Slide 1: 2014 interim results
7 August 2014 Safety Highlights Performance Delivery 2014 interim results Delivering greater value for shareholders
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
Slide 3: Sam Walsh, Chief executive
7 August 2014 Safety Highlights Performance Delivery Sam Walsh Chief executive
Slide 4: Delivering results
4 Delivering results Underlying earnings of $5.1 billion (+21%) Increased cash flows from operations of $8.7 billion $4.4 billion of net earnings Net debt reduced by $6 billion vs. H1 2013 Interim dividend increased by 15% ©2014, Rio Tinto, All Rights Reserved
Slide 5: Safety is critical to operating effectively
5 Safety is critical to operating effectively All injury frequency rate 2003 – H1 2014 Per 200,000 hours worked 2.0 1.8 1.6 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 ’13 '14 H1 Safety assessment at Yandicoogina ©2014, Rio Tinto, All Rights Reserved
Slide 6: Transforming our business performance
Delivering greater value for shareholders Transforming our business performance 6 Increased underlying Net debt reduced Strong cash flows earnings to by from operations of $5.1bn $6bn $8.7bn Net earnings of $4.4bn Achieved $3.2bn cash vs. 30 June 2013 Reduced capex Record production cost impro
Slide 7: Chris Lynch, Chief financial officer
7 August 2014 Safety Highlights Performance Delivery Chris Lynch Chief financial officer
Slide 8: 21% increase in underlying earnings as volume growth and cost improvements offset lower prices
8 21% increase in underlying earnings as volume growth and cost improvements offset lower prices Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 156 5,116 5,000 219 661 4,402 4,229 911 4,000 505 3,169 3,000 (173) (1,392) 2,000 1,000 0 H1 2013 Price Exchange Energy & Flexed H1 Volumes
Slide 9: Product group earnings were higher, driven by Iron Ore, Copper and Aluminium
9 Product group earnings were higher, driven by increases in Iron Ore, Copper and Aluminium Underlying earnings ($m) H1 2013 H1 2014 Change Key drivers Volume growth offsetting Iron Ore 4,273 4,683 +10% lower prices Cost reductions and higher market Aluminium 214 373 +74% and value-added premiums Vo
Slide 10: Optimising the value of our high quality iron ore growth
10 Optimising the value of our high quality iron ore growth Annualised half year sales by product • Demand for steel remains strong in Million tonnes per annum China: 3-4% increase expected 250 in 2014 • ~125 Mt of high cost global iron ore 200 supply expected to exit in 2014 150 +57% • Marketing is
Slide 11: Delivering significant value through marketing leadership
11 Delivering significant value through marketing leadership Iron ore spot performance • $99 per wet metric tonne (FOB) Premium over index achieved (c/dmtu) average realised price in H1 2014 10 Premium • Pilbara Blend fines spot sales consistently achieve a premium 5 above the Platts 62% Fe index •
Slide 12: Exceeded our full year operating cost reduction targets ahead of schedule
12 Exceeded our full year operating cost reduction targets ahead of schedule Pre tax operating cash cost variance • $3.2 billion of operating cash cost Reduction vs. 2012 (US$ million) improvement vs. $3 billion target 929 3,208 • Exceeded target six months ahead of schedule • $1 billion of addition
Slide 13: A leading portfolio of high quality assets
13 A leading portfolio of high quality assets Portfolio split by asset quality • High quality, low cost assets reduce Percentage of revenue (H1 2014) volatility of earnings and cash flow 100% • Almost half of our sales generate EBITDA margins in excess of 60% 75% • Businesses earning lower margins a
Slide 14: Strong cash flows from operations
14 Strong cash flows from operations Cash flows from operations • 8% increase in cash flows from US$ billion operations vs. H1 2013 • Cash flows from operations affected 12.1 in H1 2014 by: − Lower dividend from Escondida − Increase in working capital 8.6 8.7 7.9 8.0 • Significant potential for grow
Slide 15: We have strengthened our balance sheet
15 We have strengthened our balance sheet Gross and net debt profile • Net debt reduced to $16.1 billion US$ billion − In line with ‘mid-teens’ target 29.4 28.3 • Reduced adjusted total borrowings 26.3 25.7 by $2.5 billion since 31 Dec 2013 22.1 • Robust liquidity 19.2 18.1 − $9.6 billion of cash at
Slide 16: Our capital allocation framework to maximise shareholder value (2014 focus)
16 Our capital allocation framework to maximise shareholder value 1 Essential sustaining 2 Progressive dividends 3 Iterative cycle of: capex 2014 focus Further cash Compelling returns to growth shareholders Debt reduction ©2014, Rio Tinto, All Rights Reserved
Slide 17: Our capital allocation framework to maximise shareholder value (2015 focus)
17 Our capital allocation framework to maximise shareholder value 1 Essential sustaining 2 Progressive dividends 3 Iterative cycle of: capex 2015 focus Further cash Compelling returns to growth shareholders Debt reduction ©2014, Rio Tinto, All Rights Reserved
Slide 18: We have reduced capital expenditure
