Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (December 2013)
63 slides from Rio Tinto's investor day presentation, Dec 11, 2013
Slide 1: Investor Seminar: Delivering greater value for shareholders
11 December 2013 London Investor Seminar Delivering greater value for shareholders
Slide 2: Cautionary statement
2 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 statements
Slide 3: Agenda
3 Agenda Introduction, outlook and strategy Sam Walsh Capital allocation and performance Chris Lynch Diamonds & Minerals Alan Davies Energy Harry Kenyon-Slaney Break Iron Ore Andrew Harding Wrap up Sam Walsh Q&A ©2013, Rio Tinto, All Rights Reserved
Slide 4: Emergency procedure
11 December 2013 London Emergency procedure Andaz Hotel
Slide 5: Sam Walsh, Chief executive
11 December 2013 London Sam Walsh Chief executive
Slide 6: Delivering greater value for shareholders
6 Delivering greater value for shareholders Lower operating costs* Deliver approved Lower capex projects • Pilbara 290 • Oyu Tolgoi phase 1 $1.8 bn • Kestrel • • Argyle underground AP60 Exploration & evaluation* Increase production Divest non-core assets • Pilbara records $0.8 bn • Thermal c
Slide 7: Safety culture critical to operating effectively
7 Safety culture critical to operating effectively All injury frequency rates 2003 – Oct 2013 Per 200,000 hours worked 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 Oct H1 13 Safety assessment, Pilbara ©2013, Rio Tinto, All Rights Reserved
Slide 8: Copper 4+2 strategy set to create substantial and sustainable value
8 Copper 4+2 strategy set to create substantial and sustainable value for shareholders • Four key operating assets + two tier one greenfield projects • Progress already made in 2013 towards executing the strategy − Disposals of $1.8 billion from non- core assets − Material productivity improvement a
Slide 9: Transforming Rio Tinto Alcan through reducing cost and strengthening the portfolio
9 Transforming Rio Tinto Alcan through reducing cost, improving productivity and strengthening the portfolio Aluminium cash cost curve* • Divesting or curtailing high cost US$ per tonne production to focus on strongest 3000 margin businesses 2500 2000 • Over $450 million of cost reductions 1500 achi
Slide 10: Our businesses are well placed to meet global demand growth
10 Our businesses are well placed to meet global demand growth World GDP composition Chinese urbanisation Trillions of 2005 PPP$ Percentage of world GDP Percentage of population 75% 140 60% +170 Million 70% urban population 120 50% 100 65% 40% 80 60% +260 Million 30% urban population 60 55% 20% 40 5
Slide 11: A consistent strategy with clear priorities
11 A consistent strategy with clear priorities Invest in and operate long-life, Strategy low-cost, expandable operations Clear priorities for 2013 Priorities Improve Strengthen the Deliver performance balance sheet results Outcome Greater value for shareholders ©2013, Rio Tinto, All Rights Reserved
Slide 12: Chris Lynch, Chief financial officer
11 December 2013 London Chris Lynch Chief financial officer
Slide 13: Strong performance on operating cash costs
13 Strong performance on operating cash costs Pre tax operating cash cost variance • On track to achieve $2 billion target 2013 October year to date, US$ million for full year 2013 • Targeting further savings in 2014 to 1,826 reach $3 billion full-year Other PGs & central improvement vs 2012 Iron Or
Slide 14: Targeted reductions in exploration and evaluation spend
14 Targeted reductions in exploration and evaluation spend Exploration and evaluation costs • Year to date spend around 50% US$ million (pre tax) lower than 2012 • Strong project pipeline to supply 1,500 future reserves and resources 1,250 $812 million − 28 major projects ongoing 1,000 − across 10 c
Slide 15: Delivering strong growth and lower capital expenditure
15 Delivering strong growth and lower capital expenditure Expected capital expenditure profile* • Iron ore growth pathway optimised at US$ billion a lower capital intensity 20 • $2 billion reduction in sustaining 17.6 >20% capital across the Group 15 <14 • Five major projects completed so far >20% i
Slide 16: Capital allocation priorities
16 Capital allocation priorities From: Growth and 1 2 Cash returns to 3 Balance sheet sustaining capex shareholders To: Essential 1 Progressive 2 3 Iterative cycle of: sustaining capex dividends Further cash Compelling returns to growth shareholders Debt reduction ©2013, Rio Tinto, All Rights Reserv
Slide 17: Progressing non-core asset disposals
17 Progressing non-core asset disposals • $3.3 billion of divestments announced or completed this year − $2.3 billion of cash proceeds received, including Northparkes − $1 billion expected to complete in 2014 (Clermont) • Capturing value now from assets that no longer fit our strategy − >20 divestme
Slide 18: Greater returns for shareholders
