Slide 1: Notice to ASX: 2018 Full year results presentation
Notice to ASX 2018 Full year results presentation For personal use only 27 February 2019 Attached is the Rio Tinto 2018 full year results presentation to be be given today by Rio Tinto chief executive Jean-Sébastien Jacques, and chief financial officer Jakob Stausholm. The presentation slides are al
Slide 2: Contacts
Contacts For personal use only media.enquiries@riotinto.com riotinto.com Follow @RioTinto on Twitter Media Relations, United Kingdom Media Relations, Australia Illtud Harri Jonathan Rose M +44 7920 503 600 T +61 3 9283 3088 M +61 447 028 913 David Outhwaite T +44 20 7781 1623 Matt Chambers M +44 778
Slide 3: 2018 annual results
For personal use only 2018 annual results 27 February 2019 London
Slide 4: 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 5: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 6: A strong 2018
A strong 2018 Delivering $13.5 billion of cash returns For personal use only Financial Balance Value performance sheet creation $18.1bn $0.3bn $13.5bn EBITDA* on margin of 42% Net cash at Dec-2018 Total shareholder cash returns – Adjusted net debt of $11.8bn $8.0 billion** – No bond maturities until
Slide 7: Tailings storage facilities
Tailings storage facilities For personal use only With active or inactive tailings storage Active or inactive, with an Rio Tinto Kennecott, Utah, US 32 facilities, including 3 non-managed operational sites and 4 legacy sites 100 additional 36 facilities closed or under rehabilitation operations faci
Slide 8: Three levels of assurance for managing tailings and water storage
Three levels of assurance for managing tailings and water storage For personal use only Audit of control effectiveness 3 rdlevel Group Internal Audit working with external auditors Audit Assures systems for risk management, internal control and governance are effective nd Group review 2 level Surfac
Slide 9: Focus on people and sustainability
Focus on people and sustainability For personal use only Safety Performance Health and Safety Rio Tinto AIFR ICMM (23 companies) AIFR 3 fatalities in 2018; 2 workplace related, 1 security incident 2.78 CRM* a strong focus with 1.4 million verifications in 2018 White Ribbon accreditation in Australia
Slide 10: Increased portfolio value and performance
Increased portfolio value and performance For personal use only Completed ~$12bn And strengthened disposals since 2015 the portfolio: Increase in CuEq CAGR of 1.4%* Grasberg – Driven by a 3.4% increase in CuEq CAGR across our remaining portfolio Kitimat wharf & land Increased ROCE by 10pp from 2015-
Slide 11: Consistent, disciplined capital allocation
Consistent, disciplined capital allocation Investment and shareholder returns delivered from operating cash flow For personal use only $34bn $12bn $6bn $3bn Cash flow from Cash from $12bn + Sustaining 2018 final operations disposals Dividends paid capex dividend to be paid in Apr-19 $7bn $46bn Growt
Slide 12: Jakob Stausholm, Chief financial officer
For personal use only Jakob Stausholm Chief financial officer
Slide 13: Commodity specific price drivers in 2018
Commodity specific price drivers in 2018 For personal use only Iron ore Iron Ore (-4%) 80 Solid growth in global steel production, including Chinese crude steel production of ~930Mt 2018 avg*: $61.2/t vs $64.1/t in 2017 China’s structural policy-driven demand for higher grade 50 products Jan 18 Mar
Slide 14: Strong and consistent EBITDA
Strong and consistent EBITDA For personal use only Underlying EBITDA Coal EBITDA $ billion EBITDA excl. Coal 18.6 18.1 0.3 0.9 1.2 0.2 0.9 (0.4) (0.4) (0.3) (0.3) (0.2) 17.4 17.2 17.2 2017 Price Exchange Energy CPI Flexed 2017 Volumes & Raw Other cash One-offs 2018 underlying rates underlying mix ma
Slide 15: Net earnings reconciliation
Net earnings reconciliation For personal use only ($bn) Reported Underlying Exclusions Exclusions from underlying EBITDA: – gains on disposal of businesses and land (Kitimat), and gain on EBITDA 23.3 18.1 5.1* formation of Elysis JV Depreciation & Amortisation (4.6) (4.6) 0.0 – gains on embedded com
Slide 16: Iron Ore: continued delivery from a world-class asset
Iron Ore continued delivery from a world-class asset For personal use only 2018 2017 2019 Shipments increased 2% Operating metrics comparison guidance Average realised price* $62.8 / t - 3% Maintained EBITDA margin Shipments (100% basis) 338mt + 2% 338-350Mt Strong demand for our 62% Operating cost
Slide 17: Aluminium: stable operations squeezed by raw material costs
