Slide 1: ASX cover letter
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 ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 8 August 2012 Dear Sir, Attached is the Rio Tinto 2012 interim r
Slide 2: 2012 interim results
©2012, Rio Tinto, All Rights Reserved 1 For personal use only 2012 interim results 8 August 2012
Slide 3: Cautionary statement
©2012, Rio Tinto, All Rights Reserved 2 Cautionary statement For personal use only This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and consisting of the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be b
Slide 4: Tom Albanese, Chief executive
©2012, Rio Tinto, All Rights Reserved 3 For personal use only Tom Albanese Chief executive
Slide 5: Continued improvements in safety
©2012, Rio Tinto, All Rights Reserved 4 Continued improvements in safety For personal use only Injury frequency rates 2003 – H1 2012 Per 200,000 hours worked 2 All injury frequency rate 1.8 Lost time injury 1.6 frequency rate 1.4 1.2 1 0.8 0.6 0.4 0.2 0 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 H1 2012 Sa
Slide 6: Delivering on our strategy
©2012, Rio Tinto, All Rights Reserved 5 Delivering on our strategy For personal use only • Robust business of long-life, cost- competitive, expandable assets that are resilient throughout the cycle • Aim to maintain strong balance sheet and single A credit rating • Consistent delivery against a clea
Slide 7: 2012 first half highlights
©2012, Rio Tinto, All Rights Reserved 6 2012 first half highlights For personal use only • Solid financial results driven by record operational performance of iron ore division − Underlying earnings of $5.2 billion − Net earnings of $5.9 billion − Underlying EBITDA of $10.1 billion − Cash flows of $
Slide 8: Iron ore: record Pilbara production and sales alongside major project development
©2012, Rio Tinto, All Rights Reserved 7 Iron ore: record Pilbara production and sales alongside major project development For personal use only Iron ore underlying results • Record production and sales from US$ billions Pilbara iron ore operations 10 • Lower prices partly offset by higher 9 volumes
Slide 9: Copper: supply constraints continue
©2012, Rio Tinto, All Rights Reserved 8 Copper: supply constraints continue For personal use only Copper underlying results • Lower volumes due to temporary US$ billions grade decline 3 • Copper production expected to increase from second half 2012 • Brownfield investment to extend life 2 of KUC min
Slide 10: Aluminium: continued focus on productivity and business improvement
©2012, Rio Tinto, All Rights Reserved 9 Aluminium: continued focus on productivity and business improvement For personal use only Aluminium underlying results • Challenging market conditions and US$ billions operating environment 2011 Onwards − 15% lower LME price half on half 2.5 Excludes Pacific A
Slide 11: Energy: challenging market and cost environment
©2012, Rio Tinto, All Rights Reserved 10 Energy: challenging market and cost environment For personal use only Energy underlying results • Earnings impacted by lower prices US$ billions and Australian cost inflation 1.5 • Significant unseasonal wet weather in Australia continued into July • Closure
Slide 12: Diamonds and Minerals: pricing momentum
©2012, Rio Tinto, All Rights Reserved 11 Diamonds and Minerals: pricing momentum For personal use only Diamonds and Minerals underlying results • Benefit from gradual transition to US$ billions shorter term pricing: some cyclical weakness 0.9 0.8 • Increased production of diamonds and TiO2 0.7 0.6 •
Slide 13: Guy Elliott, Chief financial officer
©2012, Rio Tinto, All Rights Reserved 12 For personal use only Guy Elliott Chief financial officer
Slide 14: Strong underlying earnings in a lower price environment
©2012, Rio Tinto, All Rights Reserved 13 Strong underlying earnings in a lower price environment For personal use only Underlying earnings 2011 first half vs 2012 first half $ millions 8,000 6,000 4,000 2,000 0 7,781 (1,936) 200 366 (584) (174) (388) (111) 5,154 5,885 H1 11 Price Exchange Volume Vol
Slide 15: External cost pressures have reduced but remain significant
©2012, Rio Tinto, All Rights Reserved 14 External cost pressures have reduced but remain significant For personal use only Earnings cash cost impact • Operational readiness costs largely $ millions relate to preparation for Pilbara Cost increases Cost decreases volume ramp-up Operational Readiness •
Slide 16: Solid cash flow generation
©2012, Rio Tinto, All Rights Reserved 15 Solid cash flow generation For personal use only 2012 first half cash flows • Solid cash flow generation despite US$ billions challenging market and operating conditions 16 Other Other inflows: outflows: • Cash inflow boosted by Chalco earn- 14 $1.8bn ($1.1bn
Slide 17: Capital expenditure is being prioritised on the highest quality projects
