Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (November 2005)
48 slides from Rio Tinto's investor day presentation, November 2005
Slide 1: Investor Seminars 2005
Investor Seminars 2005 London - New York - Sydney www.riotinto.com
Slide 2: Contact details
Contact details INVESTOR RELATIONS Rio Tinto plc 6 St James’s Square London SW1Y 4LD UK Nigel Jones Telephone: + 44 (0) 20 7753 2401 Facsimile: + 44 (0) 20 7753 2395 Email: nigel.jones@riotinto.com David Ovington Telephone: + 44 (0) 20 7753 2326 Facsimile: + 44 (0) 20 7753 2395 Email: david.ovington
Slide 3: Forward-Looking Statements Safe Harbor
Investor Seminar 2005 For the purposes of the Forward-Looking Statements Safe Harbor provisions of the US securities laws This presentation contains statements which constitute forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, s
Slide 4: Leigh Clifford – Agenda
Leigh Clifford Chief Executive Officer 3 Investor Seminar November 2005 Leigh Clifford Introduction/Markets 15 mins Andrew Mackenzie Industrial Minerals 30 mins Oscar Groeneveld Aluminium 30 mins Sam Walsh Iron Ore 30 mins Break 20 mins Guy Elliott Other Product Groups 30 mins Evaluation methodology
Slide 5: Currently enjoying strong markets
Currently enjoying strong markets Copper Coking Coal 210 110 $/tonne 160 90 c/lb 70 110 50 60 30 95 96 97 98 99 00 01 02 03 04 05 95 96 97 98 99 00 01 02 03 04 05 Molybdenum Iron ore 40 50 45 USc/dltu $/lb 40 20 35 30 25 0 20 95 96 97 98 99 00 01 02 03 04 05 95 96 97 98 99 00 01 02 03 04 05 5 Invest
Slide 6: Consumption is less volatile
Consumption is less volatile World copper consumption (1930 – 2005) mt 18 US slow down (2001) 16 14 Oil crisis (1974) 12 10 8 6 4 Recessionary 2 environment (early 1990s) 0 30 35 19 0 45 50 19 5 60 65 70 19 5 80 85 90 20 5 00 4 5 7 9 19 19 19 19 19 19 19 19 19 19 19 7 Investor Seminar November 2005
Slide 7: Stronger prices lead to industry investment
Stronger prices lead to industry investment Capex, Non Ferrous Metals, 2004 US$ billion Real Non Ferrous Metal Prices 1995=100 40 200 Capex 180 35 160 140 30 120 25 100 80 20 60 Prices 40 15 20 10 0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 Source: CRU (MICA) 9 Investor Seminar November 2005 Rio Tin
Slide 8: The Rio Tinto business model deals with uncertainty
The Rio Tinto business model deals with uncertainty • Invest in the best orebodies – Cash generative through the cycle • Develop options in line with market conditions – Creative M+A – Brownfield development – Exploration • Project delivery • Operational excellence – Maximise volumes when markets ar
Slide 9: Vision and Industrial Minerals introduction
Vision: to be the undisputed sector leader in value creation • We are an innovative, disciplined developer and acquirer of value creating assets • Our corporate reputation is second to none • We have a capable and supportive team of people • Our operational performance is first class – this includes
Slide 10: Rio Tinto Industrial Minerals
Rio Tinto Industrial Minerals • Overview of Industrial Minerals • Rio Tinto Iron & Titanium • Rio Tinto Minerals – Borax – Luzenac – Dampier Salt – Potasio Rio Colorado 15 Investor Seminar November 2005 Businesses with excellent development potential Earnings history Product Group Earnings - by comm
Slide 11: Global businesses with leadership positions
Global businesses with leadership positions Borates Titanium dioxide Potash Talc Salt (Asia) Rio Tinto market share Other 17 Investor Seminar November 2005 Good fit with other Rio Tinto businesses • Large and long life resource bases • Industry leadership positions • High barriers to entry • High ma
Slide 12: These businesses add value to Rio Tinto
These businesses add value to Rio Tinto • Value of products is increased by – higher energy costs – tighter environmental regulations • Skill sets that are unique to the mining sector • Intellectual property (e.g. brands and process technology) • Provide growth opportunities 19 Investor Seminar Nove
Slide 13: Chloride pigment market presents best growth opportunities
