Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Presentation (July 2008)
66 slides from Rio Tinto's investor presentation, Jul 25, 2008
Slide 1: ASX cover letter for Energy and Minerals Seminar
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 Company Announcements Office Australian Stock Exchange Limited SYDNEY NSW 2000 25 July 2008 Dear Sir, The attached material will be pres
Slide 2: Energy and Minerals Seminar
For personal use only Energy and Minerals Seminar Preston Chiaro Friday, 25 July 2008
Slide 3: Forward looking statement
For personal use only This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and comprises the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions Forward looking statement This p
Slide 4: Agenda
For personal use only Introduction and context Preston Chiaro Coal – Australia Hubie Van Dalsen Uranium Preston Chiaro Potash Preston Chiaro Titanium Dioxide Harry Kenyon–Slaney Summary Preston Chiaro Questions & answers 25 July 2008 Energy and Minerals Seminar 3
Slide 5: Energy and Minerals group highlights
For personal use only • Number two position in thermal coal in Australia • Number two global producer of uranium • Rapidly growing position in hard coking coal • Number one global producer of titanium dioxide • High quality project to enter potash market • Combined Group EBITDA of $1.9bn in 20071 •
Slide 6: Demand drivers by commodity
! For personal use only Thermal coal • Rapid increase in power demand in developing world • Large growth in coal-fired generation in India and China will require significant coal imports Uranium • Important role for nuclear in the global power mix • Developing economies continue to climb the steel i
Slide 7: Power intensity correlation with GDP
" #" For personal use only Power intensity correlation with GDP—1994–2003* Power consumption in MWh per capita 25 20 Canada 15 US Australia 10 South Korea Japan Chile 5 EU 27 China India Brazil 0 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 Real GDP per capita * Except C
Slide 8: Global electricity generation 2005–30
$ For personal use only Global electricity generation 2005–30—IEA scenarios Thousand TWh CAGR CAGR 2005–15 2005–30 ~3.0%pa to 2030 in 35.4 Total 3.5% 2.7% ‘High Growth’ scenario* 7.3 Other** 3.4% 2.8% 25.6 6.6%pa to 2030 in ‘High 2.8 India 6.6% 5.7% Growth’ scenario 5.1 4.8 Europe 1.5% 1.3% 18.2 3.7
Slide 9: Sources of electricity generation 2005–30
# % For personal use only Sources of electricity generation 2005–30—IEA scenarios* Thousand TWh Global generation Chinese generation (Based on 2005 and 2030 data only) (Based on 2005 and 2030 data only) 45 12 Total ‘High Growth’ 40 Total ‘High Growth’ CAGR: 6.0%pa CAGR: ~3.0%pa** 10 Total ‘Ref. Case
Slide 10: Tackling climate change
& For personal use only Tackling climate change Rio Tinto’s leadership position • Rio Tinto supports market-based • Hydrogen Energy, a Rio Tinto joint solutions for pricing carbon dioxide venture with BP, is developing low- to address the issue of climate carbon power plants incorporating change car
Slide 11: Thermal coal
For personal use only Thermal coal Hubie van Dalsen Energy and Minerals seminar Friday, 25 July 2008
Slide 12: Global demand for traded thermal coal
' For personal use only Global demand for internationally traded thermal coal Drivers of demand growth Mtpa CAGR 2007–15 872 Total 3.2% • Coal supply into China’s eastern provinces will be more economical from Australia and Indonesia than from China’s western provinces 676 370 Non– 2.1% Asia • New c
Slide 13: Chinese internationally traded thermal coal
For personal use only Chinese internationally traded thermal coal Mtpa 100 Barlow Jonker forecasts 80 60 40 20 Exports 0 (20) Net position (40) Imports (60) (80) 2001 2003 2005 2007 2009 2011 2013 2015 Source: Barlow Jonker, a Wood Mackenzie company, "Thermal coal supply and demand to 2020" report p
Slide 14: Thermal coal spot price
' For personal use only Thermal coal spot price US$/t (FOB; 6,322 kCal/kg GAR) 180 160 140 120 2008 JPU reference price = $125/t 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 Source: Global coal NEWC index; Barlow Jonker, a Wood Mackenzie company 25 July 2008 Energy and Minerals Seminar 13
