Slide 1: 2018 annual results
2018 annual results 27 February 2019 London
Slide 2: Cautionary statements
Cautionary statements This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document, including but not limited to a
Slide 3: J-S Jacques, Chief executive
wi —— ~<a i. RioTinto a ae Fue we | r bar | J-S Jacques Chief executive
Slide 4: A strong 2018
A strong 2018 Delivering $13.5 billion of cash returns Financial Balance Value performance sheet creation $18.1bn $0.3bn $13.5bn EBITDA* on margin of 42% Net cash at Dec-2018 Total shareholder cash returns – Adjusted net debt of $11.8bn $8.0 billion** – No bond maturities until $2.9bn Operating cash
Slide 5: Tailings storage facilities
Tailings storage facilities With active or inactive tailings storage Active or inactive, with an Rio Tinto Kennecott, Utah, US 32 facilities, including 3 non-managed operational sites and 4 legacy sites 100 additional 36 facilities closed or under rehabilitation operations facilities Construction ty
Slide 6: Three levels of assurance for managing tailings and water storage
Three levels of assurance for managing tailings and water storage Audit of control effectiveness 3 rdlevel Group Internal Audit working with external auditors Audit Assures systems for risk management, internal control and governance are effective nd Group review 2 level Surface Mining Centre of Exc
Slide 7: Focus on people and sustainability
Focus on people and sustainability Safety Performance Health and Safety Rio Tinto AIFR ICMM (23 companies) AIFR 3 fatalities in 2018; 2 workplace related, 1 security incident 2.78 CRM* a strong focus with 1.4 million verifications in 2018 White Ribbon accreditation in Australia All injury frequency
Slide 8: Increased portfolio value and performance
Increased portfolio value and performance Completed ~$12bn And strengthened disposals since 2015 the portfolio: Increase in CuEq CAGR of 1.4%* Grasberg – Driven by a 3.4% increase in CuEq CAGR across our remaining portfolio Kitimat wharf & land Increased ROCE by 10pp from 2015-2018 Qld coking coal R
Slide 9: Consistent, disciplined capital allocation
Consistent, disciplined capital allocation Investment and shareholder returns delivered from operating cash flow $34bn $12bn $6bn $3bn Cash flow from Cash from $12bn + Sustaining 2018 final operations disposals Dividends paid capex dividend to be paid in Apr-19 $7bn $46bn Growth capex $46bn $3bn Buy
Slide 10: Jakob Stausholm, Chief financial officer
Jakob Stausholm Chief financial officer
Slide 11: Commodity specific price drivers in 2018
Commodity specific price drivers in 2018 Iron ore Iron Ore (-4%) 80 Solid growth in global steel production, including Chinese crude steel production of ~930Mt 2018 avg*: $61.2/t vs $64.1/t in 2017 China’s structural policy-driven demand for higher grade 50 products Jan 18 Mar 18 May 18 Jul 18 Sep 1
Slide 12: Strong and consistent EBITDA
Strong and consistent EBITDA Underlying EBITDA Coal EBITDA $ billion EBITDA excl. Coal 18.6 18.1 0.3 0.9 1.2 0.2 0.9 (0.4) (0.4) (0.3) (0.3) (0.2) 17.4 17.2 17.2 2017 Price Exchange Energy CPI Flexed 2017 Volumes & Raw Other cash One-offs 2018 underlying rates underlying mix material cost costs* and
Slide 13: Net earnings reconciliation
Net earnings reconciliation ($bn) Reported Underlying Exclusions Exclusions from underlying EBITDA: – gains on disposal of businesses and land (Kitimat), and gain on EBITDA 23.3 18.1 5.1* formation of Elysis JV Depreciation & Amortisation (4.6) (4.6) 0.0 – gains on embedded commodity derivatives – o
Slide 14: Iron Ore
Iron Ore continued delivery from a world-class asset 2018 2017 2019 Shipments increased 2% Operating metrics comparison guidance Average realised price* $62.8 / t - 3% Maintained EBITDA margin Shipments (100% basis) 338mt + 2% 338-350Mt Strong demand for our 62% Operating cost / t** $13.3 / t - 0% $
Slide 15: Aluminium
Aluminium stable operations squeezed by raw material costs 2018 2017 2019 1% primary metal productivity Operating metrics comparison guidance creep*** Average aluminium price* $2,470 / t + 11% Average alumina price** $474 / t + 34% Raw material and energy inflation Production – bauxite 50.4mt - 1% 5
Slide 16: Copper & Diamonds
Copper & Diamonds strong operational performance 2018 2017 2019 Improved performance Operating metrics comparison guidance at Escondida Copper price 297 c/lb + 6% – Resulting in $786 million Production – mined copper 634kt + 33% 550-600kt of dividends received Production – refined copper 275kt + 39%
Slide 17: Energy & Minerals
Energy & Minerals* a challenging year 2018 2017 2019 Production instability at RTIT an Operating metrics comparison guidance opportunity to improve in 2019 IOC pellets $114 / t + 5% – 2 furnaces currently being rebuilt at TiO2** $647 / t + 18% Rio Tinto Fer et Titane Production – IOC 9.0mt - 20% 11.
