Slide 1: 2008 Interim Results
2008 Interim Results
Slide 2: Important Information and Forward-Looking Statements
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and comprises the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions. Important Information In the United States, Rio Tinto
Slide 3: Agenda
Paul Skinner Highlights Tom Albanese Overview of performance Guy Elliott Financial results Tom Albanese Growth guidance and outlook Questions & answers 26 August 2008 Rio Tinto 2008 Interim Results 3
Slide 4: Chairman Paul Skinner
Paul Skinner - Chairman
Slide 5: First half 2008 highlights
First half 2008 highlights: • record underlying EBITDA of $11.4 billion, up 73% • record underlying earnings of $5.5 billion, up 55% • record net earnings of $6.9 billion, up 113% • record cash flow from operations of $8.9 billion, up 54% • production records set in most key commodities • record cap
Slide 6: Economic growth likely to stay robust, even with some moderation
• Economic growth likely to stay robust, even with some moderation – slow OECD growth, but USA has history of resilience – Chinese growth of 10% in 2008, and over 9% in 2009 – driven mainly by domestic demand – global growth approaching 4% in 2009 • Supply constraints and disruptions will continue •
Slide 7: BHP Billiton's pre-conditional offer referred to second phase of EU review
• BHP Billiton’s pre-conditional offer referred to second phase of review by EU competition authorities • Rio Tinto board maintains rejection of pre-conditional offer on grounds of value • Rio Tinto has a clear strategy, well balanced portfolio of high quality assets and exceptional growth opportuni
Slide 8: Chief Executive Officer Tom Albanese
Tom Albanese Chief Executive Office
Slide 9: Decline in injury frequency rates 1998 – June 2008
! Decline in injury frequency rates 1998 – June 2008 5 4 Per 200 000 hours worked 3 All Injury Frequency Rate 2 1 Adjusted for Rio Tinto and Alcan combined Lost Time Injury Frequency Rate 0 98 99 00 01 02 03 04 05 06 07 08 Source: Rio Tinto. 26 August 2008 Rio Tinto 2008 Interim Results 9
Slide 10: Earnings growth H1 2006 to H1 2008
" ! # # H1 H1 Earnings growth H1 2006 to H1 2008 % 2007 2008 change $m $m $m Underlying EBITDA 6,613 11,408 +73% 10,000 Underlying CAGR earnings 3,529 5,474 +55% +17% Cash flow from operations 5,739 8,860 +54% • Significant step up in earnings 5,000 CAGR • New half year record +10% • Bulks pricing t
Slide 11: Iron ore product group earnings
• Record earnings more than double prior period • Continued strong demand outlook • Record price increase negotiated for 2008 – premium negotiated for Pilbara product • Nearly 10 mt* of spot sales in first half (out of 15 mt* for the year) • Current Pilbara run rate of 205 mtpa* annualised • Expansi
Slide 12: Aluminium (Rio Tinto Alcan) product group earnings
• Earnings and EBITDA increase, reflecting Alcan acquisition • Continued strong demand growth, supply side pressures impacting the cost curve • Record production on like for like basis • Integration progressing well – first half synergy benefits of $250 million – on track to deliver synergy target o
Slide 13: Copper and Diamonds product group earnings
$% • Earnings impacted by lower grades and reduced refined copper, gold and molybdenum production • Copper, gold and molybdenum markets remain strong • Copper grade improvements at KUC and Grasberg expected in second half • Molybdenum autoclave project approved • $652 million investment in Resolutio
Slide 14: Energy & Minerals product group earnings
" ! amp; • Record earnings • Uranium earnings benefit from higher realised prices • Coal prices benefit from strong demand and constrained supply • Excellent recovery at rain affected Queensland operations • Full take up of port and rail allocation to meet strong demand • Studies underway to double co
Slide 15: Chief Financial Officer
' " Chief Financial Officer
Slide 16: Underlying earnings bridge 2007 H1 to 2008 H1
! ! 8,000 7,000 6,000 5,000 $m 4,000 3,000 2,000 1,000 0 3,529 2,790 (253) 616 (118) (159) (351) (219) (361) 5,474 2007 H1 Price Exchange Vol Inflation Grade Cash Costs Explor'n Interest, Tax & 2008 Rates & Eval'n Other H1 Source: Rio Tinto Cash costs plus costs associated with grade variability are
Slide 17: 3.5% period on period increase in unit costs in real terms
$m 500 3.5% period on period increase in unit costs in real terms 400 300 200 100 0 132 186 87 45 (99) 351 Oil & Materials Labour / Maintenance Efficiency Cash Source: Rio Tinto Energy Contractors benefits Cost Per cent increase in unit costs represents the pre tax increase in underlying unit costs
Slide 18: EBITDA margin comparison with other large producers
( #!#)* + + ! H1 2008 Iron Ore1 H1 2008 Aluminium smelting2 H1 2008 Copper3 EBITDA Margin (Per cent) EBITDA Margin (Per cent) EBITDA Margin (Per cent) 61% 29% 70% 56% 57% 19% Rio Tinto Average of Rio Tinto Average of Rio Tinto Average of other large other large other large producers producers produc