Slide 15: Global cost curve thermal coal
& ' For personal use only 2008 estimated global cost curve—thermal coal exported to Asia Mainly Indonesian Rio producers Tinto 0 50 100 150 200 250 300 350 400 Cumulative Forecast Production (Mt) Source : AME 25 July 2008 Energy and Minerals Seminar 14
Slide 16: Australian thermal coal resources and reserves
& ' For personal use only 2007 Australian thermal coal* resources and reserves (managed, 100% basis) Mt Hunter Valley Ops. • Large thermal coal resources in New Mount Pleasant South Wales, and MTW Marketable additional resources Reserves in Queensland Bengalla Resources in addition to • Ongoing expa
Slide 17: Thermal coal production and infrastructure constraints
& () ! For personal use only Rio Tinto thermal coal production 2007—impact of infrastructure constraints Mtpa, 100% basis With current constraints At historical production levels 23% • There is currently up to 10Mt of 33% thermal coal production that is 18% being constrained by infrastructure bottle
Slide 18: Announced port capacity expansions at Newcastle
$ For personal use only Announced port capacity expansions at Newcastle Mtpa 200 • PWCS has embarked upon 180 a continuous expansion program that has seen 160 throughput capacity rise from 140 PWCS 46 mtpa to the present 102 27Mtpa mtpa capacity 120 NCIG 100 30Mtpa • Plans have been 80 NCIG announce
Slide 19: Growth plans—managed thermal
& ' *)( + For personal use only Rio Tinto growth plans—managed thermal* Mtpa 100% basis 90 80 Winchester South Hail Creek 70 CAGR 12.5% Clermont 60 Blair Athol 50 Mt Pleasant 40 Bengalla 30 Mount Thorley Warkworth 20 10 Hunter Valley Operations 0 2008 2009 2010 2011 2012 2013 2014 2015 * Includes se
Slide 20: Hunter Valley Operations expansion
, - . % */ *)( + For personal use only Estimated managed production Project details (Mtpa) – 100% basis 25 • Rio Tinto ownership – 75.7% (CNA 100%) 20 • Thermal and semi-soft coking coal product 15 • Hunter Valley Operations is a multi-seam, multiple open cut mining operation located approximately 1
Slide 21: Clermont project
' For personal use only Estimated managed production Project details (Mtpa) – 100% basis 16 • Rio Tinto ownership – 50.1% • Thermal coal product 12 • Clermont open cut project is located close to the 8 existing Blair Athol mine in Queensland and will benefit from the existing infrastructure, marketi
Slide 22: Mount Pleasant project
" %0 *)( + For personal use only Estimated managed production Project details (Mtpa) – 100% basis 10 • Rio Tinto ownership – 75.7% 8 • Large, long life and low cost open cut thermal coal 6 operation • Project is located in the Upper Hunter Valley, 4 approximately three kilometres west of the town of
Slide 23: Hard Coking Coal
For personal use only Hard Coking Coal Hubie van Dalsen Energy and Minerals seminar Friday, 25 July 2008
Slide 24: Steel intensity and hard coking coal demand
# 1 ! ! For personal use only Steel consumption intensity curve Internationally traded hard coking coal Kg/capita Mt World average income per CAGR 3.0% 16 capita Iron ore 204 14 12 Hard Coking coal 161 2007 10 8 2015 6 4 2 0 $0 $10,000 $20,000 $30,000 $40,000 2007 2015 GDP per capita (in 2000 US$) S
Slide 25: Global cost curve hard coking coal
& ! For personal use only 2008 estimated global cost curve—hard coking coal exported to Asia Kestrel mine extension is first quartile Rio Tinto 0 50 100 Cumulative Forecast Production (Mt) Source: AME 25 July 2008 Energy and Minerals Seminar 24
Slide 26: Port capacity expansions in Queensland
" $ For personal use only Announced port capacity expansions in Queensland Mtpa 400 • Plans have been 350 announced for up to 150mt additional tonnes of capacity 300 • Rio Tinto has contracts 250 in place with the port authorities in Queensland 200 Wiggins Is for the required port 25Mtpa capacity by
Slide 27: Expansion plans—managed hard coking coal
