Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Day (September 2011)
61 slides from Rio Tinto's investor day presentation, Sep 21, 2011
Slide 1: ASX 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 Securities Exchange SYDNEY NSW 2000 21 September 2011 Dear Sir, Attached is a presentation given
Slide 2: Investor Seminar
Investor Seminar For personal use only 20 September 2011 Benga, Mozambique
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: Competent persons declaration
Competent persons declaration For personal use only The information in this report that relates to Mineral Resources at Kennecott Utah Copper is based on information compiled by Jim Vickery, who is a member of the Australian Institute of Mining and Metallurgy. Jim Vickery is a full-time employee of
Slide 5: Tom Albanese, Chief executive
For personal use only Tom Albanese Chief executive Bengalla, Australia
Slide 6: Agenda
Agenda For personal use only Introduction, outlook and strategy Tom Albanese Group investment plans Guy Elliott Energy Doug Ritchie BREAK Copper Andrew Harding Summary Tom Albanese Questions and answers 20 September 2011 London/New York Investor Relations seminar 5
Slide 7: Continued improvement in safety
Continued improvement in safety For personal use only Injury frequency rates 2002–Aug 2011 Per 200,000 hours worked 2.5 All injury frequency rate Lost time injury 2 frequency rate 1.5 1 0.5 0 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 H1 11 Aug 11 20 September 2011 London/New York Investor Relations semina
Slide 8: Introduction
Introduction For personal use only • Prices remain robust despite volatile macro environment • Long term demand outlook is unchanged • Increasing delays to industry supply response • Exceptional operational and financial performance • Balance sheet is strong • High quality growth programme – Organic
Slide 9: Volatile markets expected to continue
Volatile markets expected to continue For personal use only Commodity index vs mining equity index • Prices have remained strong, (Weekly price index (1 January 2010=100)) despite macro concerns 150 – Risks relating to pace of credit tightening in developing world 140 – Sovereign debt issues in Euro
Slide 10: Long term growth drivers remain
Long term growth drivers remain For personal use only GDP by region: 2010 vs 2015 U.N. World Urbanisation Prospects RMB trillion % 1950 to 2050 100 90 80 70 60 50 East China 2010 40 30 20 10 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 USA China India Source: NBS, CEIC, Government announ
Slide 11: Our strategy is consistent and unchanged
Our strategy is consistent and unchanged For personal use only • Our core objective is to maximise total shareholder return by sustainably finding, developing, mining and processing natural resources • Invest in and operate large, long term, cost competitive mines and assets • Driven not by choice o
Slide 12: Guy Elliott, Chief financial officer
For personal use only Guy Elliott Chief financial officer Richards Bay Minerals rehabilitation, South Africa
Slide 13: Balance sheet is strong
Balance sheet is strong For personal use only Net debt at end of period Gross debt maturity profile (US$bn) (US$bn) 50 70% 5.0 45 4.5 60% 40 4.0 35 50% 3.5 30 3.0 40% 25 2.5 30% 20 2.0 15 20% 1.5 10 1.0 10% 5 0.5 0 0% 0.0 2007 2008 2009 2010 Jun 11 Aug 11 Net debt (lhs) Gearing (rhs) Note: August 20
Slide 14: $27 billion of major capital projects underway
$27 billion of major capital projects underway For personal use only Project timeline(1) % Complete $ Capex(2) Production Dampier Ph 1 $91m +5mtpa Dampier Ph 2 $284m +5mtpa IOCC Ph 1 & 2 $763m +5.3mtpa Hope Downs 4 $2.1bn 15mtpa(4) Pilbara 53 (3) $7.3bn(3) +53mtpa Marandoo $1.1bn 15mtpa(4) Escondida
Slide 15: High quality tier one projects in advanced study
High quality tier one projects in advanced study For personal use only Rio Tinto Total funding of Indicative indicative indicative first Indicative Project Product capex(1) capex production production(1) Nammuldi (Pilbara 283) Iron ore $$ $$ 2013 NA Pilbara 333 Iron ore $$$ $$$ 2015 +50mtpa IOCC Pha
Slide 16: Capital expenditure is ramping up
Capital expenditure is ramping up For personal use only Capital expenditure • Ramp up of major project capex (US$bn) expected to continue 20 • Projects already approved will lead to increased 2012 capex • Major projects progressing well 15 • Some spend delays due to weather interruptions in first ha
Slide 17: Volume growth will be across the portfolio
Volume growth will be across the portfolio For personal use only Indexed production profile • Iron ore business set to grow by (Rio Tinto share) substantially over the next 5 years 170% • Alumina expansion at Yarwun 2 will CAGR 160% 9.8% commence production in 2012 150% 8.2% • Copper production incr
