Rio Tinto Plc · LSE:RIO
Rio Tinto — Rio Tinto Aluminium — Corporate Update (June 2006)
26 slides from Rio Tinto's corporate update, June 2006
Slide 1: Rio Tinto Aluminium
Rio Tinto Aluminium Phillip Strachan Chief Financial Officer - Rio Tinto Aluminium Financial community site visit – June 2006 Venue safety • Alarm • Fire exits • Assembly point THE GOAL IS ZER “If it’s not safe, don’t do it that way” 2 1
Slide 2: RTA presentation outline
RTA presentation outline Phillip Strachan RTA Overview (20 mins) Hubie van Dalsen Mining & Refining (20 mins) Sandeep Biswas Smelting (20 mins) Panel Questions & answers (30 mins) 3 Overview • Strategy • Rio Tinto Aluminium operations • 2005 Operational performance • Alumina and aluminium markets •
Slide 3: Rio Tinto Aluminium strategy; Operations and production - 2005
Rio Tinto Aluminium strategy To maximise value by: • Building on the outstanding resource at Weipa where reserves can support current production rate for at least 70 years • Increasing alumina production • Pursuing smelting opportunities with competitive power pricing • Opportunistic mergers and acq
Slide 4: RTA safety performance - LTIFR
RTA safety performance - LTIFR 7.5 6.8 6.0 Lost time injury frequency rate 5.3 4.5 3.8 3.0 2.3 1.5 0.8 0.0 1999 2000 2001 2002 2003 2004 2005 7 Record performance in 2005 Rio Tinto Aluminium earnings history Earnings - by commodity (2005) US$m Diamonds 5% Other 1% 450 Industrial Minerals 375 4% Copp
Slide 5: RTA material flows; Tight alumina market continues
145 kt RTA material flows (capacity) 141 kt AAM 73 kt 100% supply basis (51%) 51% External 1.4 Mt purchases 0.3 Mt 174 kt Bell CAR 3.1 Mt 1.4 Mt 336 kt Bay 174 kt 100% 100% 3.9 Mt 352 kt Weipa Bauxite QAL Alumina NZAS Metal 100% 16.5 Mt 38.6% 3.8 Mt 79.4% 854 kt 8.4 Mt 1.5 Mt 473 kt 280 kt 1.1 Mt 54
Slide 6: Aluminium supply side is changing …and so is the demand side
Aluminium supply side is changing • High cost smelters are closing in Europe and North America • China focus on domestic demand • Global demand growth underpins new capacity • Overall LME price strength underpinned by fundamentals 1980 2005 (16 million tonnes) (31 million tonnes) North America North
Slide 7: Strong aluminium prices; tight aluminium market
Strong aluminium prices are being enjoyed 000 tonnes cents/lb 4000 140 3500 120 Price 3000 100 2500 80 2000 60 1500 Exchange stocks 40 1000 Producer stocks 500 20 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: LME / WBMS 13 …with a tight aluminium market World primary aluminium balanc
Slide 8: China continues to be important; Business improvement
Source: CRU / Brook Hunt China continues to be important Chinese alumina imports Chinese aluminium consumption 9,000 9,000 7,500 7,500 6,000 6,000 k tonnes k tonnes 4,500 4,500 3,000 3,000 1,500 1,500 0 0 2000 2001 2002 2003 2004 2005 2006F 2000 2001 2002 2003 2004 2005 2006F • New capacity in China
Slide 9: Current business challenges
Current business challenges • Continue to improve health, safety, environment and communities • Maintain production efficiencies • Manage cost pressures • Disciplined growth 17 9
Slide 10: Rio Tinto Aluminium – Mining and Refining
Rio Tinto Aluminium Hubie van Dalsen Managing Director Mining & Refining Financial community site visit – June 2006 Mining and refining presentation outline • Overview • Safety • Operational review • Business improvement • Business challenges • Growth options 2 1
Slide 11: Mining & Refining operations; Safety focus
Mining & Refining (M&R) operations Eurallumina Asset Product 2005 prodn Ownership structure Weipa Weipa Cape York Bauxite 15.5 mt * 100% Rio Tinto Peninsula, Queensland CAR Gladstone, Alumina 0.8 mt * 100% Rio Tinto QAL Queensland QAL * 38.6% Rio Tinto CAR Gladstone, Alumina 4.0 mt * 41.4% Alcan Que
Slide 12: Foundations for growth; Weipa meeting growth needs
Foundations for growth • Sound asset base – Weipa bauxite resource, 100 per cent owned – Alumina interests performing well • Expansion work – Weipa – CAR • Ability to seize alumina opportunities fast – Financial strength – Technical expertise – Importantly, we have easily accessible and expandable b
Slide 13: Bauxite production increasing; Weipa costs
Bauxite production increasing Weipa production (kt) Weipa 20,000 • Reserves 1,211 mt • Resources 2,114 mt 16,000 • Capacity 16.5 mtpa 12,000 8,000 4,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7 Weipa costs Unit Cash Cost Drivers 100% 90% 80% Indexed Unit Cost $/t 70% 60% 50% 40% 30% 20%
Slide 14: Comalco Alumina Refinery; CAR production increasing
