Rio Tinto Plc · LSE:RIO
Rio Tinto — BMO Global Metals & Mining Conference 2017
17 slides from Rio Tinto's conference presentation, Feb 27, 2017
Slide 1: Delivering superior returns
Delivering superior returns Chris Lynch, chief financial officer BMO Global Metals & Mining Conference 27 February 2017
Slide 2: Cautionary statements
Cautionary statements 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, including but not limited to a
Slide 3: Our value proposition
Our value proposition 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 Delivering >2% CAGR1 CuEq growth $2 billion cost savings over 2016/17 40-60% returns through the cycle As
Slide 4: Delivering on our promises
Delivering on our promises Strong operating cash flow of $8.5 billion Portfolio optimisation with divestments announced of $1.3 billion Investing in our three major growth projects Balance sheet strength with net debt reduced to $9.6 billion Shareholder returns of $3.6 billion 4 | © Rio Ti
Slide 5: Safety comes first
Safety comes first A history of continual improvement in safety Fatality at Paraburdoo in June AIFR per 200,000 hours worked Continued focus on Fatality Prevention, Illness and 1.4 Injury Reduction and Catastrophic Event Prevention 1.2 Critical Risk Management (CRM) Programme – More than 1.3 million
Slide 6: World-class assets delivering value
World-class assets delivering value Iron Ore Aluminium Copper & Diamonds Energy & Minerals 63% 28% 35% 30% Margins Pilbara operations FOB Integrated operations Operating EBITDA Operating FOB EBITDA EBITDA margin EBITDA margin margin margin Cash flows from operations Cash flows from operations Cash f
Slide 7: Increased underlying earnings driven by cash cost reductions
Increased underlying earnings driven by cash cost reductions Underlying earnings 2015 vs 2016 $ million (post tax) 6,000 97 1,124 5,100 4,540 (136) 49 25 3,996 19 4,000 (460) (158) Total cost reductions of $1.2bn post-tax or $1.6bn pre-tax 2,000 0 2015 Price Exchange Energy Inflation Flexed 2015 Vol
Slide 8: $1.6 billion of cost reductions achieved in 2016
$1.6 billion of cost reductions achieved in 2016 2016 pre-tax operating cash cost improvements $7.8 billion cost savings achieved since 2012 ($m) 185 1,601 Cost performance helped deliver a 2016 EBITDA 342 margin of 38% (34% in FY 2015) Cost culture across all product groups 278 $2 billion cost savi
Slide 9: We aim to deliver $5 billion of free cash flow in productivity improvements
We aim to deliver $5 billion of free cash flow in productivity improvements over five years Value Chain Exploration Major projects Mining Asset Processing Infrastructure Marketing management Broadening our cost saving programme to include productivity Opportunity to Opportunity to Opportunity to imp
Slide 10: Our capital allocation framework
Our capital allocation framework Essential 1 sustaining capex Further cash Compelling Ordinary returns to 2 dividends shareholders growth Iterative 3 cycle of Debt management 10 | © Rio Tinto 2017
Slide 11: Disciplined allocation of strong cash flow
Disciplined allocation of strong cash flow Cash flow 2016 Disciplined allocation of capital ($ million) ($ billion) 10,000 761 9,580 354 8,465 1.7 8,000 Total cash from asset 3.9* 6,000 disposals of $1.1bn 1.3 4,000 2,000 2.7 0 Net cash generated Sales of PP&E Disposals Cash available for Sustaining
Slide 12: Sustaining capex and compelling growth
Sustaining capex and compelling growth Capital expenditure profile 2016 capital reduction due to project optimisation, cost $ billion improvements and timing ~5.5 ~5.5 H2 2016 spend of $1.7 billion as projects progress ~5.0 Capital allocation discipline requires project IRR >15% 3.0 Growth capital i
Slide 13: Strengthening our balance sheet
Strengthening our balance sheet Net debt and gearing ratio1 Net debt reduction of $4.2 billion in 2016 ($bn) Gearing below 20% – Provides stable foundation during uncertain 22.1 economic outlook 18.1 – Supports shareholder returns through the cycle 13.8 28% 12.5 – Enables counter-cyclical investment
Slide 14: Continuing to shape our portfolio
Continuing to shape our portfolio $7.7 billion1 disposals announced since 2013 Value delivered through divestments ($bn) January announcement of Coal & Allied divestment for up to $2.45 billion Up to 2.45 Proceeds expected in 2017: – Lochaber second tranche of $0.2 billion in H1 3,208 1.3 – Coal & A
Slide 15: Application of the new returns policy
Application of the new returns policy Capital return considerations Comments Status Underlying earnings up 12% to $5.1bn Results for 2016 Net debt reduced to $9.6bn. Long term growth prospects Focused on Silvergrass, Amrun and Oyu Tolgoi. Balance sheet strength Net debt <$10bn Strong earnings/
Slide 16: Delivering superior returns for shareholders
Delivering superior returns for shareholders Cash returns to shareholders ($bn)* Final 2016 dividend declared of 125 US cents per share, delivering full year dividend of 170 US cents 0.5 per share Share buy-back totalling $0.5 billion to be undertaken in 2017 in Rio Tinto plc shares 2.3 3.6 Total 20
Slide 17: Delivering on our promises
Delivering on our promises Strong operating cash flow of $8.5 billion Portfolio optimisation with divestments announced of $1.3 billion Investing in our three major growth projects Balance sheet strength with net debt reduced to $9.6 billion Shareholder returns of $3.6 billion 17 | © Rio T
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