Rio Tinto Plc · LSE:RIO
Rio Tinto — FY2020 Earnings Presentation
57 slides from Rio Tinto's earnings presentation, Feb 17, 2021
Slide 1: 2020 Full Year Results
2020 Full Year Results 17 February 2021
Slide 2: Cautionary and supporting statements
Cautionary and supporting statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (together with their subsidiaries, “Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking stateme
Slide 3: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive Image supplied courtesy of Puutu Kunti Kurrama and Pinikura (PKKP) people
Slide 4: Strong performance overshadowed by Juukan Gorge
Strong performance overshadowed by Juukan Gorge Health, Safety & Financials Climate Communities Wellbeing & Heritage Fatality-free $23.9bn Scope 3 Juukan Gorge Second year in a row EBITDA Goals, targets & objectives set Tragic event 0.37 AIFR1,12% 27% Scope 1 & 2 CO2e Reconciliation ROCE lower YoY e
Slide 5: Peter Cunningham, Interim Chief Financial Officer
Peter Cunningham Interim Chief Financial Officer
Slide 6: Strong demand and supply lag in iron ore
Strong demand and supply lag in iron ore China’s crude steel production (Mt annualised) Iron Ore* (+17% YoY) 1150 200 180 1100 160 1050 140 1000 120 100 950 80 900 60 40 850 20 800 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 5 Yr Range 2019 2020
Slide 7: Strong H2 recovery in copper and aluminium
Strong H2 recovery in copper and aluminium Aluminium* (-5% YoY) Copper (+3% YoY) TiO2 (chloride slag) (+1% YoY) 2800 600 380 2600 360 500 340 850 2400 400 320 2200 800 300 2000 300 750 280 1800 200 260 700 1600 240 100 650 1400 220 1200 0 200 600 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 Jan
Slide 8: Very strong financial results
Very strong financial results ($bn, except for per share data) 2020 2019 Comparison Consolidated sales revenue 44.6 43.2 +3% Underlying EBITDA 23.9 21.2 +13% ROCE 27% 24% Cash flow from operations 15.9 14.9* +6% Free cash flow 9.4 9.2* +3% Underlying earnings 12.4 10.4 +20% Underlying earnings per s
Slide 9: Significant momentum from higher iron ore prices
Significant momentum from higher iron ore prices Underlying EBITDA $bn 3.4 0.5 24.7 0.2 23.9 0.1 0.3 0.5 21.2 0.4 0.1 Iron Ore +3.3 Aluminium -0.3 Copper +0.4 2019 Prices Exchange Energy Inflation Flexed 2019 Volumes Unit cash Non-cash One offs 2020 Underlying Underlying & Mix costs costs & Underlyi
Slide 10: Maintained industry-leading profitability
Maintained industry-leading profitability.… Return on invested capital*, post tax Average ROCE 2010 to 2020 of 18% 35% Average ROCE 2001 to 2009 of 21% 30% Only one year of single digit ROCE 25% in two decades 20% 15% 10% 5% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Range for ke
Slide 11: …which we continue to translate into strong cash flows
…which we continue to translate into strong cash flows Cash flow in $bn Capital allocation framework in action 20.0 18.3 15.1 15.9 14.3 14.9 13.7 New 13.9 returns policy 11.8 9.4 9.4 9.5 9.2 9.4 7.7 8.5 6.9 7.0 5.8 4.8 2.1 (8.1) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Operating cash f
Slide 12: Iron Ore: Robust operations and strong price
Iron Ore Robust operations and strong price Operating metrics 2020 2019 2021 Continue to review mine plans to protect comparison guidance sites of exceptional cultural value and Average realised price1, 3 $98.9/t + 15% increased monitoring of operating Shipments3 (100% basis) 330.6mt + 1% 325-340Mt
Slide 13: Strength in A$ driving unit cost increase in the short term
Strength in A$ driving unit cost increase in the short term 0.4 17.2 Commissioning of Gudai-Darri in 2021 to drive the 0.3 system towards sustainably higher production if 0.5 there is market demand 1.6 16.0 Mines are healthy with record TMM. Mine health 15.4 creates options to mitigate heritage cons