Slide 18: A rich portfolio of strong earlier stage projects
A rich portfolio of strong earlier stage projects provide options for further quality growth For personal use only • Car dumper 1 • IOCC expansions Iron Ore • Pilbara 433mtpa • Orissa • Resolution • KUC North Rim Skarn Copper • La Granja • Northparkes expansion • Escondida options • AP60 Phase 2 • A
Slide 19: Industry cost pressures and equipment constraints
Industry cost pressures and equipment constraints will lead to a slower supply response For personal use only 2011 Lead time outlook • Equipment lead times are increasing Equipment type 0 1 2 3 (years) • Long term relationships with Grinding mills Draglines suppliers are critical Barges • Attracting
Slide 20: Increasing tax pressure could slow industry investment
Increasing tax pressure could contribute to slower industry investment For personal use only Taxes paid by type and by country • $7.4 billion of taxes paid in 2010 (%) • Total charge of $9 billion, 38% of 100% profit before tax 90% • Increasing focus on taxation of 80% natural resources 70% • Debate
Slide 21: A diversified portfolio is an outcome of our strategy
A diversified portfolio is an outcome of our strategy For personal use only Rio Tinto Geographic split Rio Tinto EBITDA by product Percentage of Gross Assets, Percentage of EBITDA Gross Sales and Capital expenditure 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 10% 20% 0% 10%
Slide 22: Balancing growth with capital returns
Balancing growth with capital returns For personal use only • More than $26 billion of major capital projects underway Cash from operations • A rich portfolio of unapproved project options • Capital expenditure ramping up • Regained single A credit rating Investment Prudent • Over $4 billion of buy-
Slide 23: Doug Ritchie, CEO Energy
For personal use only Doug Ritchie CEO, Energy Mount Thorley Warkworth, Australia
Slide 24: Supply challenged to meet growth in Asian energy demand
Supply will be challenged to meet substantial growth in Asian energy demand For personal use only Total primary energy Total primary energy – Total primary energy fuel fuel mix by region mix – China Btoe (%) Btoe (%) Mtoe (%) 2008-20 CAGR 2008-20 CAGR 2008-20 CAGR 3.7% 2.2% 3.5% 3.4% 1.6% 1.0% 4.5%
Slide 25: Highlights for Energy in 2011
Highlights for Energy in 2011 For personal use only Rio Tinto Coal Australia Rio Tinto Coal Mozambique Rio Tinto Uranium One of the largest Greatest undeveloped One of the largest thermal coal producers seaborne coking coal producers of uranium in Australia region in the world globally • All coal op
Slide 26: Rio Tinto Coal Mozambique: a tier one resource
Rio Tinto Coal Mozambique: a tier one resource For personal use only • 2011 Rio Tinto acquisition of Riversdale • Tier one resource with expansion options; Moatize Basin is a ’50yr+’ opportunity • Strategic objective of 25Mtpa coking coal by 2020 • On-track to commission Benga Stage 1 by year-end •
Slide 27: Our coal holdings in Mozambique
Our coal holdings in Mozambique For personal use only Legend Projects Primary Road Secondary Road Railway RTCM Tenement Rio Tinto Tenement District Boundary Province Boundary Zambeze Project Benga Project Tete East Project 20 September 2011 London/New York Investor Relations seminar 26
Slide 28: Benga: first production in late 2011
Benga: first production in late 2011 For personal use only Ownership: 65% Rio Tinto, 35% Tata Steel Stage 1 production: • 2Mt of in-pit coal currently uncovered • Plant commissioning late 2011 • 1Mtpa coking coal to be railed and 0.5Mtpa thermal to be trucked in 2012 • Target by 2013: – 5.3Mtpa Run
Slide 29: Zambeze: a substantial coking coal resource
Zambeze: a substantial coking coal resource For personal use only Ownership: 100% Rio Tinto Potential production profile: • First production 2015 • By 2019 up to: – 42Mtpa Run of Mine (ROM) – 10Mtpa hard coking coal – 6Mtpa thermal coal • Mining concession application submitted to Mozambique Governm
Slide 30: Rio Tinto Coal Mozambique work schedule
Rio Tinto Coal Mozambique work schedule For personal use only OoM Study PFS Study 2012 2013 2014 2015 2016 FS Study Construction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sena Beira Rail Line Upgrade Zambeze Barging Greenfield Rail Benga Expansion Stage 2 Benga Power Plant Zambeze
Slide 31: Mozambique coal chain capacity growth path
Mozambique coal chain capacity growth path For personal use only Barging: • 2015 • 3Mtpa, growing to 20Mtpa+ • River barging on Zambeze River, and First Coal: transloaded to OGV off shore • Late 2011/early 2012 • 1Mtpa • Sena Rail Line/Port of Beira Greenfield Rail & Port: • 2018+ • 25Mtpa, growing