Aluminium stable operations squeezed by raw material costs For personal use only 2018 2017 2019 1% primary metal productivity Operating metrics comparison guidance creep**** Average aluminium price* $2,470 / t + 11% Average bauxite price** $38.7 / t + 6% Raw material and energy inflation Average alu
Slide 18: Copper & Diamonds: strong operational performance
Copper & Diamonds strong operational performance For personal use only 2018 2017 2019 Improved performance Operating metrics comparison guidance at Escondida Copper price 297 c/lb + 6% – Resulting in $786 million Production – mined copper 634kt + 33% 550-600kt of dividends received Production – refi
Slide 19: Energy & Minerals: a challenging year
Energy & Minerals* a challenging year For personal use only 2018 2017 2019 Production instability at RTIT an Operating metrics comparison guidance opportunity to improve in 2019 IOC pellets $114 / t + 5% – 2 furnaces currently being rebuilt at TiO2** $647 / t + 18% Rio Tinto Fer et Titane Production
Slide 20: Productivity accelerating in 2019
Productivity accelerating in 2019 For personal use only Post-tax mine-to-market (M2M) productivity programme 2018 M2M additional free cash flow fully offset by $ billion (free cash flow) raw material cost headwinds, primarily related to Aluminium 0.6 1.0 2018 invested in capabilities and technology
Slide 21: Disciplined capital allocation
Disciplined capital allocation For personal use only Essential 1 sustaining capex Further cash returns to Compelling Ordinary 2 dividends shareholders growth Iterative 3 cycle of Debt management 19 ©2019, Rio Tinto, All Rights Reserved
Slide 22: Our strong balance sheet gives us resilience and flexibility
Our strong balance sheet gives us resilience and flexibility For personal use only Net debt 9.6 Net cash of $0.3 billion $ billion 8.0 Committed cash outflows for 2019 will result in 7.0* IFRS 16 adjusted net debt of $8.0 billion**: – $4.0 billion return of Grasberg and Dunkerque proceeds 9.6 via sp
Slide 23: Disciplined ramp-up of investments
Disciplined ramp-up of investments For personal use only Capital expenditure profile Maintained sustaining capital $ billion guidance of $2.0 to $2.5 billion per year, including: ~6.5 ~6.5 – Iron Ore sustaining capex of ~6.0 ~$1 billion per year 5.4 Depreciation Pilbara replacement capital 4.5 inclu
Slide 24: The industry fundamentals are robust with Rio Tinto leading the way
The industry fundamentals are robust with Rio Tinto leading the way For personal use only Capex / Depreciation and amortisation* Gearing (Net debt / (Net debt + equity))* 400% 40% 300% 30% 200% 20% 100% 10% 0% 0% H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017
Slide 25: Superior cash returns declared of $13.5 billion in 2018
Superior cash returns declared of $13.5 billion in 2018 For personal use only 2018 cash returns declared to shareholders $ billion 4.0 1.1 2.1 Grasberg and Dunkerque 13.5 proceeds 3.1 6.3 1.0 2.2 2018 interim dividend On-market plc SBB by 2018 final dividend Total returns from Off-market Ltd SBB On-
Slide 26: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 27: 2019 outlook
2019 outlook For personal use only Global GDP Global economic growth 8% USA – Momentum slowing 6% 4% Japan – Volatility and risk of trade war is ongoing Eurozone China’s GDP growth 2% 0% World – Decelerating as expected -2% Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
Slide 28: Our strategy has delivered value through the cycle
Our strategy has delivered value through the cycle For personal use only Superior cash generation World-class assets Operating and Commercial excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling
Slide 29: Investing through the cycle
Investing through the cycle 2% CAGR** from an extensive pipeline of growth options For personal use only World Class Resource Base and Established Exploration Programme Pre-Feasibility 6 Brownfield exploration 64 Greenfield exploration & Feasibility programmes programmes Arvida, AP60 Execution Pilba
Slide 30: Discovery of copper-gold mineralisation in Western Australia
Discovery of copper-gold mineralisation in Western Australia For personal use only Early success in copper at Winu*: – Copper-gold mineralisation intersected – Mineralisation close to surface 50-100m – 1.4 km of strike length open to North, South and East – Located in Western Australia and 100% owne
Slide 31: Strong base for future growth and profitability
Strong base for future growth and profitability For personal use only Consistent Attractive growth financial discipline opportunities Safety is our priority #1 $29bn* 2% CuEq Returned to shareholders in Annual growth rate to 3 years, cash generative assets 2023 from broad pipeline and strong balance
Slide 32: Appendix