Slide 14: Aluminium: Stable operations and commercial flexibility
Aluminium Stable operations and commercial flexibility 2020 2019 2021 FCF of $0.9bn despite challenging Operating metrics comparison guidance market conditions Average aluminium price1 $1,946/t - 9% Average alumina price2 $ 271/t - 18% Significantly lower sales prices, and Production – bauxite 56.1M
Slide 15: Copper & Diamonds
Copper & Diamonds Maintained investment in challenging year 2020 2019 2021 Strong recovery in copper price and Operating metrics comparison guidance tight cost control supported EBITDA Copper realised price 283c/lb + 3% and margin despite an extended Production – mined copper 528kt - 9% 500-550kt sm
Slide 16: Energy & Minerals
Energy & Minerals Solid operational delivery in face of significant COVID-19 restrictions 2020 2019 2021 Significant COVID-19 restrictions in Operating metrics comparison guidance the US, Canada and South Africa IOC pellets price1 $127.6/t - 7% Commercial flexibility at IOC: TiO2 slag price2 $790/t
Slide 17: Disciplined allocation of capital
Disciplined allocation of capital Essential 1 sustaining capex Further cash returns to Compelling Ordinary 2 dividends shareholders growth Iterative 3 cycle of Debt management ©2021, Rio Tinto, All Rights Reserved 17
Slide 18: Strong A$ driving an increase in capital profile
Strong A$ driving an increase in capital profile Capital expenditure profile 2020 capex of $6.2bn comprised of $3bn sustaining $bn and $3.2bn development and replacement Depreciation ~7.5 ~7.5 ~7.5 Guidance for 2021 and 2022 is around $7.5bn (previously around $7bn). Cumulative capex of 6.2 ~$21bn 2
Slide 19: Balance sheet strength adds to our resilience
Balance sheet strength adds to our resilience Net debt Balance sheet strength is an asset. $bn Offers resilience and creates optionality 14.1 Gearing 1% and net debt to LTM^ EBITDA of 0.03x Operating cash flow of $15.9bn after paying $7.8bn 12.9 11.3 in taxes and royalties 10.0 9.3 9.3 Invested $6.2
Slide 20: Stable five-year record of shareholder returns
Stable five-year record of shareholder returns Our pay-out ratio has averaged 73%* over past five years Full year total dividend of $9bn and a 72% pay-out ratio including 60% for the ordinary dividend in 2020 160 $6.5bn final dividend including $5.0bn (309 US cents per share) ordinary and $1.5bn spe
Slide 21: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive
Slide 22: Building on our strengths with opportunities to improve
Building on our strengths with opportunities to improve Strong safety Great Portfolio of world- Cash generation Strong record people class assets & capital discipline balance sheet Good operator Good ESG credentials, Room to sharpen focus shaken by Juukan Gorge on project development Damaged reputat
Slide 23: Four areas of focus for an even stronger Rio Tinto
Four areas of focus for an even stronger Rio Tinto Best operator Impeccable ESG Excel in Expand capability credentials development and leadership Strengthen track Deliver organic & record and inorganic growth transparency Social License Earn trust by building meaningful relationships and partnership
Slide 24: Experienced executive team to drive vision
Experienced executive team to drive vision Bold Baatar, Ivan Vella Peter Cunningham Kellie Parker Chief Executive Rio Tinto Copper Chief Executive Interim Chief Financial Officer Chief Executive Australia Rio Tinto Aluminium Mark Davies Alf Barrios Jakob Stausholm Barbara Levi Arnaud Soirat Group Ex
Slide 25: Pursuing excellence
