Rio Tinto Plc · LSE:RIO
Rio Tinto — FY2021 Earnings Presentation
68 slides from Rio Tinto's earnings presentation, Feb 23, 2022
Slide 1: 2021 Full Year results
2021 Full Year results Grow, decarbonise and deliver attractive shareholder returns 23 February 2022 Operations Centre, Perth. Western Australia
Slide 2: 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 the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance Tinto”). By accessing/attending
Slide 3: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive Melbourne, Australia
Slide 4: Delivering on our objectives to grow, decarbonise and deliver attractive shareholder returns
Delivering on our objectives in order to grow, decarbonise and deliver attractive shareholder returns Best operator Impeccable Excel in ESG credentials development Transform our safe Accelerate our own Grow in commodities operating performance decarbonisation enabling the global energy transition Em
Slide 5: Record full year results and new direction
Record full year results and new direction 0.40 $38bn All injury frequency rate (AIFR) Underlying EBITDA Zero fatalities 44% Third consecutive year Underlying ROCE Evolving our culture FCF of $18bn Partnering with experts, living our values Net cash of $1.6bn New strategy in 2021 $13.0bn* Underpinne
Slide 6: Evolving our culture
Evolving our culture Living our values: Care, Courage, Curiosity Creating a safe, respectful and inclusive work environment Implementing all 26 recommendations from the Everyday Respect report; visible shift in attitudes and behaviours over the last 12 months Empowering the front line through Rio Ti
Slide 7: Peter Cunningham, Chief Financial Officer
Peter Cunningham Chief Financial Officer New Zealand Aluminium Smelter (NZAS)
Slide 8: Record financial results
Record financial results ($bn, except for per share data) 2021 2020 Comparison Consolidated sales revenue 63.5 44.6 +42% Underlying EBITDA 37.7 23.9 +58% Underlying earnings 21.4 12.4 +72% Net earnings 21.1 9.8 +116% Underlying ROCE 44% 27% n/a Cash flow from operations 25.3 15.9 +60% Capital expend
Slide 9: Robust demand drives commodity prices
Robust demand drives commodity prices Iron Ore1 (+48% YoY) Aluminium2 (+46% YoY) Copper3 (+50% YoY) 250 3,700 900 500 800 200 3,200 450 700 600 400 150 2,700 500 350 400 100 2,200 300 300 1,700 200 50 250 100 1,200 0 200 0 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-18
Slide 10: Strong conversion of price into earnings
Strong conversion of price into earnings… Underlying EBITDA $bn Iron Ore +11.6 Copper +1.9 Aluminium +3.0 Other +1.0 ©2022, Rio Tinto, All Rights Reserved 10
Slide 11: Strong conversion of earnings into cash flows
…and strong conversion of earnings into cash flows Cash flow $bn 25.3 20.0 17.7 15.1 15.9 14.3 14.9 13.9 11.8 9.4 9.4 9.5 9.2 9.4 7.7 8.5 6.9 7.0 5.8 4.8 2.1 (8.1) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Operating cash flow Free cash flow Free cash flow is defined as net cash generate
Slide 12: Iron Ore
Iron Ore Strong financial result despite challenging conditions 2021 2020 2022 Production impacted by above average Operating metrics comparison guidance rainfall in H1, cultural heritage management Average realised price1, 3 $143.8/t + 45% and tie-in of growth and replacement mines Shipments3 (100%
Slide 13: Setting up Pilbara iron ore for stronger performance
Setting up Pilbara iron ore for stronger performance First train loaded from mobile crushing and screening at Gudai-Darri with first production from main plant expected for Q2 2022, subject to COVID-19 constraints Commissioning and ramp up of brownfield mines ongoing, impacted by supply chain qualit
Slide 14: Aluminium
Aluminium Outstanding financials with free cash flow more than doubling 2021 2020 2022 Substantial increase in FCF to $2.3bn, Operating metrics comparison guidance and more than double EBITDA on stable Aluminium realised price1 $2,899/t + 49% metal operations, higher sales prices and Average alumina
Slide 15: Copper
Copper Strong financial results despite COVID-19 and other challenges 2021 2020 2022 Strong market conditions due to declining Operating metrics comparison guidance stocks, renewed speculative interest and Copper realised price1 424c/lb + 50% COVID-related supply constraints Production – mined coppe
