Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2021 Earnings Presentation
55 slides from Rio Tinto's earnings presentation, Jul 28, 2021
Slide 1: Notice to ASX: 2021 Half year results presentation
Notice to ASX 28 July 2021 For personal use only 2021 Half year results presentation Attached is the Rio Tinto 2021 half year results presentation to be given at 9.30am (GMT) / 6.30pm (AEST) today by Rio Tinto Chief Executive Jakob Stausholm and Chief Financial Officer Peter Cunningham. The presenta
Slide 2: Please direct all enquiries to
Please direct all enquiries to Contacts media.enquiries@riotinto.com For personal use only Media Relations, UK Media Relations, Australia Illtud Harri Jonathan Rose M +44 7920 503 600 M +61 447 028 913 David Outhwaite Matt Chambers M +44 7787 597 493 M +61 433 525 739 Jesse Riseborough Media Relatio
Slide 3: 2021 Half Year Results
For personal use only 2021 Half Year Results 28 July 2021 Karratha’s Red Earth Arts Precinct, the Pilbara. Rio Tinto is a funding partner
Slide 4: 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 Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood For personal use only the following statement. F
Slide 5: Jakob Stausholm, Chief Executive
For personal use only Jakob Stausholm Chief Executive Iron Ore Company of Canada (IOC)
Slide 6: Four areas of focus for an even stronger Rio Tinto
Four areas of focus for an even stronger Rio Tinto For personal use only H1 2021 Financials Best Impeccable ESG Excel in operator credentials development Room to improve Partnerships Jadar $21.0bn ELYSISTM, InoBat, ARENA, New commodity entry; EBITDA Rio Tinto Safe Charge On Challenge large, low cost
Slide 7: Peter Cunningham, Chief Financial Officer
For personal use only Peter Cunningham Chief Financial Officer Perth operations centre, Western Australia
Slide 8: Continued supportive global conditions in iron ore
Continued supportive global conditions in iron ore For personal use only China’s crude steel production (Mt annualised) Iron Ore 1 (+101% YoY) $/dmt 250 1,250 1,200 200 1,150 1,100 150 1,050 1,000 950 100 900 850 50 800 5-year Range 5-year avg 2020 2021 750 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Slide 9: Robust demand supports aluminium, copper and TiO2
Robust demand supports aluminium, copper and TiO2 For personal use only Aluminium1 (+41% YoY) Copper (+66% YoY) TiO2 (chloride slag) (-1% YoY) $/t $c/lb $/t 2,800 700 500 850 2,600 600 450 800 2,400 500 400 2,200 400 750 2,000 350 300 1,800 700 300 200 1,600 650 100 250 1,400 1,200 0 200 600 Jan-18
Slide 10: Outstanding financial results
Outstanding financial results For personal use only ($bn, except for per share data) H1 2021 H1 2020 Comparison Consolidated sales revenue 33.1 19.4 +71% Underlying EBITDA 21.0 9.6 +118% Underlying ROCE 50% 21% n/a Cash flow from operations 13.7 5.6 +143% Free cash flow 10.2 2.8 +262% Underlying ear
Slide 11: Significant support from higher prices
Significant support from higher prices For personal use only Underlying EBITDA $bn 12.8 0.0 21.7 21.0 0.6 0.1 0.4 0.3 0.0 Iron Ore +9.9 Copper +1.2 Aluminium +1.1 Other +0.7 9.6 H1 2020 Prices Exchange Energy Inflation Flexed H1 Volumes Unit cash Noncash costs H1 2021 Underlying 2020 & Mix costs /ot
Slide 12: Iron Ore: Strong financial result despite operational challenges
Iron Ore Strong financial result despite operational challenges For personal use only H1 2021 H1 2020 2021 Production impacted by weather, tie-in of Operating metrics c comparison guidance replacement mines, plant availability and cultural heritage management Average realised price1, 3 $168.4/t + 97
Slide 13: Pilbara iron ore a stronger business beyond 2021
Pilbara iron ore a stronger business beyond 2021 For personal use only Average Pilbara shipments has been 331mt a year (100% basis) over the last 5 years The completion of 90mt of replacement mine capacity and the commissioning of Gudai-Darri (43mt), our first new mining hub in nearly a decade1, wil
Slide 14: Aluminium: Solid operating performance in recovering markets
Aluminium Solid operating performance in recovering markets For personal use only Operating metrics H1 2021 H1 2020 2021 FCF of $0.9bn matches full year 2020. C comparison Guidance All PacAl smelters FCF positive Average aluminium price1 $2,626/t + 42% Average alumina price2 $ 288/t + 9% EBITDA doub
Slide 15: Copper: Strong financial results despite COVID-19