Chloride pigment market presents the best opportunities for growth 6,000 Chloride Pigment demand 5,000 Sulphate by sector Pigm ent Dem and ('000 tonnes) 4,000 3,000 2,000 1,000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 21 Investor Seminar November 2005 Expansion options are being exercised kt 3
Slide 14: Expansion options are being exercised
Expansion options are being exercised kt 3000 2500 2000 QIT – UGS 1500 • Expansion to 325kt (H1 05) 1000 500 • Expansion to 375kt (H2 06) 0 2004 Capacity Pro-forma QIT - Sulphate QIT - UGS RBM (100%) 23 Investor Seminar November 2005 Expansion options are being exercised kt 3000 2500 2000 RBM 1500 •
Slide 15: Madagascar ilmenite project progressing
Expansion options are being exercised kt 3000 2500 2000 Madagascar/QIT 1500 • 475kt - 91% TiO2 slag 1000 500 • Start-up late 2008 0 2004 Capacity Pro-forma QIT - Sulphate QIT - UGS RBM (100%) QMM (phase 1) 25 Investor Seminar November 2005 Madagascar ilmenite project progressing Project approved in
Slide 16: Challenge of scale of smaller businesses
Challenge of scale of smaller businesses US$m Earnings by Business Units 2005 H1 Earnings (US$m) 350 300 RIT* 72 250 200 RT Minerals Borax 32 150 RIT Dampier* 9 100 50 Luzenac 11 0 2001 2002 2003 2004 2005 H1 124 Rise in earnings of 41% in H1 2005 * Rio Tinto share 27 Investor Seminar November 2005
Slide 17: RTM products and Potasio Rio Colorado
RTM’s products cover a broad spectrum Agriculture Ceramics 11% 5% 8% Detergents 3% 9% Glass Pulp and Paper 7% 14% Soda Ash Chlor Alkali Polymers Paints and Coatings 23% 15% Other 5% 29 Investor Seminar November 2005 Potasio Rio Colorado making positive progress • From July, owned 100 per cent by Rio
Slide 18: Oscar Groeneveld – Summary
Summary • Large, long life, high quality resources in good locations • Leadership position in respective markets • Potential from greater collaboration between businesses • Growth options being exercised 31 Investor Seminar November 2005 Oscar Groeneveld Chief Executive Aluminium Product Group 32 In
Slide 19: Rio Tinto Aluminium overview
Overview • Strategy • 2005 Operational performance • Alumina and aluminium markets • Alumina opportunities • Aluminium opportunities 33 Investor Seminar November 2005 Rio Tinto Aluminium FOB value chain Process RTA assets Bauxite US$10-30/t Mining Weipa CAR, QAL Alumina US$200-500/t Refining Eurallu
Slide 20: Aluminium's contribution to earnings and strategy
Aluminium’s contribution to Rio Tinto’s earnings Earnings history Earnings – by commodity (2005 H1) Industrial Minerals Diamonds 4% US$m 5% 400 Copper / moly 350 37% 300 Coal 250 14% 200 150 100 50 0 2005H1 2001 2002 2003 2004 Iron Ore 30% Aluminium 9% 35 Investor Seminar November 2005 Strategy To m
Slide 21: Operations and production YTD September 2005
Operations and production YTD September 2005 Bauxite and Alumina • Weipa 17% increase vs 04 • Alumina 42% increase vs 04 Weipa QAL, CAR Eurallumina 37 Investor Seminar November 2005 Comalco Alumina Refinery – Stage 1 Performance • On budget, ahead of time • Commissioning progress • Production CAR Pr
Slide 22: Smelting operations and alumina market
Operations and production YTD September 2005 Smelting • Best in class smelting performance • Smelting “creep” expansion • Business improvement GPS, BSL AAL Bell Bay NZAS 39 Investor Seminar November 2005 Alumina market • Growth in world alumina production delayed • China dominates demand growth Chin
Slide 23: Aluminium market and China story
Aluminium market • High cost smelters at risk in Europe and North America • China focus on domestic demand • Global demand growth underpins new capacity 1980 2004 (16 million tonnes) (27 million tonnes) North America, North 19% Aluminium America Other Production 40% 36% Other, Geography: 45% W Europ
Slide 24: Alumina investments and opportunities
Alumina investments and opportunities • Investment in Weipa to 25mtpa – Andoom – Power station – Shiploader – Weipa community – Post Panamax ships • Alumina options – CAR2 still in queue – CAR1 “creep” potential – QAL expansion and CAR3 – Bauxite for alumina 43 Investor Seminar November 2005 “Alumin
Slide 25: Smelting opportunities