18 We have reduced capital expenditure Expected capital expenditure profile • 2014 guidance lowered by $2 billion US$ billion to around $9 billion, 30% lower 20 than 2013 17.6 26% • 2015 guidance remains ~$8 billion 15 • Expect capex beyond 2015 to remain 12.9 30% at around $8 billion 10 ~9 10% ~8 5
Slide 19: Delivering the highest quality projects
19 Delivering the highest quality projects Rio Tinto copper equivalent production • Growth to 2015 includes: 2012 = 100 − Pilbara ramp-up towards 140 360 Mt/a capacity CAGR 120 > 8% − Oyu Tolgoi open pit − Kitimat modernisation 100 − Continued ramp-up of Kestrel 80 − Second crusher at Argyle 60 • Fu
Slide 20: Strong cash flows will result in a material increase in cash returns to shareholders
20 Strong cash flows will result in a material increase in cash returns to shareholders Underlying earnings of $5.1 billion Strong cash flows from operations of $8.7 billion Growth across a low-cost, diversified portfolio Capital expenditure has been reduced Solid foundation for material increase in
Slide 21: Sam Walsh, Chief executive
7 August 2014 Safety Highlights Performance Delivery Sam Walsh Chief executive
Slide 22: Our businesses are well placed to meet global demand growth
22 Our businesses are well placed to meet global demand growth China GDP growth and income levels OECD recovery underway Percentage US$(‘000) Regional contribution to global PPP GDP growth 5% 20% 25 PPP GDP per capita (RHS) 18% PPP GDP growth (LHS) 4% 16% 20 14% 3% 12% 15 10% 2% 8% 10 6% 1% 4% 5 2%
Slide 23: Our Pilbara iron ore business delivers industry-leading margins
23 Our Pilbara iron ore business delivers industry-leading margins Pilbara EBITDA per tonne • H1 2014 cash unit cost in the US$ per tonne Percentage Pilbara was US$20.40/t, 11% lower 180 80% than H1 2013 160 70% • H1 2014 Pilbara EBITDA margin of 140 60% 66% (2013: 71%) as a result of 120 50% lower
Slide 24: Pilbara growth: delivering exceptional returns on investment
24 Pilbara growth: delivering exceptional returns on investment Mine capacity potential (average annualised) • All in capital intensity of $120-130/t Million tonnes per annum (100% basis) 380 • 290 Mt/a system run rate achieved in 360 May, two months ahead of schedule 340 • 360 Mt/a infrastructure o
Slide 25: Copper delivers 23% volume growth and 71% improvement in underlying earnings
25 Copper delivers 23% volume growth and 71% improvement in underlying earnings • Significant earnings improvement driven by almost $290 million of cash cost reductions in H1 2014 • Kennecott Utah Copper − Concentrator recoveries improved following flotation circuit expansion Haul trucks at Kennecot
Slide 26: Aluminium: earnings improved through cost reductions and productivity gains
26 Aluminium: earnings improved through cost reductions and productivity gains Aluminium EBITDA margin and LME prices • Well positioned to take advantage of Percentage US$ per tonne attractive outlook for bauxite and 25% 2,500 aluminium • Record market premiums 20% 2,000 • >60% of products benefit f
Slide 27: Bauxite: unrivalled resource position offering strong growth options
27 Bauxite: unrivalled resource position offering strong growth options China net aluminium unit imports • Strong growth in bauxite demand Million tonnes from China 15 13 11 2 • Rio Tinto has the strongest bauxite 9 7 5 3 2 3 2 1 3 13 position in the industry 3 4 8 7 4 5 5 1 (1) (3) (0) (1) 2 (0) (1
Slide 28: The Rio Tinto commitment
28 The Rio Tinto commitment • To generate world-class returns • To sustain and build on our cost and productivity improvements • To significantly grow free cash flow • To maintain discipline in our allocation of capital • To deliver materially increased cash returns to shareholders ©2014, Rio Tinto,
Slide 29: 2014 interim results
7 August 2014 Safety Highlights Performance Delivery 2014 interim results Pursuing greater value for shareholders
Slide 30: Reconciliation of underlying to net earnings
30 Reconciliation of underlying to net earnings Underlying earnings H1 2014 to net earnings H1 2014 US$ million (post tax) 6,000 5,116 5,000 589 4,402 4,000 (843) (116) (187) (157) 3,000 2,000 1,000 0 Underlying Impairment Impacts of Exchange diffs & IFRS 2 charge in Other Net earnings earnings cons
Slide 31: Underlying earnings impacted by lower commodity prices
31 Underlying earnings impacted by lower commodity prices Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 6,000 5,000 Thermal 4,229 Iron ore Met coal Aluminium Ind mins Copper Coal Other 4,000 43 (80) (64) (63) (132) (122) 3,000 (1,392) 2,000 (974) 1,000 0 H1 2013 Price underlying ear
Slide 32: Significant growth in iron ore volumes from Pilbara expansion
32 Significant growth in iron ore volumes from Pilbara expansion Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 4,500 4,229 878 911 4,000 3,500 505 Other Includes: 3,000 Copper*, 31 (173) Diamonds and Minerals, 11 (1,392) Aluminium, 7 2,500 Others, 38 2,000 (54) 1,500 Iron Ore Coal O
Slide 33: Modelling earnings