Slide 32: Mozambique is central to global markets
Mozambique is central to global markets For personal use only Europe China Japan India Mozambique Brazil Located close to major growth markets including India and Brazil 20 September 2011 London/New York Investor Relations seminar 31
Slide 33: Significant growth options across the Australian portfolio
Significant growth options across the Australian portfolio For personal use only 2010-15 CAGR • Significant growth trajectory Million tonnes - 100% basis planned for Rio Tinto Coal Australia • Strong ongoing pipeline of potential Forecast expansions & developments beyond 2015 6.2% • Volume of growth
Slide 34: Australian coal expansions – Queensland
Australian coal expansions – Queensland For personal use only Hail Creek • Expanded to 8Mtpa nameplate rate • Resource optimisation focused on underground potential; accelerating resource definition drilling Kestrel • Kestrel Mine Extension (KME) offers long life (2032), low cost, coking coal • Prod
Slide 35: Australian coal expansions – NSW
Australian coal expansions – NSW For personal use only Mount Pleasant • Full feasibility study approaching completion • 8.5Mtpa operation • First coal scheduled 2014 HVO Southern • Exploration work underway • Prefeasibility study to commence Q1 2013 HVO Auckland • Exploration licence renewal process
Slide 36: Australian infrastructure
Australian infrastructure For personal use only QLD QLD • Sufficient port/rail until greenfield expansions come online 2017 • Northern Missing Link completion 2011 • Port capacity options post 2017 NSW • Port allocation at NCIG and PWCS Legend to meet growth needs NSW Operating sites • New rail acce
Slide 37: Coal & Allied – potential privatisation
Coal & Allied – potential privatisation For personal use only • Rio Tinto and Mitsubishi proposal to acquire all shares in Coal & Allied that they do not currently own under a Scheme of Arrangement • Proposed benefits: Bengalla – Simpler ownership structure for Coal & Allied – Greater flexibility to
Slide 38: Rössing
Rössing For personal use only Rössing reserves and resources at 31/12/10* Tonnes Grade ppm U308 Mlbs • 2010 production of 8.0Mlbs U3O8 Mt • Half way through a major cut-back Reserves Proven 46 319 27 to access higher grade reserves Probable 125 398 92 • 169% resource upgrade Resources Measured 16 25
Slide 39: ERA
ERA For personal use only • Approval of the Ranger 3 Deeps exploration decline • Heap Leach Facility Project will not be progressed • Investment in water management to support ERA’s future and to meet rehabilitation requirements • Expanded exploration program on the Ranger Project Area • Funding opt
Slide 40: Energy marketing and growth
Energy marketing and growth For personal use only • Rio Tinto Energy is investing in leading-edge industry analysis and is linking this to strategic growth and investment decisions • Rio Tinto Energy marketing drives long run value-add from ore body to customer; – Marketing integrated with mine plan
Slide 41: Investor Seminar
Investor Seminar For personal use only 20 September 2011 Benga, Mozambique
Slide 42: Andrew Harding, CEO Copper
For personal use only Andrew Harding CEO, Copper Bingham Canyon, USA
Slide 43: Copper supply will continue to be constrained
Copper supply will continue to be constrained For personal use only Disruption rates will continue Sovereign risk (% of planned production) Copper supply location (%) 8 9% 7 36% 41% 47% 6 5 4 3 62% 54% 2 44% 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2010 2020 Lower risk Medium risk Highe
Slide 44: Our continued focus on production at low cost
Our continued focus on production at low cost For personal use only Production profile Continued focus at low cost 2011- 2015 Production forecast C1 costs 2010 (c/lb)** Kt Cu/ Koz Au Mlbs Mo 1,350 70 1,200 60 1,050 50 900 750 40 600 30 450 20 300 100 10 95 150 0 0 66 2010 A 2011 2012 2013 2014 2015
Slide 45: Rio Tinto is also a significant gold producer
Rio Tinto is also a significant gold producer For personal use only • Produced 772 thousand ounces of gold in 2010 • Top 15 gold producer • Largest gold producer among diversified miners • Interest in two of the largest gold deposits at Grasberg and Oyu Tolgoi • Strong production from Kennecott Utah
Slide 46: Investing in our portfolio of high quality copper projects
Investing in our portfolio of high quality copper projects For personal use only Greenfield projects Brownfield projects Pebble Oyu Tolgoi Kennecott Eagle Resolution Grasberg La Granja Note: 1. Bubble size denotes size of asset (contained copper) on a 100% basis except Pebble which is the Rio Tinto
Slide 47: Kennecott: study to increase Bingham Canyon life of mine to 2028