Best operator Impeccable Excel in ESG Development credentials Pursuing excellence Social License Safety always our priority We are good operators but have room for improvement Operational excellence to drive productivity and unlock sustainable improvements This is about working consistently across t
Slide 26: Good ESG credentials shaken by Juukan Gorge
Best operator Impeccable Excel in ESG Development credentials Good ESG credentials shaken Social License by Juukan Gorge Safety Climate 12% lower AIFR1 YoY The Board intends to put the climate report Fatality-free year to an advisory vote at 2022 AGMs Strengthened link between executive Communities
Slide 27: Ongoing renewal of the portfolio
Best operator Impeccable Excel in ESG Development credentials Ongoing renewal of the portfolio Social License 2021 2022 Consistency in exploration & Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 evaluation spend. ~70% on copper & nickel in 2020 Pilbara projects (Iron ore, Australia) Gudai-Darri ramp-up Early sta
Slide 28: Oyu Tolgoi Underground
Best operator Impeccable Excel in ESG Development credentials Oyu Tolgoi Underground Social License Developing a world-class asset Estimate for Panel 01: $6.75bn development capex; Safe & feasible pathway to October 2022 sustainable production One of the largest block cave mines. Proven strength in
Slide 29: Unleash our full potential
Unleash our full potential Best operator Impeccable ESG Excel in Expand capability credentials development and leadership Strengthen track Deliver organic & record and inorganic growth transparency Social License Earn trust by building meaningful relationships and partnerships ©2021, Rio Tinto, All
Slide 30: Appendix
Appendix
Slide 31: We produce materials essential for a low-carbon future
We produce materials essential for a low-carbon future Rising societal expectations Affecting both demand and supply of commodities Decarbonisation Electrification of energy, transport and industries. Demand for higher product quality Population Urbanisation & Transition growth industrialisation in
Slide 32: Oyu Tolgoi delivers substantial economic value to Mongolia
Oyu Tolgoi delivers substantial economic value to Mongolia FDI: OT accounts for one-third of Mongolia’s GDP; Total in-country spend 70% of Foreign Direct Investment (2010 – 2020) Between 2010 and the third JOBS: Country’s largest private-sector employer, workforce quarter of 2020, Oyu Tolgoi spent o
Slide 33: Significant Paterson footprint with potential beyond Winu
Significant Paterson footprint with potential beyond Winu – Extensive portfolio of 100% owned tenure, majority owned joint RT Paterson JV’s RT Status SIPA 0 100 km venture (JV) tenure, and active earn-in opportunities Citadel JV (Antipa) 51% Secured – Continued positive engagement and partnership wi
Slide 34: Resolution Copper: enters next phase of public consultation
Resolution Copper: enters next phase of public consultation Timeline − Publication of the final EIS on 15 Jan − We are committed to seeking consent triggers a land exchange approved by from Native American Tribes consistent the US Congress under the Obama with the International Council on Mining Adm
Slide 35: We are committed to the Simandou project and Guinea
We are committed to the Simandou project and Guinea – One of the world’s largest untapped and richest high- grade iron ore deposits, located in Guinea – High-grade ores can support the transition to lower- carbon steel – Strengthens Rio Tinto’s iron ore portfolio as well as our product offering – Co
Slide 36: Our portfolio to perform strongly with proactive climate action