18 Greater returns for shareholders Free cash flows are improving • Reducing costs • Increasing volumes • Cash proceeds from divestments Lowering capex Strengthening the Increasing the balance sheet progressive dividend Annual capex expected to Focus over the next 12 months reduce by >20% in 2011: +
Slide 19: Alan Davies, Chief executive, Diamonds & Minerals
11 December 2013 London Alan Davies Chief executive, Diamonds & Minerals
Slide 20: A leader in our markets
20 A leader in our markets • Portfolio of industry leading businesses • Mid-to-late cycle commodities with demand growth in later stages of economic development • Titanium dioxide business is well placed to supply growing demand for pigment • Richard’s Bay Minerals acquisition earnings accretive fro
Slide 21: Operating demand-led operations in attractive markets
21 Operating demand-led operations in attractive markets • Strategy focused on: − Creating demand-led, integrated operations that are responsive to the changing external environment − Generating proprietary market insight − Driving returns through increasing productivity, flexibility and cutting cos
Slide 22: Long-term demand fundamentals are robust
22 Long-term demand fundamentals are robust Global commodity demand trajectories • Increases in demand equivalent to: Indexed (2013) − 7 new operations the size of 220 Richards Bay Minerals by 2030 200 − 2 new operations the size of Boron by 2030 180 • Increasing Chinese and emerging 160 market weal
Slide 23: A responsive market-driven business
23 A responsive market-driven business • Demand-led operating philosophy: − Diamonds production ramping up to meet growing demand − Zircon and rutile production adjusted to market demand − Planned RTFT furnace 5 shut brought forward − UGS facility temporarily taken offline − Temporary shut downs at
Slide 24: Driving operating performance by cutting costs and improving productivity
24 Driving operating performance by cutting costs, improving productivity and managing capital Cash operating costs* • 2013 cash operating costs ~9% lower Indexed (2012) than 2012 100 -14% • $30m in annualised savings of support 80 60 cost from streamlining the organisation 40 structure 20 0 • Reduc
Slide 25: Titanium dioxide fundamentals remain strong
25 Titanium dioxide fundamentals remain strong TiO2 contract volumes • Strong medium and longer-term Percentage fundamentals underpinned by growth 100% in pigment demand in emerging 75% economies 50% 25% • Fixed price multi-year TiO2 contracts 0% continue to be replaced 2011 2012 2013 2014 2015 Long
Slide 26: Demand-led operating philosophy with flexibility to respond to market changes
26 Demand-led operating philosophy with the flexibility to respond to market changes TiO2 feedstock production (100% basis) • Aligning capacity utilisation to market Capacity = 100 demand 100 80 -25% • Two production rebuilds coincided with 60 softer market conditions in 2012 40 20 • Further decisio
Slide 27: Diamonds are well positioned for profitable growth
27 Diamonds are well positioned for profitable growth Diamond production (Rio Tinto Share) • Near-term pressures due to tight Million carats liquidity and Indian rupee volatility but 25.0 strong industry fundamentals CAGR 20.0 23% supporting price appreciation 15.0 10.0 • Ramp up of production from
Slide 28: Aligning borates production to market demand
28 Aligning borates production to market demand Global refined borates demand • Tier one orebody at Boron, California Million tonnes (boric oxide B2O3 equivalent) • Borates demand growth driven by US 2012-2020 CAGR % 2.5 housing, Chinese industrials and global 2 6 1.5 agriculture 5 1 0.5 4 • Supplyi
Slide 29: Dampier Salt is focused on building capability
29 Dampier Salt is focused on building capability to deliver greater value Chinese salt imports • Three operations in Western Australia Million tonnes with a combined capacity of ~10.5Mt 8 CAGR • Demand growth driven by Chinese 6 47% imports to fuel automotive, construction 4 5.1 7.5 and electronic
Slide 30: Advancing a tier one iron ore project in Guinea
30 Advancing a tier one iron ore project in Guinea • Largest known undeveloped high Mine Project grade iron ore deposit in the world • 100Mtpa progressive mine development • >40 year mine life with a first quartile cost position Port & Rail Infrastructure Project • 650km trans-Guinean railway and po
Slide 31: Require Investment Framework ratification and infrastructure funding plan
31 Require Investment Framework ratification and infrastructure funding plan to accelerate End-state integrated mine and infrastructure project • Constructive and collaborate process to finalise the Investment Framework Simfer and funding plan Govt. of Jersey Guinea (Chalco & Rio Tinto) Infrastructu
Slide 32: Delivering value for shareholders
32 Delivering value for shareholders • Generating significant free cash flow • Creating demand-led, integrated operations with distinctive market insight • Improving operating performance by cutting costs, driving productivity and delayering the organisation • Strengthening position in traditional s
