Rio Tinto Plc · LSE:RIO
Rio Tinto — Investor Presentation (June 2010)
28 slides from Rio Tinto's investor presentation, Jun 21, 2010
Slide 1: ASX cover letter for presentation
120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707 For personal use only Company Announcements Office Australian Stock Exchange Limited SYDNEY NSW 2000 21 June 2010 Dear Sir, Attached is a presentation given o
Slide 2: Rio Tinto Coal Australia presentation 2010
Rio Tinto Coal Australia presentation 2010 For personal use only
Slide 3: Cautionary statement
For personal use only Rio Tinto Coal Australia Financial Community Presentation June 2010 – Sydney 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/attendin
Slide 4: Presentation Outline
Rio Tinto Coal Australia Financial Community Presentation For personal use only Presentation Outline Presentation Outline Presenter • Introduction David Peever Managing Director Rio Tinto Australia • Rio Tinto Coal Australia (RTCA) Business Overview Bill Champion Managing Director Rio Tinto Coal Aus
Slide 5: RTCA has exposure to the steel industry and energy sector
RTCA has exposure to the steel industry and energy sector For personal use only Rio Tinto Coal Australia Business Overview Queensland Coal • Assets in Bowen Basin region • Operations produce both metallurgical and thermal coal • Resource base is large and expandable (100% basis) – Reserves: 544Mt –
Slide 6: Thermal coal is a market with attractive medium term growth prospects
RTCA Financial Community Presentation For personal use only Presentation Overview • Rio Tinto Coal Australia (RTCA) Business Overview • Economic Outlook and Industry Overview • Thermal Coal • Metallurgical Coal • Rio Tinto Queensland Coal (RTQC) • Coal & Allied 7 Thermal coal is a market with attrac
Slide 7: Strong GDP growth is forecast, particularly in developing countries
Strong GDP growth is forecast, particularly in developing countries For personal use only World GDP International Dollars Trillions, PPP basis**** Developed Developing 2009-2015 CAGR 99 82 29 Rest of World 70 8.2% 24 6 India 20 5 17 China 4 12 Euro area*** 5 9 4 7 Other advanced 4 6 economies** i **
Slide 8: China's power will continue to be predominantly generated by coal
Despite the emergence of substitutes, China’s power will continue to be predominantly generated by coal For personal use only China’s forecast power generation mix TWh 2007-2030 CAGR Other 8 847 8,847 Alternatives 7.7% Wind Gas 487 Nuclear 15.0% 6,692 1,046 Hydro 8.2% 322 848 9.4% 3,318 3.4% 6,639 C
Slide 9: Short-term demand shifts in China affect the seaborne market
Short-term demand shifts in China have a large effect on the seaborne market due to imports being small relative to overall demand For personal use only China thermal coal consumption Million tonnes 2,067 45 Imports • Domestic production has largely met consumption requirements • Urbanisation and in
Slide 10: India will also rely heavily on coal
India will also rely heavily on coal For personal use only India’s forecast power generation mix TWh 2007-2030 CAGR 2,737 Other Alternatives 14% 72 Wind 299 Gas 8.1% 106 Nuclear 251 Hydro 6.8% 1,649 8.3% 189 73 188 3.1% 794 1,935 Coal 5.7% 124 1,095 537 2007 2020 2030 Coal percentage of 68% 66% 71%
Slide 11: Thermal coal contracts use a variety of pricing mechanisms
Thermal coal contracts use a variety of pricing mechanisms For personal use only Pricing Mechanisms in Thermal Coal Market • Thermal coal is a large, mature market with various pricing mechanisms – annual and spot price contracts based on fixed and/or index prices, tenders, all providing for variati
Slide 12: Metallurgical coal is an attractive product market
Metallurgical coal is an attractive product market due to high growth and relative product scarcity For personal use only Metallurgical Coal Industry • Urbanisation and industrialisation in developing countries will drive steel consumption growth • Supply is unlikely to keep pace with demand, creati
Slide 13: Steel producers will likely continue to rely on BOF technologies
Alternative substitutes have not emerged - steel producers will likely continue to rely on BOF technologies For personal use only Evolution of Steel Production Technology Million tonnes of crude steel 100% = 1 051 1,051 1 230 1,230 1 352 1,352 1 408 1,408 Open Hearth 2 1 1 Furnace (OHF) 27 Electric
Slide 14: Prices likely to remain high relative to historical levels
Prices are likely to remain high relative to historical levels, supported by strong demand and the lack of supply and substitutes For personal use only Contract Coal Prices US$/t nominal Semi-soft prices are likely 350 to remain tied to the HCC prices given expectation of 300 ongoing tightness in th
Slide 15: Rio Tinto Queensland Coal (RTQC) is a low cost producer
