Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Presentation (September 2006)
43 slides from Rio Tinto's investor presentation, Sep 6, 2006
Slide 1: Improving Performance Together investor seminar
Improving Performance Together investor seminar 6th September 2006 1 Improving Performance Together Seminar 6th September 2006
Slide 2: Forward-Looking Statements Safe Harbor
For the purposes of the Forward-Looking Statements Safe Harbor provisions of the US securities laws This presentation contains statements which constitute forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, statements with regard
Slide 3: Guy Elliott, CFO
Guy Elliott CFO 3 Improving Performance Together Seminar 6th September 2006
Slide 4: Presentation outline
Presentation outline Guy Elliott Business context Industry challenges 10 mins Keith Johnson The elements of IPT IPT case studies 20 mins Grant Thorne OTX Role of technology 15 mins Guy Elliott Conclusion 5 mins Q&A 4 Improving Performance Together Seminar 6th September 2006
Slide 5: Business context
Business context • Very strong market conditions for Mining stocks market capitalisation the mining sector as % of FTSE100 10 8 • The rising tide is lifting all boats 8 Number of mining 6 • More capital is entering the sector stocks in FTSE 100 6 5 • Increasing competition for talent 4 4 and resourc
Slide 6: Cost pressures continue in the industry
Cost pressures continue in the industry Labour Wage inflation in regional hotspots Raw materials/ consumables Rising cost of consumables, Freight / royalties e.g. tyres, explosives Non cash Fuel and energy Persisting higher energy costs Contractors / Sellers’ market for contractor consultants servic
Slide 7: IPT is about value creation through replicating best performance
IPT is about value creation through replicating best performance Fewer equipment Equipment Enhanced revenues failures utilisation Less More capable duplication IPT will address costs employees through performance improvement Extended lives Collaboration and synergies Fewer surprises Better planning
Slide 8: IPT is part of a long standing commitment to improvement
IPT is part of a long standing commitment to improvement • Two examples of the benefit of Group wide standards, systems and processes: Procurement Safety Today: Full global integration and Today: Industry leading performance specialist skills 2000: Group wide 2002: Standard processes and mandatory s
Slide 9: Group safety performance: LTI per 200,000 hours worked
LTI per 200 000 hours worked The power lies in consistent metrics and processes 2 LTIFR 1.5 1 0.5 Group safety performance trend 0 98 99 00 01 02 03 04 05 2 Business unit safety rankings in 2005 LTI FR 1 0 9 Improving Performance Together Seminar 6th September 2006
Slide 10: In the long run IPT is transformational
In the long run IPT is transformational • Strong local accountability enhanced by greater collaboration • Global scale and reach leveraged effectively • Business systems aligned with Group wide ERP platform • Operational excellence supported by common systems, standards and metrics • Best practice a
Slide 11: Keith Johnson, CEO Diamonds Product Group
Keith Johnson CEO, Diamonds Product Group Executive in charge of IPT 11 Improving Performance Together Seminar 6th September 2006
Slide 12: IPT has clear objectives
IPT has clear objectives… Investment Project Construction Opportunity Development & Generation & Evaluation Commissioning Quantitative & qualitative goals Development Asset Deliver quantifiable improvement Management Logistics Marketing in performance with measurable bottom line impact Operation Imp
Slide 13: …and will focus initially on high value areas
…and will focus initially on high value areas Narrow and deep scope of activities Mining Processing Marketing Asset Mgt 9 Ore body 9 Value-driven 9 Customer 9 Heavy knowledge production portfolio Mobile 9 Strategic planning Equipment 9 Product mine portfolio planning 9 Pricing 13 Improving Performan
Slide 14: Building an integrated global operating model
Building an integrated global operating model Marketing Mining Processing Asset Operations Operations Mgt Performance Monitoring Human Resources Business Systems Organisational Structure & Governance 14 Improving Performance Together Seminar 6th September 2006
Slide 15: Drivers of sustainable performance