Smelting Opportunities • Greenfield smelter projects – Proven technology – Capital project management – Operational performance – Alumina supply • Energy remains the ‘orebody’ • Looking worldwide for opportunities – Some at “advanced” exploration stage – Hydro and gas are the front runners 45 Invest
Slide 26: Sam Walsh – Summary
Summary • World class Weipa resource provides platform for growth • Building alumina capability and opportunities for growth • “Exploring” for growth in smelting • Business improvement is making a difference • Our aspiration is to grow our business upstream 47 Investor Seminar November 2005 Sam Wals
Slide 27: Rio Tinto Iron Ore key focus areas
Rio Tinto Iron Ore is focused on four key areas: • Capitalising on strong market conditions • Operational excellence • Growing the business • Resources 49 Investor Seminar November 2005 Seaborne iron ore market share* • Top three iron ore producers Rio Tinto 23% Other 28% supply more than 70% of sea
Slide 28: Strong performance in H1
Strong performance in H1 05 Earnings history Earnings - by commodity (2005 H1) Diamonds 4% US$m Industrial Minerals 5% 800 Copper / moly 37% 700 Coal 600 14% 500 400 300 200 100 0 Iron Ore Aluminium 2001 2002 2003 2004 H1 05 30% 9% 51 Investor Seminar November 2005 Outlook is for continued strong gr
Slide 29: Chinese construction and iron ore price drivers
Chinese residential construction driven by continued urbanisation and rising per capita floor space 60% Urbanisation rate Urban per capita floor space 30 50% m2/per capita 25 40% 20 30% 15 20% 10 90 92 94 96 98 00 02 04 90 93 96 99 02 05 08 11 14 19 19 19 19 19 20 20 20 19 19 19 19 20 20 20 20 20 So
Slide 30: RTIO logistics and expansion on schedule
RTIO delivering value through improving logistics • Logistics enterprise established in Shandong Province, China • Looking to replicate this enterprise in southern China • Maximising vessel sizes • Optimising ship schedules across three ports • Tighter controls on vessel arrivals 55 Investor Seminar
Slide 31: RTIO expansion – on time and on budget
RTIO expansion – on time and on budget (handout only) Completion of feasibility, works approved 2007 2004 2005 2006 Completion of extra capacity Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Yandi – Stage 1 (+4Mtpa -> 24Mtpa) Yandi – Stage 2 (+12Mtpa -> 36Mtpa) Yand
Slide 32: Pilbara port capacity increasing to almost 200Mtpa
Pilbara port capacity increasing to almost 200Mtpa Dampier port expansion to 116mtpa • Project remains on time and on budget • September 2005 - first shipment of fines ore from new shiploader Dampier port expansion to 140mtpa • Seamless transition from phase one of expansion to phase two 59 Investor
Slide 33: Hope Downs
Hope Downs 61 Investor Seminar November 2005 Hope Downs Port Hedland Cape Lambert Dampier N 0 km 100 • 50:50 joint venture with Hancock Prospecting • Use of existing Pilbara Iron managed port, rail and Robe power infrastructure Brockman 2 • Feasibility study is Marandoo progressing, due for Tom Pric
Slide 34: Hope Downs and RTIO global operations
Hope Downs Port Hedland Cape Lambert Potential Port Dampier Hedland rail line N 0 km 100 • 50:50 joint venture with Hancock Prospecting Proposed Lang • Use of existing Pilbara Iron Robe Hancock Railway managed port, rail and (spur line to Hope power infrastructure Downs) Brockman 2 • Constrained sco
Slide 35: RTIO global projects and reserves
RTIO global operations and projects • Corumbá (Brazil) – High grade resource, primarily lump ore – 2mtpa complete and staged expansion to 15mtpa envisaged – Facilitating development of regional steel centre • Simandou (Guinea) – Large high grade resource in West Africa – Pre-feasibility study in 200
Slide 36: Guy Elliott – Summary
Summary • World class assets and a substantial resource base • Long history of mutually beneficial relationships in China and Japan • Current expansion well underway – underpinned by long term sales contracts • Commitment to next phase of iron ore expansion • Pilbara Iron offers unrivalled flexibili
Slide 37: Overview and Copper