& $ ! ( 0 For personal use only Rio Tinto expansion plans—managed hard coking coal production Mtpa 100% basis 25 20 CAGR 9.8% Winchester South 15 Kestrel 10 5 Hail Creek 0 2008 2009 2010 2011 2012 2013 2014 2015 Source: Rio Tinto Note: attributable CAGR 2008-15 = 9.8%; 2015 attributable production 1
Slide 28: Kestrel expansion
2 $ For personal use only Estimated managed production Project details (Mtpa) 8 HCC Thermal • Rio Tinto ownership – 80% 6 • Product mainly hard coking coal with some semi hard coking coal 4 • Expansion involves the development of a low cost 2 underground operation 0 • 1st Quartile on the cost curve
Slide 29: Hail Creek expansion
, ! $ *)( / For personal use only Estimated managed production Project details (Mtpa) 18 • Rio Tinto ownership – 82% 15 HCC Thermal 12 • Product mainly Hard Coking Coal with some thermal 9 • Expansion includes two stage washing 6 • Mine life and production based on existing resources 3 and reserves
Slide 30: Winchester South
& $ 3 For personal use only Estimated managed production Project details (Mtpa) 5 • Rio Tinto ownership – 75% 4 HCC Thermal • Open cut product HCC / Thermal 3 • Greenfield located 40km south of Moranbah 2 • Close to existing rail link with potential marketing 1 synergies with Hail Creek and Kestrel
Slide 31: Coal growth options and undeveloped resources
' 4 $ 5 For personal use only Mongolia* • Hard Coking and thermal coal growth option, currently in OOM Crowsnest (Canada)* Further undeveloped resources in the Bowen Basin: • Coking coal growth option close to Elkview, with seismic • Kestrel West: 153Mt UG thermal coal extension to Kestrel and drill
Slide 32: Coal summary
& *)( + For personal use only • Strong markets sustained by economic fundamentals in both thermal and metallurgical coal • Rio Tinto’s ability to grow is underpinned by large resources and reserves in world class assets and supported by announced infrastructure expansions • Rio Tinto has a clear pla
Slide 33: Uranium
For personal use only Uranium Preston Chiaro Energy and Minerals seminar Friday, 25 July 2008
Slide 34: U3O8 demand and reactor growth
( 6( *)*) For personal use only U3O8 Demand—WNA forecasts* Growth of nuclear reactors* Mlbs per annum Reactors 569 CAGR 2.8% 59 Other 29 India 438 40 China 33 44 Russia 31 44 E. Europe 36 50 Other Asia 28 67 Japan 239 55 212 167 104 116 USA 123 120 W. Europe 2007 2015 2020 2007 2020 * Based on World
Slide 35: U3O8 supply and demand
" For personal use only U3O8 supply and demand Mlbs 350 WNA demand forecast* 300 (3.6% CAGR, 2007-2025) 250 200 Market opportunity 150 100 Existing production 50 Secondary supplies 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 * World Nuclear Association high case Source: World Nuclear Associa
Slide 36: Historical uranium spot price
! ( ) For personal use only Historical spot price Recent Price Drivers U3O8, $/lb 140 • Long-term underinvestment 120 • A lack of exploration for new production sources 100 • Drying up of secondary supply 80 60 • These drivers have led to a 40 structural market shift that has impacted pricing 20 0 1
Slide 37: Major uranium producing mines
& &7 8 For personal use only Production Share of world Mine Country Operator 2007 (klbs U3O8) production McArthur River Canada Cameco 18,716 17% Ranger Australia ERA* 11,713 11% Olympic Dam Australia BHP Billiton 8,808 8% Krasnokamensk Russia ARMZ 7,895 7% Rössing Namibia Rössing* 6,714 6% Arlit Nig
Slide 38: Rio Tinto uranium reserves and resources
8 For personal use only Rio Tinto uranium reserves and resources Mt of ore, 100% basis 200 • Rössing has contained metal reserves of 180 56 kt U3O8 and resources of 44 kt U3O8 Reserves 160 Resources 140 • ERA has contained metal reserves of 50 kt U3O8 and resources of 188 kt U3O8 120 100 80 60 40 20
Slide 39: Rössing expansion
&7 ( * *)( * For personal use only Estimated production Project details (m lbs pa) 100% basis 14 • Rio Tinto ownership – 69% 12 • A large scale asset that has been in operation for over 10 30 years 8 6 • The original SJ ore body has been successively 4 expanded with future expansions under considera
Slide 40: Radiometric anomalies at Rössing mine
