Slide 1: ASX cover letter
Rio Tinto Limited 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 ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 14 February 2013 Dear Sir, Attached is the Rio
Slide 2: 2012 Full year results: Pursuing greater value for shareholders
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only 2012 Full year results Pursuing greater value for shareholders
Slide 3: Cautionary statement
2 Cautionary statement For personal use only 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. Forw
Slide 4: Jan du Plessis, Chairman
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only Jan du Plessis Chairman
Slide 5: Sam Walsh, Chief executive
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only Sam Walsh Chief executive
Slide 6: Safety is a core priority
5 Safety is a core priority For personal use only Injury frequency rates 2003 – 2012 Per 200,000 hours worked 2.0 All injury 1.8 frequency rate Lost time injury 1.6 frequency rate 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 Safety briefing ©2013, Rio Tinto, All Rights Res
Slide 7: A consistent strategy
6 A consistent strategy For personal use only • Maximise total shareholder return • Invest in and operate large, long-life, low-cost, expandable operations • Run the business as owners • Manage our capital wisely • Improve performance from our operations Bingham Canyon ©2013, Rio Tinto, All Rights R
Slide 8: Pursuing greater value for shareholders
7 Pursuing greater value for shareholders For personal use only Refocusing the organisation − Focus, discipline, accountability − Stronger systems Improving operations − $5 billion cumulative operating cost reduction over 2013 and 2014 − Productivity improvements Delivering approved growth projects
Slide 9: Guy Elliott, Chief financial officer
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only Guy Elliott Chief financial officer
Slide 10: 2012 highlights
9 2012 highlights For personal use only • Strong underlying earnings and cash flows from operations − Record iron ore volumes; recovery in copper grades during second half − Lower prices and price volatility across most commodities − Stronger currencies, input cost pressures especially in Australia
Slide 11: Underlying earnings impacted by lower commodity prices
10 Underlying earnings impacted by lower commodity prices following 2011 record highs For personal use only Underlying earnings 2011 vs 2012 $US million 20,000 299 15,549 15,000 (306) (220) (494) (942) 10,000 (5,315) (3,652) Iron ore Aluminium Met coal Copper Ind mins Other 5,000 0 2011 Price underl
Slide 12: Growth in iron ore offset by lower copper and gold volumes
11 Growth in iron ore offset by lower copper and gold volumes For personal use only Underlying earnings 2011 vs 2012 $US million 20,000 326 15,549 15,000 198 634 154 10,000 (5,315) Other, 32 Coal, 78 5,000 Iron ore Copper¹ Other 1 Escondida, Northparkes 0 2011 Price Exchange Volume underlying Rates
Slide 13: Growth in iron ore offset by lower copper and gold volumes
12 Growth in iron ore offset by lower copper and gold volumes For personal use only Underlying earnings 2011 vs 2012 $US million 20,000 15,549 (93) Coal 15,000 Ind (96) (33) Mins 634 (59) Moly 154 10,000 (31) Other (5,315) (943) (302) 5,000 (329) Copper¹ Gold Aluminium Other 1 Kennecott Utah Copper
Slide 14: Cost pressures have reduced but remain significant
13 Cost pressures have reduced but remain significant For personal use only Underlying earnings 2011 vs 2012 $US million 20,000 15,549 15,000 634 154 10,000 (5,315) (943) (270) (304) 5,000 0 2011 Price Exchange Volume Volume Energy and Other cash underlying Rates increase decrease inflation costs ea
Slide 15: External cost pressures have reduced but remain significant
14 External cost pressures have reduced but remain significant For personal use only Earnings cash cost impact • Better cost performance than 2011 $ million • Operational readiness costs largely Cost increases Cost decreases relate to Pilbara, IOC and Rio Tinto Operational Coal Australia development
Slide 16: Underlying earnings
15 Underlying earnings For personal use only Underlying earnings 2011 vs 2012 $US million 20,000 15,549 15,000 634 154 10,000 9,303 (5,315) (943) (270) (304) (202) 5,000 0 2011 Price Exchange Volume Volume Energy and Other cash Explor'n, 2012 underlying Rates increase decrease inflation costs eval'n
