Slide 1: 2011 full year results
©2012 Rio Tinto, All Rights Reserved 1 2011 full year results 9 February 2012
Slide 2: Cautionary statement
©2012 Rio Tinto, All Rights Reserved 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 c
Slide 3: Continued improvements in safety
©2012, Rio Tinto, All Rights Reserved 3 Continued improvements in safety Injury frequency rates 2002 – 2011 Per 200,000 hours worked 2.5 Lost time injury frequency rate All injury 2 frequency rate 1.5 1 0.5 0 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11
Slide 4: 2011 highlights
©2012, Rio Tinto, All Rights Reserved 4 2011 highlights • Record underlying earnings, EBITDA and cash flows from operations − Higher prices, stronger currencies and input cost pressures − Record iron ore volumes; grade and weather challenges elsewhere • Net earnings reduced by aluminium impairments
Slide 5: Iron ore: record production, shipments and earnings
©2012, Rio Tinto, All Rights Reserved 5 Iron ore: record production, shipments and earnings Iron ore underlying results • Record prices during the year, with US$ billions all product sold 25 • Production and shipment records achieved in the Pilbara, despite 20 severe weather in Q1 2011 • Continued e
Slide 6: Global iron ore growth options without equal
©2012, Rio Tinto, All Rights Reserved 6 Global iron ore growth options without equal • Capital expenditure on time and on local currency budget − Next 5mt due Q1 2012 will increase Pilbara capacity to 230Mt/a − 283Mt/a expansion fully approved − 353Mt/a accelerated to first half 2015 • Pilbara miner
Slide 7: Rio Tinto Alcan: second half margin squeeze
©2012, Rio Tinto, All Rights Reserved 7 Rio Tinto Alcan: second half margin squeeze Rio Tinto Alcan underlying results • Estimated 2.5mt of production ex- US$ billions China is loss making at current prices 4 2009 Onwards Excludes Pacific • Chinese capacity growth in the west Aluminium, Lynemouth, S
Slide 8: Rio Tinto Alcan: strategic focus on transforming the aluminium business
©2012 Rio Tinto, All Rights Reserved 8 Rio Tinto Alcan: strategic focus on transforming the aluminium business • Disciplined portfolio management • Deliver cost and productivity improvements • Focus on high return production creep and modernisation projects • Focused strategy will reshape the alumin
Slide 9: Copper: recovery of copper grades expected in second half of 2012
©2012 Rio Tinto, All Rights Reserved 9 Copper: recovery of copper grades expected in second half of 2012 Copper underlying results • Copper market finely balanced and US$ billions highly sensitive to supply disruptions 6 • Lower volumes in 2011 from anticipated dip in grades at all three 5 major ope
Slide 10: Investment in copper projects continues
©2012, Rio Tinto, All Rights Reserved 10 Investment in copper projects continues • Oyu Tolgoi progresses − Project 70% complete − Power remains the critical path item − Majority ownership of Ivanhoe secured Oyu Tolgoi, Mongolia • La Granja pre-feasibility funding • KUC extension feasibility study •
Slide 11: Energy: recovery from significant weather events in Australia
©2012, Rio Tinto, All Rights Reserved 11 Energy: recovery from significant weather events in Australia Energy underlying results • Coal prices were volatile with global US$ billions disruptions to supply and demand 4 • Coal and uranium operations in Australia were impacted by significant wet weather
Slide 12: Significant growth options across the Energy group
©2012, Rio Tinto, All Rights Reserved 12 Significant growth options across the Energy group • Australian growth options supported by improving coal chain capacity • Successfully completed acquisitions of Riversdale in Mozambique and Hathor in Canada − First coal from Benga in first half 2012 Benga,
Slide 13: Diamonds and Minerals: supply tightness reflected in price momentum
©2012, Rio Tinto, All Rights Reserved 13 Diamonds and Minerals: supply tightness reflected in price momentum Diamonds and Minerals underlying results • Supply tightness in TiO2, sustained US$ billions pricing for borates, diamond long term fundamentals remain strong 1.4 • Recovery in diamond product
Slide 14: Guy Elliott, Chief financial officer
©2012, Rio Tinto, All Rights Reserved 14 Guy Elliott Chief financial officer
Slide 15: Record underlying earnings
©2012, Rio Tinto, All Rights Reserved 15 Record underlying earnings Underlying earnings 2010 vs 2011 $ millions 25,000 20,000 15,000 10,000 5,000 0 13,987 6,675 (998) (502) (376) (249) (2,096) (796) (96) 15,549 2010 Price Exchange Volume Inflation Energy Cash costs Explor'n & Interest, Tax 2011 unde
Slide 16: Net earnings reduced by impairment