Copper Strong financial results despite COVID-19 and other challenges For personal use only Operating metrics H1 2021 H1 2020 2021 Strong recovery in prices of copper, gold, c comparison Guidance silver and molybdenum Copper realised price1 415c/lb + 66% OT underground – achieved key technical 500-5
Slide 16: Minerals: Strong demand across all products
Minerals Strong demand across all products especially high grade iron ore For personal use only Operating metrics H1 2021 H1 2020 2021 $2.4bn commitment to fund Jadar. Low c comparison guidance cost, long life asset, entry into battery IOC pellets price1 $218/t + 86% materials at scale TiO2 slag pri
Slide 17: Disciplined allocation of capital
Disciplined allocation of capital For personal use only 1 Essential sustaining capex Further cash Compelling returns to growth shareholders 2 Ordinary dividends 3 Iterative cycle of Debt management ©2021, Rio Tinto, All Rights Reserved 15
Slide 18: Discipline maintained under strong price conditions
Discipline maintained under strong price conditions For personal use only Underlying earnings, $bn Total capital expenditure, $bn Growth is about value not volume Platts Price - 62% Fe, $/dmt 16 200 171 173 180 Investing to sustain our assets 14 160 12 134 Developing projects that deliver 129 additi
Slide 19: Measured ramp-up continues
Measured ramp-up continues For personal use only Capital expenditure profile Capex of $3.3bn comprised $1.4bn $bn sustaining and $1.9bn replacement ~7.5 ~7.5 ~7.5 and growth 24% higher YoY as we ramp up our 6.2 projects 5.4 5.5 Guidance for 2021 - 2023 unchanged ~$7.5bn Jadar funding commitment of $
Slide 20: Balance sheet strength adds to our resilience
Balance sheet strength adds to our resilience For personal use only Net debt (cash) $bn Balance sheet strength is an asset. 14.1 Offers resilience and creates optionality Gearing -6% 12.9 11.3 10.0 9.3 9.3 Operating cash flow of $13.7bn 8.0 9.6 5.2 5.6 Invested $3.3bn and distributed $6.4bn to 7.6 4
Slide 21: Stable five-year record of shareholder returns
Stable five-year record of shareholder returns For personal use only Shareholder returns of 40-60% of underlying earnings on average through the cycle $6.1bn ordinary interim dividend, Pay out ratio (%) $3.76 per share, 50% pay-out ratio 100 $3.0bn special dividend, $1.85 per share 80 75% total pay-
Slide 22: Jakob Stausholm, Chief Executive
For personal use only Jakob Stausholm Chief Executive Gobi desert, Mongolia
Slide 23: We produce materials essential for a low-carbon future
We produce materials essential for a low-carbon future For personal use only Cu Cu Cu Ti Copper Copper Copper Titanium 29 29 29 22 Al Al Al Li Aluminum Aluminum Aluminum Lithium 13 13 13 3 Fe Fe Fe B Iron Iron Iron Boron 26 26 26 5 Al Cu Fe Aluminum Copper Iron 13 29 26 Fe Li Cu Iron Lithium Copper
Slide 24: Four areas of focus for an even stronger Rio Tinto
Four areas of focus for an even stronger Rio Tinto For personal use only Best Impeccable ESG Excel in operator credentials development Expand capability Strengthen track Deliver organic & and leadership record and inorganic growth transparency Social Licence Earn trust by building meaningful relatio
Slide 25: Becoming more outward looking
Best operator Impeccable Excel in ESG Development Becoming more credentials Social Licence outward looking For personal use only New Executive Committee effective 1 March. Embed for the long term. CEO Australia on Executive Committee A period of deep engagement. Over 130 meetings1 by the CEO across
Slide 26: Working towards impeccable ESG credentials
Best operator Impeccable Excel in ESG Development Working towards impeccable credentials License Social Licence ESG credentials For personal use only Everyday Respect Initiative Embedding communities & heritage Decarbonising our business - Building a safer, more respectful in daily operations and va
Slide 27: Building on our strengths
Best Impeccable Excel in operator ESG Development Building on our credentials Social Licence strengths For personal use only Safety always our priority Rio Tinto Safe Production System a bottom-up, people centric approach COO organisation established including governance, scope and people at the ass
Slide 28: Controlled risk taking; disciplined progress
Best Impeccable Excel in operator ESG Development Controlled risk taking; disciplined progress credentials Social Licence For personal use only 2021 2022 Jadar funding committed Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 8% equity stake in Western Copper Pilbara projects (Iron ore, Australia) and Gold Gudai-D
Slide 29: Oyu Tolgoi Underground
