Rio Tinto Plc · LSE:RIO
Rio Tinto — Debt Investor Presentation (March 2018)
23 slides from Rio Tinto's debt investor presentation, March 2018
Slide 1: Fixed income investors update
Fixed income investors update March 2018
Slide 2: Cautionary statements
2 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
Slide 3: Safety and health come first
3 Safety and health come first Continuing history of improvement Safety fatality at Kennecott Operations and Health fatality in Pilbara Exploration in October Rio Tinto ICMM (23 companies) 2.78 Focusing on fatality elimination – 1.5 million CRM verifications in 2017 Reducing injuries – All injury fr
Slide 4: Robust demand drove stronger prices in 2017
4 Robust demand drove stronger prices in 2017 Iron Ore Aluminium 90 3000 $/t LME + MW Premium $/dmt FOB WA 80 2500 70 60 2000 50 1500 40 30 1000 2016 2017 2018 2016 2017 2018 Copper Hard coking coal 375 c/lb 350 $/t FOB QLD 325 300 250 275 200 225 150 175 100 125 50 2016 2017 2018 2016 2017 2018 Sou
Slide 5: Strong results delivered in 2017
5 Strong results delivered in 2017 Robust financial performance Disciplined capital allocation Positioning for the long-term EBITDA of $18.6 billion Full year 2017 dividend of $5.2 billion Silvergrass iron ore mine commissioned in Q4 2017 Operating cash flow of $13.9 billion Share buy-backs declared
Slide 6: Higher prices driving increased earnings
6 Higher prices driving increased earnings Underlying earnings 2016 vs 2017 $ billion (post tax) 10 4.1 0.4 9 8.5 0.1 8.6 (0.3) (0.2) 8 (0.4) (0.1) (0.1) Total cost reductions1 of 7 $0.4bn post-tax or $0.6bn pre-tax 6 5.1 5 4 3 2 1 0 FY2016 Price Exchange Energy & Flexed FY16 Volumes Cash cost Escon
Slide 7: Superior returns from world-class assets
7 Superior returns from world-class assets Iron Ore Aluminium Copper & Diamonds Energy & Minerals 68% 35% 39% 36% Margins Pilbara operations FOB Integrated operations EBITDA margin EBITDA margin EBITDA margin EBITDA margin Cash flows from operations Cash flows from operations Cash flows from operati
Slide 8: Global macro indicators remain supportive
8 Global macro indicators remain supportive PMIs remain elevated Global growth momentum remains healthy 65 US growth supported by record high consumer confidence and healthy 60 manufacturing and investment 55 EU performing better than expectations on stronger manufacturing and Index consumer confide
Slide 9: $2 billion cost-out programme completed
9 $2 billion cost-out programme completed Pre-tax operating cash cost improvements Reduction vs. 2012 ($ billion) 0.6 8.3 $8.3 billion cost savings achieved since 1 Jan 2013 1.6 $2.2 billion cost savings across 2016/17 1.3 – Achieved target six months ahead of schedule 1.5 – Offsetting raw material
Slide 10: Delivering $5 billion of additional free cash flow from productivity
10 Delivering $5 billion of additional free cash flow from productivity Mine to market …with a focus on …delivering $5 billion of additional free productivity… Marketing four levers… cash flow Best practice Mining Infrastructure Asset Productivity Partnering with management Processing Opportunity ou
Slide 11: Disciplined allocation of strong cash flow in 2017
11 Disciplined allocation of strong cash flow in 2017 Cash flow 2017 $8.2 billion (49)% of cash generated in 2017 ($ billion) allocated to shareholder returns ($ billion) 2.7 16.7 13.9 0.1 2.0 $1.2 billion 5.9* Total cash from asset allocated to disposals of $2.8bn Australian tax 2.5 payment $1.9 bi
Slide 12: Sustaining capital and compelling growth