For personal use only Appendix 27 February 2019 London
Slide 33: Higher aluminium and RTIT prices partly offset by lower iron ore prices
Higher aluminium and RTIT prices partly offset by lower iron ore prices For personal use only Underlying EBITDA 2017 vs 2018 $ million 19,000 277 18,580 Aluminium* Minerals Uranium Diamonds Copper Iron ore Other, net 500 282 281 182 49 33 0 17,000 (92) -500 (458) 15,000 2017 Price underlying EBITDA
Slide 34: Strong sales in iron ore, copper, gold and aluminium
Strong sales in iron ore, copper, gold and aluminium For personal use only Underlying EBITDA 2017 vs 2018 $ million 366 863 203 185 286 177 19,000 277 18,580 18,406 (436) 14 (301) (40) (42) Aluminium Iron & Titanium Diamonds Iron ore Gold Copper Other 17,000 15,000 2017 Price Exchange Energy Inflati
Slide 35: Iron Ore: maintaining our competitive advantage
Iron Ore maintaining our competitive advantage For personal use only Pilbara cash unit cost 2018 cash unit cost of $13.3/t ($0.1/t lower than 2017) $ per tonne Focus on maintaining strong EBITDA margins (68% in 2018, in line with 2017) 20.4 Productivity initiatives and weakening Australian dollar in
Slide 36: Iron Ore: lower prices partly offset by higher volumes
Iron Ore lower prices partly offset by higher volumes For personal use only Underlying EBITDA 2017 vs 2018 $ million 12,000 11,520 321 27 11,325 142 11,008 (105) (31) (479) (70) 10,000 8,000 2017 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Tax & other 2018 underlying EB
Slide 37: Aluminium: higher prices and volumes offset by raw material cost headwinds
Aluminium higher prices and volumes offset by raw material cost headwinds For personal use only Underlying EBITDA 2017 vs 2018 $ million 136 3,616 4,000 3,423 283 185 3,095 (132) (94) 3,000 (491) (215) 2,000 1,000 0 2017 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Tax &
Slide 38: Copper & Diamonds: strong operational performance
Copper & Diamonds strong operational performance For personal use only Underlying EBITDA 2017 vs 2018 $ million 260 65 2,776 3,000 316 26 1,904 356 1 1,780 2,000 (27) (25) (52) (48) 1,000 0 2017 Price Exchange Energy Inflation Flexed Volumes Cash cost Exploration & Escondida Grasberg Tax & other 201
Slide 39: Energy & Minerals: higher prices offset by coal disposal
Energy & Minerals higher prices offset by coal disposal and one-off disruptions For personal use only Underlying EBITDA 2017 vs 2018 $ million 4,000 384 3,062 445 2,803 3,000 (2) (31) (92) (5) 2,193 (201) 2,000 (718) (339) (51) 1,000 0 2017 Price Exchange Energy Inflation Flexed Volumes Cash cost Co
Slide 40: Other movements in underlying EBITDA
Other movements in underlying EBITDA For personal use only Underlying EBITDA impact Energy & Cash Interest, $ million 2017 FX/ price Inflation Volumes costs E&E Non-cash tax, other 2018 Other operations (116) 121 (117) 6 (31) - 2 64 (70) Exploration & Evaluation (net) (218) 2 1 - - (17) - - (231) Ot
Slide 41: Near-term maturities further reduced in 2018
Near-term maturities further reduced in 2018 For personal use only 31 December 2018 debt maturity profile* Gross debt reduced by $2.3 billion in 2018 to $ million ~$13 billion 3,500 $1.9 billion nominal value of bonds 3,000 purchased in 2018 2,500 Average outstanding debt maturity of 2,000 corporate
Slide 42: Modelling EBITDA
Modelling EBITDA For personal use only Underlying EBITDA sensitivity 2018 ($m) impact on FY 2018 underlying average price/ rate EBITDA of 10% price/rate change Copper 297c/lb 388 Aluminium $2,110/t 612 Gold $1,269/oz 46 Iron ore (62% Fe FOB) $61.2/dmt 1,566 A$ 75USc 721 C$ 77USc 354 Oil $71/bbl 78 N
Slide 43: Modelling aluminium costs
Modelling aluminium costs For personal use only ($/t) Impact a $100/t change in Canadian* smelting unit cash** cost sensitivity each of the input costs below will have on our 2018 Canadian smelting unit cash cost of $1,533/t Alumina (FOB) 191 Green petroleum coke (FOB) 34 Calcined petroleum coke (FO
Slide 44: Case Study: Active management at Kennecott
Case Study: Active management at Kennecott For personal use only South impoundment – closed in 2002 North impoundment – opened 2002-present – No longer met seismic hazard design criteria – Design review board comprised of international experts – Upstream construction method – Designed to +7.25 magni
Slide 45: Closure, taking the long term view
Closure, taking the long term view For personal use only Committed to closing our assets well At end 2018, closure and restoration provisions of $10 billion Dedicated closure team, in-house R&D Dedicated team, defined strategy and technical experts to improve closure outcomes and manage legacy sites