Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2022 Earnings Presentation
52 slides from Rio Tinto's earnings presentation, Jul 27, 2022
Slide 1: Notice to ASX: 2022 Half year results presentation
Notice to ASX 27 July 2022 For personal use only 2022 Half year results presentation Attached is the Rio Tinto 2022 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 present
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 Matthew Klar Matt Chambers M+ 44 7796 630 637 M +61 433 525 739 David Outhwaite Jesse Riseborough
Slide 3: 2022 Half Year results
For personal use only 2022 Half Year results Grow, decarbonise and deliver attractive shareholder returns 27 July 2022 Kemano, Kitimat
Slide 4: Cautionary and supporting statements
Cautionary and supporting statements For personal use only 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”).
Slide 5: Jakob Stausholm, Chief Executive
For personal use only Jakob Stausholm Chief Executive Oyu Tolgoi, Mongolia
Slide 6: A dynamic world full of opportunities and some challenges
A dynamic world full of opportunities and some challenges For personal use only 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 –
Slide 7: Foundations for a stronger Rio Tinto emerging
Foundations for a stronger Rio Tinto emerging For personal use only 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 custo
Slide 8: Robust financials; focused on strategy
Robust financials; focused on strategy For personal use only 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 $0.3bn Rincon lithium
Slide 9: Peter Cunningham, Chief Financial Officer
For personal use only Peter Cunningham Chief Financial Officer Karratha rail, Western Australia
Slide 10: Robust financial results against all-time highs in 2021
Robust financial results against all-time highs in 2021 For personal use only ($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 earni
Slide 11: Rising macro economic uncertainty
Rising macro economic uncertainty For personal use only 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
Slide 12: Disciplined focus on cash costs in a period of rising inflation
Disciplined focus on cash costs in a period of rising inflation For personal use only 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 O
Slide 13: RTSPS supports improvements across safety, people and productivity
RTSPS supports improvements across safety, people and productivity For personal use only 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
Slide 14: Iron Ore: Ramp-up of Gudai-Darri is pivotal
Iron Ore Ramp-up of Gudai-Darri is pivotal For personal use only 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 Shipment
Slide 15: Aluminium
Aluminium Strong pricing lifted our industry-leading margins with smelter ramp-ups For personal use only 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
Slide 16: Higher price environment for Aluminium raw materials
Higher price environment for Aluminium raw materials For personal use only 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
Slide 17: Copper
Copper Continued progress at Oyu Tolgoi underground; strong average pricing For personal use only 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 +
Slide 18: Minerals
Minerals Price support in some commodities however cost pressures at operations For personal use only 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
Slide 19: Disciplined allocation of capital remains at our core
Disciplined allocation of capital remains at our core For personal use only 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 20: Disciplined investing for growth and decarbonisation
Disciplined investing for growth and decarbonisation For personal use only 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 t
Slide 21: Balance sheet is strong; we will maintain our discipline
Balance sheet is strong; we will maintain our discipline For personal use only 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
Slide 22: Attractive dividends remain paramount
Attractive dividends remain paramount For personal use only 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%
Slide 23: Jakob Stausholm, Chief Executive
For personal use only Jakob Stausholm Chief Executive Gobi desert, Mongolia
Slide 24: Getting the right culture is essential for successful execution
Getting the right culture is essential for successful execution For personal use only 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 Every
Slide 25: Foundations for a stronger Rio Tinto emerging
Foundations for a stronger Rio Tinto emerging For personal use only 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 1
Slide 26: Decarbonising our business and value chain
Gudai-Darri, Western Australia Decarbonising our business and value chain For personal use only - 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 partn
Slide 27: Pursuing our growth agenda
Pursuing our growth agenda For personal use only - 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)
Slide 28: Strong foundation for growth, decarbonisation and shareholder returns
Strong foundation for growth, decarbonisation and shareholder returns For personal use only 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, Strength
Slide 29: Appendices
For personal use only Appendices
Slide 30: Iron ore market tight despite slowdown in China
Iron ore market tight despite slowdown in China For personal use only China’s crude steel production (Mt annualised) Iron Ore1 (-24% YoY) 1200 $/dmt 1150 250 1100 200 1050 150 1000 950 100 900 50 850 800 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-
Slide 31: Price support for aluminium, copper and TiO2
Price support for aluminium, copper and TiO2 For personal use only Aluminium1 (+37% YoY) Copper2 (+7% YoY) TiO2 (chloride slag) (+18% YoY) 4,000 1050 500 950 3,500 900 450 900 750 3,000 400 850 600 2,500 350 800 450 750 2,000 300 300 700 1,500 150 250 650 1,000 0 200 600 LME Aluminium ($/t) HY Avera
Slide 32: Accelerating current abatement projects
Accelerating current abatement projects For personal use only 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
Slide 33: Weipa solar extension project
Weipa solar extension project For personal use only 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 Sy
Slide 34: Reducing anode effects at Alma
Reducing anode effects at Alma For personal use only 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
Slide 35: QMM wind and solar project
QMM wind and solar project For personal use only 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
Slide 36: 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 For personal use only Customer partnerships Technology partnerships and investments 2022 customer engagements - Baowu / Tsinghua (2019) 28% of our customers have public Iron ore 365Mt - Nippon Steel (2020) Blas
Slide 37: Partnering to reduce the carbon footprint of our value chains
Partnering to reduce the carbon footprint of our value chains For personal use only 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
Slide 38: Our focus areas for iron and steel decarbonisation
Our focus areas for iron and steel decarbonisation For personal use only 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
Slide 39: 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. - Q4 2020: Rio Tinto supplied ELYSIS metal to AB InBev a
Slide 40: Kaizens continuing to supplement RTSPS deployments for immediate value
Kaizens continuing to supplement RTSPS deployments for immediate value For personal use only 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 lo
Slide 41: Automation Drill System supporting delivery of first ore at Gudai-Darri
Automation Drill System (ADS) – supporting delivery of first ore at Gudai-Darri For personal use only 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
Slide 42: Agile mining and right sized trucks driving zero emissions productivity
Agile mining and right sized trucks driving zero emissions productivity For personal use only – 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
Slide 43: Inflation impacts on closure liabilities
Inflation impacts on closure liabilities For personal use only – 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 significan
Slide 44: Inflation impacts on closure liabilities
Inflation impacts on closure liabilities For personal use only 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
Slide 45: Debt maturity profile
Debt maturity profile 30 June 2022 debt maturity profile* For personal use only $ 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
Slide 46: Group level financial guidance
Group level financial guidance For personal use only 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 reflect
Slide 47: Product group level guidance
Product group level guidance For personal use only 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 $0.71 Copper C1 Copper unit costs Mined Copper 500 to 575kt 130-150 US c/lb Refined Copper 230 – 29
Slide 48: Modelling EBITDA
Modelling EBITDA For personal use only Underlying EBITDA sensitivity Average published price/exchange rate for HY US$ 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
Slide 49: Application of the returns policy
Application of the returns policy For personal use only 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 $8.6 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing
Slide 50: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement For personal use only Proforma Rio Tinto Group Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ)(2) Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 YTD YTD YTD YTD YTD YTD US$m US$m US$m US$m US$m US$m Consolidated sales revenue 29,775 3
Slide 51: Group Balance Sheet
Group Balance Sheet For personal use only Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ) Jun-22 Dec-21 Jun-22 Dec-21 Jun-22 Dec-21 YTD YTD YTD YTD YTD YTD US$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 Curr
Slide 52: Common acronyms
Common acronyms For personal use only 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 Comp