Slide 18: Productivity accelerating in 2019
Productivity accelerating in 2019 Post-tax mine-to-market (M2M) productivity programme 2018 M2M additional free cash flow fully offset by $ billion (free cash flow) raw material cost headwinds, primarily related to Aluminium 0.6 1.0 2018 invested in capabilities and technology for future productivit
Slide 19: Disciplined capital allocation
Disciplined capital allocation Essential 1 sustaining capex Further cash returns to Compelling Ordinary 2 dividends shareholders growth Iterative 3 cycle of Debt management 19 ©2019, Rio Tinto, All Rights Reserved
Slide 20: Our strong balance sheet gives us resilience and flexibility
Our strong balance sheet gives us resilience and flexibility Net debt 9.6 Net cash of $0.3 billion $ billion 8.0 Committed cash outflows for 2019 will result in 7.0* IFRS 16 adjusted net debt of $8.0 billion**: – $4.0 billion return of Grasberg and Dunkerque proceeds 9.6 via special dividend – $1.7
Slide 21: Disciplined ramp-up of investments
Disciplined ramp-up of investments Capital expenditure profile Maintained sustaining capital $ billion guidance of $2.0 to $2.5 billion per year, including: ~6.5 ~6.5 – Iron Ore sustaining capex of ~6.0 ~$1 billion per year 5.4 Depreciation Pilbara replacement capital 4.5 includes Koodaideri and Rob
Slide 22: The industry fundamentals are robust with Rio Tinto leading the way
The industry fundamentals are robust with Rio Tinto leading the way Capex / Depreciation and amortisation* Gearing (Net debt / (Net debt + equity))* 400% 40% 300% 30% 200% 20% 100% 10% 0% 0% H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 20
Slide 23: Superior cash returns declared of $13.5 billion in 2018
Superior cash returns declared of $13.5 billion in 2018 2018 cash returns declared to shareholders $ billion 4.0 1.1 2.1 Grasberg and Dunkerque 13.5 proceeds 3.1 6.3 1.0 2.2 2018 interim dividend On-market plc SBB by 2018 final dividend Total returns from Off-market Ltd SBB On-market Plc SBB 2019 sp
Slide 24: J-S Jacques, Chief executive
RioTinto J-S Jacques Chief executive
Slide 25: 2019 outlook
2019 outlook Global GDP Global economic growth 8% USA – Momentum slowing 6% 4% Japan – Volatility and risk of trade war is ongoing Eurozone China’s GDP growth 2% 0% World – Decelerating as expected -2% Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 China – Introd
Slide 26: Our strategy has delivered value through the cycle
Our strategy has delivered value through the cycle Superior cash generation World-class assets Operating and Commercial excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth 26 ©2019, Rio T
Slide 27: Investing through the cycle
Investing through the cycle 2% CAGR** from an extensive pipeline of growth options World Class Resource Base and Established Exploration Programme Pre-Feasibility 6 Brownfield exploration 64 Greenfield exploration & Feasibility programmes programmes Arvida, AP60 Execution Pilbara Iron Ore Pilbara Ir
Slide 28: Discovery of copper-gold mineralisation in Western Australia
Discovery of copper-gold mineralisation in Western Australia Early success in copper at Winu*: – Copper-gold mineralisation intersected – Mineralisation close to surface 50-100m – 1.4 km of strike length open to North, South and East – Located in Western Australia and 100% owned – Extensive drilling
Slide 29: Strong base for future growth and profitability
Strong base for future growth and profitability Consistent Attractive growth financial discipline opportunities Safety is our priority #1 $29bn* 2% CuEq Returned to shareholders in Annual growth rate to 3 years, cash generative assets 2023 from broad pipeline and strong balance sheet of growth oppor
Slide 30: Appendix
Appendix 27 February 2019 London
Slide 31: Higher aluminium and RTIT prices partly offset by lower iron ore prices
Higher aluminium and RTIT prices partly offset by lower iron ore prices Underlying EBITDA 2017 vs 2018 $ million 19,000 277 18,580 Aluminium* Minerals Uranium Diamonds Copper Iron ore Other, net 500 282 281 182 49 33 0 17,000 (92) -500 (458) 15,000 2017 Price underlying EBITDA 31 * Aluminium include
Slide 32: Strong sales in iron ore, copper, gold and aluminium