Drivers of sustainable performance • Standardise core processes to leading practice • Improved analytical tools • Common, transparent metrics & data • Enhanced functional training and capability development 15 Improving Performance Together Seminar 6th September 2006
Slide 16: Drivers of sustainable change
Drivers of sustainable change Maintenance Planning and Scheduling • Standardise core • Standardise processes for scope & schedule processes to leading of maintenance tasks practice • Standard levels of resourcing • Standard approaches to defect analysis and elimination • Monitoring of compliance Val
Slide 17: Drivers of sustainable change
Drivers of sustainable change Asset Management Metrics • Common, transparent • Establish clear accountability for HME fleet metrics & data • Mandate uniform outcome measures: asset productivity, reliability, and health • Support with ‘leading’ process execution measures • Enhanced functional Marketi
Slide 18: Sustaining performance
Sustaining performance • Standardise core processes to • Maintenance Planning and Scheduling leading practice • Improved analytical tools • Value Models for Processing Plants • Common, transparent metrics & data • Asset Management Metrics • Enhanced functional training and • Marketing Competency Pro
Slide 19: IPT is now being rolled out across the Group
IPT is now being rolled out across the Group Mid 05 Jan 06 Mid 06 End 06 Phase I Phase II Phase III Asset Mgt KUCC Pilbara Iron Diavik RT Coal Australia RT Energy America IOC Boron Comalco Processing KUCC Boron Mt Thorley Warkworth Hunter Valley Ops Pilbara Iron Yandi Mining Comalco Hunter Valley Op
Slide 20: Case studies
Case studies • Improving Maintenance/Extending Component Lives • Extending Tyre Lives • Production Flexibility at KUCC - The “Moly Story” 20 Improving Performance Together Seminar 6th September 2006
Slide 21: Hydrocarbons improve the effectiveness of maintenance
Hydrocarbons improve the effectiveness of maintenance Truck Oil and Lube Samples Shovel Analysis • Predict wear Use as indicator for and tear Intervention to condition based • Avoid keep oil clean management impurities Condition monitoring through oil analysis Truck Critical Caution Safe Issue Ident
Slide 22: Improvements are visible and growing at RTEA
Improvements are visible and growing at RTEA Leading Indicators – Work Management Expected Benefits 100 2.5% Component Life Increase 10.0% 80 Schedule Compliance (%) 60 Mean Time 7.5% Between 40 Failure Increase 30.0% 20 Equipment 0.5% 0 Utilisation Value of $18m 0 20 40 60 80 100 Increase 2.5% in 2
Slide 23: Case studies
Case studies • Improving Maintenance/Extending Component Lives • Extending Tyre Lives • Production Flexibility at KUCC - The “Moly Story” 23 Improving Performance Together Seminar 6th September 2006
Slide 24: Overcoming the critical supply deficit of tyres
Overcoming the critical supply deficit of tyres Supply Demand Rio Tinto 2006 OTR Supply/Demand 4000 Saving in 2006 of 3000 up to $60m Demand Other supply Reduction Inc Re-Treads From 2000 Management Value of Programmes $’00s m in maintaining 1000 production 0 OEM Rio Tinto 2006 Operations Inventory
Slide 25: Improvements in tyre life will be sustainable
Improvements in tyre life will be sustainable 30 Improvement in tyre life: H1 2006 vs FY2005 (% increase in hours) 25 Average improvement of 13% % Improvement Achieved 20 15 10 5 0 Business Units -5 25 Improving Performance Together Seminar 6th September 2006
Slide 26: Case studies
Case studies • Improving Maintenance/Extending Component Lives • Extending Tyre Lives • Production Flexibility at KUCC - The “Moly Story” 26 Improving Performance Together Seminar 6th September 2006
Slide 27: Orebody knowledge and mine planning have been enhanced
Orebody knowledge and mine planning have been enhanced • Better mine planning capability and process • Improved orebody knowledge • Additional drilling to recharacterise ore KUCC pit NPV increase of $’00s million 27 Improving Performance Together Seminar 6th September 2006
Slide 28: The production planning process has also been improved
The production planning process has also been improved Sulphuric acid Improved inventory management Smelter Refinery Copper cathode Crusher Concen- (in mine) trator KUCC Pit Gold Silver Roaster (off site) Optimise Moly/Copper Optimised Moly mix roasting capacity FeMo Mo oxides 28 Improving Performan
