Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (September 2009)
46 slides from Rio Tinto's investor day presentation, Sep 21, 2009
Slide 1: ASX cover letter: Rio Tinto Alcan Montreal presentations
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 Company Announcements Office Australian Stock Exchange Limited SYDNEY NSW 2000 21 September 2009 Dear Sir/Madam Please find attached pre
Slide 2: Rio Tinto Alcan Financial community site visit
For personal use only Rio Tinto Alcan Financial community site visit 20 September 2009 1 Jacynthe Côté Chief Executive, Rio Tinto Alcan 20 September 2009 2009 North America Financial Community Site Tour 2 1
Slide 3: Cautionary Statement
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 bound by the following conditions. Forwar
Slide 4: The leading aluminium business
The leading aluminium business For personal use only • Scale and strength across the upstream aluminium value chain – A leading position in all three major areas: bauxite, alumina and aluminium – Increasingly long positions in bauxite and alumina • Predominantly modern, low-cost assets • World’s lar
Slide 5: Alumina: 4.17Mt of capacity in the lower half of the cost curve
For personal use only The leading aluminium business Asset overview Optimising the business Promising future 20 September 2009 2009 North America Financial Community Site Tour 7 Alumina: 4.17Mt of capacity in the lower half of the cost curve Cash Cost, 2009 USD/tonne Rio Tinto Alcan 2009 400 weighte
Slide 6: Aluminium: 95% of power secured on long-term basis
Aluminium: 95% of power secured on long-term basis including 65% clean renewable hydro For personal use only Sustainable, low-cost energy supply Secured energy sources Rio Tinto Alcan 2008 smelter energy sources Gas/coal Long-term Short & medium- thermal contracts term contracts (47%) (24%) (5%) Nuc
Slide 7: Major initiatives to drive improvements in aluminium earnings and free cash flow
For personal use only The leading aluminium business Asset overview Optimising the business Promising future 20 September 2009 2009 North America Financial Community Site Tour 11 Major initiatives to drive improvements in aluminium earnings and free cash flow • Permanent closure of high cost capacit
Slide 8: Permanent smelter closures
Permanent smelter closures For personal use only • Beauharnois smelter (Quebec, Canada) – 52,000 tonnes of annual production – Söderberg technology, commissioned in 1943 – Ceased smelting operations in Q2 2009 • Anglesey Aluminium Metal Limited (UK) – 118,000 tonnes of production in 2008 on 100% bas
Slide 9: Production costs are coming down
Production costs are coming down For personal use only Aluminium Production Cost Alumina Production Cost (cost in US$ index) (cost in US$ index) Rio Tinto Alcan hot metal cash cost of production Rio Tinto Alcan alumina cash cost of production 100% -5% -24% -27% 100% -11% -28% -25% Q3 2008 Q4 2008 Q1
Slide 10: Cash preservation an ongoing key priority
Cash preservation an ongoing key priority For personal use only • Working capital initiatives and reductions in growth and sustaining capital expenditures improved cash flow by US$1.4 billion compared to 2008 • Tight hold on growth capital in 2010 with further reductions compared to 2009 • Mindful o
Slide 11: Long-run story continues to be attractive
For personal use only The leading aluminium business Asset overview Optimising the business Promising future 20 September 2009 2009 North America Financial Community Site Tour 19 Long-run story continues to be attractive Global Aluminium Consumption (million tonnes) 160 • Our base case is for 4.1% g
Slide 12: Longer term – aluminium story remains robust
Longer term – aluminium story remains robust For personal use only • Current initiatives are transformational and are positioning the business with a sustainably lower cost base • R&D technology platform will continue improving performance • Growth pipeline has been preserved and will deliver strong
Slide 13: Questions?
