37: Iron Ore: increased price, cost reductions and volumes
37 Iron Ore: increased price, cost reductions and volumes Underlying earnings 2016 vs 2017 $ million (post tax) 8,000 239 181 6,692 1,784 6,190 82 6,000 (106) (50) (49) 4,611 4,000 2,000 0 2016 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Tax & other 2017 underlying earn
Slide 38: Aluminium: higher prices driving increased earnings
38 Aluminium: higher prices driving increased earnings Underlying earnings 2016 vs 2017 $ million (post tax) 2,500 989 2,000 55 1,684 1,583 (106) (48) (17) 1,500 (98) (139) 947 1,000 500 0 2016 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Tax & other 2017 underlying earn
Slide 39: Copper & Diamonds: higher prices and cost savings partly offset
39 Copper & Diamonds: higher prices and cost savings partly offset by one-offs, lower volumes and inflation Underlying earnings 2016 vs 2017 $ million (post tax) 750 480 112 500 402 (16) (13) (11) 263 (31) 250 (27) (176) (37) 0 (18) -250 2016 Price Exchange Energy Inflation Flexed Volumes Cash cost
Slide 40: Energy & Minerals: higher prices and further cost improvements
40 Energy & Minerals: higher prices and further cost improvements driving earnings Underlying earnings 2016 vs 2017 $ million (post tax) 1,500 778 36 81 1,242 1,239 1,250 (63) (26) (62) (16) (98) 1,000 750 612 500 250 0 2016 Price Exchange Energy Inflation Flexed 2016 Volumes Cash cost Exploration &
Slide 41: Other movements in underlying earnings
41 Other movements in underlying earnings Underlying earnings impact Energy & Interest, tax & $ million 2016 FX/ price Inflation Volumes Cash Costs Epl'n eval'n Non Cash other 2017 Other operations (88) 73 12 20 52 - 14 (221) (138) Exploration & Evaluation (net) (147) - - - - (31) - - (178) Interest
Slide 42: Near-term maturities further reduced in 2017
42 Near-term maturities further reduced in 2017 $(m) 31 Dec 2016 debt maturity profile* 3,000 Gross debt reduced by $2.7 billion in 2017 2,000 $2.5 billion nominal value of bonds purchased or 1,000 repaid with cash 0 2034-2039 2022 2029 2017 2018 2019 2020 2021 2023 2024 2025 2026 2027 2028 2030 203
Slide 43: Rigorous measurement of productivity gains
43 Rigorous measurement of productivity gains Accounting basis – Free cash flow basis, Rio Tinto share, post-tax Price – Actual price achieved each year – not a constant or rebased price Commercial excellence – Variation of product mix included Volumes – Tonnes from growth capex excluded – Adjustmen
Slide 44: Modelling earnings
44 Modelling earnings 2017 ($m) impact on FY 2017 underlying earnings of average price/ Earnings sensitivity 10% price/rate change rate Copper 281c/lb 242 Aluminium $1,969/t 592 Gold $1,257/oz 30 Iron ore (62% Fe FOB) $64.1/dmt 1,037 Coking coal (realised) $169/t 69 A$ 77USc 674 C$ 77USc 160 Oil $54
Slide 45: Net earnings
45 Net earnings US$m 2017 underlying earnings 8,627 Impairments (481) Net gains on disposals 2,022 Exchange gains/losses on (810) debt and derivatives Changes in corporate tax rates (439) in the US and France Adjustment to deferred tax assets (202) relating to planned divestments Other 45 2017 net e
Slide 46: Grasberg metal strip
46 Grasberg metal strip Grasberg metal strip thresholds1 Rio Tinto is entitled to 40% of all production in excess of the metal strip Cu Au Ag (m lbs) (000 oz) (000 oz) Entitled to 40% of all production from ~2022 2017 1,001 1,602 3,877 2018 1,008 1,861 3,825 ‒ First full year of 40% share expected i