Strong sales in iron ore, copper, gold and aluminium Underlying EBITDA 2017 vs 2018 $ million 366 863 203 185 286 177 19,000 277 18,580 18,406 (436) 14 (301) (40) (42) Aluminium Iron & Titanium Diamonds Iron ore Gold Copper Other 17,000 15,000 2017 Price Exchange Energy Inflation Flexed Volumes unde
Slide 33: Iron Ore maintaining our competitive advantage
Iron Ore maintaining our competitive advantage Pilbara cash unit cost 2018 cash unit cost of $13.3/t ($0.1/t lower than 2017) $ per tonne Focus on maintaining strong EBITDA margins (68% in 2018, in line with 2017) 20.4 Productivity initiatives and weakening Australian dollar in 2018 offset: 18.7 – S
Slide 34: Iron Ore lower prices partly offset by higher volumes
Iron Ore lower prices partly offset by higher volumes Underlying EBITDA 2017 vs 2018 $ million 12,000 11,520 321 27 11,325 142 11,008 (105) (31) (479) (70) 10,000 8,000 2017 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Other 2018 underlying EBITDA 2017 underlying reducti
Slide 35: Aluminium higher prices and volumes offset by raw material cost headwinds
Aluminium higher prices and volumes offset by raw material cost headwinds Underlying EBITDA 2017 vs 2018 $ million 136 3,616 4,000 3,423 283 185 3,095 (132) (94) 3,000 (491) (215) 2,000 1,000 0 2017 underlying Price Exchange rates Energy Inflation Flexed Volumes Cash cost Other 2018 underlying EBITD
Slide 36: Copper & Diamonds strong operational performance
Copper & Diamonds strong operational performance Underlying EBITDA 2017 vs 2018 $ million 260 65 2,776 3,000 316 26 1,904 356 1 1,780 2,000 (27) (25) (52) (48) 1,000 0 2017 Price Exchange Energy Inflation Flexed Volumes Cash cost Exploration & Escondida Grasberg Other 2018 underlying rates 2017 redu
Slide 37: Energy & Minerals higher prices offset by coal disposal and one-off disruptions
Energy & Minerals higher prices offset by coal disposal and one-off disruptions Underlying EBITDA 2017 vs 2018 $ million 4,000 384 3,062 445 2,803 3,000 (2) (31) (92) (5) 2,193 (201) 2,000 (718) (339) (51) 1,000 0 2017 Price Exchange Energy Inflation Flexed Volumes Cash cost Coal gains on Coal dispo
Slide 38: Other movements in underlying EBITDA
Other movements in underlying EBITDA Underlying EBITDA impact Energy & Cash Interest, $ million 2017 FX/ price Inflation Volumes costs E&E Non-cash tax, other 2018 Other operations (116) 121 (117) 6 (31) - 2 64 (70) Exploration & Evaluation (net) (218) 2 1 - - (17) - - (231) Other (736) - 3 - (22) -
Slide 39: Near-term maturities further reduced in 2018
Near-term maturities further reduced in 2018 31 December 2018 debt maturity profile* Gross debt reduced by $2.3 billion in 2018 to $ million ~$13 billion 3,500 $1.9 billion nominal value of bonds 3,000 purchased in 2018 2,500 Average outstanding debt maturity of 2,000 corporate bonds at ~13 years (~
Slide 40: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity 2018 ($m) impact on FY 2018 underlying average price/ rate EBITDA of 10% price/rate change Copper 297c/lb 388 Aluminium $2,110/t 612 Gold $1,269/oz 46 Iron ore (62% Fe FOB) $61.2/dmt 1,566 A$ 75USc 721 C$ 77USc 354 Oil $71/bbl 78 Note: The sensitivities
Slide 41: Modelling aluminium costs
Modelling aluminium costs ($/t) Impact a $100/t change in Canadian* smelting unit cash** cost sensitivity each of the input costs below will have on our 2018 Canadian smelting unit cash cost of $1,533/t Alumina (FOB) 191 Green petroleum coke (FOB) 34 Calcined petroleum coke (FOB) 30 Coal tar pitch (
Slide 42: Case Study: Active management at Kennecott
Case Study: Active management at Kennecott South impoundment – closed in 2002 North impoundment – opened 2002-present – No longer met seismic hazard design criteria – Design review board comprised of international experts – Upstream construction method – Designed to +7.25 magnitude earthquake (MCE*)
Slide 43: Closure, taking the long term view
Closure, taking the long term view Committed to closing our assets well At end 2018, closure and restoration provisions of $10 billion Dedicated closure team, in-house R&D Dedicated team, defined strategy and technical experts to improve closure outcomes and manage legacy sites Proven closure capabi