Rio Tinto Plc · LSE:RIO
Rio Tinto — Non-Deal Roadshow (October 2018)
21 slides from Rio Tinto's roadshow presentation, October 2018
Slide 1: Aluminium
Aluminium Alf Barrios Chief executive, Aluminium October 2018
Slide 2: Cautionary statements
2 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
Slide 3: Safety and health come first
3 Safety and health come first Fatality at Rio Tinto Fer et Titane in April 2018 Continuing history of improvement in AIFR Fatal assault on a security contractor at Richards Bay Rio Tinto ICMM (23 companies) Minerals in July 2018 2.78 Fatality at Paraburdoo Iron Ore mine in August 2018 All injury fr
Slide 4: Strong global growth in aluminium
4 Strong global growth in aluminium Primary aluminium production and stocks Weeks of Aluminium demand growth ~3.2% p.a. next 5 years Million tonnes consumption ‒ Increased intensity of use in autos in N. America 80 18 70 16 China expected to be broadly balanced in aluminium in 14 60 medium to long-t
Slide 5: We continue to widen the gap over our competitors
5 We continue to widen the gap over our competitors Upstream EBITDA margins (per cent) 45 Rio Tinto 40 35 Margin gap: portfolio quality and performance delivery 30 +16 25 EBITDA margin increase to 38%* 20 Cash cost improvements $1.2bn since end 2012 15 10 5 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2015 2015 2016 2016
Slide 6: We maintain our low-cost position despite commodity headwinds
We maintain our low-cost position despite commodity 6 headwinds Commodity Index (base 2016) 300 LME +49% Raw materials & energy lifting cost curve by 16% vs 2017 250 Caustic +157% 200 Coke +83% Costs are expected to stay elevated in 2019 Pitch +86% 150 Rio Tinto well placed 100 50 ‒ Self-generated h
Slide 7: China shows determination to curb overcapacity and reduce pollution
China shows determination to curb overcapacity and 7 reduce pollution Supply-side reform aluminium capacity cuts – 2017/18 Smelting 3.8 Mtpa of illegal capacity removed in 2017 and 2018 (~9% of total) Xinjiang Inner 0.8 Mtpa Mongolia 0.4 Mtpa Further 0.8 Mt capacity cuts from environmental winter po
Slide 8: Productivity continues to deliver cash
8 Productivity continues to deliver cash Partnering Best Practice Data & Technology Automation with Suppliers Creep Rail debottlenecking & payload optimisation Mine planning optimisation Shipping optimisation Equipment utilisation Predictive analytics & optimisation in real-time Bauxite Bauxite grad
Slide 9: Increasing production in bauxite and alumina
9 Increasing production in bauxite and alumina Bauxite production Million tonnes Bauxite: Maximising value from existing operations +5% 50.8 49 - 51 ‒ Production track record: Weipa 5% p.a. / Gove 11% p.a . 47.7 ‒ Optimising grade allocation to maximise customer ViU 42.5 43.7 41.9 39.4 Alumina: maxi
Slide 10: Bauxite: asset performance drives productivity
10 Bauxite: asset performance drives productivity Debottlenecking the value chain through data Performance improvements: 2018 YTD vs 2016 analytics (constraint identification / elimination) ‒ Processing system rates increases for minimal capital Haul truck expenditure at Gove and Weipa Plant rate ut
Slide 11: Smelters creeping at 1% per annum, double industry average
Smelters creeping at 1% per annum, double industry 11 average Amperage creeping history +12% +11% +11% Long history of cutting-edge smelter productivity ‒ Industry-leading technology, expertise and innovation ‒ Creep innovation the engine of technology productivity Low capital intensity, high-return
Slide 12: Technology, process intelligence and expertise underpin our competitive advantage
Technology, process intelligence and expertise 12 underpin our competitive advantage Industry-leading technology Process intelligence Skills & expertise AP Technology Advanced control systems Technology and product development APxe low energy consumption Anode resistivity measurement Academic and in
Slide 13: Data analytics, automation and integrated operations drive the next wave of productivity
Data analytics, automation and integrated operations 13 drive the next wave of productivity Data analytics Automation Integrated Operations Anode traceability Anode change Real-time process optimisation & integration Anode spike predictive detection Automated Guided Vehicle logistics Hydropower Cont
Slide 14: Enhancing margins through VAP
14 Enhancing margins through VAP Rio Tinto VAP product premiums1 $ per tonne 355 Value added product (VAP) enhances margins 242 201 197 186 ‒ VAP 58% of portfolio Slab Billet Foundry High Purity Rod & Others ‒ Additional revenue $222 per tonne1 Rio Tinto VAP product mix1 Further scope to grow margin
Slide 15: Amrun ramping up in 2019
15 Amrun ramping up in 2019 Tier 1 investment with low market risks • 23 Mt total capacity: replaces East Weipa (13 Mt), captures China market growth (10 Mt) • First quartile cost curve position, low technical risks First shipment in Q4 2018 with full ramp-up in 2019 Range of expansion options that
Slide 16: In summary: strong demand outlook, value delivery through productivity and growth options
In summary: strong demand outlook, value delivery 16 through productivity and growth options Aluminium ~$0.5 billion additional free cash flow Strong demand outlook per year from 2021 … ‒ Hot metal and bauxite creep China supply-side turning point ‒ VAP volume & mix ‒ Integrated operations World-cla
Slide 17: Appendix
Appendix
Slide 18: Section 232 impact
18 Section 232 impact US total primary metal consumption (Mt) 5.6 Tariff providing some support to restarts: 0.6 Mt of capacity restarts announced1 1.1 • Of which ~0.5 Mt restarted or in progress • Additional 0.26 Mt idle, could potentially restart2 0.7 • New capacity unlikely 0.8 US primary metal d
Slide 19: Relevance of Alunorte curtailment, Rusal sanctions and alumina legacy contracts
Relevance of Alunorte curtailment, Rusal sanctions and 19 alumina legacy contracts Total 2017 Alumina market 133 Mt, of which 60 Mt outside China • China: net importer 2.9Mt in 2017, net exporter estimate 0.2Mt in 2018 Alunorte: 2017 production: 6.38 Mt (~11% of ex-China volumes) - ~60% used for Hyd
Slide 20: Modelling Aluminium EBITDA
20 Modelling Aluminium EBITDA Impact on FY 2018 underlying EBITDA Estimated impact for H1 2018 of 10% price/rate change full year 2018 vs 2017 EBITDA sensitivity average price/rate $m $m Aluminium $2,209/t 887 Caustic soda (FOB) $587/t 31 Petroleum coke (FOB) $440/t 32 ~$400m ($229m at H1 18) Green
Slide 21: Impact of legacy contracts and tariffs in H1 18 results
21 Impact of legacy contracts and tariffs in H1 18 results Gross revenue (a) EBITDA (b) Net earnings (c) for the 6 months ended for the 6 months ended for the 6 months ended 30 June 30 June 30 June 30 June 30 June 30 June 2018 2017 2018 2017 2018 2017 US$m US$m US$m US$m US$m US$m Aluminium Bauxite