Best Impeccable Excel in operator ESG Development Oyu Tolgoi credentials Social Licence Underground For personal use only Technical progress despite COVID-19 restrictions Material Handling System 1 is 90% complete; technical criteria achieved to support undercut commencement despite site operating a
Slide 30: Strengthening our portfolio with commitment to fund Jadar
Strengthening our portfolio with Best Impeccable Excel in operator ESG Development credentials Social Licence commitment to fund Jadar For personal use only Continue to work closely with stakeholders in Serbia. Subject to award of final permits and approvals, construction will commence in 2022, with
Slide 31: Unleashing our potential
Unleashing our potential For personal use only Our priorities Best operator | Impeccable ESG credentials | Excel in development with controlled risk taking | Be more outward looking to strengthen social licence Attractive assets A focused team Clear ambition - Strong safety record - New Exco started
Slide 32: Appendices
For personal use only Appendices Jadar project, Loznica, Serbia
Slide 33: Our portfolio is well positioned for the low-carbon transition
Our portfolio is well positioned for the low-carbon transition For personal use only Our portfolio No carbon in product No carbon in product No carbon in product Over 95% of our 2020 revenues are from Carbon in product sold and widely Carbon in product sold but CO2 intensive processing sold and best
Slide 34: Our portfolio to perform strongly in scenarios with proactive climate action
Our portfolio to perform strongly in scenarios with proactive climate action For personal use only Our Scope 3 goals to guide our partnerships 2020 Highlights - Technology for reductions in steelmaking carbon intensity of at - Reduced emissions by 1.1Mt CO2e or 3% least 30% from 2030 vs 2018 baselin
Slide 35: ELYSIS zero carbon metal meets new market demand
ELYSIS zero carbon metal meets new market demand For personal use only 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. Scaling up ELYSISTM technology - Q4 2020: Rio Tinto suppl
Slide 36: Oyu Tolgoi delivers substantial economic value to Mongolia
Oyu Tolgoi delivers substantial Total in-country spend (2010 – Q2 2021) economic value to Mongolia For personal use only FDI: OT accounts for one-third of Mongolia’s GDP; 70% of Foreign Direct Investment Jobs: Country’s largest private-sector employer, workforce of 12,000 is 96% Mongolian Taxes: Sin
Slide 37: Resolution Copper: potential to produce up to 25% of US copper demand
Resolution Copper: potential to produce up to 25% of US copper demand; critical to a low carbon future For personal use only We are continuing to work with the US Forest Service to review the Final Environmental Impact Statement (EIS) and draft Record of Decision. Mine studies continue to progress i
Slide 38: Significant Paterson footprint with potential beyond Winu
Significant Paterson footprint with potential beyond Winu For personal use only RT Paterson JV’s RT Status SIPA Extensive portfolio of 100% owned tenure, majority owned joint Citadel JV (Antipa) 51% Secured 0 100 km venture (JV) tenure, and active earn-in opportunities SIPA, Carrawine, Alloy Earning
Slide 39: We are committed to the Simandou project and Guinea
We are committed to the Simandou project and Guinea For personal use only One of the world’s largest untapped and richest high-grade iron ore deposits, located in Guinea High-grade ores can support the transition to lower-carbon steel Strengthens Rio Tinto’s iron ore portfolio as well as our product
Slide 40: Strong commodity pricing driving EBITDA
Strong commodity pricing driving EBITDA For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 24,000 22,000 Iron ore Iron & Titanium Diamonds Copper Aluminium* Other, net 20,000 11,000 9,874 18,000 9,000 16,000 12,833 7,000 14,000 12,000 5,000 9,640 10,000 3,000 1,193 1,090 8,000 591
Slide 41: Lower volume in iron ore driven by weather and mine tie-in
Lower volume in iron ore driven by weather, mine tie- in work, plant availability and heritage management For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 24,000 43 21,752 22,000 210 (627) (137) 20,000 (381) 66 47 18,000 4 16,000 12,833 (30) (66) 14,000 12,000 9,640 10,000 8,000
Slide 42: Iron Ore: Strong pricing supports EBITDA
Iron Ore Strong pricing supports EBITDA For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 18,000 213 16,000 (244) (5) (40) (559) 14,000 (212) 12,000 9,209 10,000 8,000 16,618 16,060 6,000 4,000 7,698 2,000 0 H1 2020 Price Exchange rates Energy Inflation Flexed H1 2020 Volumes and
