Rio Tinto Plc · LSE:RIO
Rio Tinto — Non-Deal Roadshow (June 2015)
20 slides from Rio Tinto's roadshow presentation, June 2015
Slide 1: Creating leading copper and coal businesses
June 2015 Rio Tinto Copper & Coal Roadshow Creating leading copper and coal businesses Jean-Sébastien Jacques, chief executive, Copper & Coal
Slide 2: Cautionary statement
2 Cautionary statement This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. In this presentation all figures are US dollars unless stated otherwise
Slide 3: Combining Copper & Coal will deliver further cost savings in a challenging market environment
3 Combining Copper & Coal will deliver further cost savings in a challenging market environment 2014 US$bn Copper assets • Structural change Revenue 10.0 Coal assets implemented to EBITDA 2.7 contribute further cost savings to $750 Cash flow generated 2.1 million 2015 Group target Headcount (FTEs) 1
Slide 4: Copper fundamentals remain strong
4 Copper fundamentals remain strong Population, GDP and electricity Copper intensity by vehicle type US$ ‘000 GDP / capita Copper intensity (kg/vehicle) 50 60 USA 40 30 Japan 15 EU 30 Conventional Hybrid Full electric Supply decreases due to grade declines 20 India (2030) (2030) Copper head grade al
Slide 5: Copper outlook continues to improve
5 Copper outlook continues to improve Attractive long-term fundamentals • Firm fundamentals re-assert Copper supply/demand (million tonnes) 24 Oversupply / lower Supply gap opening up copper pricing support and volatile prices 22 4-6Mt of additional capacity required • Supply continues to disappoint
Slide 6: Rio Tinto's copper assets are world-class
6 Rio Tinto’s copper assets are world-class 2015 copper equivalent cost curve (CuEq. costs vs. copper production) Copper equivalent cost including sustaining capex, deferred strip and royalties (c/lb) 400 Q1 Q2 Q3 Q4 300 Kennecott 200 Grasberg Oyu Tolgoi Escondida 100 0 kt 0 2,000 4,000 6,000 8,000
Slide 7: A clear strategy to become a benchmark for profitability in the copper industry
7 A clear strategy to become a benchmark for profitability in the copper industry New sources of copper - Greenfield - Exploration Re-set the base-line Grow existing mines - Brownfield options - Resolution - Quality of earnings Profitability - La Granja - Closing the gap Profitability - Exploration
Slide 8: Re-set the baseline: improving earnings quality
8 Re-set the baseline: improving earnings quality Significantly reduced costs • 42% EBITDA margins in 2014 Cost savings (US$ millions) − Margin maintained despite 30% 409 923 copper price declines • Productivity and cost reductions 514 achieved over $900 million of savings to 31 Dec. 2014 vs. 2012 •
Slide 9: Delivering increased copper volumes through growing existing mines
9 Delivering increased copper volumes through growing existing mines H2 2015: Higher grade areas exploited in the mine plan for Oyu Tolgoi open pit Oyu Tolgoi 2020+: First production from Oyu Tolgoi underground1 2016/2017: Significant metal share expected from Grasberg2 2021+: Step-change in Grasber
Slide 10: Developing new Tier 1 sources of copper with world-class greenfield projects
10 Developing new Tier 1 sources of copper with world- class greenfield projects in low-risk jurisdictions Resolution • Inferred Mineral Resource of 1,766Mt @ 1.51% Cu1 • Potential long life (> 40 year) operation • Land exchange approved in 20142 • First shaft completed in 2014 • Permitting process
Slide 11: Oyu Tolgoi is a world-class copper business
11 Oyu Tolgoi is a world-class copper business • Potential Tier 1 asset with first quartile net unit cash costs • Probable Underground Ore Reserves of 499Mt at 1.66% Cu and 0.35 g/t Au1 • Open Pit Proved Ore Reserves of 383Mt at 0.54% Cu and 0.39 g/t Au & Probable Ore Reserves of 612Mt at Concentrat
Slide 12: Underground Development Plan signed on 18 May 2015 marks a significant step forward
12 Underground Development Plan signed on 18 May 2015 marks a significant step forward with Oyu Tolgoi • Over 80% of Oyu Tolgoi’s value in the underground − Life of mine potentially extends to 2100+ • The Plan clarifies the future tax and royalties framework and resolves shareholder issues Open pit,
Slide 13: A clear strategy to create long term value
13 A clear strategy to create long term value Four key operating assets Strong long-term fundamentals despite short term volatility Safety and focus on costs and Oyu Tolgoi Kennecott productivity Clear strategy to deliver sustainable value: • Maximise value from existing Escondida Grasberg operation
Slide 14: Coal will play a key role in the world's future
14 Coal will play a key role in the world’s future Solid demand growth in seaborne metallurgical China power generation by source Petawatt hours, PWh of electricity generation coal driven by India and China Seaborne metallurgical coal demand (million tonnes) 13.2 Coal CAGR 4.7% +55Mt 407 2010 to 203
Slide 15: Coal: large, high-quality Hunter Valley resource
15 Coal: large, high-quality Hunter Valley resource RTCA has a large footprint • Prime position in “spine” of the Mt Pleasant project Hunter Valley Bengalla • Very large, contiguous, shallow Hunter Valley resource position Operations (HVO) Favourable • Increased quality at depth geology Auckland (HV
Slide 16: Strategy to maximise value from our coal assets accelerated by combination with Copper
16 Strategy to maximise value from our coal assets has been accelerated by combination with Copper Create long- term options: Unlock network Realise value from synergies: and add to reserves & resources base Harness full asset Improve potential through earnings quality: integrating operations Maximi
Slide 17: Improving earnings – cost and productivity
17 Improving earnings – cost and productivity Cost position continues to improve Indexed • Around $800 million in cost savings 100 to 31 Dec. 2014 vs. 2012 90 • Combination with Copper group 80 expected to deliver further $20 70 69 million in savings 60 65 • Coal’s cost and productivity 2012 2013 20
Slide 18: Unlock network synergies – Hunter Blend creates one integrated system
18 Unlock network synergies – Hunter Blend creates one integrated system Implement integrated operating methodology in the Hunter Valley to: • Establish integrated operations centre • Intersite blending to capture full value potential of each cargo • Recovery improvement through washplant excellence
Slide 19: Realise value from reserves and resources
19 Realise value from reserves and resources Hunter Valley coal resource upgrade • Ore Reserves increased by over Million tonnes 39% in 2014 to 1,847Mt 2,718 • Mineral Resources exclusive of Ore 2,349 Reserves increased by 16% to 2,718Mt at the same time 1,847 • Continuing to examine asset base for
Slide 20: Creating leading copper & coal businesses
20 Creating leading copper & coal businesses Copper Coal Long-life, low cost and expandable Tier 1 High quality asset base asset portfolio Free cash flow positive in challenging Attractive margin/profitability through cost market environment savings & portfolio restructuring Significant cost savings