Rio Tinto Plc · LSE:RIO
Rio Tinto — Rio Tinto 2008 Australian financial community site visit
39 slides from Rio Tinto's conference presentation, Jun 20, 2008
Slide 1: Cover letter to ASX Company Announcements Office
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 For personal use only Company Announcements Office Australian Stock Exchange Limited SYDNEY NSW 2000 20 June 2008 Dear Sir, Attached are presentations given o
Slide 2: Maximising value in changing market conditions
Maximising value in changing market conditions For personal use only Ian Bauert Managing director, Sales & Marketing 20 June 2008
Slide 3: Cautionary statement
For personal use only Cautionary statement This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and comprises the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions. Forward lo
Slide 4: Market Context
For personal use only Market Context • Strong demand fundamentals in China • Early signs of India following China • Global steel industry achieving record prices • Iron ore supply side pressure and constraints • Ore market forecast tight for the medium term Financial community site visit (15 - 20 Ju
Slide 5: A changing world order
A changing world order For personal use only World GDP Developing world 3.6% 4.3% Developed world 3.5% Source: World Bank for 1975 and 2005 data; Global Insight for growth estimates to 2025; Rio Tinto estimates for 2050 data. Financial community site visit (15 - 20 June 2008) 4
Slide 6: The scale of urbanisation in developing countries is unprecedented
The scale of urbanisation in developing countries is unprecedented For personal use only Urbanisation curves Chinese population Urbanisation rate % Millions of people Rural population 90 Urban population 850 811 805 798 792 80 800 784 777 770 763 755 70 South Korea 750 60 700 50 Average of middle in
Slide 7: As a population urbanises, its steel intensity increases
As a population urbanises, its steel intensity increases For personal use only Rural China Rapidly growing Tier 2 cities Developed Coastal cities Photo: Farming a countryside field, Photo: Chongqing Photo: Shanghai Yangshuo, China GDP per capita (Real 2000 US$) $0-1500 $1,500-4,000 $4,000+ Populatio
Slide 8: Some major Chinese cities are already reaching Korean steel intensity levels
Some major Chinese cities are already reaching For personal use only Korean steel intensity levels Beijing 2000-2006 1000 Shanghai 2000-2006 900 Korea 1974-1997 800 Steel consumption kg/capita 700 600 500 Japan 1958-1973 China 400 2000- 2006 300 200 100 0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 US$
Slide 9: This trend towards higher steel intensity is forecast to move inland
This trend towards higher steel intensity is forecast to move inland For personal use only Legend: kg per person 2005 2010 0-99 100-199 200-299 300-399 400-499 500-600 600-699 800-899 2015 2020 1000-1100 1300-1400 Legend: Kg per person Source: China Statistic Yearbook, China Statistic Yearbook on Co
Slide 10: India's growing steel requirements are forecast to reduce iron ore exports
India's growing steel requirements are forecast to reduce iron ore exports For personal use only Indian urban population Indian iron ore exports % of total population Million tonnes UN Crude Steel Production 100 Indian Iron Ore Exports Goldman Sachs 80 MGI CSO 60 Indian Planning 40 Commission 20 0 2
Slide 11: Global steel prices are at record levels
For personal use only Global steel prices are at record levels HRC Prices Source: SBB Financial community site visit (15 - 20 June 2008) 10
Slide 12: China is forecast to double iron ore imports in the next 6 years
For its part China is forecast to double iron ore imports in the next 6 years For personal use only Seaborne iron ore imports Million tonnes 1500 Actual Forecast Rest of 1200 World 900 600 China 300 0 2000 2003 2006 2009 2012 2015 Source: Actual data – GTIS, CRU, CBI. Forecast data - Rio Tinto estim
Slide 13: China is increasingly relying on imports
China is increasingly relying on imports, although For personal use only domestic production is still a major source of supply Chinese iron ore consumption Chinese iron ore imports by market 2002 Million tonnes Imports Domestic (Import Eq) 2007 Domestic Imports (Import Eq) Source: GTIS; IISI; Rio Ti
Slide 14: Declining ROM grades are leading to structurally higher production costs
