Slide 1: Notice to ASX: 2017 half year results presentation
Notice to ASX 2017 half year results presentation For personal use only 2 August 2017 Attached is the Rio Tinto 2017 half year results presentation to be given today by Rio Tinto chief executive Jean-Sébastien Jacques, and chief financial officer Chris Lynch. The presentation slides will also be ava
Slide 2: 2017 half year results
For personal use only 2017 half year results 2 August 2017 London
Slide 3: Cautionary statements
Cautionary statements For personal use only 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, includin
Slide 4: Supporting statements
Supporting statements For personal use only Ore Reserves (slide 23) Silvergrass Ore Reserve grade. Proved and Probable Ore Reserves for Silvergrass (178Mt at 61.3% Fe) were released to the market in the 2016 Rio Tinto Annual Report on 2 March 2017 and can be found on p 225 of that report. The Compet
Slide 5: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 6: Our value proposition
Our value proposition For personal use only Capital discipline and Team and performance Long-term strategy Cash focus shareholder returns culture World-class assets Value over volume Strong balance sheet Safety first $2 billion cost savings delivered six Delivering >2% CAGR1 CuEq growth 40-60% retur
Slide 7: Safety and health come first
Safety and health come first For personal use only Continued history of improvement in safety Continued focus on Fatality Prevention AIFR per 200,000 hours worked – 731,000 CRM verifications in H1 2017 3.00 Rio Tinto ICMM (23 companies) Further AIFR improvement achieved in H1 2.78 All injury frequen
Slide 8: Disciplined allocation of strong cash flow in H1 2017
Disciplined allocation of strong cash flow in H1 2017 For personal use only 0.7 2.5 1.1 $6.3 bn Operating cash flow H1 2017 2.0 Sustaining capital Growth capital Balance sheet strength Shareholder returns paid in H1 2017 7 | © Rio Tinto 2017
Slide 9: Delivering on our promises
Delivering on our promises For personal use only Shareholder returns of $3.0 billion Strong EBITDA generation of $9.0 billion and margin of 45% $2 billion cost-out programme achieved early Balance sheet strength with net debt reduced to $7.6 billion Strengthening the portfolio with divestm
Slide 10: Chris Lynch, Chief financial officer
For personal use only Chris Lynch Chief financial officer
Slide 11: Market overview
Market overview For personal use only $/dmt, 62%, FOB WA $/t LME + MW Premium Iron Ore Aluminium 100 2,500 2,250 Chinese macroeconomic data 75 outperformed market expectations 2,000 50 Iron ore price volatility and port stocks 1,750 remain elevated 25 1,500 2016 2017 2016 2017 Improved copper prices
Slide 12: Higher prices driving increased earnings
Higher prices driving increased earnings For personal use only Underlying earnings H1 2016 vs H1 2017 $ billion (post tax) 5 2.7 4.0 0.3 4 (0.1) 3.9 (0.1) (0.1) (0.2) (0.2) 3 Total cost reductions1 of $0.3bn post-tax or $0.5bn pre-tax 2 1.6 1 0 H1 2016 Price Exchange Energy Inflation Flexed H1 2016
Slide 13: Net earnings
Net earnings For personal use only US$m H1 2017 underlying earnings 3,941 Impairments (166) Net losses on disposals (5) Exchange losses on (502) debt and derivatives Rio Tinto Kennecott insurance claim 45 Other (8) H1 2017 net earnings 3,305 12 | © Rio Tinto 2017
Slide 14: $2 billion cost-out programme achieved early
$2 billion cost-out programme achieved early For personal use only Pre-tax operating cash cost improvements $8.2 billion cost savings achieved since 1 Jan 2013 Reduction vs. 2012 ($ billion) $2.1 billion cost savings across 2016/17 0.5 1.6 8.2 – achieved target six months ahead of schedule $5 billio
Slide 15: Continuing to shape our portfolio
Continuing to shape our portfolio For personal use only $7.9 billion1 disposals announced since 2013 Value delivered through divestments $ billion Coal & Allied divestment to Yancoal for $2.69 billion 2.7 7.9 – Improvement of $0.5 billion cash on completion – Proceeds of $2.56 billion expected in H2
Slide 16: Sustaining capex and compelling growth
Sustaining capex and compelling growth For personal use only Capital expenditure profile H1 2017 spend of $1.8 billion as projects progress $ billion – Sustaining capex of $0.7 billion ~5.5 ~5.5 ~5.0 – Growth capex of $1.1 billion AutohaulTM expected to be fully operational end-2018 Pilbara rail upg
Slide 17: Balance sheet strength
Balance sheet strength For personal use only Leverage1 and net debt Net debt reduced by $2 billion in H1 2017 to $7.6 billion $ billion Net debt Strong balance sheet: 1.1x 0.7x 0.4x 0.6x to EBITDA – Provides stable foundation during uncertain economic 13.8 outlook 10.8 – Supports shareholder returns
Slide 18: Near-term maturities greatly reduced
Near-term maturities greatly reduced For personal use only $ million 31 Dec 2015 debt maturity profile1 3,000 Gross debt reduced by $2.5 billion in H1 2017 – principally from bonds purchased/redeemed 2,000 with cash 1,000 0 Average outstanding debt maturity now ~11 2016 2017 2018 2019 2020 2021 2022
