Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (November 2009)
42 slides from Rio Tinto's investor day presentation, Nov 2, 2009
Slide 1: Cover letter to Company Announcements Office
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 2 November 2009 Dear Sir/Madam, Attached is the annual in
Slide 2: Investor Seminar 2 November 2009 - Cautionary Statement
For personal use only Investor Seminar 2 November 2009 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
Slide 3: Seminar outline
For personal use only Tom Albanese Chief Executive Officer Seminar outline Introduction, outlook & strategy Tom Albanese Iron ore Sam Walsh Aluminium Jacynthe Côté BREAK Financial update Guy Elliott Summary Tom Albanese Questions & answers 2 November 2009 Rio Tinto Investor Seminar 4 2
Slide 4: Safety remains key; we have strengthened the business
Safety remains key to our business For personal use only Decline in injury frequency rates 2000 – September 2009 5 Per 200 000 hours worked 4 3 All Injury Frequency Rate 2 1 Lost Time Injury Frequency Rate 0 00 01 02 03 04 05 06 07 08 Sept 09 Source: Rio Tinto. 2 November 2009 Rio Tinto Investor Sem
Slide 5: The Iron Ore production joint venture remains on track
The Iron Ore production joint venture remains on track For personal use only Commercial • Negotiations are continuing to progress the definitive JV agreements • Discussions continue constructively • On track for binding agreements within original timetable • Decision taken not to proceed with joint
Slide 6: Cyclical upturn in the developed world; China leading recovery
Cyclical upturn in the developed world but short term recovery may not be strong For personal use only Purchasing manager indicators suggest recovery … .. but a number of ‘headwinds’ 60 • Release of pent-up demand, 55 government stimulus and end to destocking is driving current 50 ‘normalisation’ in
Slide 7: Metals demand will double over the next fifteen to twenty years
Metals demand will double over the next fifteen to twenty years requiring a significant supply response For personal use only Global consumption of leading Rio Tinto commodities Indexed, 2000=100 450 Underlying demand trends over the next two decades indicate that 400 Iron Ore the global mining indu
Slide 8: Large scale assets provide significant expansion options
Large scale assets provide significant expansion options For personal use only The majority of Hamersley Iron’s value has come from brownfield expansions NPV (indexed) Greenfield Brownfield Brownfield Brownfield Total Hamersley Iron Sevenfold increase in NPV 2 November 2009 Rio Tinto Investor Semina
Slide 9: A diversified business with tier one growth options
A diversified business with tier one growth options For personal use only Aluminium Aluminium Nickel Copper / Nickel Copper / Gold Gold / Copper Molybdenum Aluminium Alumina Iron ore Aluminium Copper / Gold Copper Uranium Bauxite Coal Uranium Iron ore Coal Copper Alumina Feasibility & development Br
Slide 10: Iron ore overview and safety
Iron ore overview For personal use only Recent operating conditions and business performance Long term market outlook Pilbara growth options Global development WA iron ore production JV update Summary 2 November 2009 Rio Tinto Investor Seminar 17 Safety is our top priority Iron Ore Injury Rates, 200
Slide 11: All major markets on the road to recovery
All major markets on the road to recovery For personal use only Annualised global crude steel production (Mt)* China Rest of World Japan, Korea & Taiwan EU15 EU27 N. America Seaborne iron ore imports (Mt)** Source: *World Steel Association, **Global Trade Atlas 2 November 2009 Rio Tinto Investor Sem
Slide 12: Pilbara operations consistently performing
Pilbara operations consistently performing For personal use only Pilbara iron ore run rates Planned shutdowns Week 1 Week 43 Source: Rio Tinto 2 November 2009 Rio Tinto Investor Seminar 21 Operations Centre… 2 November 2009 Rio Tinto Investor Seminar 22 11
Slide 13: Mine of the Future vision and cost focus
…a key to the Mine of the Future vision For personal use only • Mine of the Future programme – Operations Centre – Automated Drill and Blast – Autonomous Haul Trucks – Automated Train Operations – Evaluation, Planning and Innovation Centre • Key relationships with world-class R&D institutes to suppo
Slide 14: China and other emerging nations will drive steel consumption growth
China and other emerging nations will drive steel consumption growth For personal use only * Charts show steel consumption (Mt) 2 November Source: WSA, 2009 RTIO analysis Rio Tinto Investor Seminar 25 Urbanisation will continue to drive Chinese steel finished consumption 2000 Increasing steel intens
Slide 15: China increasingly reliant on lower-cost iron ore imports