Slide 16: Minerals
Minerals Robust financials in operationally challenging year Operating metrics 2021 2020 2022 Entered into a binding agreement to comparison guidance acquire the Rincon lithium project in IOC pellets price1 $214/t + 68% Argentina TiO2 slag price2 $785/t - 2% Production – IOC 9.7Mt - 6% 10.0-11.0Mt I
Slide 17: Disciplined allocation of capital remains at our core
Disciplined allocation of capital remains at our core 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 18: Disciplined reinvesting for growth and decarbonisation
Disciplined reinvesting for growth and decarbonisation Capital expenditure profile $bn Ambition to grow and decarbonise ~9.0-10.0 ~9.0-10.0 reflected in 2023-24 capex of up to ~$9-10bn including up to $3bn in growth investment, depending on ~8.0 opportunities 7.4 Total decarbonisation investment 6.2
Slide 19: Value accretive decarbonisation investment
Value accretive decarbonisation investment $7.5bn of estimated investments5 between 2022 and 2030 – value accretive in aggregate at a modest carbon price Mt CO2e In the Pilbara we consume $150m pa of gas for electricity generation. Our first GW of renewable capacity can replace ~80% of this 32.5 1.5
Slide 20: Balance sheet is strong; we will maintain our discipline
Balance sheet is strong; we will maintain our discipline Net (cash) debt $bn Balance sheet strength is an asset. 14.1 Offers resilience and creates optionality Gearing -3% and net (cash)/debt to 12.9 11.3 LTM^ EBITDA of -0.04x 10.0 9.6 9.3 9.3 Operating cash flow of $25.3bn 8.0 7.6 Invested $7.4bn a
Slide 21: Attractive dividends remain paramount
Attractive dividends remain paramount Shareholder returns of 40-60% of underlying earnings on average through the cycle Pay-out ratio (%) Consistent six-year track record of shareholder returns 100 2021 pay-out of 79% reflects exceptional financial results, strong 80 balance sheet and disciplined ra
Slide 22: Jakob Stausholm, Chief Executive
Jakob Stausholm Chief Executive Gobi Desert, Mongolia
Slide 23: Delivering a stronger Rio Tinto
Delivering a stronger Rio Tinto Best operator Impeccable ESG credentials Excel in development RTSPS*: 5 pilot sites initiated, ELYSIS™ successfully produced Oyu Tolgoi underground project: already seeing returns. Significant aluminium without any direct GHG reset relationship with partners and step
Slide 24: Respect for people, communities and environment at our heart
Respect for people, communities Impeccable Best Excel in ESG operator development credentials and environment at our heart Social licence – Launched the Everyday Respect initiative and engaged an external expert review on workplace culture. We are working to create safe, inclusive and respectful wor
Slide 25: Building sustained operating improvement
Building sustained Impeccable Best Excel in ESG operator development credentials operating improvement Social licence Safety always our priority Rio Tinto Safe Production System initiated at five pilot sites focusing on sustainably unlocking capacity across the system and improving production rates
Slide 26: Decarbonising our business and value chain
Decarbonising our Impeccable Best Excel in ESG operator development credentials business and value chain* Social licence Net zero by 2050 across our operations Scope 1 and 2: 15% reduction by 2025, 50% by 2030 Scope 3: Engaging with iron ore and bauxite customers Energy Development team established
Slide 27: Reframing our approach to growth
Reframing our approach to growth Impeccable Best Excel in ESG operator development credentials Social licence - 18 countries across seven commodities Fe Pilbara: Gudai-Darri, Western - Unlocking opportunities Turner Syncline, Robe Valley, through technology Western Range - Accelerating discovery, Ex
Slide 28: Oyu Tolgoi Underground
Oyu Tolgoi Underground Impeccable Best Excel in ESG operator development credentials Social licence Resetting the relationship between partners and increasing the value the project delivers for Mongolia – Underground mining commenced on 25 Jan 2022 following comprehensive agreement reached with all