Slide 19: Delivering superior returns for shareholders
Delivering superior returns for shareholders For personal use only Cash returns to shareholders in H2 2017 Total returns to shareholders of $3.0 billion announced $ billion – 75% of underlying earnings 0.2 – Interim dividend of $2.0 billion or $1.10 per share to be paid in H2 2017 1.0 – Share buy-ba
Slide 20: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 21: Strong Chinese steel industry margins and low inventories
Strong Chinese steel industry margins and low inventories Quarterly Real GDP growth is stable China’s supply-chain is tightening For personal use only Percentage change year on year Steel inventory days 4 7 18 2013 2014 2015 2016 2017 3 6 16 14 2 5 12 1 4 United States (LHS) Eurozone (LHS) China (RH
Slide 22: Strategy will deliver value through the cycle
Strategy will deliver value through the cycle For personal use only Superior cash generation World-class assets Operating excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth 21 | © Rio Ti
Slide 23: Delivering $5 billion of free cash flow from productivity
Delivering $5 billion of free cash flow from productivity For personal use only Load & Haul e.g ~15% Retiring 20% of mobile >800 trucks with 55-75% EU improvement in truck EU equipment capital base >200 dig units with 30-50% EU Or Processing e.g ~15% increase in Moving 25% more material ~50 processi
Slide 24: High-return growth projects
High-return growth projects For personal use only Silvergrass Amrun Oyu Tolgoi High-grade, low phosphorus iron ore Creating seaborne bauxite market, Largest and highest quality copper enhancing value of Pilbara Blend high-grade and expandable development in the world >100% IRR >20% IRR >20% IRR $0.5
Slide 25: Continuing to deliver on our commitments
Continuing to deliver on our commitments For personal use only Focusing on cash flow growth - $5 billion from productivity by 2021 Strengthening our portfolio Investing in our three major growth projects Maintaining balance sheet strength Delivering superior shareholder returns - $3.0 bill
Slide 26: Appendix
For personal use only Appendix
Slide 27: Higher prices driving increased earnings in H1 2017
Higher prices driving increased earnings in H1 2017 For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) Semi-soft coking 6,000 Iron ore Aluminium* Met. coal Copper Thermal coal coal Minerals Other 1,583 2,743 4,000 2,000 1,563 444 271 178 131 109 25 2 0 H1 2016 Price un
Slide 28: Volumes impacted by weather and maintenance in iron ore and coal
Volumes impacted by weather and maintenance in iron ore and coal For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) 6,000 41 27 22 10 2,743 4,028 4,000 (92) (63) -14 (123) (177) -67 -84 -112 2,000 1,563 0 H1 2016 Price Exchange Energy Inflation Flexed Volumes underlyin
Slide 29: Iron Ore: lower volumes offset by higher pricing and cost reductions
Iron Ore: lower volumes offset by higher pricing and cost reductions For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) 4,000 1,471 109 83 3,255 3,129 (28) (32) (25) (66) 2,000 1,743 0 H1 2016 Price Exchange rates Energy Inflation Flexed Volumes Cash cost Tax & other H
Slide 30: Aluminium: prices, cost savings and volumes drive increased earnings
Aluminium: prices, cost savings and volumes drive increased earnings For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) 1,000 444 56 4 739 27 759 (27) (6) (67) (49) 500 377 0 H1 2016 Price Exchange Energy Inflation Flexed Volumes Cash cost Exploration & Tax & other H1
Slide 31: Copper & Diamonds: higher prices and cost savings offset by lower volumes
Copper & Diamonds: higher prices and cost savings offset by lower volumes and one-offs For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) 250 174 121 4 88 (1) (14) (15) 0 (103) (56) (145) (34) (69) -250 H1 2016 Price Exchange Energy Inflation Flexed Volumes Cash cost E
Slide 32: Energy & Minerals: higher prices driving earnings
Energy & Minerals: higher prices driving earnings For personal use only Underlying earnings H1 2016 vs H1 2017 $ million (post tax) 800 610 27 652 605 29 36 (33) (20) (34) (45) 400 82 0 H1 2016 Price Exchange rates Energy Inflation Flexed Volumes Cash cost Exploration & Tax & other H1 2017 underlyin
Slide 33: Other movements in underlying earnings
Other movements in underlying earnings For personal use only Underlying earnings impact Energy & Interest, tax & $ million H1 2016 FX/ price Inflation Volumes Cash Costs Epl'n eval'n Non Cash other H1 2017 Other operations (32) 41 9 10 (14) - 8 (56) (34) Exploration & Evaluation (net) (64) - - - - (
Slide 34: Modelling earnings
Modelling earnings For personal use only H1 2017 ($m) impact on FY 2017 underlying earnings of average price/ Earnings sensitivity 10% price/rate change rate Copper 262c/lb 190 Aluminium $1,880/t 592 Gold $1,238/oz 28 Iron ore (62% Fe FOB) $68.2/dmt 1,057 Coking coal (benchmark) $285/t 68 Thermal co