' &7 For personal use only Radiometric anomalies at Rössing mine Substantial mineralisation position • Rössing represents “district-style” potential with known satellite opportunities for future evaluation • The current exploration of the SK prospect SK and extension of the SJ geological information
Slide 41: Near-term expansion opportunities at ERA
&' – For personal use only Near–term expansion opportunities at ERA • Pit push back announced in September 2007: ERA increased reserves of contained uranium by 4,857 tonnes, extending the mine life to 2012 • Laterite plant to treat “lateritic” ore and a radiometric sorting facility will be commissio
Slide 42: Medium-term growth options at ERA
8 % For personal use only Medium–term growth options at ERA • Ranger 3 mineralisation continues to the east at depth • Drilling has continued to the north of the Ranger 3 deeps with 44 holes (13,275 m) drilled in the second quarter of this year. Further drilling will continue this year to assess the
Slide 43: Longer-term growth options at ERA
&' $ % For personal use only Longer–term growth options at ERA Jabiluka deposit • A band of mineralisation has been identified Known through radiometric surveys that extends from mineralised trend the existing mine 20 km to the Jabiluka deposit Further electromagnetic anomalies • Exploration work ha
Slide 44: Uranium summary
9 For personal use only • World’s number two producer • Established position and reputation, with a presence in uranium for over 40 years • Rössing is positioned to scale up to 12 M lbs by 2012 • Further growth options, both in the near– term and longer–term 25 July 2008 Energy and Minerals Seminar
Slide 45: Potash
For personal use only Potash Preston Chiaro Energy and Minerals seminar Friday, 25 July 2008
Slide 46: Increase in demand for potash 1997–2015
$ ' ' For personal use only Increase in demand for potash 1997–2015 Mtpa CAGR 2007-15 Total 3.2% • Demand is expected to grow at 3%pa 76 over the next eight years 4 Other 2.6% 5 E. Europe 2.4% • The key driver of this growth is robust 59 6 W. Europe (0.2%) demand growth for fertilizer, the 3 primary
Slide 47: Potash price history and capacity utilisation
" $ For personal use only Potash price history and capacity utilisation, 1995 - 2007 US$ / t (CFR Latin America); per cent $700 100% • Prices have risen over the last ten years as demand has grown and the 95% utilisation of production capacity has $600 increased 90% $500 • Prices are currently at re
Slide 48: Brazilian potash consumption
& 5 " & ( : ; For personal use only Brazilian potash consumption Million tonnes per annum • Rio Tinto has acquired a tier 1 asset of outstanding quality CAGR 4.1% • PRC is located in Argentina, and 10.3 benefits from proximity to Brazil, an attractive potash market: 7.5 • Largest potash market in So
Slide 49: Potasio Rio Colorado project details
" & $ ( : ; For personal use only Project Details • With proximity to Brazil it is anticipated PRC will be the lowest cost supplier • PRC will also benefit from shorter lead times compared to competitors • Solution mining advantage, shorter Colorado commissioning period and lower capex • Constructio
Slide 50: Potasio Rio Colorado estimated production
" & *)( * For personal use only Estimated production Project details (million tonnes per annum) 5 • Rio Tinto ownership 100% 4 • Project status – feasibility • The resource is at 1,100m underground, 20 3 holes drilled and successful solution mining 2 trials have been undertaken • Expenditure to end
Slide 51: Regina potash project
& 5 $ < & " For personal use only Attractive asset • Large 1,200km² property (100%-owned) east of the Belle Plaine mine in Canada Pati enc e La ke • Target is a potash solution mine Van sco y Cory Colo nsa y N • Project is currently at “Target Testing” stage, with Alla n RTX Claims drilling and eval
Slide 52: Potash summary
& ! For personal use only • The potash market shows strong growth characteristics with robust pricing • Growth is underpinned by increasing food and animal feed consumption, plus biofuels • Potasio Rio Colorado is a world scale tier one asset with significant potential to grow • Located near the lar
Slide 53: Iron and Titanium
