Rio Tinto Plc · LSE:RIO
Rio Tinto — Debt Investor Presentation (August 2020)
39 slides from Rio Tinto's debt investor presentation, August 2020
Slide 1: Fixed income investor update
Fixed income investor update August 2020
Slide 2: Cautionary and supporting statements
Cautionary and supporting statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (together with their subsidiaries, “Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking stateme
Slide 3: A resilient performance in H1 2020
A resilient performance in H1 2020 Health, safety & well being our top priority – good progress $9.6 billion $3.8 billion Underlying EBITDA Paid to shareholders2 47% & 21% $2.7 billion Underlying EBITDA margin & ROCE1 Corporate taxes paid $2.8 billion $1.2 billion Free cash flow Royalties3 $4.8 bill
Slide 4: Financial resilience supports sustainability
Financial resilience supports sustainability Cultural Heritage COVID-19 – Engaging with PKKP1, Traditional Owners – Fully embedded rigorous health and hygiene across our operations and Indigenous groups controls across Australia – Progressing a return to normal rosters where – Board review of herita
Slide 5: Commitment to sustainability performance and climate
Commitment to sustainability performance and climate No fatalities in 2019 46% reduction1 $100 million new in emissions since 2008 investment in solar in 2020 Employee engagement 12 point increase in net promoter score (eNPS) ASI 2 34% $36 million Invested in community 76% of power certified decreas
Slide 6: Our climate and water targets
Our climate and water targets Group water target Increased disclosure of water allocations $1 billion and usage for all estimated spend on managed operations 30% climate-related projects by 2023 reduction in over five years Scope 1 and 2 emissions intensity by 15% Net zero 2030 reduction in ambition
Slide 7: Our commodity portfolio is positioned for a low-carbon future
Our commodity portfolio is positioned for a low-carbon future Iron Ore Copper Used in steel as fundamental Essential to electrification building block of energy- of low-carbon economy efficient urban centres and transport due to and infrastructure superior conductivity We do not We do not extract Al
Slide 8: Disciplined allocation of capital
Disciplined allocation of capital Essential 1 sustaining capex Further cash returns to Compelling Ordinary 2 dividends shareholders growth Iterative 3 cycle of Debt management 8 ©2020, Rio Tinto, All Rights Reserved
Slide 9: H1 2020 capital allocation
H1 2020 capital allocation $1.2bn $3.6bn + $2.5bn Sustaining capex Ordinary dividends paid 2020 interim dividend to be paid in September 2020 47% $1.5bn EBITDA margin Development capex $5.6bn +8% of operating TSR2 21% cash flow ROCE1 $0.3bn $0.2bn ERA fund transfer to trust Buy-backs3 $1.2bn Increas
Slide 10: Continue to invest $20bn over three years
Continue to invest $20bn over three years Capital expenditure profile Controlled ramp-up of investments $ billion continues. ~7.0 ~7.0 H1 2020 capex of $2.7 billion Depreciation ~6.0 - Sustaining capex of $1.2 billion 5.4 5.5 - Development and replacement 4.5 capex of $1.5 billion Capital portion of
Slide 11: Shareholder returns based on a well defined pay-out policy
Shareholder returns based on a well defined pay-out policy Shareholder returns of 40-60% of underlying earnings on average $2.5 billion ordinary interim dividend, through the cycle $1.55 per share, up 3% year-on-year 53% pay-out ratio 160% 140% Primary decision taken by Board for final dividend 120%
Slide 12: Maintained our balance sheet strength
Maintained our balance sheet strength Net debt Balance sheet strength is an asset. $ billion Offers resilience and creates optionality 14.1 Gearing 10% and net debt to LTM^ EBITDA of 0.23 12.9 11.3 10.0 Operating cash flow of $5.6 billion 9.3 9.3 following $1 billion of taxes paid in June 8.0 2020 r
Slide 13: Debt maturity profile