Slide 29: Strong foundation for growth, decarbonisation and shareholder returns
Strong foundation for growth, decarbonisation and shareholder returns Clear strategy Significant achievements in 2021 Continued progress in 2022 - Accelerate our own decarbonisation - New strategy - Further evolving our culture - Grow in materials enabling the global energy - Ambitious emissions tar
Slide 30: Appendices
Appendices Winu, Western Australia
Slide 31: Strong iron ore demand and tight supply despite H2 slowdown in China
Strong iron ore demand and tight supply despite H2 slowdown in China China’s crude steel production (Mt annualised) Iron Ore1 (+48% YoY) $/dmt 1,200 250 1,150 200 1,100 1,050 150 1,000 950 100 900 50 850 800 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 5 Yr Ra
Slide 32: Robust demand supports aluminium, copper and TiO2
Robust demand supports aluminium, copper and TiO2 Aluminium1 (+46% YoY) Copper2 (+50% YoY) TiO2 (chloride slag) (-2% YoY) 3,700 900 500 850 800 3,200 450 700 800 600 400 2,700 750 500 350 400 2,200 700 300 300 1,700 200 650 250 100 1,200 0 200 600 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-18 Jan-19 Jan
Slide 33: Already seeing returns from 2021 deployments
Already seeing returns from 2021 deployments; focus on highest-value in 2022 Kennecott Concentrator West Angelas Drill and Blast Flow Shutdown management Pulse Survey | Feedback Addressing bottlenecks Efficiently executing longer Increase in team member sentiment 20+ people upskilled periods of down
Slide 34: Kaizens delivering immediate value
Kaizens delivering immediate value Pilbara iron ore 2021 complete Cape Lambert - Brockman 4 – West Angelas Yandi - Conveyors Conveyors Wait for Trucks (WFT) - ‘Super Kaizen’ with 30 - To improve ‘clean up’ delays - Cleaning of excessive material - Demonstrated a reduction in participants comprising
Slide 35: Sustainability highlights
Sustainability highlights 2021 performance Goals People - Zero fatalities at managed operations - To maintain zero fatalities, and to eliminate workplace injuries and catastrophic events - All injury frequency rate (AIFR) at 0.40 (target: 0.33) Safety - To improve diversity in our business by: - 25%
Slide 36: Accelerating current abatement projects
Accelerating current abatement projects Our Marginal Abatement Cost Curve for Scope 1 & 2 emissions (excl. Pilbara and Pacific Operations repowering, ELYSISTM, energy efficiency and carbon offsets) USD$/t CO2e 300 250 Renewables 200 Mobile diesel 150 Process heat Anodes & reductants 100 50 0 0.0 0.5
Slide 37: MACC project: Queensland Alumina boiler feed water heating
MACC project*: Queensland Alumina Limited (QAL) boiler feed water heating Project summary: Details: Boiler feed water heating project seeks to install heat QAL operates three parallel high recovery equipment to reduce waste energy by 50% temperature digestion units, using displacing 1.6 PJ/pa of coa
Slide 38: MACC project: Rio Tinto Fer et Titane energy efficiency
MACC project*: Rio Tinto Fer et Titane energy efficiency Project summary: Details: Decrease natural gas and reductant consumption by • Optimising operation parameters with lean indicators and new various energy efficiency initiatives instrumentation to improve the process for rotary kiln at the Ore
Slide 39: QMM construction on solar and wind power plant commenced
QMM construction on solar and wind power plant commenced QMM has signed a 20-year power purchase agreement using renewable energy with CrossBoundary Energy to supply their mine operations in southern Madagascar ~18,000 solar panels and four wind turbines will enable QMM to meet all of its electricit
Slide 40: We operate in three out of the eleven advantageous regions for renewable energy
We operate in three out of the eleven advantageous regions for renewable energy Advantaged positions Large power producer and consumer. Uniquely positioned in advantaged green energy Ideal for wind Ideal for solar Ideal for solar and wind Existing major hydropower RES* endowed region locations – Pil
Slide 41: 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 Customer partnerships Technology partnerships and investments 2022 customer engagements Iron ore 365Mt - Baowu / Tsinghua (2019) Blast furnace Pilbara Low-carbon 28% of our customers have public - Nippon Steel