For personal use only Questions? 20 September 2009 2009 North America Financial Community Site Tour 23 12
Slide 14: Rio Tinto Alcan Financial community site visit - Carmine Nappi
For personal use only Rio Tinto Alcan Financial community site visit 20 September 2009 1 Carmine Nappi Vice President, Industry Analysis Rio Tinto Alcan 20 September 2009 2009 North America Financial Community Site Tour 2 1
Slide 15: Cautionary Statement
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 bound by the following conditions. Forwar
Slide 16: Impact on global industrial production and primary aluminium demand
Impact on global industrial production and global primary aluminium demand For personal use only Global IP Global apparent shipments Q1 2007 – Q2 2009 42 8 41 Percentage change from a year earlier 6 per annum 40 Percentage Change from a year earlier 4 39 . 2 per annum 38 Jun-09 0 37 33.5 Mtpa -2 -15
Slide 17: Soaring inventories and much lower prices
…but were insufficient to offset global demand, causing soaring inventories and For personal use only much lower prices LME Inventories LME Prices Currency/t 11-July-08 4,800,000 3,600 $3340.5 4,600,000 3,400 4,400,000 4,200,000 3,200 4,000,000 15-Sep-09 3,000 3,800,000 4,617,900kt $ 3,600,000 2,800
Slide 18: Recovery signs in aluminium end-use markets still mixed
For the time being, the recovery signs in aluminium main end-use markets are still For personal use only mixed... China’s automobile production and sales US housing starts and car production and floor space under construction SAAR 2800 14 S.A.A.R SAAR) 18,500 4,500 SAAR SAAR) mSAAR) S.A.A.R. S.A.A.R
Slide 19: Impact on demand gradually showing
...and their impact on demand is gradually showing North American domestic mill shipments 8500 60% For personal use only Mill Shipments (kt) SAAR 8000 50% Domestic Mill Shipments (kt) SAAR . Jun-09 7500 -18.5%y/y 40% 7000 30% 6500 20% 6000 10% Domestic 5500 0% 5000 -10% 4500 -20% 4000 -30% 2003 2004
Slide 20: Factors behind LME price improvement: US dollar, energy, commodity funds
For personal use only b. Depreciation of the US dollar Real effective value of US$ Renminbi / US$ exchange rate 105 6.50 Jan. 2003 = 100 100 6.75 Exchange Rate (Renminbi / US$) . Aug 2009 7.00 95 84.67 7.25 90 7.50 85 7.75 80 8.00 75 8.25 70 8.50 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 200
Slide 21: China net importer; LME stocks; headwinds
f. China becoming a net importer For personal use only e. Rate of change in LME stocks of unwrought aluminium Variations in LME stocks China net unwrought imports 1,400 400 kt *China also remains a net importer of LME Inventory Quarterly Variation (kt) 1,200 1139 300 bauxite, alumina and aluminium s
Slide 22: Overhang of reported stocks and long-term outlook
3. The overhang of reported stocks For personal use only Price-Inventory relationship 5000 21 LME 3-mos Unwrought WW inventory ratio 4500 Minimum inventories 18 4000 Jun-09 Weeks Shipments 15 3500 16.97 wks 2007$/tonne 3000 12 2500 9 2000 6 1500 1000 3 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Slide 23: Structural demand growth and upward shift of cost curve
Structural Demand growing at a compounded annual growth rate of 4-6%, For personal use only despite the economic cycle Demand Demand Structural cycle trend Time 20 September 2009 2009 North America Financial Community Site Tour 19 Upward shift of aluminium cost curve • Idled capacity to come back as
Slide 24: Questions?
For personal use only Questions? 20 September 2009 2009 North America Financial Community Site Tour 21 11
Slide 25: Rio Tinto Alcan Financial community site visit - Phillip Strachan
For personal use only Rio Tinto Alcan Financial community site visit 20 September 2009 Phillip Strachan Chief Financial Officer, Rio Tinto Alcan 20 September 2009 2009 North America Financial Community Site Tour 2 1
Slide 26: Cautionary Statement
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 bound by the following conditions. Forwar
Slide 27: H1 2009 in-period net earnings from synergies exceeded target
H1 2009 in-period net earnings from synergies of US$483 million exceeded target by 28% For personal use only • Benefits tracking ahead of target, primarily due to procurement savings • Continue to remain on track to deliver US$1.1 billion in 2010 • Total synergy program one-off capital and operating
Slide 28: Weipa/Gove bauxite grade strategy
Weipa/Gove bauxite grade strategy For personal use only Reduced production input costs • Coordinating Gove and Weipa bauxite mining outputs maximises opportunities to lower caustic usage at Gladstone refineries • Benefit achieved through optimising output of bauxite from Weipa’s Andoom mine • Synerg
Slide 29: US$65 million synergies by Primary Metal North America
US$65 million synergies recorded by Primary Metal in North America by Q2 for 2009 For personal use only US$28 million from benchmarking and productivity improvements • Re-focusing of synergy efforts to efficiency and productivity has replaced many deferred projects • Only value considered sustainabl
Slide 30: Lower input costs are beginning to take effect
Lower input costs are beginning to take effect For personal use only Further procurement savings expected • Further savings for pitch, coke 100% 100% 100% and caustic expected to come 85% 81% through in second half 78% 61% • Costs declines lag prices due to nature of contracts 45% 39% • Aggressive s