Debt maturity profile 30 June 2020 debt maturity profile* $ million Reported gross debt decreased by $0.7 billion to $13.6 billion at 30 June, 2,000 mainly attributable to the EUR 2020 Millions 1,800 bond redemption 1,600 Average outstanding debt maturity of 1,400 corporate bonds at ~13 years 1,200
Slide 14: Improved conditions but wide range of potential outcomes ahead
Improved conditions but wide range of potential outcomes ahead A V-shaped recovery in China so far: high frequency data Current state of play 200 175 90 85 – China: improvement in conditions with good 150 80 performance in construction and infrastructure 125 75 100 70 % sectors. Support for consumer
Slide 15: Robust liquidity throughout the cycle
Robust liquidity throughout the cycle Liquidity $ billion 25 $16.5 billion total liquidity as of June 2020 20 The Group's $7.5 billion facility remains undrawn 15 The RCF still has over two years to maturity and will be refinanced well in 10 advance of maturity We apply stress test scenario analysis
Slide 16: Credit ratings have stayed consistently strong over the past decade
Credit ratings have stayed consistently strong over the past decade A+ Credit highlights – Resilient business model A – Balance sheet flexibility to act counter cyclically – The strength of the iron ore operations driven by a resilient Chinese A- economy that has decoupled from the Western economies
Slide 17: $10 billion in net debt reduction since 2016
$10 billion in net debt reduction since 2016 $10bn $22bn + $2.5bn Sustaining capex Ordinary and special 2020 interim dividend dividends paid to be paid in September 2020 44% average EBITDA margin1 $55bn operating cash flows $11bn $67bn $4bn Development capex of cash Buy-backs 27% 17% + $12bn TSR3 av
Slide 18: Enhance resilience, strengthen partnerships and continue to adapt
Enhance resilience, strengthen partnerships and continue to adapt Resilience Partnerships Agile Strong balance sheet Access to resources COVID-19 tactical response Disciplined capital allocation Technology and R&D Rio Tinto post COVID-19 Access to markets Risk sharing New approach to growth Value ov
Slide 19: Appendices
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Slide 20: Iron Ore
Iron Ore Strong operating performance at a time of high price H1 2020 H1 2019 2020 We remain even more committed Operating metrics comparison guidance to our relationship with communities Average realised price* $85.4 /t 0% via active engagement, following the events in the Juukan Gorge area Shipmen
Slide 21: Aluminium
Aluminium Stable operations and good cash conversion in challenging market H1 2020 H1 2019 2020 FCF of $0.6 billion despite Operating metrics comparison guidance challenging market conditions Average aluminium price* $1,849 / t - 15% Average alumina price** $ 264 / t - 30% Lower prices impacted EBIT
Slide 22: Copper & Diamonds
Copper & Diamonds Focus on productivity as price, grades and earthquake impact result H1 2020 H1 2019 2020 EBITDA and margin impacted by Operating metrics comparison guidance lower price, lower grades and Copper realised price 250 c/lb - 11% earthquake at Kennecott Production – mined copper 266kt -
Slide 23: Energy & Minerals
Energy & Minerals Steady performance with some COVID-19 constraints H1 2020 H1 2019 2020 Operational stability despite some Operating metrics comparison guidance COVID restrictions in Canada and IOC pellets price* $117 / t - 17% South Africa TiO2 slag price** $809 / t + 7% Commercial flexibility at
Slide 24: Stable EBITDA at constant prices and exchange
Stable EBITDA at constant prices and exchange Underlying EBITDA $ billion 10.3 0.6 0.3 9.9 0.1 0.2 0.1 0.2 0.3 0.2 9.6 Iron Ore -0.06 Aluminium -0.45 Copper -0.15 Other +0.05 H1 2019 Price Exchange Flexed H1 Volume Unit cash Energy Inflation Non-cash One-offs H1 2020 underlying 2019 and mix costs co
Slide 25: Very resilient financial results
Very resilient financial results ($bn, except for per share data) H1 2020 H1 2019 Comparison Gross revenue 20.3 21.8 -7% Underlying EBITDA 9.6 10.3 -6% ROCE 21% 23% Cash flow from operations 5.6 6.4 -12% Free cash flow 2.8 3.9 -28% Underlying earnings 4.8 4.9 -4% Underlying earnings per share ($) 2.