Slide 17: Strong operating cash flows in a year of peak capex
16 Strong operating cash flows in a year of peak capex For personal use only 2012 cash flows • Strong cash flow from operations US$ billion despite challenging market and operating conditions 30 Other: ($2.2bn) Acquisitions: ($1.3bn) Buy-back ($1.5bn) • Cash inflow boosted by Chalco Increase in 25 d
Slide 18: Prudent balance sheet management
17 Prudent balance sheet management For personal use only Gross debt maturity profile • Aim to maintain a single A credit rating at 31 December 2012 US$ billion • Long term and smooth debt maturity profile 5 − Weighted average maturity of 4 around nine years − $7.9 billion of bonds issued in 2012 3
Slide 19: Targeting $5 billion cumulative reduction in operating cash costs
18 Targeting $5 billion cumulative reduction in operating cash costs by end of 2014 For personal use only Cash cost reduction target • Sustainable annual cash cost US$ billion, base = 2012 cash operating cost base decrease of $3 billion by end of 2014 4.0 − Assumes constant operating 2.0 conditions
Slide 20: Capital expenditure is being prioritised on the highest quality projects
19 Capital expenditure is being prioritised on the highest quality projects For personal use only Approved capital expenditure • Capex programme managed within US$ billion boundaries of single A credit rating, dividend policy and other returns to 20 shareholders • Yarwun 2 completion and rapid 15 ra
Slide 21: Disciplined capital management
20 Disciplined capital management For personal use only • Disciplined and rigorous approach Cash from operations to capital allocation and divestment proceeds • Investment programme focused on highest quality opportunities Disciplined Prudent Cash investment in balance returns to • Evaluate investme
Slide 22: Sam Walsh, Chief executive
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only Sam Walsh Chief executive
Slide 23: Positive momentum in China to be sustained into 2013
22 Positive momentum in China to be sustained into 2013 For personal use only China indicators remain positive • Some positive short term signals 103 54 − China recovery 102 101 100 52 50 − Shallower Eurozone recession 99 98 48 − Gradual recovery in the US 97 46 • Forecasting China GDP growth to Mar
Slide 24: Improving performance at existing businesses
23 Improving performance at existing businesses For personal use only Production growth across key commodities • Record iron ore production and 2011 production = 100 shipments 145 • Rerated Pilbara iron ore capacity to 140 237 Mt/a with minimal capital 135 investment 130 • Substantial production inc
Slide 25: Our growth programme is across regions, products and brownfield/greenfield
24 Our growth programme is across regions, products and brownfield/greenfield For personal use only Kitimat Oyu Tolgoi Utah Copper Resolution Simandou La Granja Coal Mozambique Yarwun 2 Escondida Pilbara Brownfield Greenfield ©2013, Rio Tinto, All Rights Reserved
Slide 26: Oyu Tolgoi: site overview
25 Oyu Tolgoi: site overview For personal use only ©2013, Rio Tinto, All Rights Reserved
Slide 27: Oyu Tolgoi: progress towards first production
26 Oyu Tolgoi: progress towards first production For personal use only Concentrator complex SAG-2 mill feed conveyer Regrind cyclone First copper concentrate stockpile ©2013, Rio Tinto, All Rights Reserved
Slide 28: Pilbara expansion
27 Pilbara 360 expansion For personal use only ©2013, Rio Tinto, All Rights Reserved
Slide 29: Pilbara expansion: acceleration of first ore to 290 Mt/a
28 Pilbara expansion: acceleration of first ore from expansion to 290 Mt/a For personal use only Rio Tinto Pilbara iron ore shipping capacity (100% basis) Average Annualised Mt/a 380 360 First Ore 360 340 340 First Ore 320 290 First Ore 300 280 1H 260 4Q 240 3Q 220 200 2010 2011 2012 2013 2014 2015
Slide 30: Consistent strategy, clear priorities for 2013
29 Consistent strategy, clear priorities for 2013 For personal use only • Core strategy remains unchanged • Greater focus, discipline and accountability • A clear agenda for 2013 − Improving performance at existing operations − Delivering approved growth projects − Reinforcing capital allocation dis
Slide 31: 2012 Full year results: Appendices
