Rio Tinto Plc · LSE:RIO

Rio Tinto — FY2012 Earnings Presentation

43 slides from Rio Tinto's earnings presentation, Feb 14, 2013

  1. Slide 1: 2012 Full year results

    14 February 2013 Introduction Strategy 2012 results Outlook 2012 Full year results Pursuing greater value for shareholders

  2. Slide 2: Cautionary statement

    2 Cautionary statement 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. Forward-looking statements

  3. Slide 3: Jan du Plessis, Chairman

    14 February 2013 Introduction Strategy 2012 results Outlook Jan du Plessis Chairman

  4. Slide 4: Sam Walsh, Chief executive

    14 February 2013 Introduction Strategy 2012 results Outlook Sam Walsh Chief executive

  5. Slide 5: Safety is a core priority

    5 Safety is a core priority Injury frequency rates 2003 – 2012 Per 200,000 hours worked 2.0 All injury 1.8 frequency rate Lost time injury 1.6 frequency rate 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 Safety briefing ©2013, Rio Tinto, All Rights Reserved

  6. Slide 6: A consistent strategy

    6 A consistent strategy • Maximise total shareholder return • Invest in and operate large, long-life, low-cost, expandable operations • Run the business as owners • Manage our capital wisely • Improve performance from our operations Bingham Canyon ©2013, Rio Tinto, All Rights Reserved

  7. Slide 7: Pursuing greater value for shareholders

    7 Pursuing greater value for shareholders Refocusing the organisation − Focus, discipline, accountability − Stronger systems Improving operations − $5 billion cumulative operating cost reduction over 2013 and 2014 − Productivity improvements Delivering approved growth projects Reinforcing capital al

  8. Slide 8: Guy Elliott, Chief financial officer

    14 February 2013 Introduction Strategy 2012 results Outlook Guy Elliott Chief financial officer

  9. Slide 9: 2012 highlights

    9 2012 highlights • Strong underlying earnings and cash flows from operations − Record iron ore volumes; recovery in copper grades during second half − Lower prices and price volatility across most commodities − Stronger currencies, input cost pressures especially in Australia • Net loss following a

  10. Slide 10: Underlying earnings impacted by lower commodity prices following 2011 record highs

    10 Underlying earnings impacted by lower commodity prices following 2011 record highs Underlying earnings 2011 vs 2012 $US million 20,000 299 15,549 15,000 (306) (220) (494) (942) 10,000 (5,315) (3,652) Iron ore Aluminium Met coal Copper Ind mins Other 5,000 0 2011 Price underlying earnings ©2013, R

  11. Slide 11: Growth in iron ore offset by lower copper and gold volumes

    11 Growth in iron ore offset by lower copper and gold volumes Underlying earnings 2011 vs 2012 $US million 20,000 326 15,549 15,000 198 634 154 10,000 (5,315) Other, 32 Coal, 78 5,000 Iron ore Copper¹ Other 1 Escondida, Northparkes 0 2011 Price Exchange Volume underlying Rates increase earnings ©201

  12. Slide 12: Growth in iron ore offset by lower copper and gold volumes

    12 Growth in iron ore offset by lower copper and gold volumes Underlying earnings 2011 vs 2012 $US million 20,000 15,549 (93) Coal 15,000 Ind (96) (33) Mins 634 (59) Moly 154 10,000 (31) Other (5,315) (943) (302) 5,000 (329) Copper¹ Gold Aluminium Other 1 Kennecott Utah Copper 0 2011 Price Exchange

  13. Slide 13: Cost pressures have reduced but remain significant

    13 Cost pressures have reduced but remain significant Underlying earnings 2011 vs 2012 $US million 20,000 15,549 15,000 634 154 10,000 (5,315) (943) (270) (304) 5,000 0 2011 Price Exchange Volume Volume Energy and Other cash underlying Rates increase decrease inflation costs earnings ©2013, Rio Tint

  14. Slide 14: External cost pressures have reduced but remain significant

    14 External cost pressures have reduced but remain significant Earnings cash cost impact • Better cost performance than 2011 $ million • Operational readiness costs largely Cost increases Cost decreases relate to Pilbara, IOC and Rio Tinto Operational Coal Australia developments Readiness • Reduced

  15. Slide 15: Underlying earnings

    15 Underlying earnings Underlying earnings 2011 vs 2012 $US million 20,000 15,549 15,000 634 154 10,000 9,303 (5,315) (943) (270) (304) (202) 5,000 0 2011 Price Exchange Volume Volume Energy and Other cash Explor'n, 2012 underlying Rates increase decrease inflation costs eval'n & other underlying ea