Slide 42: Partnering to reduce the carbon footprint of our value chains
Partnering to reduce the carbon footprint of our value chains 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 countries that have pl
Slide 43: Climate and value chain: H1 2021 highlights
Climate and value chain: H1 2021 highlights - Signed a charter agreement with Singapore’s ship management company Eastern Pacific Shipping for three liquefied natural gas dual-fuel Newcastlemax bulk carriers, to further reduce our scope 3 shipping emissions. - Charge On Innovation Challenge, along w
Slide 44: Climate and value chain: H2 2021 highlights
Climate and value chain: H2 2021 highlights - Carbfix partnership: to implement a technology - Purchased four battery-electric trains for use for capturing carbon and permanently storing it in the Pilbara, WA. Production is due to commence in underground at our ISAL aluminium smelter in Iceland. 202
Slide 45: Our focus areas for iron and steel decarbonisation
Our focus areas for iron and steel decarbonisation 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 projects pathway 1 pa
Slide 46: ELYSIS zero carbon metal meets new market demand
ELYSIS™ zero carbon metal meets new market demand 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 as part of partnership
Slide 47: Mine project pipeline
Mine project pipeline Capital Intensity Completed projects High volume of environmental approvals ($/t Real 2021) Projects in development for new mines Projects in study stage $150 $130 $110 $90 Western GD1 Range $70 BS1 $50 Robe Valley Sustaining BHT/HD2 $30 West Angelas WTS2 Deposits $10 C&D -$10
Slide 48: Ongoing focus on quality and product mix
Ongoing focus on quality and product mix Shipments by product (%) Consistent quality remains key for our Pilbara Blend. 46% 45% 43% 45% Demand remains strong, and will continue to underpin our product strategy 20% 26% 24% 27% Pilbara Blend quality maintained by: 18% - Blending different ore sources
Slide 49: Shareholder structure
Shareholder structure 23% Rio Tinto Limited Shares outstanding: 0.371bn 77% Rio Tinto plc Shares outstanding: 1.247bn 100% Rio Tinto DLC Shares outstanding: 1.619bn 1.1 0.3 0.4 0.5 5.7 14.8 13.9 17.5 18.8 35.9 7.1 59.2 29.5 28.9 31.9 8.2 14.1 12.5 Australia UK Europe (ex UK) North America Asia ROW ©
Slide 50: Strong commodity pricing driving EBITDA
Strong commodity pricing driving EBITDA Underlying EBITDA 2021 vs 2020 $ million 45,000 17,464 40,000 11,589 35,000 30,000 23,902 25,000 20,000 3,027 15,000 1,896 674 161 117 10,000 5,000 Iron ore Iron & Titanium Diamonds Copper Aluminium* Other, net 0 2020 Price underlying EBITDA *Aluminium include
Slide 51: Lower volume in iron ore driven by weather, heritage management and delays
Lower volume in iron ore driven by weather, heritage management and delays in mine tie-in projects Underlying EBITDA 2021 vs 2020 $ million 445 45,000 17,464 258 39,672 40,000 26 (606) (398) (690) (583) 35,000 (19) (169) (230) 30,000 23,902 25,000 20,000 (894) 15,000 Diamonds Gold Aluminium Copper I
Slide 52: Iron Ore
Iron Ore Strong pricing supports EBITDA Underlying EBITDA 2021 vs 2020 $ million 10,346 28,794 252 30,000 27,592 18,837 (88) (114) (187) (863) (591) 20,000 10,000 0 2020 Price Exchange rates Energy Inflation Flexed 2020 Volumes and Mix Cash costs Other 2021 underlying EBITDA underlying EBITDA underl
Slide 53: Aluminium
Aluminium Higher prices, recovery of VAP demand and volumes Underlying EBITDA 2021 vs 2020 $ million 5,500 2,977 4,564 258 4,382 (270) (34) (261) (269) 4,000 (50) (121) 2,152 2,500 1,000 2020 Price Exchange rates Energy Inflation Flexed 2020 Volumes Cash costs One-offs Other 2021 underlying underlyi
Slide 54: Aluminium Value Chain
Aluminium Value Chain 2021 Actuals Mining Refining Aluminium Casting Bauxite 30% Alumina 54.3dmt 7.9mt 80% Aluminium Casthouse 100% RTA 70% 3.2mt Prodn 20% Intersegment 50% 50% 3rd Party Bauxite Alumina VAP Non-VAP Sales 37.6dmt 1.6mt ©2022, Rio Tinto, All Rights Reserved 54
Slide 55: Copper