China increasingly reliant on lower-cost iron ore imports For personal use only Apparent consumption of domestic iron ore (Mt) Iron ore market cost curve* Iron ore market cost curve 250 Contestable iron ore market 200 $/t, CR China 150 * Consists of seaborne iron ore and Chinese private domestic 100
Slide 16: Pilbara Blend and sustaining 220 Mt/a capacity
Pilbara Blend: an example in innovative marketing For personal use only • Benefits for customers – reliable, long-term supply – stable product quality, lower variability – lower risk profile • Benefits for Rio Tinto – optimised operations; improved efficiency – products aligned with resource base –
Slide 17: Incremental steps add value; keys to Pilbara 330 Mt/a
Incremental steps add considerable value For personal use only • Dampier Port de-bottlenecking – currently in feasibility study – additional 5 Mt by Q1 2011, increasing total system capacity to 225 Mt/a – expanding Rail Pooled Fleet capacity – improvement works at East Intercourse Island inload and
Slide 18: Continuing to grow our resource base
Continuing to grow our resource base For personal use only Rio Tinto Pilbara iron ore reserves* (Mt) Rio Tinto Pilbara iron ore resources** (Mt) 8% R 6% CAGR CAG • Significant drilling programs continuing as part of supplementing Pilbara resource base • 400,000 metres of drilling is forecast each ye
Slide 19: Simandou and Orissa growth options
Simandou – large-scale, single best source of high grade iron ore For personal use only • Rio Tinto (95%), IFC (5%) • Pre-feasibility study completed • Non-essential spending deferred • Continue working in good faith with the Government • Resource base: – Pic de Fon: 572 Mt (66.8% Fe)* – Oueleba: 1,
Slide 20: Production JV to capture synergies; Summary
Production JV to capture +$10 billion in synergies… For personal use only Sources: Rio Tinto and BHP Billiton public releases 2 November 2009 Rio Tinto Investor Seminar 37 Summary • Signs of improvement in all markets but caution justified • Pilbara operating at 220 Mt/a run rates consequently globa
Slide 21: Rio Tinto Alcan overview
For personal use only Rio Tinto Alcan Jacynthe Côté Chief executive, Rio Tinto Alcan 39 Rio Tinto Alcan overview Aluminium market update Optimising the business Sustainable competitive advantages Leveraged to industrialisation and urbanisation Summary 2 November 2009 Rio Tinto Investor Seminar 40 20
Slide 22: Safety integration; aluminium inventories and demand
We have fully integrated the Rio Tinto safety systems For personal use only 20% reduction in All Injury Frequency Rate from 2008 to 2009 On the way to reaching Rio Tinto performance levels 2000 to 2009 All Injury Frequency Rates 2008-20092008-2009 AIFR Performance AIFR Performance RTA compared to Ri
Slide 23: Chinese aluminium market balance and demand growth
Historically, the Chinese aluminium market has remained fairly balanced For personal use only Capacity utilisation rate (Western World and China) China net exports of unwrought aluminium (kt) 100% 400 Western World Exports 300 90% 200 80% 100 0 70% China (100) (200) 60% (300) Imports 50% (400) 01/20
Slide 24: Four major initiatives driving improvements; synergies
Four major initiatives are driving improvements For personal use only Cash cost, 2009 1. Delivering on synergies and US$/tonne integration targets 2200 2000 2. Permanent closure of high- Rio Tinto Alcan cost capacity 1800 lt 2 3. Curtailment of some lower- 1600 3 cost capacity and some 1400 leverage
Slide 25: High-cost smelters permanently closed; flexible curtailments
High-cost smelters permanently closed For personal use only • Beauharnois smelter (Quebec) – 52,000 tonnes of annual production – Söderberg technology – Ceased smelting operations in Q2 2009 • Anglesey Aluminium Metal Limited (UK) – 118,000 tonnes of production in 2008 on 100% basis – Smelting cease
Slide 26: Transformation focus: cash preservation and cost reduction
Transformation focus throughout the business – cash preservation and cost reduction For personal use only • SG&A reductions of 20% by end of 2009 • Optimisation of working capital and sustaining capital expenditure • Tight hold on growth capital in 2010 • Retaining capability to efficiently operate
Slide 27: Unrivalled position in clean, renewable power
Unrivalled position in clean, renewable, self-generated power For personal use only Clean, low-cost energy supply Secured energy sources Gas/coal Long-term Short & medium- thermal contracts term contracts (46%) (24%) (5%) Nuclear Hydro (9%) (67%) Self-generated (49%) • 3,815MW owned hydro electric g
Slide 28: Technological leadership drives value
Technological leadership drives value For personal use only “Technology” is more than just a cell • Supporting industrial equipment, processes and know-how • An organisation-wide commitment to sustainable development • Rio Tinto Alcan technology extends beyond smelting to bauxite & alumina • Assists
Slide 29: Emerging market demand will drive aluminium consumption