For personal use only Iron and Titanium Harry Kenyon-Slaney Energy and Minerals seminar Friday, 25 July 2008
Slide 54: Titanium industry set for strong growth
& = > & =? For personal use only Titanium • Titanium Dioxide intensity of use is at an upward inflection point industry set for • Strong growth prospects driven by China strong growth • Structurally higher co–product prices are expected to prevail • Global industry leader Rio Tinto is the • Strong r
Slide 55: GDP per capita versus pigment consumption
For personal use only GDP per capita versus pigment consumption per capita 1990–2006 kg/person, 1990-2006 5 North America 4 3 Western Europe 2 China Latin America 1 E Eur/CIS 0 $0 $5 $10 $15 $20 $25 $30 $35 $40 GDP per capita ('000 2000USD, PPP) Source: IBMA, Rio Tinto Energy and Minerals Seminar 25
Slide 56: Pigment demand and technology leader
$ & =5 For personal use only Pigment demand Technology leader ‘000s tonnes 1997-2015f Forecast • Technology focus helps create a clear differentiator in the market place and is unmatched by any competitor • The superior UGS technology allows slag to be upgraded to the highest level CAGR 3.2% • This
Slide 57: TiO2 units produced and revenue/cost ratio
= *))@A& = $ 6)B ! For personal use only 6)B TiO2 units produced—2006* Revenue / cash cost ratio—2006* Ratio Total market = 5.3 Mt 2.0 1.5 RTIT Managed 1.0 Rest of Industry 0.5 0.0 RTIT Rest of industry * Latest available data Source: TZMI' s comparative cost study 25 July 2008 Energy and Minerals S
Slide 58: Pig iron and zircon price forecasts
& = 5 ! For personal use only Basic pig iron price forecast Zircon price forecasts US$/tonne* US$/tonne $1,000 Forecast $1,000 Forecast Rio Tinto 2007 Rio Tinto 2007 production of iron production of and steel products zircon = 232kt** $800 $800 = 1,329 kt** $600 $600 Structurally higher $400 $400 pr
Slide 59: QMM Madagascar project details
& > C ? C/*))0 For personal use only Project details New port facilities • Rio Tinto ownership – 80%, (20% Madagascar Government) • Project status – on schedule for Q4 2008 start-up • Annual production: 500ktpa of TiO2 units by 2011 • Smelting will take place at QIT and produce new 90-91% TiO2 slag
Slide 60: Potential future TiO2 production capacity
& = @)B *)( + For personal use only Potential future production capacity*- 100% basis Millions tonnes TiO2 units 3.0 • The market for Titanium Dioxide is CAGR 6.9% Madagascar 2 2.5 strong, with forecast continued growth (under study) Madagascar 1 • Rio Tinto is building on its leading 2.0 (under pos
Slide 61: Energy and Minerals Seminar summary
For personal use only Energy and Minerals Seminar Preston Chiaro Energy and Minerals seminar Friday, 25 July 2008
Slide 62: Summary
For personal use only • Strong market outlook in Energy and Minerals Group businesses • Well-positioned for sustained growth: • Doubling of coal output by 2015 • 12m lbs of uranium production at Rössing by 2012 • 4.3 Mtpa of potash from PRC, could ramp–up from 2012 • 60% increase in TiO2 production
Slide 63: Appendix
For personal use only Energy and Minerals Seminar Appendix Friday, 25 July 2008
Slide 64: Crowsnest coking coal project, Canada
D $ E ! For personal use only • Project stage – Target Testing Canada US • Country – Canada • Ownership – 100% Rio Tinto • 100km² property 20km south of 6Mtpa Elkview open-cut coking coal mine; adjacent to existing rail • Conceptual target is a longwall underground mine • 3 recent CBM holes on prope
Slide 65: Mongolia coal project
' $ ! For personal use only • Project stage – Order of Magnitude • Country – Mongolia • Ownership – Rio Tinto earning 70% - 100%, potentially subject to Mongolian Government equity requirements • 489km² property located 280km from rail • Conceptual target is very large low-volatile hard coking coal
Slide 66: Limpopo coal project, South Africa
F : % G- For personal use only • Project stage – Target Testing (coking), pre- feasibility (thermal) • Country – Republic of South Africa • Ownership – 35% to 70% Rio Tinto with potential to increase equity • Dominant land position in the basin (1257km2) • Basin host to Rio Tinto’s recently discover