Slide 1: 2017 half year results
2017 half year results 2 August 2017 London
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: Supporting statements
Supporting statements 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 Competent Person responsible
Slide 4: J-S Jacques, Chief executive
J-S Jacques Chief executive
Slide 5: 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 $2 billion cost savings delivered six Delivering >2% CAGR1 CuEq growth 40-60% returns through the cycle A
Slide 6: Safety and health come first
Safety and health come first 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 frequency rate per 200,000 2.
Slide 7: Disciplined allocation of strong cash flow in H1 2017
Disciplined allocation of strong cash flow in H1 2017 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 8: Delivering on our promises
Delivering on our promises 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 divestments and compelling gr
Slide 9: Chris Lynch, Chief financial officer
Chris Lynch Chief financial officer
Slide 10: Market overview
Market overview $/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 prompted c/lb $/t FOB
Slide 11: Higher prices driving increased earnings
Higher prices driving increased earnings 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 $0.5bn pre-tax 2 1.6 1 0 H1 2016 Price Exchange Energy Inflation Flexed H1 2016 Volumes Cash cost Tax
Slide 12: Net earnings
Net earnings US$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 13: $2 billion cost-out programme achieved early
$2 billion cost-out programme achieved early 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 billion productivity program
Slide 14: Continuing to shape our portfolio
Continuing to shape our portfolio $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 1.3 3,208 Lochaber se
Slide 15: Sustaining capex and compelling growth
Sustaining capex and compelling growth 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 upgrade capex included in
Slide 16: Balance sheet strength
Balance sheet strength 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 through the cycle 9.6
Slide 17: Near-term maturities greatly reduced
Near-term maturities greatly reduced $ 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 2023 2024 2025 2026 2
Slide 18: Delivering superior returns for shareholders
Delivering superior returns for shareholders 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-back of $1.0 billion in
Slide 19: J-S Jacques, Chief executive
J-S Jacques Chief executive
Slide 20: 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 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 (RHS) 10 0 3 8 2015 2015
Slide 21: Strategy will deliver value through the cycle
Strategy will deliver value through the cycle 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 Tinto 2017
Slide 22: Delivering $5 billion of free cash flow from productivity
Delivering $5 billion of free cash flow from productivity 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 processing plants with 55-95%
Slide 23: High-return growth projects
High-return growth projects 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 billion1 capex, first
Slide 24: Continuing to deliver on our commitments
Continuing to deliver on our commitments 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 billion of cash 24 | © Rio
Slide 25: Appendix
RioTinto Appendix
Slide 26: Higher prices driving increased earnings in H1 2017
Higher prices driving increased earnings in H1 2017 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 underlying earnings * Al
Slide 27: Volumes impacted by weather and maintenance in iron ore and coal
Volumes impacted by weather and maintenance in iron ore and coal 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 underlying rates H1 2016 & Mix
Slide 28: Iron Ore: lower volumes offset by higher pricing and cost reductions
Iron Ore: lower volumes offset by higher pricing and cost reductions 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 H1 2017 underlying H1 2
Slide 29: Aluminium: prices, cost savings and volumes drive increased earnings
Aluminium: prices, cost savings and volumes drive increased earnings 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 2017 underlying rates
Slide 30: 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 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 Exploration & One-offs
Slide 31: Energy & Minerals: higher prices driving earnings
Energy & Minerals: higher prices driving earnings 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 underlying H1 2016 reductions e
Slide 32: Other movements in underlying earnings
Other movements in underlying earnings 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) - - - - (12) - - (76) Interest
Slide 33: Modelling earnings
Modelling earnings 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 coal (average spot) $81/