©2012, Rio Tinto, All Rights Reserved 16 Capital expenditure is being prioritised on the highest quality projects For personal use only Approved capital expenditure • $16 billion capital expenditure US$ billions approved for 2012 • Rio Tinto’s proportionate share of 18 capital is $13.6 billion 16 •
Slide 18: Further progress in shaping the portfolio
©2012, Rio Tinto, All Rights Reserved 17 Further progress in shaping the portfolio For personal use only • Capturing value from assets that are not aligned with our strategy − >20 divestments worth a total of $12 billion completed since 2008 • Introducing new partners to projects • Acquisition of hi
Slide 19: Balancing value adding investment with returns to shareholders
©2012, Rio Tinto, All Rights Reserved 18 Balancing value adding investment with returns to shareholders For personal use only • Disciplined and balanced approach to capital allocation Cash from operations • Balance sheet strength and single A credit rating prudent in a volatile environment Disciplin
Slide 20: Tom Albanese, Chief executive
©2012, Rio Tinto, All Rights Reserved 19 For personal use only Tom Albanese Chief executive
Slide 21: China stimulus supports Q4 demand, but near term risks remain
©2012, Rio Tinto, All Rights Reserved 20 China stimulus supports Q4 demand, but near term risks remain For personal use only • Eurozone debt crises and fragile US recovery create ongoing near-term uncertainty • Central government launched a series of pro-growth policies since April 2012 • Expect thi
Slide 22: Chinese crude steel production forecast of ~1 billion tonnes p.a. towards 2030
©2012, Rio Tinto, All Rights Reserved 21 We continue to forecast Chinese crude steel production of ~1 billion tonnes p.a. towards 2030 For personal use only Chinese crude steel demand forecasts Chinese crude steel production Million tonnes Million tonnes 1000 1 -1 1600 900 -1 1400 800 1200 700 4 100
Slide 23: Iron ore: supply continues to fall short of forecasts
22 Iron ore: supply continues to fall short of forecasts For personal use only Major iron ore production* Rio Tinto – Pilbara iron ore (million tonnes) (million tonnes) 1000 400 800 300 -158 Mt -31 Mt 600 200 400 100 2007 2008 2009 2010 2011 2012 2013 2007 2009 2011 2013 2015 2007-8 forecast 2011-12
Slide 24: Superior performance delivering Pilbara projects on time and on budget
©2012, Rio Tinto, All Rights Reserved 23 We have demonstrated superior performance in delivering Pilbara projects on time and on budget For personal use only Western Australian construction projects performance Cost (% of local currency budget) 250% 60 Over budget RTIO projects Non RTIO projects beh
Slide 25: Unrivalled global iron ore expansion programme
©2012, Rio Tinto, All Rights Reserved 24 Unrivalled global iron ore expansion programme For personal use only Expected Pilbara production (100 per cent) • Pilbara expansion remains on time Million tonnes and local currency budget 400 − Dredging now complete 353 Mt/a 350 first ore in − Phase one pili
Slide 26: Port: current progress for expansion
©2012, Rio Tinto, All Rights Reserved 25 Port: current progress for 283 Mt/a expansion For personal use only Car Dumper tunnel progress Wharf progress Camp A with Camp B in background Stock yard progress
Slide 27: Rail: current progress for expansion
©2012, Rio Tinto, All Rights Reserved 26 Rail: current progress for 283 Mt/a expansion For personal use only Electronically Controlled Pneumatic 8 Mile yard (ECP) ore car fit-out ECP locomotive fit-out Track welding facilities
Slide 28: Oyu Tolgoi Phase is nearing completion
©2012, Rio Tinto, All Rights Reserved 27 Oyu Tolgoi Phase 1 is nearing completion For personal use only • Phase one over 90% complete • Stockpiling of ore under way • On track for commercial production in first half of 2013 • Physical construction and testing of power infrastructure complete • Look
Slide 29: Embedding leadership in next generation step change technologies
©2012, Rio Tinto, All Rights Reserved 28 Embedding leadership in next generation step change technologies For personal use only Our Mine of the Future™ provides an integrated approach to unlocking value Find Develop Mine Recover • Find future tier one • Develop future block • Optimise resource • Rec
Slide 30: Consistent strategy, resilient business
©2012, Rio Tinto, All Rights Reserved 29 Consistent strategy, resilient business For personal use only • Consistent strategy delivered solid financial results in challenging markets and operating environment • Record operational performance at Pilbara iron ore • Resilient cost structure and balance
Slide 31: 2012 interim results
©2012, Rio Tinto, All Rights Reserved 30 For personal use only 2012 interim results 8 August 2012
Slide 32: Value creating divestments has been a continuous process