Slide 43: Aluminium: Higher prices, recovery of VAP demand and volumes
Aluminium Higher prices, recovery of VAP demand and volumes For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 2,500 83 66 2,000 (265) (41) (75) 79 (77) 1,500 1,229 1,000 1,931 1,924 500 925 0 H1 2020 underlying Price Exchange rates Energy Inflation Flexed H1 2020 Volumes Cash cost
Slide 44: Copper: Higher prices & volume, albeit impacted by COVID-19
Copper Higher prices & volume, albeit impacted by COVID-19 For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 2,500 50 86 16 2,000 (43) (31) (17) 1,500 1,301 1,000 1,896 2,048 500 686 0 H1 2020 Price Exchange rates Energy Inflation Flexed H1 2020 Volumes Cash costs Other H1 2021 un
Slide 45: Minerals: Strong pricing across portfolio supports EBITDA
Minerals Strong pricing across portfolio supports EBITDA For personal use only Underlying EBITDA H1 2021 vs H1 2020 $ million 2,000 52 (99) (13) (31) (63) (47) (47) 934 1,000 1,503 1,398 712 0 H1 2020 underlying Price Exchange rates Energy Inflation Flexed H1 2020 Volumes and Mix Cash costs One-offs
Slide 46: Other movements in underlying EBITDA
Other movements in underlying EBITDA For personal use only Underlying EBITDA impact Energy $ million H1 2020 FX/ price Volumes Cash costs E&E Non-cash Other H1 2021 & Inflation Other operations 1 260 9 17 6 - -54 -243 -4 Exploration & Evaluation (net) -121 - - - 18 -17 - - -120 Other -261 -76 -8 72
Slide 47: Group level financial guidance
Group level financial guidance For personal use only FY2021 FY2022 FY2023 CAPEX Total Group ~$7.5bn ~$7.5bn ~$7.5bn Sustaining Capex Group $3.0 - $3.5bn $3.0 - $3.5bn $3.0 to $3.5bn Pilbara Sustaining Capex $1.2-$1.6bn $1.2-$1.6bn $1.2-$1.6bn Effective tax rate 30% Returns Total returns of 40 – 60%
Slide 48: Product group level guidance
Product group level guidance For personal use only 2021 production guidance1 2021 costs Iron Ore $18.0-18.5/wmt (FOB), based on an 325 – 340mt2 (100% basis) Shipments Australian dollar exchange rate of $0.77 C&D Mined Copper 500 – 550kt3 C1 Copper unit costs 60-75 US c/lb Refined Copper 210 – 250kt
Slide 49: Debt maturity profile
Debt maturity profile 30 June 2021 debt maturity profile* For personal use only $ million Average outstanding debt maturity of 2,000 corporate bonds at ~12 years (~ 9 years for Group debt) 1,800 1,600 No corporate bond maturities until 2024 1,400 1,200 Liquidity remains strong under stress tests 1,0
Slide 50: Modelling EBITDA
Modelling EBITDA For personal use only Underlying EBITDA sensitivity Average published price/exchange US$ million impact on full year 2021 underlying rate for 2021 first half EBITDA of a 10% change in prices/exchange rates Copper 413c/lb 478 Aluminium $2,245/t 784 Gold $1,805/oz 77 Iron ore realised
Slide 51: Modelling aluminium costs
Modelling aluminium costs For personal use only Canadian* smelting unit cash** cost sensitivity ($/t) Impact a $100/t change in each of the input costs below will have on our H1 2021 Canadian smelting unit cash cost of $1,262/t Alumina (FOB) $191 Green petroleum coke (FOB) $27 Calcined petroleum cok
Slide 52: RTA Value Chain – 2020 Actuals
RTA Value Chain – 2020 Actuals For personal use only Mining Refining Aluminium Casting Bauxite Alumina 56.1 dmt 30% 8.0mt 80% Aluminium Cast Prod RTA 3.2mt 100% Intersegment 70% 20% 43% 57% 3rd Party Sales Bauxite Alumina VAP Non-VAP 39.4 dmt 1.6mt ©2021, Rio Tinto, All Rights Reserved 50
Slide 53: Application of the returns policy
Application of the returns policy For personal use only Capital return considerations Comments – Operating cash flow of $13.7 billion 1 Results for H1 2021 – FCF of $10.2 billion – Underlying earnings up 156% to $12.2 billion – Focused on Oyu Tolgoi and Jadar Long-term growth prospects – Investing i
Slide 54: Group Income Statement and Cash Flow Statement
Group Income Statement and Cash Flow Statement For personal use only Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill1 (excluding OT and TRQ)2 Jun-21 YTD Jun-20 YTD Jun-21 YTD Jun-20 YTD Jun-21 YTD Jun-20 YTD US$m US$m US$m US$m US$m US$m Consolidated sales revenue 33,083 19,36
Slide 55: Group Balance Sheet
Group Balance Sheet For personal use only Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ) Jun-21 YTD Dec-20 YTD Jun-21 YTD Dec-20 YTD Jun-21 YTD Dec-20 YTD US$m US$m US$m US$m US$m US$m Non-current assets 77,676 76,535 11,789 10,930 65,887 65,605 Curr