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only 2012 Full year results Pursuing greater value for shareholders
Slide 32: Reconciliation of underlying to net earnings
31 Reconciliation of underlying to net earnings For personal use only Underlying earnings 2012 to net earnings 2012 $US million 10,000 9,303 8,000 6,000 4,000 2,000 0 (2,000) 1,130 553 (2,990) 827 (443) (4,000) (6,000) (14,360) Underlying Impairment Consolidation / Exchange MRRT Other Net earnings e
Slide 33: Reconciliation of underlying earnings H1 2012 vs H2 2012
32 Reconciliation of underlying earnings H1 2012 vs H2 2012 For personal use only Underlying earnings H1 2012 vs H2 2012 $US million 6,000 5,154 5,000 647 656 4,149 4,000 7 (390) (181) (1,645) (99) 3,000 2,000 1,000 0 H1 2012 Price Exchange Volume Volume Energy and Other cash Explor'n, H2 2012 Rates
Slide 34: Modelling earnings
33 Modelling earnings For personal use only 2011 2012 Impact on 2012 full Earnings average price/ average price/ 10% change in year underlying sensitivity rate rate 2012 average earnings ($m) Copper 400c/lb 361c/lb +/-36c/lb 270 Aluminium* $2,395/t $2,018/t +/-$202/t 384 Gold $1,571/oz $1,669/oz +/-
Slide 35: Iron ore: delivering expansions on time and budget
34 Iron ore: delivering expansions on time and budget For personal use only Movement in underlying earnings 2011 vs 2012 $US million 13,267 326 5 9,242 (3,658) (1) (121) (22) (222) (332) FY, 11 FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY, FY 12 12 • Record annual production and
Slide 36: Copper: lower prices and grades, recovering during second half
35 Copper: lower prices and grades, recovering during second half For personal use only Movement in underlying earnings 2011 vs 2012 $US million 1,932 14 (322) 15 23 134 1,092 (498) (28) (178) FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 • Impact of lower prices and lower volu
Slide 37: Aluminium: pricing and cost pressure
36 Aluminium: pricing and cost pressure For personal use only Movement in underlying earnings 2011 vs 2012 $US million 442 121 107 160 3 14 (70) (588) (36) (147) 2011 FY 11 Price Fx Vols CPI Energy Other cash Expl’n Eval’n Other 2012 FY 12 • 16% lower LME price year on year partly offset by impact o
Slide 38: Energy: price, currency and cost headwinds
37 Energy: price, currency and cost headwinds For personal use only Movement in underlying earnings 2011 vs 2012 $US million 1,074 10 148 (575) (15) (45) 283 (28) (155) (131) FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 • Earnings impacted by lower prices, increased cash costs
Slide 39: Diamonds & Minerals: TiO2 pricing momentum
38 Diamonds & Minerals: TiO2 pricing momentum begins to flow through earnings For personal use only Movement in underlying earnings 2011 vs 2012 $US million 86 3 119 233 9 10 (32) (11) (17) (162 ) FY FY2011 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other Other cash FY2012 FY 12 • Underlyi
Slide 40: Other
39 Other For personal use only Interest, $million FX/ Cash Epl'n Non tax & (net earnings impact) FY 2011 price Volumes CPI Energy Costs Eval'n Cash other FY 2012 Intersegment 40 – – – – – – – (48) (8) Other operations (120) (406) (20) – (105) 157 – 120 (154) (528) Central exploration (net) (102) – –
Slide 41: Provisional pricing
40 Provisional pricing For personal use only Open Provisional • 2011: driven by an 18% decline in shipments pricing effect the copper 3 month forward price (million lbs) (US$m) and a 33% decrease in tonnes 31 31 provisionally priced at the end of Dec Dec 2011, resulting in an unfavourable 2012 2011
Slide 42: Earnings reconciliations
41 Earnings reconciliations For personal use only 2012 Energy Resources of Australia US$m Earnings per ERA press release (A$151m) (156) Increased depreciation of closure asset (27) Tax and unwinding of discount 7 Less: Minority interests 56 Other (11) Underlying earnings as reported by Rio Tinto (13
Slide 43: Variance analysis methodology
42 Variance analysis methodology For personal use only • Price = Change in commodity price x prior year sales volumes • Exchange = (Change in exchange rates x Prior year cost of sales) + Relative movements in exchange gains and losses on working capital • Inflation = Inflation rate x Prior year cash
Slide 44: Appendices
14 February 2013 Introduction Strategy 2012 results Outlook For personal use only 2012 Full year results Appendices