Our portfolio to perform strongly in scenarios with proactive climate action Our Scope 3 goals to guide our partnerships 2020 Highlights - Technology for reductions in steelmaking carbon intensity of at - Reduced emissions by 1.1Mt CO2e or 3% least 30% from 2030 vs 2018 baseline, though flat in 2020
Slide 37: Our portfolio is well positioned for the low-carbon transition
Our portfolio is well positioned for the low-carbon transition Our portfolio − Over 95% of our revenues are from No carbon in product No carbon in product Carbon in product sold but CO2 sold and best-in- No carbon in product assets with favourable operational sold, low process Carbon in product inte
Slide 38: Empowering customers with a “nutrition label” for materials
Empowering customers with a “nutrition label” for materials Demand Transparency Digital Brand − Growing demand for qualitative − Transparency from mine to metal − Leverages blockchain − Goes beyond low CO2 metal to information about materials − Points of distinction from − Distinguish products beyon
Slide 39: ELYSIS zero carbon metal meets new market demand
ELYSIS zero carbon metal meets new market demand Scaling up ELYSISTM technology Strong market demand emerging – ELYSIS has achieved stable cell operation, Q3 2020: Apple’s 16” MacBook Pro is world’s first device producing commercial metal grade manufactured using ELYSIS metal, delivered through Rio
Slide 40: Sustainability Fact Book summary
Sustainability Fact Book summary 2020 achievements Goals People - Zero fatalities at managed operations - To reach zero fatalities, and to eliminate workplace injuries and - All injury frequency rate (AIFR) at 0.37 (target: 0.37), reduced 12% from 2019 (0.42) catastrophic events Safety - 26.1% of se
Slide 41: Strong iron ore pricing driving EBITDA
Strong iron ore pricing driving EBITDA Underlying EBITDA 2020 vs 2019 $ million 26,000 3,407 24,000 Iron ore Iron & Titanium Diamonds Copper Aluminium* Other, net 21,197 4,000 22,000 3,262 20,000 3,000 18,000 16,000 2,000 14,000 1,000 12,000 405 151 10,000 0 8,000 ( 47) ( 50) -1,000 ( 314) 6,000 4,0
Slide 42: Some variations in volume driven by mine phasing and market conditions
Some variations in volume driven by mine phasing and market conditions Underlying EBITDA 2020 vs 2019 $ million 28,000 110 26,000 3,407 461 24,711 24,000 (251) 21,197 (103) (452) 22,000 20,000 (14) (14) 18,000 (110) (105) (84) 16,000 14,000 (235) 12,000 10,000 8,000 Diamonds Gold Aluminium Copper Ir
Slide 43: Iron Ore: Strong pricing supports EBITDA
Iron Ore Strong pricing supports EBITDA Underlying EBITDA 2020 vs 2019 $ million 25,000 3,161 156 19,056 18,837 20,000 16,098 15,000 (282) (77) (71) (1) (147) 10,000 5,000 0 2019 Price Exchange rates Energy Inflation Flexed 2019 Volumes and Mix Cash costs Other 2020 underlying EBITDA underlying EBIT
Slide 44: Aluminium: Lower prices and volumes partly offset by improved costs
Aluminium Lower prices and volumes partly offset by improved costs Underlying EBITDA 2020 vs 2019 $ million 2,400 2,285 259 2,152 2,200 18 112 2,017 2,000 (24) 10 (68) 1,800 (330) (110) 1,600 1,400 1,200 1,000 2019 Price Exchange rates Energy Inflation Flexed 2019 Volumes Cash cost One-offs Other 20
Slide 45: Copper & Diamonds
Copper & Diamonds Higher prices & cost reduction efforts partly offset by lower volumes and extended maintenance activities Underlying EBITDA 2020 vs 2019 $ million 2,900 2,689 44 86 2,700 523 2,500 (37) (195) 221 2,172 2,300 2,073 2,100 (83) 1,900 (460) 1,700 1,500 2019 Price Exchange rates Energy
Slide 46: Energy & Minerals
Energy & Minerals Stable EBITDA despite COVID-19 restrictions Underlying EBITDA 2020 vs 2019 $ million 3,000 1,762 75 69 32 1,880 2,000 1,646 (58) (51) (69) (70) (44) 1,000 0 2019 underlying Price Exchange rates Energy Inflation Flexed 2019 Volumes and Mix Cash costs One-offs Other 2020 underlying E