Slide 33: Harry Kenyon-Slaney, Chief executive, Energy
11 December 2013 London Harry Kenyon-Slaney Chief executive, Energy
Slide 34: Rio Tinto Energy is getting back to basics
34 Rio Tinto Energy is getting back to basics by reducing costs and delivering value • “Run it like you own it” − fostering a culture of performance and cost control • Over $600m of cost reductions to the end of October 2013 • Stakeholder engagement • Technology to leverage resource base • Optimisin
Slide 35: Around one third of seaborne thermal coal production loss-making
35 Around one third of global seaborne thermal coal production has been loss-making this year International seaborne thermal coal • Industry wide challenges cost curve 2013 US$ per tonne FOB Newcastle − Adjusting costs in a declining price environment High 2013 Spot 100 Average 2013 Spot Low 2013 Sp
Slide 36: Strong long-term fundamentals for coal demand
36 Strong long-term fundamentals for coal demand Seaborne thermal coal demand Thermal coal to grow 19% by 2018 Million tonnes • China, India and emerging South 40 (6) 1067 1100 90 67 East Asian countries continued 1000 896 900 (24) 4 urbanisation and industrialisation 800 driving demand 700 600 2012
Slide 37: Hunter Valley assets are world class thermal coal resources
37 Hunter Valley assets are world class thermal coal resources with transformed cost position • Large, option-rich ore bodies with premium quality thermal and semi- soft coking coal serviced by existing supply chain in NSW • 0.6 billion tonnes reserves and 1.6 billion tonnes resources* Hunter Valley
Slide 38: Improving performance through cost reductions and productivity gains
38 Improving performance through cost reductions and productivity gains Group pre tax operating cash cost variance • $600 million savings to October 2013 2013 October year to date, US$ million • $1 billion in ongoing savings by end of 2014 1,826 • $30/t reduction in operating costs Other PGs & centr
Slide 39: We are improving our position on the cost curve
39 We are improving our position on the cost curve Australian thermal coal cost curve 2013 • Mount Thorley Warkworth, Bengalla US$ per tonne fob Newcastle mines and Hunter Valley operations are moving down the cost curve 2012 2013 100 MTW • Annual savings: Bengalla HVO − $61m, contract labour 0 − $4
Slide 40: Rio Tinto Coal Australia has reduced unit cash costs
40 Rio Tinto Coal Australia has reduced unit cash costs to below 2010 levels while increasing productivity Rio Tinto Coal Australia unit cash costs* • Unit cash costs are now 14% below Indexed (three month rolling average) September 2010 14% reduction below Sept. • >1,500 individual initiatives 2010
Slide 41: New pathway for our coal business in Mozambique
41 We are working to secure a new pathway for our coal business in Mozambique • RTCM has established itself as a premium hard coking coal producer • Significantly improved asset performance achieved by reducing operating costs and increasing productivity • Challenges remain due to infrastructure con
Slide 42: Long-term outlook for uranium is positive
42 The long-term outlook for uranium is positive within the global energy mix • Uranium has an important part to play in the global energy mix • Our portfolio is: − Geographically diverse − Increasingly low cost − Includes high grade projects at Rossing Mine, Namibia Ranger 3 Deeps (Australia) and R
Slide 43: Energy group's transformation is delivering sustainable results
43 Our Energy group’s transformation is delivering sustainable results • Confident of long term industry fundamentals • Aggressive spend reduction program • Business wide improvement program • ‘Owner operator’ value-focused mindset and culture – ensuring sustainable gains, through the commodity cycl
Slide 44: Break
11 December 2013 London Break
Slide 45: Andrew Harding, Chief executive, Iron Ore
11 December 2013 London Andrew Harding Chief executive, Iron Ore
Slide 46: Sector leadership continues to deliver strong returns
46 Sector leadership continues to deliver strong returns • Driving efficiency though fully integrated operations • Lowest cost large volume producer • Continuous optimisation of capital efficient growth pathways • Low capital growth projects delivered within time and budget • Leading sales and marke
Slide 47: Breakthrough Pilbara growth pathway provides $3 billion capital saving
47 Breakthrough Pilbara growth pathway provides a $3 billion saving in growth capital Mine capacity potential (average annualised) • Capital intensity to reduce from mid Million tonnes per annum $150s/t to $120-130/t (100% basis) 400 • Mine production capacity to increase from 290 Mt/a to more 375 t
Slide 48: Infrastructure development to 360 Mt/a progressing on budget
48 Infrastructure development to 360 Mt/a is progressing on budget and on schedule • Port and rail expansion to 360Mt/a approved June 2012 • Expected completion during H1 2015 • All wharf topside New stacker reclaimer being New car dumper being delivered modules installed delivered – Cape Lambert –
