Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2022 Earnings Presentation
50 slides from Rio Tinto's earnings presentation, Jul 27, 2022
Slide 1: Half Year results 2022
2022 Half Year results Grow, decarbonise and deliver attractive shareholder returns 27 July 2022 Kemano, Kitimat
Slide 2: Cautionary and supporting statements
Cautionary and supporting statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (together with their subsidiaries, “Rio the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance Tinto”). By accessing/attending
Slide 3: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive Oyu Tolgoi, Mongolia
Slide 4: A dynamic world full of opportunities and some challenges
A dynamic world full of opportunities and some challenges Consumer Price Index - Short-term outlook remains unpredictable. Presents 10% 9.6 some challenges but offers many opportunities 9.1 - Heightened inflation is leading to intervention by 8% Central Banks and Governments – in turn, adding to 7.4
Slide 5: Foundations for a stronger Rio Tinto emerging
Foundations for a stronger Rio Tinto emerging Best operator Impeccable ESG credentials Excel in development Transform our safe Accelerate our own Grow in commodities enabling operating performance decarbonisation the global energy transition Empower our workforce Help our customers develop Deliver v
Slide 6: Robust financials; focused on strategy
Robust financials; focused on strategy 0.35 $16bn All injury frequency rate (AIFR) Underlying EBITDA Gudai-Darri first ore 34% Ramping up Underlying ROCE Oyu Tolgoi first draw bell Free cash flow of $7bn First sustainable production in H1 2023 Net cash of $0.3bn Rincon lithium early works funding Ac
Slide 7: Peter Cunningham, Chief Financial Officer
Peter Cunningham Chief Financial Officer Karratha rail, Western Australia
Slide 8: Robust financial results against all-time highs in 2021
Robust financial results against all-time highs in 2021 ($bn, except where stated) H1 2022 H1 2021 H1 2020 vs H1 2021 vs H1 2020 Consolidated sales revenue 29.8 33.1 19.4 - 10% +54% Underlying EBITDA 15.6 21.0 9.6 - 26% +63% Underlying earnings 8.6 12.2 4.8 - 29% +79% Net earnings 8.9 12.3 3.3 - 28%
Slide 9: Rising macro economic uncertainty
Rising macro economic uncertainty Iron Ore1 (-24% YoY) Aluminium2 (+37% YoY) Copper3 (+7% YoY) 250 4,000 1050 500 200 3,500 900 450 3,000 750 150 400 600 2,500 350 100 450 2,000 300 300 50 1,500 150 250 0 1,000 0 200 Iron ore (US$/dmt) HY Average LME Aluminium ($/t) HY Average MWP (RHS) Price (c/lb)
Slide 10: Disciplined focus on cash costs in a period of rising inflation
Disciplined focus on cash costs in a period of rising inflation Underlying EBITDA $bn 21.0 External $4.6bn Controllables $0.8bn 3.4 0.3 16.4 1.5 0.3 0.4 0.5 15.6 0.2 Iron Ore -5.7 Energy -0.6 - Diesel -0.5 Fixed cost -0.3 Copper -0.1 inefficiencies Kitimat -0.3 Aluminium -0.4 Other cost raw material
Slide 11: RTSPS supports improvements across safety, people and productivity
RTSPS supports improvements across safety, people and productivity RTSPS impact Kennecott Concentrator West Angelas Drill & Blast IOC Concentrator Safety AIFR AIFR AIFR*** Practices and training YTD – 0.36 YTD – 0.33 YTD – 0.37 have improved safety performance 2021 – 0.53 2021 – 0.58 2021 – 0.73 32%
Slide 12: Iron Ore
Iron Ore Ramp-up of Gudai-Darri is pivotal H1 2022 H1 2021 2022 Continue to manage COVID-19: currently Operating metrics comparison guidance elevated levels of unplanned absences at our Average realised price1, 3 $120.5/t - 28% Pilbara operations due to spikes in cases Shipments3 (100% basis) 151.4M
Slide 13: Aluminium
Aluminium Strong pricing lifted our industry-leading margins with smelter ramp-ups in the second half H1 2022 H1 2021 2022 Substantial increase in FCF to $1.5bn Operating metrics comparison guidance on strength in LME price and heightened Aluminium realised price1 $3,808/t + 45% demand for value-add
Slide 14: Higher price environment for Aluminium raw materials