12 Sustaining capital and compelling growth Capital expenditure profile Maintained sustaining capital guidance of $2.0 to $2.5 $ billion billion per year, including: ~6.0 ~6.0 – Iron Ore sustaining capex of ~$1 billion per year ~5.5 Pilbara replacement capital includes Koodaideri 4.5 development fro
Slide 13: Strong balance sheet
13 Strong balance sheet Net debt Adjusted net debt of $7 billion reflecting: ($ billion) – $1.9 billion outstanding from Sept-2017 buy-back 9.6 – $1.2 billion tax payment in 2018 based on 2017 profits Strong balance sheet: 1.2 7.0 – Provides stable foundation against any market 1.9 volatility – Supp
Slide 14: Near-term maturities further reduced in 2017
14 Near-term maturities further reduced in 2017 $(m) 31 Dec 2016 debt maturity profile* 3,000 Gross debt reduced by $2.7 billion in 2017 2,000 $2.5 billion nominal value of bonds purchased or 1,000 repaid with cash 0 2034-2039 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 203
Slide 15: In Summary
15 In Summary Strong balance sheet with net debt of $3.8 billion Operating cash flow of $13.9 billion Reshaping the portfolio with divestments completed of $2.7 billion Invested $2.5 billion in high-return growth Delivered $0.4 billion free cash flow from productivity Cash returns to sha
Slide 16: Appendix
RioTinto Appendix Se
Slide 17: Outperforming in key commodities
17 Outperforming in key commodities Rio Tinto Iron Ore EBITDA performance EBITDA 58% relativity to margin (%) Platts 62% index Iron Ore EBITDA FOB margin increases to 68% 70% 0% Significant spread between high and low quality iron ores 60% -10% 50% -20% Steelmakers targeting high-grade / low-impurit
Slide 18: Impact of China policy changes on steel capacity
18 Impact of China policy changes on steel capacity Supply-side reform steel capacity cuts by province (excluding IFs) Cuts of 58 Mtpa of steel capacity in 2017 and 2018 ‒ ~5% of total Chinese steel capacity Hebei 34 Mtpa ‒ In addition to induction furnace (IF) capacity Others 8 Mtpa closures of >10
Slide 19: Impact of China policy changes on aluminium capacity
19 Impact of China policy changes on aluminium capacity Supply-side reform aluminium capacity cuts by province 3.8 Mtpa of illegal capacity removed in 2017 and 2018 ‒ ~9% of total Chinese aluminium capacity Xinjiang Inner ‒ Potential for some restarts 0.9 Mtpa Mongolia 0.4 Mtpa 0.7 Mtpa of capacity
Slide 20: Productivity programme delivering $5 billion of additional free cash flow by 2021
20 Productivity programme delivering $5 billion of additional free cash flow by 2021 Post-tax mine to market (M2M) productivity programme ($ billion) $0.4 billion mine to market free cash flow delivered in 2017 Headwinds from raw material inputs Cumulative 2017 and 2018 mine to market 0.6 forecast o
Slide 21: Disciplined capital allocation
21 Disciplined capital allocation Essential 1 sustaining capex Further cash Compelling Ordinary returns to 2 dividends shareholders growth Iterative 3 cycle of Debt management ©2018, Rio Tinto, All Rights Reserved
Slide 22: Delivering superior returns for shareholders
22 Delivering superior returns for shareholders Cash returns paid to shareholders in 2017 Final 2016 dividend paid of 125 US cents per share, and ($ billion)* record 2017 interim dividend of 110 US cents per share, Paid Paid $4.2 billion in total paid to shareholders Paid 0.6 Share buy-back of
Slide 23: Modelling earnings
23 Modelling earnings 2017 ($m) impact on FY 2017 underlying earnings of average price/ Earnings sensitivity 10% price/rate change rate Copper 281c/lb 242 Aluminium $1,969/t 592 Gold $1,257/oz 30 Iron ore (62% Fe FOB) $64.1/dmt 1,037 Coking coal (realised) $169/t 69 A$ 77USc 674 C$ 77USc 160 Oil $54