31 Value creating divestments has been a continuous process For personal use only Major divestments from 2008 to 2012 US$bn Greens Creek 0.8 Cortez 1.7 Kintyre 0.5 Potasio Rio Colorado 0.9 Corumbá 0.7 Ningxia 0.1 Jacobs Ranch 0.8 Alcan Composites 0.3 Cloud Peak 1.3 Alcan Packaging Food Americas 1.2
Slide 33: Reconciliation of underlying earnings to net earnings
32 Reconciliation of underlying earnings to net earnings For personal use only $m H1 2012 H1 2011 Underlying earnings 5,154 7,781 Impairment charges net of reversals (115) (157) (Losses)/Profits on consolidation and disposal of interests in businesses (51) 29 Loss after tax from discontinued operati
Slide 34: Breakdown of price variance
33 Breakdown of price variance For personal use only Earnings impact from price variance -$1,936 million $US million 400 201 200 53 53 29 -278 -709 -67 1,110 -83 -17 -4 0 -200 -400 -600 -800 -1,000 -1,200 Copper Aluminium Gold Other Iron ore Th coal Met coal Uranium Ind mins Diamonds Other (net of h
Slide 35: Breakdown of volume variance (increases)
34 Breakdown of volume variance (increases) For personal use only Earnings impact from volume increases $366 million $US millions 250 219 200 150 100 62 47 50 24 10 0 0 4 0 0 Copper Aluminium Gold Moly Iron ore Coal Industrial Diamonds Other minerals
Slide 36: Breakdown of volume variance (decreases)
35 Breakdown of volume variance (decreases) For personal use only Earnings impact from volume decreases -$584 million $US millions 0 0 0 -16 -9 -17 -29 -50 -38 -100 -150 -148 -200 -250 -300 -327 -350 Copper Aluminium Gold Moly Iron ore Coal Industrial Diamonds Other minerals *Aluminium
Slide 37: Modelling earnings
36 Modelling earnings For personal use only Impact on full year 2012 first half average underlying earnings Earnings sensitivity price / rate 10% Change ($m) Copper 367c/lb +/-37c/lb 234 Aluminium $2,081/t +/-$208/t 399 Gold $1,652/oz +/-$165/oz 32 Iron ore +/-10% 1,073 Coal* +/-10% 186 A$ 103 Usc +
Slide 38: Iron ore
37 Iron ore For personal use only Movement in underlying earnings H1 2011 vs H1 2012 $US millions 5,952 -1,110 219 -43 -11 -107 -94 - 95 42 4,753 HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12 • Record first half production and sales from the Pilbara partly offset lower p
Slide 39: Copper
38 Copper For personal use only Movement in underlying earnings H1 2011 vs H1 2012 $US millions 1,237 279 18 424 556 12 10 36 44 86 HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12 • Impact of lower prices and lower volumes from temporary reduction in grades at Kennecott Ut
Slide 40: Aluminium
39 Aluminium For personal use only Movement in underlying earnings H1 2011 vs H1 2012 $US millions 344 -406 107 -38 -29 -124 7 108 55 24 HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash Closing Balance • 15% lower LME price half on half • Canadian dollar weakened against US dollar
Slide 41: Energy
40 Energy For personal use only Movement in underlying earnings H1 2011 vs H1 2012 $US millions 61 23 169 97 375 47 9 8 132 307 HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12 • Earnings impacted by lower prices and Australian cost inflation. • Offset by higher volumes and
Slide 42: Diamonds & Minerals
41 Diamonds & Minerals For personal use only Movement in underlying earnings H1 2011 vs H1 2012 $US millions 197 22 2 -21 -14 -9 203 -30 -42 98 HY, 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other cash HY, 12 • Underlying earnings are 107% higher than the first half of 2011 reflecting stro
Slide 43: Other
42 Other For personal use only Interest, FX/ Cash Epl'n Non tax & $millions HY, 2011 price Volumes CPI Energy Costs Eval'n Cash other HY,2012 Intersegment 25 – – – – – – – (25) – Other operations 91 (294) (15) (27) (60) 39 – 76 (37) (227) Central exploration (net) 21 – – – – – (98) – – (79) Interest
Slide 44: Provisional pricing
43 Provisional pricing For personal use only • H1 2011: driven by a decline in Open Provisional shipments pricing effect copper 3 month forward price (million lbs) (US$m) between the end of 2010 and the end of June 2011 and a 11% increase in 30 31 tonnes provisionally priced at 30 June Jun Dec H1 H1
Slide 45: Earnings reconciliations
44 Earnings reconciliations For personal use only H1 2012 Energy Resources of Australia US$m Earnings per ERA press release (A$54m) (62) Increase depreciation of closure asset (8) Tax and unwinding of discount 5 Less: Minority interests 24 Other (12) Underlying earnings as reported by Rio Tinto (53)
Slide 46: Variance analysts methodology
45 Variance analysts methodology For personal use only • Price = Change in commodity price x prior year sales volumes • Exchange = (Change in exchange rates x Prior year cost of sales) + Relative movements in exchange gains and losses on working capital • Inflation = Inflation rate x Prior year cash