Higher price environment for Aluminium raw materials Input costs H1 2021 H2 2021 H1 2022 Inventory FY22 Alumina refining* (nominal) index price index price index price flow 7 Annual cost sensitivity 100% 100% Caustic Soda 1 274 $/t 535 $/t 675 $/t 3 - 4 months $10m per $10/t 14% 13% 14% 22% Energy N
Slide 15: Copper
Copper Continued progress at Oyu Tolgoi underground; strong average pricing offset by lower by-product volumes H1 2022 H1 2021 2022 Lower sales volumes at Kennecott due to Operating metrics comparison guidance unreliable smelter performance from Copper realised price1 447c/lb + 8% significant COVID-
Slide 16: Minerals
Minerals Price support in some commodities however cost pressures at operations H1 2022 H1 2021 2022 IOC – record safety performance and Operating metrics comparison guidance monthly records for concentrate production IOC pellets price1 $199/t - 9% and total material moved TiO2 slag price2 $913/t +
Slide 17: Disciplined allocation of capital remains at our core
Disciplined allocation of capital remains at our core 1 Essential capex Integrity, Replacement, Decarbonisation Further cash Compelling returns to growth shareholders 2 Ordinary dividends Debt management 3 Iterative cycle of... ©2022, Rio Tinto, All Rights Reserved 17
Slide 18: Disciplined investing for growth and decarbonisation
Disciplined investing for growth and decarbonisation Capital expenditure profile Reduced 2022 guidance due to stronger $bn US dollar and rephasing of ~9.0-10.0 ~9.0-10.0 decarbonisation and development projects Ambition to grow and decarbonise reflected in 2023-24 capex of up to ~$9- 7.4 ~7.5 10bn i
Slide 19: Balance sheet is strong; we will maintain our discipline
Balance sheet is strong; we will maintain our discipline Net (cash)/debt Balance sheet strength is an asset. $bn Offers resilience and creates optionality 14.1 Gearing -0.5% and net (cash)/debt to 12.9 11.3 LTM^ EBITDA of -0.01x 10.0 9.3 9.3 Operating cash flow of $10.5bn 9.6 8.0 7.6 Invested $3.1bn
Slide 20: Attractive dividends remain paramount
Attractive dividends remain paramount Shareholder returns of 40-60% of underlying earnings on average through the cycle $bn Interim ordinary dividend payout ratio % 3.0 6.1 50% interim ordinary dividend payout on average 4.3 1.0 1.0 1.0 $0.8bn $2.2bn 2.5 2.5 2.0 2.2 50% 53% 50% 50% 0.8 50% 50% 52% 2
Slide 21: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive Gobi desert, Mongolia
Slide 22: Getting the right culture is essential for successful execution
Getting the right culture is essential for successful execution Strengthening relationships with communities and Traditional Owners: Puutu Kunti Kurrama and Pinikura and More Greater Yinhawangka co-management plans caring trust Implementing all 26 recommendations from the Everyday Respect report, in
Slide 23: Foundations for a stronger Rio Tinto emerging
Foundations for a stronger Rio Tinto emerging Best operator Impeccable ESG credentials Excel in development Three and a half years fatality free on a Increased female representation by one Oyu Tolgoi underground project: managed site, 0.35 AIFR in Q2 2022 percentage point (or 11%) vs Dec 2021 fired
Slide 24: Decarbonising our business and value chain
Gudai-Darri, Western Australia Decarbonising our business and value chain - Mobilising teams; significant amount of work on the ground - Our emissions are flat year on year (15.5mt in the first half of 2022) - Cannot do it alone; partnership with Government, suppliers and partners critical - Executi
Slide 25: Pursuing our growth agenda
Pursuing our growth agenda - 19 countries across seven commodities Pilbara: Gudai-Darri, Western Turner - Unlocking opportunities Syncline, Robe Valley, Western through technology Fe Range, Hope Downs 2 (includes - Accelerating discovery, Exploration Replacement Bedded Hilltop), and Brockman minimis
Slide 26: Strong foundation for growth, decarbonisation and shareholder returns
Strong foundation for growth, decarbonisation and shareholder returns Compelling investment Outstanding foundation Delivery on strategy proposition - Long-life, low cost assets - Best operator, Impeccable ESG, Excel - Unique resilience through the cycle in development, Strengthening our - All materi