RTCA Financial Community Presentation For personal use only Presentation Overview • Rio Tinto Coal Australia (RTCA) Business Overview • Economic Outlook and Industry Overview • Thermal Coal • Metallurgical Coal • Rio Tinto Queensland Coal (RTQC) • Coal & Allied 25 Rio Tinto Queensland Coal (RTQC) is
Slide 16: Queensland assets competitively positioned on the cost curve
Rio Tinto’s Queensland coking coal assets are competitively positioned on the cost curve For personal use only 2009 Australian Coking Coal Cost Curve US$/t Hail Creek Kestrel 0 30 60 90 120 Production Kt 27 Source: Wood Mackenzie Rio Tinto’s Queensland thermal coal assets are competitively positione
Slide 17: Queensland infrastructure arrangements and expansion options
Queensland infrastructure arrangements and expansion options For personal use only Rio Tinto Queensland Coal Infrastructure Arrangements • Expansion from 20 Mtpa to 50 Mtpa underway • Newlands system upgrade and northern missing link (GAPE project) will provide rail capacity • Sufficient contracted
Slide 18: Easing of infrastructure constraints will allow growth
Easing of infrastructure constraints will allow Rio Tinto Queensland Coal to pursue its desired growth path For personal use only Rio Tinto Queensland Coal Organic Growth Profile Million tonnes Forecast 35 RSPT* creates uncertainty around 30 Upside future growth path potential*** 25 Defined growth**
Slide 19: Hail Creek and Clermont Region operations
Hail Creek For personal use only Overview of Hail Creek Operations Operation details Production (100% basis) Mt • Operating at expanded 8Mt rate from second half of 2010 ~7.5 – Strong growth since development 6.1 6.3 5.9 – Plant capacity already in place 5.0 4.5 • Long term resource planning work to
Slide 20: Kestrel Mine / Kestrel Mine Extension
Kestrel Mine / Kestrel Mine Extension For personal use only Overview of Kestrel Mine / Kestrel Mine Extension Operation details Production (100% basis) Mt • KME offers long life, low cost, coking coal – Long life extension to 2032 – Significant reduction in operating costs 4.0 ~4.3 3.7 3.6 3.6 3.7 –
Slide 21: Coal & Allied operations overview
RTCA Financial Community Presentation For personal use only Presentation Overview • Rio Tinto Coal Australia (RTCA) Business Overview • Economic Outlook and Industry Overview • Thermal Coal • Metallurgical Coal • Rio Tinto Queensland Coal (RTQC) • Coal & Allied 37 Coal & Allied is a large thermal an
Slide 22: Coal & Allied well positioned to capture value from demand growth
For personal use only Coal & Allied is well positioned to capture value from demand growth in thermal and semi-soft coking coal Key Coal & Allied value drivers • Competitive margin position due to production of thermal and semi-soft coking coal • Easing of infrastructure bottlenecks will allow mines
Slide 23: Initiatives to improve future cost competitiveness
For personal use only Initiatives are underway to improve future cost competitiveness Impact of cost improvement initiatives Cost Reduction Initiative Latent Capacity (100% basis) Mt 21 • Operating at installed capacity % 14 • On-site initiatives 25 % 12 – Truck & shovel productivity 11 – Labour opt
Slide 24: Long term framework provides certainty in port capacity
For personal use only The agreed long term framework provides producers with certainty and fairness in the distribution of available port capacity Objectives achieved by the Capacity Framework agreement Provide certainty of capacity to producers by: • suspending the Common User Clauses and allow lon
Slide 25: Arrangements to move the coal chain towards an integrated system
For personal use only The new arrangements are intended to move the coal chain towards a fully integrated system – behaving as if it has a single owner Key features of the proposed end-state end state • Delay accounting, • HVCCC has full authority penalties & incentives for Clear for planning, measu
Slide 26: Coal & Allied assets have large resource bases
For personal use only Coal & Allied assets have large resource bases that present expansion options Map of Coal & Allied resources Project Reserves Resources Hunter Valley 278Mt 1,413Mt Operations Mount Thorley 24Mt 129Mt Warkworth 270Mt 530Mt Bengalla 126Mt 170Mt Mt Pleasant 350Mt 699Mt Million ton
Slide 27: Overview of Bengalla and Mt Pleasant Project
For personal use only Overview of Bengalla Operation details Production (100% basis) Mt • Feasibility study approaching completion 6.0 5.5 5.2 5.3 5.5 ~5.5 – 1st stage ~7.5mt pa saleable production – 2nd stage ~8.5mt pa saleable production • Project now under review • Further work on dragline capaci
Slide 28: Coal & Allied Summary and Summary
For personal use only Coal & Allied Summary Coal & Allied Summary • Competitive margin position due to production of thermal and semi-soft coking coal • Easing of infrastructure bottlenecks will allow mines to run at installed capacity • Clearly defined growth path beyond existing installed capacity