Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Presentation (September 2018)
26 slides from Rio Tinto's investor presentation, September 2018
Slide 1: Investor meetings
Investor meetings Stephen McIntosh September 2018
Slide 2: Cautionary statements
2 Cautionary statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document, including but not limited to
Slide 3: Our strategy is delivering
3 Our strategy is delivering Total cash returns to shareholders of $7.2 billion, comprising: - Interim returns of $3.2 billion (including dividend of $2.2 billion, 127 US cents per share) - Disposal proceeds of $4.0 billion EBITDA of $9.2 billion, margin of 43% Reshaping the portfolio with div
Slide 4: Safety and health come first
4 Safety and health come first Fatality at Rio Tinto Fer et Titane in April 2018 Continuing history of improvement in AIFR Fatal assault on a security contractor at Richards Bay Rio Tinto ICMM (23 companies) Minerals in July 2018 2.78 Fatality at Paraburdoo Iron Ore mine in August 2018 All injury fr
Slide 5: Strong cash flow from world-class assets
5 Strong cash flow from world-class assets Copper & Energy & Iron Ore Aluminium Diamonds Minerals 67% 35% 45% 36% Margins Pilbara operations FOB Integrated operations EBITDA margin EBITDA margin EBITDA margin EBITDA margin Cash flows from Cash flows from Cash flows from Cash flows from operations: $
Slide 6: Further strengthening our world-class portfolio
6 Further strengthening our world-class portfolio Successful divestment programme. Since 2017: c.$8bn of disposals – Exiting thermal coal and coking coal assets Cost curve position, scale and expandability announced since 2017 Core – Exiting European smelters portfolio Thermal coal Met coal Continuo
Slide 7: EBITDA driven by higher pricing and increased volumes, offsetting cost headwinds
EBITDA driven by higher pricing and increased 7 volumes, offsetting cost headwinds Underlying EBITDA H1 2017 vs H1 2018 $ billion 12 0.9 10 9.0 0.6 9.2 9.2 (0.3) (0.1) (0.2) (0.2) (0.1) (0.4) 8 6 4 2 0 H1 2017 Price Exchange Energy CPI Flexed H1 2017 Volumes & mix Raw material Other cash One-offs an
Slide 8: Productivity programme on track despite cost headwinds
Productivity programme on track despite cost 8 headwinds Post-tax mine-to-market (M2M) productivity programme $ billion (free cash flow) 1.1 $0.3 billion mine-to-market free cash flow (net of cost headwinds) delivered in H1 2018 – Cost headwinds from Aluminium and Energy & (0.2) Minerals raw materia
Slide 9: Disciplined capital allocation
9 Disciplined capital allocation $8.5 billion paid to shareholders over the last 12 months* ($ billion) 2.3 Essential Sustaining 1 sustaining capex capital 8.5 Further cash Compelling Cash returned returns to Growth 2.8 Ordinary growth to shareholders 2 dividends shareholders capital Balance Iterati
Slide 10: Sustaining capital and compelling growth
10 Sustaining capital and compelling growth Capital expenditure profile Maintained sustaining capital guidance of $2.0 to $2.5 $ billion billion per year, including: ~6.5 – Iron Ore sustaining capex of ~$1 billion per year ~6.0 ~5.5 Pilbara replacement capital of ~$2.7 billion includes Koodaideri de
Slide 11: High-return growth optionality
11 High-return growth optionality Iron Ore Aluminium Copper Industrial Minerals Optimising the world’s premier iron Building optionality into the lowest Building the largest and highest Extensive exploration programme ore business cost bauxite and aluminium business quality copper development and hi
Slide 12: Growth & Innovation: enabling value generation across asset lifecycle
Growth & Innovation : enabling value generation across 12 asset lifecycle Find Study Develop Optimise Close Technical Excellence geosciences, mining, processing, infrastructure, asset management, operating centres Enabling a digital future best in class IT, digital workplace, data science & analytic
Slide 13: Our exploration discovery track record is industry leading
Our exploration discovery track record is industry 13 leading Selected Rio Tinto discovery highlights Significant discoveries in new commodities Founding discoveries for key product groups Discoveries in existing product groups 1996 2002 Las Cruces Resolution 1955 1968 1972 1983 Coppe r Coppe r 2009