Slide 31: Capital initiatives generating significant savings
Capital initiatives generating significant savings For personal use only Significant reduction in Capital • Driving down capex in 2009 Expenditures (US$ millions) • Evaluating growth capex for Growth 2010 Sustaining • Prioritising use of capital 2417 1108 • Keeping focus on the 586 500 reliability o
Slide 32: Aluminium pricing tracking closely to spot prices
For personal use only Synergies and integration Cost initiatives Modelling the business 20 September 2009 2009 North America Financial Community Site Tour 15 Rio Tinto Alcan’s aluminium pricing tracking closely to spot prices in 2009 US$/t (lines) 3,500 Aluminium spot price • 2009 first half average
Slide 33: Remelt sales nearly double in H1 2009
Remelt sales nearly double in H1 2009 versus H1 2008 but volumes are returning For personal use only 75% % of Remelt volume vs. total sales volume (bars) • Percentage of remelt sales nearly doubled in H1 2009 vs. H1 2008 with premia down almost 30% 51% 50% 48% • Continuing signs of steady value 43%
Slide 34: Key raw material prices have a lag effect; sensitivities
Key raw material prices have a lag effect For personal use only Aluminium 100% • Coke and pitch generally have three to five month lag due to 32% 32% 80% Other the pricing (mostly semi- Other annual) and days of inventory 60% 14% • Alumina (two to five month lag) 24% Carbon Caustic • 16% of energy L
Slide 35: Conclusions
Conclusions For personal use only Benefits of actions will continue to flow through in years to come • On track to deliver US$1.1 billion in integration synergies • Focus on margin improvement – Hold cost improvements to date – Further cost compression opportunities – Market recovery flow through •
Slide 36: Rio Tinto Alcan Financial community site visit - Sandeep Biswas
For personal use only Rio Tinto Alcan Financial community site visit 20 September 2009 1 Sandeep Biswas Senior Vice President Business Development and Growth Rio Tinto Alcan 20 September 2009 2009 North America Financial Community Site Tour 2 1
Slide 37: Cautionary Statement
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 bound by the following conditions. Forwar
Slide 38: A platform for growth
Rio Tinto Alcan – A platform for growth For personal use only Drivers for sustainable growth • Access to competitive, long-term energy supply • Access to reliable and competitive supplies of bauxite, alumina, and other materials • Access to capital Leading Extensive technology for project alumina ma
Slide 39: Preserving options in our strong project pipeline
Preserving options in our strong project pipeline For personal use only AP 50 Pilot Plant Straumsvik, Iceland (100%) Arvida, Canada (100%) • ~45kt • Ph 1 under construction: ~60kt • Potential Ph 2: ~140–340kt (replacing current Arvida smelter with capacity of ~165kt) Sohar, Oman (20% Ph 1) Alma II,
Slide 40: AP technology leadership
AP technology leadership For personal use only Organisation-wide commitment to sustainable development AP smelting technology Equipment Anode and cathode Engineering and ALPSYS technical solutions ECL, ALESA Supply, management and operating support 20 September 2009 2009 North America Financial Comm
Slide 41: Breakthrough technologies
What next? For personal use only AP 50 cells Breakthrough AP-Xe technologies… 20 September 2009 2009 North America Financial Community Site Tour 11 Breakthrough technologies Breakthrough technologies with the goal of lowering unit energy consumption by up to 20% while reducing and eventually elimina
Slide 42: Climate change
For personal use only Industry growth drivers R&D and technology leadership Climate change Value improvement approach 20 September 2009 2009 North America Financial Community Site Tour 13 Rio Tinto believes that GHG emissions resulting from human activities are contributing to climate change Rio Tin
Slide 43: Reduction of GHG emissions while increasing aluminium production
Reduction of our GHG emissions while increasing aluminium production For personal use only Track record shows Rio Tinto Alcan’s absolute carbon reductions while increasing aluminium production • 1990 performance compared to 2008 • Onsite GHG emissions reduced by 54% • Aluminium production increased
Slide 44: New value improvement approach
For personal use only Industry growth drivers R&D and technology leadership Climate change Value improvement approach 20 September 2009 2009 North America Financial Community Site Tour 17 New value improvement approach Initiatives have been developed to improve Rio Tinto Alcan’s value • 20-30% capit
Slide 45: Value improvement: Kitimat Modernisation and AP50 pilot plant
Value improvement: Kitimat Modernisation Project For personal use only Aggressive cost reduction • Minimise investment scope • Maximise low cost country sourcing • Implement latest low energy consumption technology • Maximise use of existing infrastructure • Apply lean construction principles • Over
Slide 46: In summary
In summary For personal use only Rio Tinto Alcan’s Business Development objectives during the current market scenario • Deliver value improvements on projects that are underway • Prepare for execution of growth opportunities once timing is right • Drive down costs of our current portfolio and reduce