Slide 47: Other movements in underlying EBITDA
Other movements in underlying EBITDA Underlying EBITDA impact Energy & Interest, $ million 2019 FX/ price Inflation Volumes Cash costs E&E Non-cash tax, other 2020 Other operations -77 - 74 28 -44 - 23 -4 - Exploration & Evaluation (net) -315 9 - - -19 75 - - -250 Other -629 17 -10 -53 -116 - -8 144
Slide 48: Group level financial guidance
Group level financial guidance FY2021 FY2022 FY2023 CAPEX Total Group ~$7.5bn ~$7.5bn ~$7.5bn Sustaining Capex Group $3.0 - $3.5bn $3.0 - $3.5bn $3.0 to $3.5bn Pilbara Sustaining Capex $1.2-$1.6bn $1.2-$1.6bn $1.2-$1.6bn Effective tax rate 30% Returns Total returns of 40 – 60% of underlying earnings
Slide 49: Product group level guidance
Product group level guidance 2021 production guidance1 2021 costs $16.7-17.7/wmt (FOB), based on an Iron Ore Shipments 325 – 340mt (100% basis) Australian dollar exchange rate of $0.77 C&D C1 Copper unit costs 60-75 US c/lb Mined Copper 500 – 550kt Refined Copper 210 – 250kt Diamonds 3.0 – 3.8m cara
Slide 50: Debt maturity profile
Debt maturity profile 31 December 2020 debt maturity profile* $ million Reported gross debt decreased by $0.7 billion to $13.6 billion at 31 2,000 December, mainly attributable to the 1,800 EUR 2020 bond redemption 1,600 Average outstanding debt maturity of 1,400 corporate bonds at ~12 years (~ 9 ye
Slide 51: Pro-forma net debt reconciliation
Pro-forma net debt reconciliation 2020 2019 $bn $bn Reported net debt 0.7 3.7 Australian tax top-up in June of following year 0.9 1.0 Shareholder returns remaining relating to disposals - 0.2 Proforma net debt 1.6 4.9 Note: $0.2bn in 2019 is the remaining share buyback relating to the disposal of co
Slide 52: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity FY 2020 ($m) impact on FY 2020 underlying average / rate EBITDA of 10% price/rate change Copper 281c/lb 370 Aluminium $1,702/t 577 Gold $1,770/oz 62 Iron ore (62% Fe CFR $98.9/dmt 2,318 freight-adjusted) A$ 0.69US$ 617 C$ 0.75US$ 201 Oil (Brent) $42/bbl
Slide 53: Modelling aluminium costs
Modelling aluminium costs Canadian* smelting unit cash** cost sensitivity ($/t) Impact of $100/t change in each of the input costs below will have on our FY 2020 Canadian smelting unit cash cost of $1,162/t Alumina (FOB) $191 Green petroleum coke (FOB) $27 Calcined petroleum coke (FOB) $36 Coal tar
Slide 54: RTA Value Chain - 2020 Actuals
RTA Value Chain - 2020 Actuals Mining Refining Aluminium Casting Bauxite Alumina 56.1 dmt 8.0mt 80% 30% RTA Intersegment Aluminium Cast Prod 3.2mt 100% 70% 20% 43% 57% 3rd Party Bauxite Alumina VAP Non-VAP Sales 39.4 dmt 1.6mt ©2021, Rio Tinto, All Rights Reserved 54
Slide 55: Application of the returns policy
Application of the returns policy Capital return considerations Comments – Operating cash flow of $15.9 billion 1 Results for FY 2020 – FCF of $9.4 billion – Underlying earnings up 20% to $12.4 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing high quality assets in
Slide 56: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement Proforma Rio Tinto Group Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ)(2) Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 YTD YTD YTD YTD YTD YTD US$m US$m US$m US$m US$m US$m Consolidated sales revenue 44,611 43,165 1,078 1,166 43,5
Slide 57: Group Balance Sheet
Group Balance Sheet Proforma Rio Tinto Group Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ) Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 YTD YTD YTD YTD YTD YTD US$m US$m US$m US$m US$m US$m Non-current assets 76,535 70,499 10,930 9,589 65,605 60,910 Current assets 20,855 17,30