Comalco Alumina Refinery • Continues ramp up to nameplate capacity • Commissioning issues largely overcome • Currently operating at around 90% of nameplate capacity • On target to nameplate capacity within 2 years of startup 9 CAR production increasing 350 300 250 Kt 200 150 100 50 0 Q4 '04 Q1 '05 Q
Slide 15: CAR operating cost breakdown; Non-managed alumina operations
CAR operating cost breakdown 2005 Actual Maintenance 16% 11% Employees 1% Operating Supplies Fuel - Oil & Gas 18% 31% External Services Other Depreciation & 17% 6% Amortisation 11 Non-managed alumina operations • QAL – Record production in 2005 – Good safety and environmental performance – First qua
Slide 16: Business improvement and development; Alumina production growth
Business improvement and development • Improving Performance Together – Strategic Production Planning (Weipa pilot) – Marketing • Lean Six Sigma • Logistics – recent purchase of ships 13 Alumina production growth RTA share of alumina production 3.5 3 CAR 2.5 EA QAL 2 Mtpa 1.5 1 0.5 0 1996 1997 1998
Slide 17: Alumina - major producers; investments and opportunities
Alumina - major producers 16 12 2004 Mtpa 2005 8 4 - AWAC Chalco Alcan BHP Rio Tinto Glencore Rusal Kaiser Sual CVG- Billiton Aluminium Bauxilum • Rio Tinto Aluminium becoming a more prominent player in world alumina Source: CRU, Rio Tinto Aluminium 15 RTA’s alumina investments and opportunities • I
Slide 18: Alumina growth opportunities; Summary
Alumina growth opportunities would place us number three today… mt 8.0 7.0 RTA share of alumina production CAR3, QAL Expansion 6.0 5.0 CAR2, CAR1 creep 4.0 3.0 Current assets: 2.0 CAR, QAL and EA 1.0 0.0 Time 17 Summary • Weipa growth meeting increasing demand • CAR ramp up on target • Alumina non-m
Slide 19: Rio Tinto Aluminium – Smelting
Rio Tinto Aluminium Sandeep Biswas Managing Director Smelting (Australia) Financial community site visit – June 2006 Smelting presentation outline • Overview • Safety • Operational Review • Business improvement/technology • Growth options 2 1
Slide 20: Aluminium operations; Smelting safety
Aluminium operations • Record aluminium Anglesey production from Bell Bay, Boyne and NZAS in 2005 • Best in class smelting performance • Smelting “creep” expansion • Business improvement 2005 Ownership structure Boyne production Smelters Boyne Smelters 545 kt * Lines 1 and 2 – 59.5% Rio Tinto Gladst
Slide 21: Boyne Smelters Limited; Bell Bay
Boyne Smelters Limited Achievements Opportunities • Stable operation across all • Improved safety performance in reduction lines 2006 onwards • Record production levels • Casthouse upgrade to block casting • Successful trialling of B32 reduction cells continues • Dedicated team looking at expansion
Slide 22: NZAS; Anglesey
NZAS Achievements Opportunities • YTD safety on target • Return to full capacity • Record production levels • New power contract • Negotiated Greenhouse • Recycling Agreement • Larger anode • Biggest production of high purity aluminium in the world and expanding 7 Anglesey Achievements Opportunities
Slide 23: Breakdown of smelter production costs; Cost curve position
Breakdown of smelter production costs 2005 hot metal cash costs Maintenance Other 4% 3% External Services 3% Labour 11% Alumina 35% Raw Materials 13% Power 31% 9 Cost curve position RTA smelters CRU 2005 Nominal Business Operating Cost Curve - RTA Operations 2300 2100 BSL 3 BSL 1&2 NZAS Bell Bay Ang
Slide 24: Metal production improvement; Growth in Value Added Product
Metal production improvement Metal production improvement (indexed) 1.3 1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 1997 1998 1999 2000 2001 2002 2003 2004 2005 Bell Bay BSL 1&2 BSL 3 NZAS Anglesey Base year = 1 11 Growth in Value Added Product Smelter Sales - Growth of Value Added 900,000 800,000 700,000 MT
Slide 25: Business improvement / technology; RTA’s smelting opportunities
Business improvement / technology • Lean Six Sigma • IPT – Marketing – Asset management • Drained Cathode Cell • Energy efficiency 13 RTA’s smelting opportunities • Greenfield smelter projects – key criteria: – Proven technology – Capital project management – Operational performance – Alumina supply
Slide 26: Aluminium growth opportunities; Summary
Aluminium growth opportunities would place us number four today mt 2.5 RTA share of aluminium production 2.0 Expansions 1.5 Target 2 / Hydro Target 1 / Gas 1.0 Current assets: 0.5 Bell Bay, BSL, NZAS and Anglesey 0.0 Time 15 Summary • Continuing focus on safety • Strong operational performance in 20