Slide 27: Appendices
Appendices
Slide 28: Iron ore market tight despite slowdown in China
Iron ore market tight despite slowdown in China China’s crude steel production (Mt annualised) Iron Ore1 (-24% YoY) 1200 $/dmt 1150 250 1100 200 1050 150 1000 950 100 900 50 850 800 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 5 Yr Range 2
Slide 29: Price support for aluminium, copper and TiO2
Price support for aluminium, copper and TiO2 Aluminium1 (+37% YoY) Copper2 (+7% YoY) TiO2 (chloride slag) (+18% YoY) 4,000 1050 500 950 3,500 900 450 900 750 3,000 400 850 600 2,500 350 800 450 750 2,000 300 300 700 1,500 150 250 650 1,000 0 200 600 LME Aluminium ($/t) HY Average MWP (RHS) Price (c/
Slide 30: Accelerating current abatement projects
Accelerating current abatement projects Our Marginal Abatement Cost Curve for Scope 1 & 2 emissions (excl. Pilbara and Pacific Operations repowering, ELYSISTM, energy efficiency and carbon offsets) USD$/t CO2e 300 250 200 150 100 50 0 -50 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 -100 Mt CO2e Renewabl
Slide 31: Weipa solar extension project
Weipa solar extension project Project summary: Details: Increase renewable energy generation and storage to - Addition of a new 4MW solar farm next to existing 1.6MW solar farm support Weipa and Andoom mining operations and - Installation of a 4MW/4MWh Battery Energy Storage System next to Weipa Wei
Slide 32: Reducing anode effects at Alma
Reducing anode effects at Alma Project summary: Details: The Electrolysis team at Alma smelter identified and “Anode effects” can occur if oxygen levels inside the pot are too low, leading to implemented a process improvement to address emissions. The team carried out tests on trial pots to review a
Slide 33: QMM wind and solar project
QMM wind and solar project Project summary: Details: QMM has signed a 20-year power purchase agreement The renewable power supply will reduce QMM's heavy fuel oil purchases by up using renewable energy with CrossBoundary Energy to to 8.5kt per year supply their mine operations in southern Madagascar
Slide 34: Our products enable the energy transition and we need to be part of net zero value chains
Our products enable the energy transition and we need to be part of net zero value chains Customer partnerships Technology partnerships and investments 2022 customer engagements - Baowu / Tsinghua (2019) 28% of our customers have public Iron ore 365Mt - Nippon Steel (2020) Blast furnace Pilbara Low-
Slide 35: Partnering to reduce the carbon footprint of our value chains
Partnering to reduce the carbon footprint of our value chains 95% of Scope 3 emissions is from the processing of iron ore, bauxite and other products by our customers 94% of these processing emissions take place at our customer facilities in China, South Korea, Japan and other countries that have pl
Slide 36: Our focus areas for iron and steel decarbonisation
Our focus areas for iron and steel decarbonisation Future pathways for Pilbara iron ore 1 2 3 4 5 6 Blast furnace Pilbara Low-carbon H2 DRI H2 DRI Simandou optimisation beneficiation research project and melter Canada Multiple Universities Pilbara Pilbara Project – High-quality projects pathway 1 pa
Slide 37: ELYSIS zero carbon metal meets new market demand
ELYSIS™ zero carbon metal meets new market demand Strong market demand emerging - Q3 2020: Apple’s 16” MacBook Pro is world’s first device manufactured using ELYSIS metal, delivered through Rio Tinto’s commercial network. - Q4 2020: Rio Tinto supplied ELYSIS metal to AB InBev as part of partnership
Slide 38: Kaizens continuing to supplement RTSPS deployments for immediate value
Kaizens continuing to supplement RTSPS deployments for immediate value Iron Ore – Marandoo dewatering bore turnover time Copper – Kennecott shovel shift change - Dewatering bore turnover time - Addressing productivity was risking access to 30.5Mt of opportunities with shovel loads saleable ore at Ma