Overview • Copper, Energy, Diamonds • Project evaluation methodology • Cash flow priorities • Projects 69 Investor Seminar November 2005 Copper Kennecott Utah Copper • Capitalising on strong moly market • Further evaluation of development options Grasberg • Lower grades in 2006 (Cu) and 2007 (Au) Es
Slide 38: Energy and Diamonds
Energy Rio Tinto Coal Australia • Hail Creek expansion on track • Significant future potential Infrastructure issues • Port and rail constraints • US railroad capacity Markets • Improving US coal markets, sulphur credits Rossing • Strong uranium market • Decision on life extension 71 Investor Semina
Slide 39: Approach to evaluating capital projects
Approach to evaluating capital projects – Methodology unchanged, measured approach – Best estimate of risk adjusted DCF – Long run price balances upside and downside risk – Focus on long run cost drivers and major underlying demand trends 73 Investor Seminar November 2005 Copper price has followed m
Slide 40: Project evaluation prices and cash flow priorities
Project evaluation prices evolve over time • Large database of actual and potential mining projects • Evaluation prices kept under constant review • Some commodity price forecasts revised upwards since 2003 – demand outlook, China – structural cost pressures 75 Investor Seminar November 2005 Cash fl
Slide 41: Strong progressive dividend history; organic growth opportunities
Strong progressive dividend history 2500 200 2000 20% rebasing 150 1500 100 DLC 1000 RTZ plc dividend 50 500 £ 1975=100 (lhs) Rio Tinto dividend US$ 1996=100 (rhs) 0 0 1975 1980 1985 1990 1995 2000 77 Investor Seminar November 2005 Many organic growth opportunities Conceptual projects Advanced studi
Slide 42: An evolving list of opportunities
An evolving list of opportunities Conceptual projects Advanced studies Committed projects Simandou iron Corumba iron to 15mtpa Pilbara expansion options Pilbara expansion options Sari Gunay gold ($1.35bn) Hope Downs Resolution copper Cortez Hills Further KUC extensions / ($0.18bn) underground develo
Slide 43: Projects committed in 2005
Projects committed in 2005 Recently committed projects Yandi expansion ($530m) Hamersley Brownfield ($290m) Pilbara Iron port ($690m) Total capital expenditure Hamersley infrastructure ($113m) US$ 2.7 billion KUC East 1 pushback ($170m) Cortez Hills ($182m) UGS capacity to 375 kt ($78m) QMM Madagasc
Slide 44: Leigh Clifford – Vision
Leigh Clifford Chief Executive Officer 83 Investor Seminar November 2005 Vision: to be the undisputed sector leader in value creation • We are an innovative, disciplined developer and acquirer of value creating assets • Our corporate reputation is second to none • We have a capable and supportive te
Slide 45: Long track-record of business improvement
Rio Tinto has a long track-record of business improvement 1996 • Post DLC focus reduced costs by $1 billion • Product Group structure encourages best practice transfer • Increased co-ordination between business units ~ Group procurement ~ Rio Tinto Shipping • Transfer of best practice between busine
Slide 46: Key business processes and leadership team
The way Rio Tinto is run – key business processes Investment Project Construction & Opportunity Development Commissioning Generation & Evaluation Development Asset Logistics Marketing Management Operation Processing Mining Operations Operations Procurement Global information technology 87 Investor S
Slide 47: Initially focused on five business units
Initially focused on five business units • Pilot schemes in business units - Kennecott Copper (HME, Marketing, Process Management) - Kennecott Energy (HME) - Borax (HME) - Coal Australia (Mining, Process Management, Marketing) - RT Aluminium (Mining) 89 Investor Seminar November 2005 Operational imp
Slide 48: IPT summary and overall conclusion
IPT - Summary • Early stages of a new group wide business improvement programme • Focus is on performance improvement leading to value enhancement – margins, capital and volume • Ensuring first class operational performance 91 Investor Seminar November 2005 Overall conclusion • Capitalising on curre