33 Modelling earnings 2013 first half 2014 first half Impact on 2014 full average price/ average price/ 10% change in year underlying Earnings sensitivity rate rate 2014 average earnings ($m) Copper 343c/lb 312c/lb +/-31c/lb 322 Aluminium $1,919/t $1,753/t +/-$175/t 444 Gold $1,523/oz $1,290/oz +/-$
Slide 34: Iron ore: achieving record sales in H1 2014
34 Iron ore: achieving record sales in H1 2014 while delivering expansions on time and budget Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 5,000 211 4,683 4,273 878 181 10 4,000 149 3,000 (974) (45) 2,000 1,000 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax,
Slide 35: Copper: cost focus and improved volumes more than offset lower prices
35 Copper: cost focus and improved volumes more than offset lower prices Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 700 151 594 600 205 500 (89) 400 348 66 300 15 200 (91) (11) 100 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, one offs H1 2014 rates infla
Slide 36: Aluminium: cost improvements and exchange rates more than offset lower prices
36 Aluminium:(1) cost improvements and exchange rates more than offset lower prices Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 400 162 3 373 350 (2) 300 141 250 214 7 200 150 (51) 100 (101) 50 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, one offs H1 2014
Slide 37: Energy: lower prices and volumes partly offset by exchange rates and cost savings
37 Energy: lower prices and volumes partly offset by exchange rates and cost saving initiatives Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) - 92 -50 (19) (52) 32 -100 130 91 -150 -200 (39) -250 (68) (205) -300 H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, on
Slide 38: Diamonds & Minerals: cost reductions partially offset lower prices and higher taxes
38 Diamonds & Minerals: cost reductions partially offset lower prices and higher taxes Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 250 15 192 43 200 53 11 160 150 (27) (58) 100 (69) 50 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, one offs H1 2014 rates in
Slide 39: Provisional pricing
39 Provisional pricing Open shipments Provisional pricing effect (million lbs) (US$m) 30 31 June Dec H1 H1 2014 2013 2014 2013 Escondida 215 240 (18) (66) Oyu Tolgoi 48 14 (3) (0) Grasberg JV/Other 3 0 (1) (5) 266 254 (22) (71) ©2014, Rio Tinto, All Rights Reserved
Slide 40: Other movements in underlying earnings
40 Other movements in underlying earnings Underlying earnings impact Epl'n Interest, FX/ Cash Epl'n Eval'n Non tax & US$ million H1 2013 price Volumes CPI Energy Costs Eval'n disp Cash other H1 2014 Intersegment (4) – – – – 4 – – – – – Other operations (158) 51 17 – – (64) – – (42) 14 (182) Central
Slide 41: Earnings reconciliations
41 Earnings reconciliations 2014 Energy Resources of Australia US$m Earnings per ERA press release (A$127m) (116) Tax and unwinding of discount 3 Less: Minority interests (31.6%) 37 Other (2) Underlying earnings as reported by Rio Tinto (78) ©2014, Rio Tinto, All Rights Reserved
Slide 42: 2014 Half year results Cost saving case studies
2014 Half year results Cost saving case studies
Slide 43: Emerging market suppliers
2014 Half year results cost saving case studies Improvements since this time last year C RTCA has built on Rio Tinto’s experience in sourcing capital items In addition to reduced costs, benefits include improved security of supply, Strong collaboration across Rio Tinto to drive Energy for emerging m
Slide 44: Kennecott smelter value programme
2014 Half year results cost saving case studies Improvements since this time last year Cu Reduced operating costs by 12% in 2013 ($24m) and by Over a 1/3 reduction in production costs per Record productivity and quality at the smelter Copper $10m in first half 2014 tonne smelted in the last (tonnes
Slide 45: Training transformation
2014 Half year results cost saving case studies Improvements since this time last year Fe ~ 255,000 hrs / year released as productive time, no longer spent in 7% reduction in actual Training FTEs 9% improvement in training team service ratio (efficiency) Iron Ore training or assessment activities Tr
Slide 46: Alma productivity and cost reductions
2014 Half year results cost saving case studies Improvements since last year Al Alma increased its productivity by implementing a reorganisation of work supported by the lean philosophy. Aluminium Standardising tasks across the plant allowed the Alma smelter to: Productivity and Improve work quality
Slide 47: Argyle Diamonds power project
2014 Half year results cost saving case studies Improvements since this time last year Ti Diamonds 15% increase in Reduction of greenhouse A significant reduction in diesel use and & Minerals Argyle’s use of power gas emissions by 23,300 a nomination for a Golden Gecko network capacity. tCO2 – e per
Slide 48: Processing plant by-product sales
2014 Half year results cost saving case studies In recent years, coking coal prices have decreased and the thermal coal market has evolved – $ these changes created a marketing opportunity for the Hail Creek mine. Traditionally a coking coal operation, the mine has created a range of new thermal coa