Slide 39: Automation Drill System (ADS) – supporting delivery of first ore at Gudai-Darri
Automation Drill System (ADS) – supporting delivery of first ore at Gudai-Darri We have the world’s largest autonomous drill fleet - - Delivers quality production data to enable and 30 drills supporting both Caterpillar and Epiroc support other compatible technologies e.g. the platforms Rio Tinto Sm
Slide 40: Agile mining and right sized trucks driving zero emissions productivity
Agile mining and right sized trucks driving zero emissions productivity – The Agile Mining/Right Size Autonomous Trucks (RSATe) programme is underway in partnership with Scania, with a trial happening at the Channar mine in the Pilbara – The programme is testing whether smaller, civil size trucks ca
Slide 41: Inflation impacts on closure liabilities
Inflation impacts on closure liabilities – At the balance sheet date we reflect the latest view of closure cost obligations in current year real terms, which is achieved by adjusting the existing estimate for current year inflation – Inflation expectations have risen significantly over the last 12 m
Slide 42: Inflation impacts on closure liabilities
Inflation impacts on closure liabilities Impact of inflation on H122 earnings vs H121 (US$million) Higher rates of inflation have increased our closure liabilities with an impact to 2022 2021 Change underlying earnings. A. Amortisation of discount (opening inflation assumption 503 206 297 In 2022 fi
Slide 43: Debt maturity profile
Debt maturity profile 30 June 2022 debt maturity profile* $ million Average outstanding debt maturity of corporate bonds ~15 years (~10 years for Group debt) 2,000 1,800 No corporate bond maturities until 2024 1,600 Liquidity remains strong under 1,400 stress tests 1,200 $7.5bn back-stop Revolving C
Slide 44: Group level financial guidance
Group level financial guidance 2022 2023 2024 CAPEX Total Group ~$7.5bn ~$9.0 – 10.0bn ~$9.0 – 10.0bn Sustaining Capex ~$3.5bn ~$3.5bn ~$3.5bn Group Pilbara Sustaining ~$1.5bn* ~$1.5bn ~$1.5bn Capex - $1.5bn** to decarbonise our assets - Ambition to grow and decarbonise reflected in from 2022 to 202
Slide 45: Product group level guidance
Product group level guidance 2022 2022 Production Guidance Costs $19.5-21.0/wmt (FOB), Iron Ore 320 – 335Mt1 based on an Australian Shipments (100% basis) dollar exchange rate of $0.71 Copper C1 Copper unit costs Mined Copper 500 to 575kt 130-150 US c/lb Refined Copper 230 – 290kt Aluminium 54 – 57M
Slide 46: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity Average published price/exchange rate for HY US$ million impact on full year 2022 underlying 2022 EBITDA of a 10% change in prices/exchange rates Copper 442c/lb 629 Aluminium $3,082/t 1,374 Gold $1,874/oz 69 Iron ore realised price (62% Fe CFR freight-a
Slide 47: Application of the returns policy
Application of the returns policy Capital return considerations Comments – Operating cash flow of $10.5 billion 1 Results for HY 2022 – FCF of $7.1 billion – Underlying earnings down 29% to $8.6 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing high quality assets i
Slide 48: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement Proforma Rio Tinto Group Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ)(2) Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 YTD YTD YTD YTD YTD YTD US$m US$m US$m US$m US$m US$m Consolidated sales revenue 29,775 33,083 805 844 28,970 3
Slide 49: Group Balance Sheet
Group Balance Sheet Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ) Jun-22 Dec-21 Jun-22 Dec-21 Jun-22 Dec-21 YTD YTD YTD YTD YTD YTD US$m US$m US$m US$m US$m US$m Non-current assets 78,488 78,464 12,982 12,250 65,506 66,214 Current assets 23,417 24,4
Slide 50: Common acronyms
Common acronyms T Tonne RTSPS Rio Tinto Safe Production System Mt Million tonnes ROCE Return on capital employed Gt Giga tonnes Earnings Before Interest, Taxes, EBITDA tCO2 Tonne of carbon dioxide Depreciation and Amortisation tCO2 e Tonne of carbon dioxide equivalent CAGR Compound annual growth rat