©2012, Rio Tinto, All Rights Reserved 16 Net earnings reduced by impairment Reconciliation of underlying to net earnings $ millions 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 15,549 (9,290) 167 (57) (342) (201) 5,826 Underlying Impairment Profits on disposal Net exchange & Deferred
Slide 17: Cash cost performance driven by rising input prices, lower grades and weather
©2012, Rio Tinto, All Rights Reserved 17 Cash cost performance was driven by rising input prices, lower grades and weather events Breakdown of cash cost variance • Cost efficiency adversely impacted $ millions by lower grades in copper and diamonds Other Input production prices and and one- other •
Slide 18: Record cash flow generation
©2012, Rio Tinto, All Rights Reserved 18 Record cash flow generation 2011 Cash flows Cash flows from operations US$ billions US$ billions 40 25 35 Other: ($1.6bn) Increase in net debt and Net interest ($0.6bn) 30 other inflows: Tax: ($6.2bn) 20 Dividends from EAUs $7.1bn Dividends: ($2.2bn) Cash flo
Slide 19: Capital expenditure focused on the highest quality options
©2012, Rio Tinto, All Rights Reserved 19 Capital expenditure focused on the highest quality options Capital expenditure • $16 billion capital expenditure US$ billions approved for 2012 18.0 • Further project approvals, mainly in 16.0 the Pilbara, are likely to increase 2012 spend 14.0 12.0 • Discipl
Slide 20: Capital expenditure diversified across geographies and products
©2012, Rio Tinto, All Rights Reserved 20 Capital expenditure diversified across geographies and products 2012 Capital expenditure by country 2012 Capital expenditure by product Per cent of total spend Per cent of total spend Australia Canada Iron ore Copper United States Mongolia Aluminium Energy Ot
Slide 21: Challenges of bringing on new supply
©2012, Rio Tinto, All Rights Reserved 21 Challenges of bringing on new supply Announced and completed iron ore production capacity • Shortage of specialist mining skills (global) (million tonnes) • New tier one ore bodies are in 1000 remote locations 800 600 • Technical challenges increasing 400 200
Slide 22: Balancing growth with returns to shareholders
©2012, Rio Tinto, All Rights Reserved 22 Balancing growth with returns to shareholders • Strong balance sheet and regained single A credit rating Cash from operations • More than $33 billion of major capital projects underway • A rich portfolio of unapproved project options Investment in value Prude
Slide 23: Tom Albanese, Chief executive
©2012, Rio Tinto, All Rights Reserved 23 Tom Albanese Chief executive
Slide 24: Short term outlook expected to remain volatile
©2012, Rio Tinto, All Rights Reserved 24 Short term outlook expected to remain volatile Commodity market prices • Higher average prices in 2011 but Daily spot index (1 January 2010=100) finished year lower than started Prices at • Macroeconomic outlook volatile 3 Feb 2012 in the near term • Eurozone
Slide 25: Our belief in the long term demand story is unchanged
©2012 Rio Tinto, All Rights Reserved 25 Our belief in the long term demand story is unchanged Demand for metals increases Global copper supply vs. demand outlook1 in line with increasing income (Mine output, kt Cu) 2011 population Expenditure per capita distribution World average US$ (2011 terms) 30
Slide 26: Our strategy is consistent and unchanged
©2012, Rio Tinto, All Rights Reserved 26 Our strategy is consistent and unchanged • 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 by the quality of
Slide 27: >$33 billion of major capital projects underway
©2012, Rio Tinto, All Rights Reserved 27 >$33 billion of major capital projects underway Project timeline(1) % Complete $ Capex(2) Production Dampier Ph 2 $284m +5mtpa IOCC Ph 1 & 2 $763m +5.3mtpa Hope Downs 4 $2.1bn 15mtpa(3) Pilbara 283 $9.7bn +53mtpa Marandoo $1.1bn 15mtpa(3) Escondida EOA $166m(
Slide 28: Embedding industry leadership in exploration, technology and innovation
©2012, Rio Tinto, All Rights Reserved 28 Embedding industry leadership in exploration, technology and innovation • Planned expansion of driverless truck fleet from 10 to 150 trucks • Further options for automation • Continued development of innovative recovery technologies • Tunnel boring system to
Slide 29: Executing our strategy
©2012, Rio Tinto, All Rights Reserved 29 Executing our strategy • Record underlying earnings, EBITDA and cash flows from operations • Strong balance sheet • Growing established operations • Identifying, acquiring and developing the next generation of tier one orebodies • At the forefront of explorat
Slide 30: 2011 full year results
©2012, Rio Tinto, All Rights Reserved 30 2011 full year results 9 February 2012
Slide 31: High quality tier one projects in advanced study