Kennecott: study to increase Bingham Canyon life of mine to 2028 well advanced For personal use only With the expansion, Bingham Canyon will mine 974 million tonnes of ore and recover 3.7 Mt of copper, 4.1 Moz of gold and 584 million lbs of moly • Push back south wall by 7%, deepen pit 8% • More hau
Slide 48: Kennecott: going underground
Kennecott: going underground For personal use only Progressing with pre-feasibility • Long term future is underground • First step is near term development of North Rim Skarn (NRS) – 20 million tonne mineral resource at 3.6% Cu Existing ~900m shaft – 1.0 million ounces of contained gold Common acces
Slide 49: Kennecott: going underground
Kennecott: going underground For personal use only Progressing with pre-feasibility • Long term future is underground • First step is near term development of North Rim Skarn (NRS) – 20 million tonne mineral resource at 3.6% Cu ~900m – 1.0 million ounces of contained gold – $165 million approved for
Slide 50: Grasberg and Escondida
Grasberg and Escondida For personal use only Grasberg Escondida • Grasberg Block Cave • Ore access, bioleach and de- • Deep Mill Level Zone bottlenecking projects • From 2021 entitled to 40% • Los Colorados concentrator of all production relocation 20 September 2011 London/New York Investor Relation
Slide 51: Northparkes: step change
Northparkes: step change For personal use only • Potential to increase annual Cu production to 150ktpa with a 20+ year life • $114 million pre-feasibility study approved: – Exploration decline, additional drilling and studies to expand concentrator • Will move unit costs to bottom of 2nd quartile •
Slide 52: Developing Oyu Tolgoi to deliver long term value
Developing Oyu Tolgoi to deliver long term value For personal use only • Rio Tinto 48.5% interest Ivanhoe Mines • Rio Tinto is the developing and operating manager • First 100 Rio Tinto employees in key management roles • More than 14,000 people on site • Phase 1 construction on track • Power remain
Slide 53: Resolution - potential 600ktpa Cu with initial production ~2021
Resolution - potential 600ktpa Cu with initial production ~2021 For personal use only Progress • High quality resource – 1.47% copper Shaft 9 with significant molybdenum Shaft 10 • Top of resource about 1.5 km deep, with production level 2 km deep • Land exchange cleared House Committee on Natural R
Slide 54: La Granja - potential 500ktpa Cu for 40+ years
La Granja - potential 500ktpa Cu for 40+ years For personal use only Development plan Progress Conceptual representation of development plan • Wholly owned by Rio Tinto • Substantial additional mineral inventory Copper Processing capacity (Ktpa) (Mtpa) identified 600 160 – Major new porphyry system
Slide 55: Technology and innovation from strategy to trials
Technology and innovation from strategy to trials For personal use only Pilot at Kennecott Copper NuWave™ recovery innovation • Pilot Plant in construction at Kennecott • Commissioning Q2 2012 • Upgrade marginal ore or waste material • Reduction in Energy consumption Pilot at NPM Tunnel boring syste
Slide 56: Well positioned with world class assets and industry leading cost base
Well positioned with world class assets and industry leading cost base For personal use only • Constrained supply • Copper has strong, long term industry fundamentals • Substantial brownfield investment to optimise our current assets • A strong pipeline of value-generating greenfield projects • Oyu
Slide 57: Tom Albanese, Chief executive
For personal use only Tom Albanese Chief executive Oyu Tolgoi construction site, Mongolia
Slide 58: How the world might look by 2040
How the world might look by 2040 For personal use only A momentous swing in economic power GDP per capita US$ Bubble size reflects GDP in 2010 and 2040 Source: Rio Tinto, Access Economics 20 September 2011 London/New York Investor Relations seminar 57
Slide 59: Our strategic focus will allow us to address key challenges
Our strategic focus will allow us to address the key challenges facing the mining sector For personal use only • Commodity supply growth is increasingly dependent on: – Resource nationalism – Competition for skilled labour – New geographies – More challenging ore bodies – Managing greater stakeholde
Slide 60: Executing our strategy
Executing our strategy For personal use only • Delivering exceptional performance from existing assets • Growing established operations • Identifying, acquiring and developing the next generation of tier one orebodies • Leadership in sustainable development • At the forefront of exploration, innovat
Slide 61: Investor Seminar
Investor Seminar For personal use only 20 September 2011 Benga, Mozambique