Slide 49: Brownfield expansions and productivity improvements at less than $15/t
49 Brownfield expansions and productivity improvements at less than $15/t • Initiatives at existing operations will see production of more than 330mt in 2015 • $400m capex approved to date • Key activities − Minor plant modifications, including additional crushing and screening − Additional mobile e
Slide 50: Opportunities to defer greenfield mine development
50 Opportunities to defer greenfield mine development reduces medium term capital expenditure Silvergrass ~21 Mt/a • Optimisation will increase capacity and reduce capital cost • Required for growth ramp-up to 360 Mt/a • Share Nammuldi BWT infrastructure • Investment decision deferred until third qu
Slide 51: Pilbara operations and 290 Mt/a ramp-up in top gear
51 Pilbara operations and 290 Mt/a ramp-up in top gear Pilbara mine production • Record nine month Pilbara mine Million tonnes per quarter production of 184 Mt (YoY +4%) 80 70 290 • 64 Mt record production in Q3 2013 60 237 50 40 • Cape Lambert B first ore on ship four 30 20 2013 2012 months ahead o
Slide 52: Pilbara operations achieving sustainable cost reductions
52 Pilbara operations achieving sustainable cost reductions 9% reduction in mining costs to Q3 2013 Mining cost per tonne of material moved • Higher payload from light weight truck trays Indexed (Q3 2012) • Improved mine planning 100 91 − Increased truck utilisation − Lower tyre and fuel consumption
Slide 53: Driving productivity through targeted improvement initiatives
53 Driving productivity through a large number of targeted improvement initiatives Port capacity • Parker Point – increased ship loading rates by nearly 1,000 tonnes per hour • Car dumper work standardisation – improvements in excess of 2 Mt/a and enabled faster train turnaround times Rail fleet • C
Slide 54: Iron Ore Company of Canada: integrated mine to port system
54 Iron Ore Company of Canada: integrated mine to port production system • Unencumbered rail and port network wholly-owned by IOC (Rio Tinto 58.7%) • CEP project adds mining fleet, ore delivery, grinding and spiral capacity and power infrastructure • 2013 first 9 months saleable production of 11.4Mt
Slide 55: Chinese resurgence in steel demand
55 Chinese resurgence in steel demand this year, with further steady growth ahead Chinese steel demand Crude steel demand projections Million tonnes per annum Million tonnes per annum 800 1,200 7.5% 2.2% 700 1,000 9.1% 600 800 500 600 400 400 300 200 200 0 100 2010 2015 2020 2025 2030 For exported g
Slide 56: Other developing regions ensure strong long-run iron ore demand
56 Other developing regions should ensure a strong long-run demand for iron ore Total iron ore requirements Growth fundamentals Million tonnes 2010-30 CAGR 3,500 China India 3,000 Population 0.3 1.0 Urban 2,500 2.0 2.3 population 2,000 GDP per capita 6.1 6.1 0 5 10 0 5 10 1,500 ASEAN Middle East 1,0
Slide 57: Ongoing constraint to development of new iron ore supply
57 On-going constraint to the development of new iron ore supply Announced and completed seaborne iron ore • New seaborne supply capacity production capacity (global) continues to be constrained Million tonnes − Reduced sources of project 1000 financing 800 600 − Protracted approvals processes 400 −
Slide 58: Rapid uptake of 2014 off-take opportunities
58 Rapid uptake of 2014 off-take opportunities with unfulfilled demand for Rio Tinto iron ores 2014 Pilbara off-take agreements • Pilbara Blends continue to be base by pricing mechanism load products for Asian steel industry • Unprecedented demand for 2014 off- Spot take opportunities due to our rep
Slide 59: Sector leadership continues to deliver strong returns
59 Sector leadership continues to deliver strong returns • Breakthrough Pilbara growth pathway provides a $3 billion saving in growth capital • Proven operational performance across the integrated supply chain • Lowest cost iron ore producer, continuing to reduce operating costs • Delivering major p
Slide 60: Sam Walsh, Chief executive
11 December 2013 London Sam Walsh Chief executive
Slide 61: A diverse portfolio of sector leading businesses
61 A diverse portfolio of sector leading businesses Product group Delivering greater value for shareholders by: Iron ore Maintaining position as lowest-cost large-volume producer Copper Shaping a tier one low cost asset portfolio Aluminium Continuing the transformation to improve our portfolio of bu
Slide 62: Delivering greater value for shareholders
62 Delivering greater value for shareholders Lower operating costs* Deliver approved Lower capex projects • Pilbara 290 • Oyu Tolgoi phase 1 $1.8 bn • Kestrel • • Argyle underground AP60 Exploration & evaluation* Increase production Divest non-core assets • Pilbara records $0.8 bn • Thermal
Slide 63: Investor Seminar
11 December 2013 London Investor Seminar Delivering greater value for shareholders