  16. Slide 16: Strong operating cash flows in a year of peak capex

    16 Strong operating cash flows in a year of peak capex 2012 cash flows • Strong cash flow from operations US$ billion despite challenging market and operating conditions 30 Other: ($2.2bn) Acquisitions: ($1.3bn) Buy-back ($1.5bn) • Cash inflow boosted by Chalco Increase in 25 debt $10.8bn Dividends:

  17. Slide 17: Prudent balance sheet management

    17 Prudent balance sheet management Gross debt maturity profile • Aim to maintain a single A credit rating at 31 December 2012 US$ billion • Long term and smooth debt maturity profile 5 − Weighted average maturity of 4 around nine years − $7.9 billion of bonds issued in 2012 3 with a weighted averag

  18. Slide 18: Targeting $5 billion cumulative reduction in operating cash costs by end of 2014

    18 Targeting $5 billion cumulative reduction in operating cash costs by end of 2014 Cash cost reduction target • Sustainable annual cash cost US$ billion, base = 2012 cash operating cost base decrease of $3 billion by end of 2014 4.0 − Assumes constant operating 2.0 conditions 0.0 9% − Includes over

  19. Slide 19: Capital expenditure is being prioritised on the highest quality projects

    19 Capital expenditure is being prioritised on the highest quality projects Approved capital expenditure • Capex programme managed within US$ billion boundaries of single A credit rating, dividend policy and other returns to 20 shareholders • Yarwun 2 completion and rapid 15 ramp-up • Oyu Tolgoi com

  20. Slide 20: Disciplined capital management

    20 Disciplined capital management • Disciplined and rigorous approach Cash from operations to capital allocation and divestment proceeds • Investment programme focused on highest quality opportunities Disciplined Prudent Cash investment in balance returns to • Evaluate investment opportunities highe

  21. Slide 21: Sam Walsh, Chief executive

    14 February 2013 Introduction Strategy 2012 results Outlook Sam Walsh Chief executive

  22. Slide 22: Positive momentum in China to be sustained into 2013

    22 Positive momentum in China to be sustained into 2013 China indicators remain positive • Some positive short term signals 103 54 − China recovery 102 101 100 52 50 − Shallower Eurozone recession 99 98 48 − Gradual recovery in the US 97 46 • Forecasting China GDP growth to Mar 11 Mar 12 Sep 11 Nov

  23. Slide 23: Improving performance at existing businesses

    23 Improving performance at existing businesses Production growth across key commodities • Record iron ore production and 2011 production = 100 shipments 145 • Rerated Pilbara iron ore capacity to 140 237 Mt/a with minimal capital 135 investment 130 • Substantial production increases in 125 copper,

  24. Slide 24: Our growth programme is across regions, products and brownfield/greenfield

    24 Our growth programme is across regions, products and brownfield/greenfield Kitimat Oyu Tolgoi Utah Copper Resolution Simandou La Granja Coal Mozambique Yarwun 2 Escondida Pilbara Brownfield Greenfield ©2013, Rio Tinto, All Rights Reserved

  25. Slide 25: Oyu Tolgoi: site overview

    25 Oyu Tolgoi: site overview ©2013, Rio Tinto, All Rights Reserved

  26. Slide 26: Oyu Tolgoi: progress towards first production

    26 Oyu Tolgoi: progress towards first production Concentrator complex SAG-2 mill feed conveyer Regrind cyclone First copper concentrate stockpile ©2013, Rio Tinto, All Rights Reserved

  27. Slide 27: Pilbara expansion

    27 Pilbara 360 expansion ©2013, Rio Tinto, All Rights Reserved

  28. Slide 28: Pilbara expansion: acceleration of first ore from expansion to 290 Mt/a

    28 Pilbara expansion: acceleration of first ore from expansion to 290 Mt/a Rio Tinto Pilbara iron ore shipping capacity (100% basis) Average Annualised Mt/a 380 360 First Ore 360 340 340 First Ore 320 290 First Ore 300 280 1H 260 4Q 240 3Q 220 200 2010 2011 2012 2013 2014 2015 2016 2017 ©2013, Rio T

  29. Slide 29: Consistent strategy, clear priorities for 2013

    29 Consistent strategy, clear priorities for 2013 • Core strategy remains unchanged • Greater focus, discipline and accountability • A clear agenda for 2013 − Improving performance at existing operations − Delivering approved growth projects − Reinforcing capital allocation discipline • Pursuing gre

  30. Slide 30: 2012 Full year results

    14 February 2013 Introduction Strategy 2012 results Outlook 2012 Full year results Pursuing greater value for shareholders