However, declining ROM grades are leading to structurally higher production costs For personal use only 45% Typical open cut mine* (RMB/t concentrate) 40% ROM grade 35% 312 35% 371 30% Average ROM Grade 25% 445 30% 20% 536 25% 15% 682 20% Typical underground mine cost (RMB/t concentrate) 15% ROM gra
Slide 15: The market may again be underestimating supply-side pressures and constraints
The market may again be underestimating supply-side pressures and constraints For personal use only Iron ore fines contract price estimates* Supply constraints $/t FOB contract prices (real 2007 US Dollars) Steepening cost curves: • Structural shift in energy costs • Declining ore grades • Currency
Slide 16: These constraints will contribute to ongoing strong markets
These constraints will contribute to ongoing strong markets For personal use only Cost of iron ore delivered to China Cash cost 2008 adjustments and Average spot USD/tonne assumptions: price • Oil price of $125 2008 • Consensus view on long-run RMB appreciation against USD (to 5.5:1) April 2008 • 30
Slide 17: Rio Tinto's response to changing market conditions
Rio Tinto’s response to changing market conditions For personal use only • Strategically well placed with our high volume expansions • From Pilbara Blend to Global Blend • Logistics a key component of our global strategy • Rio Tinto is determined to achieve fair prices for its products • There is va
Slide 18: Strong growth platform underpinned by end-to-end value chain strategy
Rio Tinto’s strong growth platform is underpinned by end-to-end value chain strategy For personal use only Rio Tinto global iron ore production • High volume growth supported by (million tonnes per annum 100% basis) extensive reserves and resources • Important to align customer requirements, product
Slide 19: From Pilbara Blend to Global Blend
From Pilbara Blend to Global Blend For personal use only • Rio Tinto has a history of blending iron ore - first to introduce Marra Mamba IOC into a blended product pellets & concentra • The successful introduction of te Pilbara Blend Simandou - reduced quality variation high - reduced stockpile requ
Slide 20: Delivered sales are a key part of the global blending strategy
Delivered sales are a key part of the global blending strategy For personal use only Rio Tinto Iron Ore CFR sales volumes* Million tonnes 200 Forecast 180 160 140 120 100 80 60 40 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Hamersley Robe * On a 100% basis Source: Rio Tinto. Hamersley volumes
Slide 21: Rio Tinto is determined to achieve fair prices for its products
Rio Tinto is determined to achieve fair prices for its products For personal use only $204.3 $197.3 $183.5 $103.6 Source: MySteel, Clarksons CU Steel, Tex Report and Rio Tinto estimates Domestic concentrate price excludes 13% VAT Financial community site visit (15 - 20 June 2008) 20
Slide 22: The value of proximity
For personal use only The value of proximity… Brazil-China Vs WA-China Freight Market Differential Brazil-China Vs WA-China Spot Differential as on 13 June 2008 : $55/tonne $ 58 $ 42 US$/day $ 31 $ 27 Source: Baltic Capesize Index Financial community site visit (15 - 20 June 2008) 21
Slide 23: Reduced fleet efficiency is underpinning a structural increase in freight costs
Reduced fleet efficiency is underpinning a structural increase in freight costs For personal use only Haulage 1999; Mt Haulage 2007; Mt Haulage 2012; Mt 400 400 400 300 300 300 200 200 200 100 100 100 0 0 0 Fronthaul Backhaul Fronthaul Backhaul Fronthaul Backhaul Source: GTIS Iron Ore and Coal Shipm
Slide 24: Upside value in more responsive pricing mechanisms
Upside value in more responsive pricing mechanisms For personal use only • Goal is to achieve transparent pricing • Benchmark system must reflect fundamentals • Transparent pricing can be achieved by a number of approaches: – Benchmark – Spot pricing – Hybrid – Link to indices – Other • A degree of
Slide 25: Summary
For personal use only Summary • Strong demand fundamentals – Market remains tight • China the current driver, India to follow • Structural shift to higher cost production supports prices • Rio Tinto well positioned with rapid production growth close to key markets • Target of transparent pricing can