Copper Higher prices, volume impacted by COVID-19 Underlying EBITDA 2021 vs 2020 $ million 4,500 2,190 4,089 3,969 (1) (101) (83) (1) (68) (22) (29) 3,000 2,084 1,500 2020 Price Exchange rates Energy Inflation Flexed 2020 Volumes Cash costs One-offs Other 2021 underlying underlying & Mix underlying
Slide 56: Minerals
Minerals Strong pricing across portfolio supports EBITDA Underlying EBITDA 2021 vs 2020 $ million 4,000 1,432 3,000 2,817 19 2,603 1,710 (136) (60) (129) 2,000 (105) (69) (59) 1,000 0 2020 underlying Price Exchange rates Energy Inflation Flexed 2020 Volumes and Mix Cash costs One-offs Other 2021 und
Slide 57: Other movements in underlying EBITDA
Other movements in underlying EBITDA Underlying EBITDA impact FX/ Energy Cash $ million 2020 price & Inflation Volumes costs E&E Non-cash Other 2021 Other operations 24 578 -91 37 -56 0 -102 -418 -28 Exploration & Evaluation (net) -250 -10 -5 - - 3 5 - -257 Other -655 -158 -24 91 1 -28 42 190 -541 T
Slide 58: Debt maturity profile
Debt maturity profile 31 December 2021 debt maturity profile* $ million Average outstanding debt maturity of 2,000 corporate bonds extended to ~16 years following the bond maturity extension 1,800 transaction undertaken in H2 2021 1,600 (~11 years for Group debt) 1,400 1,200 No corporate bond maturi
Slide 59: Pro-forma net debt reconciliation
Pro-forma net debt reconciliation $ billion 2021 2020 Reported net (cash)/debt (1.6) 0.7 Australian tax top-up in June of following year 1.1 0.9 Proforma net (cash) debt (0.5) 1.6 ©2022, Rio Tinto, All Rights Reserved 59
Slide 60: Group level financial guidance
Group level financial guidance 2022 2023 2024 CAPEX Total Group ~$8.0bn ~$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 - $0.5bn* per year to decarbonise our assets - Ambition to grow and decarbonise reflected in from 2022
Slide 61: Product group level guidance
Product group level guidance 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 $0.75 Copper C1 Copper unit costs Mined Copper 500 to 575kt 130-150 US c/lb Refined Copper 230 – 290kt Aluminium Bauxite
Slide 62: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity US$ million impact on full year 2021 underlying Average published price/exchange rate for 2021 EBITDA of a 10% change in prices/exchange rates Copper 422c/lb 543 Aluminium $2,480/t 813 Gold $1,799/oz 120 Iron ore realised price (62% Fe CFR freight-adjus
Slide 63: Modelling aluminium costs
Modelling aluminium costs Canadian* smelting unit cash** cost sensitivity ($/t) Impact a $100/t change in each of the input costs below will have on our 2021 Canadian smelting unit cash cost of $1,373/t Alumina (FOB) $191 Green petroleum coke (FOB) $25 Calcined petroleum coke (FOB) $36 Coal tar pitc
Slide 64: Application of the returns policy
Application of the returns policy Capital return considerations Comments – Operating cash flow of $25.3 billion 1 Results for FY 2021 – FCF of $17.7 billion – Underlying earnings up 72% to $21.4 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing high quality assets i
Slide 65: Oyu Tolgoi delivers substantial economic value to Mongolia
Oyu Tolgoi delivers substantial Total in-country spend (2010 – Q4 2021) economic value to Mongolia FDI OT accounts for one-third of Mongolia’s GDP; 70% of Foreign Direct Investment Jobs Country’s largest private-sector employer, workforce of 12,000 is >96% Mongolian Taxes Since 2010, OT has spent US
Slide 66: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ)(2) Dec-21 YTD Dec-20 YTD Dec-21 YTD Dec-20 YTD Dec-21 YTD Dec-20 YTD US$m US$m US$m US$m US$m US$m Consolidated sales revenue 63,495 44,611 1,971 1,078 61,5
Slide 67: Group Balance Sheet
Group Balance Sheet Rio Tinto Group Proforma Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) (excluding OT and TRQ) Dec-21 YTD Dec-20 YTD Dec-21 YTD Dec-20 YTD Dec-21 YTD Dec-20 YTD US$m US$m US$m US$m US$m US$m Non-current assets 78,464 76,535 12,250 10,930 66,214 65,605 Current assets 24,432 20,8
Slide 68: Common acronyms
Common acronyms T Tonne RTSPS Rio Tinto Safe Production Sytem Mt Million tonnes ROCE Return on capital employed Gt Giga tonnes Earnings Before Interest, Taxes, tCO2 Tonne of carbon dioxide EBITDA Depreciation and Amortisation tCO2 e Tonne of carbon dioxide equivalent CAGR Compound annual growth rate