Slide 29: Gaining value from additional moly production
Gaining value from additional moly production Copper and Moly Production at Utah Copper 900 800 700 > $100m of incremental Moly Prices 600 revenue in 2006 from IPT 500 Index 2002 =100 400 Moly Sales 300 - actual Additional value 200 100 Copper Sales 0 2003 2004 2005 H1 2006 29 Improving Performance
Slide 30: Next steps for IPT
Next steps for IPT • Project phase will be complete at the end of 2006 • Transition is under way from pilots to progressive Group wide roll out • Operational and Technical Excellence (‘OTX’) will take functional ownership • IPT will be embedded in the business 30 Improving Performance Together Semin
Slide 31: Grant Thorne, Head of OTX
Grant Thorne Head of Operational and Technical Excellence (OTX) OTX and the role of Technology 31 Improving Performance Together Seminar 6th September 2006
Slide 32: Experience of IPT at Coal Australia
Experience of IPT at Coal Australia • Widespread acceptance by staff of value of collaboration • Widespread appreciation by staff of action without crisis • Priorities seen to align with long-term business imperatives • Experience of • Marketing (business-wide) • Value-driven Production Planning (Hu
Slide 33: OTX will embed IPT
OTX will embed IPT IPT OTX • 24 month project • New organisation • Design, pilot • Roll out, extend • Develop new model • Make it ‘the way we operate’ 33 Improving Performance Together Seminar 6th September 2006
Slide 34: Vision for OTX has two elements
Vision for OTX has two elements Operational excellence Innovation Focus Current large/longlife Orebody of the future: orebodies less amenable? Increased value from a Deliverable global operating model Technologies of value Levers • Share best practice • Economic underground • Selectively standardise
Slide 35: The new OTX organisation will build organisational capability
The new OTX organisation will build organisational capability OTX organisational structure Shared Expertise Evaluation Projects Production Assets HSE Value Innovation Support Improvement Orebody Health Scheduling Studies Reliability Optimisation Knowledge & Portal R&D Safety Implement Mining Systems
Slide 36: OTX centres of excellence will be close to the operations
OTX centres of excellence will be close to the operations North America Bristol Europe 31 % 3% Salt Lake 2% Indonesia City Africa Brisbane Perth 4% S America 4% Australasia 56% Melbourne % Regional proportion of the Group’s gross assets 36 Improving Performance Together Seminar 6th September 2006
Slide 37: How OTX will work with the business units
How OTX will work with the business units OTX BUSINESS UNITS Centres Of Excellence ROTATION OF STAFF COMMUNITIES OF PRACTICE OTX Shared Expertise 37 Improving Performance Together Seminar 6th September 2006
Slide 38: Examples of key innovation programmes
Examples of key innovation programmes Underground mining Surface mining Processing Equipment automation Remote sensing Advanced comminution Remote monitoring Data fusion Heap/in-place leaching Tunnel development Continuous mining Ore-sorting Block-caving In-pit sizing/conveying 38 Improving Performa
Slide 39: The OTX approach will deliver valuable benefits
The OTX approach will deliver valuable benefits Operational • Build a culture of continuous improvement • Integrate leading operational practice into our operating model Strategic • Enable effective M&A through integration into a strong operating model • Help Rio Tinto acquire and develop scarce tal
Slide 40: Guy Elliott, CFO
Guy Elliott CFO 40 Improving Performance Together Seminar 6th September 2006
Slide 41: Capturing value creating ideas around the Group
Capturing value creating ideas around the Group Investment Opportunity Generation process Ideas for Order of Feasibility Execution Investment Concept Pre-Feasibility Magnitude Opportunities Watch List Rejected 41 Improving Performance Together Seminar 6th September 2006
Slide 42: Conclusion
Conclusion Where next for IPT? • IPT enhances operational capabilities for the next decade • Establishes a new business system for the Group – rapid roll out in case of M&A • Facilitates management for value through: – capabilities, collaboration, scale, synergy • Embeds deeply into the Group struct
Slide 43: Questions?
Improving Performance Together investor seminar Questions? 43 Improving Performance Together Seminar 6th September 2006