Slide 26: Temporary lower cash conversion
Temporary lower cash conversion $ billion -0.2 0.9 4.9 Temporary 4.8 -1.1 0.2 3.9 0.2 2.8 0.9 0.4 0.3 0.4 Capex / Working Joint venture Taxes Provisions Total Depreciation capital income / expensed/ / Other** dividend* paid Underlying earnings Free cashflow H1 2019 H1 2020 * Includes income and divi
Slide 27: Group level financial guidance
Group level financial guidance FY2020 FY2021 FY2022 CAPEX Total Group ~$6.0bn ~$7.0bn ~$7.0bn Sustaining Capex Group Up to $3.0bn Up to $3.0bn Up to $3.0bn Pilbara Sustaining Capex $1.0-1.5bn $1.0-$1.5bn $1.0-$1.5bn Effective tax rate 30% Returns Total returns of 40 – 60% of underlying earnings thro
Slide 28: Group level financial guidance
Group level financial guidance 2020 production guidance1 2020 costs $14-15/wmt (FOB), based on an Iron Ore Shipments 324 – 334mt (100% basis) Australian dollar exchange rate of $0.67 C&D C1 unit costs 120-135 c/llb Mined Copper 475 – 520kt Refined Copper 165 – 205kt Diamonds 12 – 14m carats Aluminiu
Slide 29: Pro-forma net debt reconciliation
Pro-forma net debt reconciliation FY2019 HY 2020 $bn $bn Reported net debt 3.7 4.8 Australian tax top-up in June of following year 1.0 Shareholder returns remaining relating to disposals 0.2 Proforma net debt 4.9 4.8 Note: $0.2bn in 2019 is the remaining share buyback relating to the disposal of coa
Slide 30: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity H1 2020 ($m) impact on FY 2020 underlying average / rate EBITDA of 10% price/rate change Copper 249c/lb 276 Aluminium $1,595/t 447 Gold $1,645/oz 38 Iron ore (62% Fe CFR freight-adjusted) $85.1/dmt 1,892 A$ 0.66US$ 542 C$ 0.73US$ 209 Oil (Brent) $41/bbl
Slide 31: Modelling aluminium costs
Modelling aluminium costs Canadian* smelting unit cash** cost sensitivity ($/t) Impact of $100/t change in each of the input costs below will have on our H1 2020 Canadian smelting unit cash cost of $1,196/t Alumina (FOB) $191 Green petroleum coke (FOB) $36 Calcined petroleum coke (FOB) $33 Coal tar
Slide 32: Application of the returns policy
Application of the returns policy Capital return considerations Comments – Operating cash flow of $5.6 billion 1 Results for H1 2020 – FCF of $2.8 billion – Underlying earnings down 4% to $4.8 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing high quality assets in
Slide 33: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) Proforma Rio Tinto Group (excluding OT and TRQ)(2) Jun-20 Jun-19 Jun-20 Jun-19 Jun-20 Jun-19 YTD YTD YTD YTD YTD YTD Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Consolidated sa
Slide 34: Group Balance Sheet
Group Balance Sheet Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) Proforma Rio Tinto Group (excluding OT and TRQ) Jun-20 Dec-19 Jun-20 Dec-19 June-20 Dec-19 YTD YTD YTD YTD YTD YTD Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Non-current assets 69,376 70,499 10,155 9,58
Slide 35: Winu progressing with Maiden Resource and further positive results
Winu progressing with Maiden Resource and further positive results – Inferred Mineral Resource of 503 Mt at 0.45% CuEq (0.2% CuEq cutoff) and 188 Mt @ 0.68% CuEq (0.45% CuEq cutoff)* – Deposit open at depth as well as to the North and Southeast – Studies progressing - metallurgical testing and basel
Slide 36: Oyu Tolgoi Underground takes another step to first production
Oyu Tolgoi Underground takes another step to first production Preferred mine design selected – lowering risk, providing optionality for extension – Block caving remains a viable mining option with pillars between panels to Hugo North ore body Longitudinal section address stability risks Remote techn
Slide 37: Oyu Tolgoi and Turquoise Hill Resources – key dates
Oyu Tolgoi and Turquoise Hill Resources – key dates Rio Tinto: completion of 2020 OT Feasibility Study and updated Mineral Reserves and Mineral Resources1 announced Rio Tinto: Definitive Estimate – projected to be complete3 03 July 2020 Q4 2020 Q3 2020 TRQ: to disclose Technical Report2 1 Prepared i
Slide 38: Carbon intensity
70% of scope 1 & 2 emissions are from our aluminium business low 0.2 31.8* (Mt CO2e) 2.6 3.3 Uranium Diamonds Copper Pilbara Borates 3.7 IOC Carbon intensity (tCO2e / tCu-eq) Atlantic Al Bauxite & 5.1 Alumina TiO2 6.6 10.3 Pacific Al high low EBITDA margin (%) high Aluminium (Pacific) Bauxite & Alum
Slide 39: We are already a very large user of renewable energy
We are already a very large user of renewable energy Electricity generation Electricity consumption and share from renewables World energy system* Rio Tinto** Diversified mining majors*** 26,600 56 15 TWh TWh TWh Renewables Fossil fuels Renewables Fossil fuels Renewables Fossil fuels *Source: IEA Wo