Slide 19: First half cash flows from operations and capital expenditure
# , + First half cash flows from operations Capital expenditure 10 10 8 8 Second half capex 6 6 First half capex $bn $bn 4 4 2 2 0 0 H1 05 H1 06 H1 07 H1 08 05 06 07 H1 08 08 F First half cash flow Sustaining Brownfield Greenfield Source: Rio Tinto 26 August 2008 Rio Tinto 2008 Interim Results 19
Slide 20: $3 billion of divestments announced to date
%+ ! • $3 billion of divestments announced to date – Cortez sold for $1.7 billion – Greens Creek sold for $0.75 billion – Kintyre sold for $0.5 billion • Very good prices being achieved for asset sales • Strong trade interest in all assets • Twin track process announced for US coal business • On tra
Slide 21: Cash flows of $1.5 billion per month; gearing reduced to 56%
! • Cash flows of $1.5 billion per month Net debt of $42bn at 30 June 2008 • Gearing reduced to 56%* % times 40 4 • Successful bond issue in first half 3 • $5 billion debt termed out 20 • Demonstrates Rio Tinto’s reputation 2 and quality in difficult credit market 1 • Target single A credit rating 0
Slide 22: Dividend per share growth
- , + At least 200 +20% At least +20% Increase of 150 +31% over 140% USc per share from 2005 to 2009 100 50 0 2005* 2006 2007 2008 2009 *2005 excludes special dividend of $1.5 billion Source: Rio Tinto 26 August 2008 Rio Tinto 2008 Interim Results 22
Slide 23: Chief Executive Officer Tom Albanese
Tom Albanese Chief Executive Office
Slide 24: Metals forward curves July 2007 to Aug 2008
- , ! # # ! ! # . Metals forward curves—July 2007 to Aug. 2008 US$/tonne Copper Aluminium $8,500 $3,500 21 Aug 08 $7,500 21 Aug 08 $3,000 1 Jan 08 $6,500 $2,500 1 Jan 08 1 Jul 07 $5,500 1 Jul 07 $2,000 $4,500 $3,500 $1,500 0 6 12 18 24 30 36 42 48 54 60 0 6 12 18 24 30 36 42 48 54 60 Month Month Sou
Slide 25: Chinese regional steel intensity
& ! # + / ! ! # + Chinese regional steel intensity Kgs per Capita = 31 Chinese regions 1,200 1,000 Many large, less– developed interior provinces 800 600 400 More developed coastal 200 cities: Shanghai; Beijing; Tianjin 0 0 10 20 30 40 50 60 GDP (Thousands RMB Per Capita) Source: Global Insight Chin
Slide 26: Chinese regional asset investment and trade exposure
# + #+ 0 ! ,# # / , 0 Production Volume Index Chinese regional asset investment and trade exposure H1 2008 increase in fixed asset investment Importance of net export industry Per cent Per cent of GDP Population 43 61 69 98 61 68 18 Millions 50% 10% 45% 40% 8% 35% 30% 6% 25% 20% 4% 15% 10% 2% 5% 0%
Slide 27: World GDP growth (PPP basis)
' , # 12 , + # + ! # 3 4 344 World GDP growth (PPP basis) Per cent per annum 6% 2009F growth is 43% above average over 1990-99 5% 4% 1980–89 average 3% 1990–99 average 2% 1% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008F 2009F Source: IMF survey, July 2008 26 August 2008 Rio Tinto 2008 Interim Res
Slide 28: Ongoing delivery of Rio Tinto's growth plans
! ! # #+ ( ! ,# Ongoing delivery of Rio Tinto’s growth plans Near-term growth Future growth options Current growth pipeline delivery Additional resources announced Investments of over $6bn Strong production result to support our future growth approved since January, including • Record production in
Slide 29: Production volume index—sources of growth
( ! ,# , 0 + 0 ! ! Production volume index—sources of growth Growth index from 2008 to 2012 Growth index from 2008 to 2015 Greenfield Greenfield 17% 30% Brownfield Brownfield developments and developments and existing regions existing regions 83% 70% Notes: Split based on production volume index pre
Slide 30: Record underlying earnings and cash flow; summary
• Record underlying earnings and cash flow • Earnings acceleration underlines momentum • Record production levels in many key products • Record investment in growth options • Outstanding pipeline of opportunities • Proven capability to deliver • Alcan synergies and investment thesis reaffirmed • Dem
Slide 31: 2008 Interim Results
2008 Interim Results
Slide 32: Handout slide: Earnings impact from price +$2,790 million
HANDOUT SLIDE 5 , + Earnings impact from price +$2,790 million 2,000 Traded Non-traded 1,800 1614 1,600 1,400 1,200 1,000 $m 800 600 393 400 245 200 89 74 151 91 82 24 40 -1 -12 0 re um r ds er s er m y al d al pe -200 in ol O ol th co iu th on co ni M op M G in O n O ra m al Iro g d um C U in In ia
Slide 33: Handout slide: Volume contribution to earnings +$616m
HANDOUT SLIDE 5 , + + Volume contribution to earnings +$616m 1200 1000 800 $m 600 400 200 0 Iron ore Aluminium Coal Diamonds Copper Gold Moly Other Total 303 739 39 17 -176 -169 -104 -33 616 * Alcan earnings are included in the volume variance Source: Rio Tinto 26 August 2008 Rio Tinto 2008 Interim
Slide 34: Handout slide: Earnings sensitivity
HANDOUT SLIDE & ! ! 2008 first half Impact on full year 2008 Earnings Sensitivity average price/rate underlying earnings ($m) Copper 367c/lb +/-1c/lb 12 Aluminium 128c/lb +/-1c/lb 63 Iron ore – lump 152.5USc/dmtu +/-1c/dmtu 52 benchmark A$ 92USc +/-US1c 59 C$ 99USc +/-US1c 23 US$ LIBOR +/-0.5% 147 S