Slide 14: Exploration operates across a broad footprint
14 Exploration operates across a broad footprint Exploring for 8 different commodities across 17 countries 2018 Expenditure by commodity 14% 4% Copper Diamonds 10% Iron Ore 53% Bauxite Other (1) 19% 2018 Expenditure by region 27% OECD + Peru Non-OECD 73% Copper Iron Ore Minerals Uranium Brownfield D
Slide 15: Innovating for productive growth options
15 Innovating for productive growth options Innovation in ore body knowledge Designing for the future Lean in construction 3D orebody shells - Resolution Oyu Tolgoi Isometric Looking North: Feasibility Study Footprint Jadar – Illustration of proposed processing plant Amrun – Chith export facility >2
Slide 16: World class project delivery capability
16 World class project delivery capability Delivering major capital projects safely, efficiently and on time and on budget or better, with seamless handover to operations Oyu Tolgoi Amrun Autohaul® Koodaideri Jadar Resolution Underground First loaded Initial work underway Shaft #9 deepening Using in
Slide 17: Advanced analytics & control enables next step productivity
Advanced analytics & control enables next step 17 productivity asset automation networked machines connecting market to orebody « « « « « « Autonomous drilling to Optimised explosive Optimal loading Optimal crushing and remove line of fire, collect blast charging to manage scheduling train load out
Slide 18: Driving Rio Tinto mine to market productivity
18 Driving Rio Tinto mine to market productivity Partnering Refocus on Best Additional $5bn with our the basics practice suppliers mine to market in 5 years Deliver Redesign Data & Automation technology operations our future Operating of the future assets & projects Performance Leverage workforce Te
Slide 19: Appendix
Appendix
Slide 20: Strong results delivered in H1 2018
20 Strong results delivered in H1 2018 Robust financial performance Disciplined capital allocation Positioning for the long-term AutoHaulTM delivering flexibility and increased EBITDA of $9.2 billion Interim 2018 dividend of $2.2 billion capacity in the Pilbara Operating cash flow of $5.2 billion Ad
Slide 21: Robust pricing across most commodities
21 Robust pricing across most commodities Iron Ore Aluminium 90 $/dmt 62%, FOB WA $/dmt 58%, FOB WA 3,250 $/t LME + MW Premium Iron ore prices underpinned by record steel 3,000 80 production in China. Steel and iron ore 2,750 70 2,500 inventories drawing down 60 2,250 50 2,000 ~40% 40 1,750 Aluminiu
Slide 22: Inflation is challenging the industry
22 Inflation is challenging the industry Australian & US headline CPI increasing Return of inflation in the US driving an increase in % the federal funds rate 4.0 US Federal Funds Rate US CPI Australian CPI 3.0 Higher input energy prices impacted EBITDA by 2.0 $0.2 billion in H1 2018 1.0 Raw materia
Slide 23: Strong balance sheet
23 Strong balance sheet Net debt Net debt of $5.2 billion $ billion Cash outflows in H1 2018: 7.6 – $1.2 billion final Australian tax payment pertaining to 2017 profits 5.2 – $4.7 billion in returns to shareholders 5.0 – $2.4 billion in capital expenditure 3.8 Gross debt reduced by $2.1 billion in H
Slide 24: Delivering superior returns for shareholders
24 Delivering superior returns for shareholders 2018 cash returns to shareholders* Interim 2018 returns to shareholders of $3.2 billion $ billion announced 1.0 9.3 – Interim dividend of $2.2 billion or 127 US cents per 2.2 share to be paid in September 2018 1.4 – Additional share buy-back of $1.0 bi
Slide 25: Global macro indicators remain supportive
25 Global macro indicators remain supportive Global PMIs have eased but remain in expansion Chinese growth slowing very gradually 10 65 8 YoY ytd % real 60 6 55 PMI Index 4 50 2 45 US Eurozone China Japan 40 0 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Jun-17
Slide 26: China supply-side reform and tightening environmental policy have driven structural change
China supply-side reform and tightening environmental 26 policy have driven structural change Supply side reform Environmental policies Driving structural change Improved productivity and Policies focused on restoring Environmental protection profitability of Chinese steel profitability and reducing