Slide 26: Maximising value in changing market conditions
Maximising value in changing market conditions For personal use only Ian Bauert Managing director, Sales & Marketing 20 June 2008
Slide 27: Global development
For personal use only Global development Alan Davies Managing director, Global Development & Chief financial officer 20 June 2008
Slide 28: Cautionary statement
For personal use only Cautionary statement This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and comprises the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions. Forward lo
Slide 29: Overview
For personal use only Overview • Expansion opportunities beyond the Pilbara • In-country project teams supporting global development program • Taking a sustainable development approach • Simandou development • IOCC expansions • Feasibility study into Corumbá expansion • Orissa JV development plans •
Slide 30: Rio Tinto has an impressive pipeline of value adding projects
Rio Tinto has an impressive pipeline of value adding projects For personal use only Corumbá Corumba 1 Corumbá 2 Cape Lambert Hope Downs Brockman 4 Simandou to 180mtpa 2008 2009 2010 2011 2012-13 Cape Lambert Hope Downs Mesa A Hope Downs 4 to 80mtpa South IOCC Ore carriers <$500m +$500m – $1bn >$1bn
Slide 31: RTIO has a diversified global asset portfolio and marketing presence
RTIO has a diversified global asset portfolio and marketing presence For personal use only Sales offices • Shanghai • Beijing • Tokyo • Seoul • London • Montreal • Rio de Janeiro Benefits of global portfolio • Mitigation of production risks • Synergies in use of freight fleet (e.g., backhaul) • Bett
Slide 32: Simandou project continues to advance, with 2.25bt of resources announced
Simandou project continues to advance, with 2.25bt of resources announced For personal use only Estimated iron ore production Project details (million tonnes per annum) 80 • Rio Tinto ownership – 95% 70 • Government of Guinea – 20% buy in option 60 50 • Size of mining concession 738km2 40 • Project
Slide 33: Mine and infrastructure studies for the Simandou project are progressing well
Mine and infrastructure studies for the Simandou project are progressing well For personal use only Area of Simandou Mining Concession Guinea Kamsar Proposed rail route Conakry Port area Simandou Mining Concession • Mine studies – Initial Mining Area defined • Rail studies Rail corridor reduced from
Slide 34: IOCC is a premium Atlantic asset, with plans to grow to 25mtpa
IOCC is a premium Atlantic asset, with plans to grow to 25mtpa For personal use only Iron Ore Company, Canada million tonnes per annum* Mines and plants +25 21.1 Rail Concentrate 6.0+ 16.1 7.3 Pellet 4.5 project 3.4 Port 13.8 14.5* Existing 12.7 pellet plant 2006 Under In study production constructi
Slide 35: Corumba expected to be expanded to 22Mtpa by 2012
Corumba expected to be expanded to 22Mtpa by 2012, For personal use only with further options to expand as region is developed Corumba, Brazil Corumba potential production profile Mtpa lump 30 – 40* Expansion 22 Studies 12 2 2007 2010 2012 2015 • Large, high-grade lump deposit, located in Western Br
Slide 36: Orissa Joint Venture
For personal use only Orissa Joint Venture Keonjhar Singhbhum Iron Ore Belt • Orissa a key iron ore region, potentially a steel making hub underpinned by a rapidly growing economy • Orissa JVC – Rio Tinto holds 51% in JV with State companies • JVC leases advantageously positioned for rail access to
Slide 37: Outstanding brownfield and greenfield exploration opportunities
Outstanding brownfield and greenfield exploration opportunities For personal use only Canada IOCC West Africa India Brazil Central Africa Corumba Pilbara New Zealand Brownfield Exploration Source: Rio Tinto Greenfield Opportunities 11 Financial community site visit (15 - 20 June 2008)
Slide 38: Summary
For personal use only Summary • Simandou offers RTIO a top-quality Greenfield option; which has a demonstrated ability to develop rapidly • Other global assets Corumbá and IOCC offer substantial expansion possibilities, currently underway or in advanced study • Upside opportunities exist with Orissa
Slide 39: Global development
For personal use only Global development Alan Davies Managing director, Global Development & Chief financial officer 20 June 2008
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