©2012, Rio Tinto, All Rights Reserved 31 High quality tier one projects in advanced study Rio Tinto Total funding of indicative indicative Indicative first Indicative Project Product capex(1) capex production production(1) Pilbara 353 Iron ore $$ $$ 2015 +70mtpa IOCC Phase 3 Iron ore $ $ 2013 +2.7
Slide 32: A rich portfolio of strong earlier stage projects
©2012, Rio Tinto, All Rights Reserved 32 A rich portfolio of strong earlier stage projects provide options for further quality growth • Pilbara 453mtpa • Orissa Iron Ore • IOCC expansions • Resolution • KUC North Rim Skarn Copper • La Granja • Northparkes expansion • Escondida options • AP60 Phase 2
Slide 33: Reconciliation of underlying earnings to net earnings
©2012, Rio Tinto, All Rights Reserved 33 Reconciliation of underlying earnings to net earnings $m 2011 2010 Underlying earnings 15,549 13,987 Impairment charges net of reversals (9,290) (739) Profits on disposal of interests in businesses 167 174 Gain on consolidation of Oyu Tolgoi – 445 Loss after
Slide 34: Breakdown of price variance
©2012, Rio Tinto, All Rights Reserved 34 Breakdown of price variance Earnings impact from price variance $6,675 million $US million 4,000 3,784 Traded Non-traded 3,500 3,000 2,500 2,000 1,500 1,000 663 623 500 386 215 244 228 214 122 88 108 0 Copper Aluminium Gold Other Iron ore Th coal Met coal Ura
Slide 35: Breakdown of volume variance
©2012, Rio Tinto, All Rights Reserved 35 Breakdown of volume variance Earnings impact from volumes $502 million $US millions 300 200 181 100 36 0 -9 -12 -11 -37 -100 -71 -200 -246 -300 -333 -400 Copper Aluminium Gold Moly Iron ore Coal Industrial Diamonds Other minerals
Slide 36: Modelling earnings
©2012, Rio Tinto, All Rights Reserved 36 Modelling earnings Impact on full year 2011 average underlying earnings Earnings sensitivity price/rate 10% Change ($m) Copper 400c/lb +/-40c/lb 340 Aluminium $2,395/t +/-$240/t 510 Gold $1,571/oz +/-$157/oz 70 Iron ore +/-10% 1,720 Coal* +/-10% 280 A$ 103 Us
Slide 37: Iron ore
©2012, Rio Tinto, All Rights Reserved 37 Iron ore Movement in underlying earnings 2010 vs 2011 $US millions 3,747 (274) 187 (91) (82) (515) (264) (44) 12,853 10,189 FY, 2010 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY,2011 • Record global iron ore shipments of 239mt/a despite first ha
Slide 38: Aluminum
©2012, Rio Tinto, All Rights Reserved 38 Aluminum Movement in underlying earnings 2010 vs 2011 $US millions (282) 17 574 (12) (90) (329) 611 (27) (20) 442 FY, 2010 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY,2011 • Tight physical markets offset by macroeconomic concerns resulted in av
Slide 39: Copper
©2012, Rio Tinto, All Rights Reserved 39 Copper Movement in underlying earnings 2010 vs 2011 $US millions 738 (23) (548) (45) (66) (560) (182) 88 2,530 1,932 FY, 2010 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY,2011 • Lower grades at Kennecott Utah Copper, Escondida and Grasberg as pr
Slide 40: Energy
©2012, Rio Tinto, All Rights Reserved 40 Energy Movement in underlying earnings 2010 vs 2011 $US millions 955 (241) (71) (90) (26) (244) (13) (383) 1,187 1,074 FY, 2010 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY,2011 • Lower volumes following adverse weather conditions in the first h
Slide 41: Diamonds & Minerals
©2012, Rio Tinto, All Rights Reserved 41 Diamonds & Minerals Movement in underlying earnings 2010 vs 2011 $US millions (21) (72) (39) 442 (9) (203) (32) (142) 328 252 FY, 2010 Price Fx Vols CPI Energy Other cash Expl'n Eval'n Other FY,2011 • Higher prices and improved market conditions for all produ
Slide 42: Other
©2012, Rio Tinto, All Rights Reserved 42 Other Interest, FX/ Sales Cash Epl'n Non tax & $millions FY, 2010 price Inflation Vols Energy Costs Aval'n Cash other FY,2011 Intersegment (15) – – – – – – – 55 40 Other operations 237 72 14 (21) (83) (99) – – (240) (120) Central exploration (net) (52) (1) –
Slide 43: Provisional pricing
©2012, Rio Tinto, All Rights Reserved 43 Provisional pricing • 2010: driven by the 28% increase in Open Provisional shipments pricing effect copper 3 month forward price (million lbs) (US$m) between the end of 2009 and the end of 2010, resulting in a favourable 31 31 earnings impact of $143m Dec Dec
Slide 44: Earnings reconciliations
©2012, Rio Tinto, All Rights Reserved 44 Earnings reconciliations 2011 Energy Resources of Australia US$m Earnings per ERA press release (A$54m) (56) Increase depreciation of closure asset (14) Tax and unwinding of discount 1 Less: Minority interests 24 Other (8) Underlying earnings as reported by R
Slide 45: Variance analysis methodology
©2012, Rio Tinto, All Rights Reserved 45 Variance analysts methodology • Price = Change in commodity price x prior year sales volumes • Exchange = (Change in exchange rates x Prior year cost of sales) + Relative movements in exchange gains and losses on working capital • Inflation = Inflation rate x