Emerging market demand will drive aluminium consumption For personal use only • Rio Tinto base case is for Aluminium consumption and GDP per capita in 2007 4.1% per annum growth 30 over next two decades Per capita consumption (kg) 25 • Implies that one Saguenay USA Japan system (1mtpa) will be 20 re
Slide 30: Longer term aluminium story remains robust
Longer term aluminium story remains robust For personal use only Scale and strength across the upstream aluminium value chain Bauxite reserves Modern, low-cost assets Unrivalled power position Technology leadership One of the industry's most value-creating project pipelines Markets will recover Caut
Slide 31: The balance sheet has been recapitalised
For personal use only Guy Elliott Chief Financial Officer The balance sheet has been recapitalised Net debt ($bn) at end of period • Net debt of $22.3 billion at 30 50 80% September 2009 70% 40 • Gearing reduced to 33% at Q3 60% • Successful rights issues $16.8b 50% 30 • Divestments progress 40% 20
Slide 32: Strong liquidity position; divestments
Strong liquidity position For personal use only Debt maturity profile 2009 - 2017 ($bn) at • $12.2 billion of net committed 30 September 2009 undrawn facilities and cash at 30 12 September** 10 • Today we have repaid $1.5 8 billion of Facility D • Credit rating stabilised at 6 BBB+/Baa1 with stable
Slide 33: Engineered Products update; operating cost reduction
Engineered Products update For personal use only • Very challenging environment impacted by slow-down in the US and Europe; average volume decrease more than 20% • Strong cost reduction initiatives, including headcount reductions and structural changes, in order to mitigate the downturn • Significan
Slide 34: Continued investment retains growth pipeline
Continued investment in 2009 has allowed us to retain our growth pipeline For personal use only • 2009 capex forecast at $5 billion • $3 billion investment in major projects • Madagascar project completed • Expansion of Pilbara mines to 220mtpa complete, proceeding to 225mtpa • Clermont remains on t
Slide 35: Dividend update and summary
Dividend update For personal use only • No interim dividend in 2009 • Expect to make a 2009 final dividend payment subject to – satisfactory trading conditions – progress on divestments – prevailing market conditions • Expect aggregate cash dividend for 2010 to be at least $1.75 billion, in line wit
Slide 36: Strong copper operating performance
For personal use only Tom Albanese Chief Executive Officer Strong copper operating performance supported by recovering market Kennecott Utah Copper Western copper stocks vs price • A world class long life operation with significant reserves and resources kt c/lb 2,000 400 • Further potential at Bing
Slide 37: Copper challenges; Oyu Tolgoi next Tier 1 operation
The location and grade of new copper mines will create challenges for the industry For personal use only Increasing depth . . . …decreasing grade… … and higher risk Current production and project Underground copper production1 Copper Industry average grade1 capacity in high risk2 regions (% of globa
Slide 38: Oyu Tolgoi resources; Energy: investing through the cycle
Current resources at Oyu Tolgoi could support a 50 year plus mine life For personal use only • The Oyu Tolgoi project contains a corridor of copper-gold mineralisation at least 20km in length. • 36Mt of contained Cu and 45Moz of contained Au within the resources identified to date. This makes the Oy
Slide 39: Diamonds & Minerals; exploration optionality
Diamonds & Minerals For personal use only • Weak markets attributable to OECD, late stage of development focus Diamonds • Some signs of recovery • Diavik underground due to commence production in early 2010 • Await decision on Argyle ramp-up of underground vs scale-down of open pit Minerals • QMM de
Slide 40: Technology and innovation; climate change
Technology and innovation deliver clear competitive advantage For personal use only • Continued investment in technology as a competitive advantage • Unlocking the value of low grade mineral deposits • Mine of the Future – leading the revolution in remote control and automation • Alcan has brought c
Slide 41: Chinese growth set to continue; priorities for next twelve months
Chinese growth is set to continue For personal use only • Chinese growth has averaged 9.5% over the past decade • 120+ cities in China with more than 1 million inhabitants today • World’s largest consumer of iron ore, copper, coal and aluminium • Over 50% of seaborne traded iron ore is now sold to C
Slide 42: A strong pipeline of value adding growth options
For personal use only Investor Seminar 2 November 2009 HANDOUT A strong pipeline of value adding growth options Potential future growth Product Group Projects in progress projects Iron Ore Brockman 4 Pilbara 330mt infrastructure Mesa A and studies WA power station Automated Train Operations Pilbara