  31. Slide 31: Reconciliation of underlying to net earnings

    31 Reconciliation of underlying to net earnings Underlying earnings 2012 to net earnings 2012 $US million 10,000 9,303 8,000 6,000 4,000 2,000 0 (2,000) 1,130 553 (2,990) 827 (443) (4,000) (6,000) (14,360) Underlying Impairment Consolidation / Exchange MRRT Other Net earnings earnings disposal of di

  32. Slide 32: Reconciliation of underlying earnings H1 2012 vs H2 2012

    32 Reconciliation of underlying earnings H1 2012 vs H2 2012 Underlying earnings H1 2012 vs H2 2012 $US million 6,000 5,154 5,000 647 656 4,149 4,000 7 (390) (181) (1,645) (99) 3,000 2,000 1,000 0 H1 2012 Price Exchange Volume Volume Energy and Other cash Explor'n, H2 2012 Rates increase decrease inf

  33. Slide 33: Modelling earnings

    33 Modelling earnings 2011 2012 Impact on 2012 full Earnings average price/ average price/ 10% change in year underlying sensitivity rate rate 2012 average earnings ($m) Copper 400c/lb 361c/lb +/-36c/lb 270 Aluminium* $2,395/t $2,018/t +/-$202/t 384 Gold $1,571/oz $1,669/oz +/-$167/oz 42 Iron ore +/

  34. Slide 34: Iron ore: delivering expansions on time and budget

    34 Iron ore: delivering expansions on time and budget Movement in underlying earnings 2011 vs 2012 $US million 13,267 326 5 9,242 (3,658) (1) (121) (22) (222) (332) FY, 11 FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY, FY 12 12 • Record annual production and sales from the Pilbara

  35. Slide 35: Copper: lower prices and grades, recovering during second half

    35 Copper: lower prices and grades, recovering during second half Movement in underlying earnings 2011 vs 2012 $US million 1,932 14 (322) 15 23 134 1,092 (498) (28) (178) FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 • Impact of lower prices and lower volumes from lower through

  36. Slide 36: Aluminium: pricing and cost pressure

    36 Aluminium: pricing and cost pressure Movement in underlying earnings 2011 vs 2012 $US million 442 121 107 160 3 14 (70) (588) (36) (147) 2011 FY 11 Price Fx Vols CPI Energy Other cash Expl’n Eval’n Other 2012 FY 12 • 16% lower LME price year on year partly offset by impact of a weaker Canadian do

  37. Slide 37: Energy: price, currency and cost headwinds

    37 Energy: price, currency and cost headwinds Movement in underlying earnings 2011 vs 2012 $US million 1,074 10 148 (575) (15) (45) 283 (28) (155) (131) FY 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY 12 • Earnings impacted by lower prices, increased cash costs and Australian cost i

  38. Slide 38: Diamonds & Minerals: TiO2 pricing momentum begins to flow through earnings

    38 Diamonds & Minerals: TiO2 pricing momentum begins to flow through earnings Movement in underlying earnings 2011 vs 2012 $US million 86 3 119 233 9 10 (32) (11) (17) (162 ) FY FY2011 11 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other Other cash FY2012 FY 12 • Underlying earnings of $119m w

  39. Slide 39: Other

    39 Other Interest, $million FX/ Cash Epl'n Non tax & (net earnings impact) FY 2011 price Volumes CPI Energy Costs Eval'n Cash other FY 2012 Intersegment 40 – – – – – – – (48) (8) Other operations (120) (406) (20) – (105) 157 – 120 (154) (528) Central exploration (net) (102) – – – – – 5 – – (97) Inte

  40. Slide 40: Provisional pricing

    40 Provisional pricing Open Provisional • 2011: driven by an 18% decline in shipments pricing effect the copper 3 month forward price (million lbs) (US$m) and a 33% decrease in tonnes 31 31 provisionally priced at the end of Dec Dec 2011, resulting in an unfavourable 2012 2011 2012 2011 earnings imp

  41. Slide 41: Earnings reconciliations

    41 Earnings reconciliations 2012 Energy Resources of Australia US$m Earnings per ERA press release (A$151m) (156) Increased depreciation of closure asset (27) Tax and unwinding of discount 7 Less: Minority interests 56 Other (11) Underlying earnings as reported by Rio Tinto (131) Palabora US$m Loss

  42. Slide 42: Variance analysis methodology

    42 Variance analysis methodology • 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 cost of sales • Volum

  43. Slide 43: 2012 Full year results: Appendices

    14 February 2013 Introduction Strategy 2012 results Outlook 2012 Full year results Appendices

Rio Tinto — FY2012 Earnings Presentation on 6ix