Rio Tinto Plc · LSE:RIO
Rio Tinto — Merger or Acquisition (February 2009)
41 slides from Rio Tinto's merger presentation, Feb 13, 2009
Slide 1: Cautionary Statement
Cautionary Statement This presentation, has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and consists of the slides for a presentation concerning Rio Tinto and Chinalco. By reviewing/attending this presentation you agree to be bound by the following conditions.Forward-Looking S
Slide 2: Paul Skinner, Chairman
Paul Skinner Chairman Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf
Slide 3: Pioneering strategic partnership with Chinalco
Pioneering strategic partnership with Chinalco • Rio Tinto has agreed to enter into a pioneering strategic partnership with Chinalco delivering US$ 19.5bn in cash to Rio Tinto:– investments in aluminium (US$ 2.1bn), copper (US$ 4.5bn) and iron ore (US$ 5.2bn) joint ventures and project development o
Slide 4: Securing Rio Tinto's position as a resource industry leader
Securing Rio Tinto’s position as a resource industry leader • Capitalise on the resource sector’s ongoing shift towards the developing world Pioneering strategic • Value delivered through joint ventures and intention to explore broader partnership co-operation • Benefits from Chinalco’s insight, rel
Slide 5: Proposed partnership has two components
Proposed partnership has two components Joint venturesConvertible bonds • US$ 12.3bn investment • US$ 7.2bn investment in Rio Tinto through • Rio Tinto retains existing operational andsubordinated convertible bonds management control • Two tranches in each of Rio Tinto plc and Rio Tinto Ltd: Rio Tin
Slide 6: China is playing a crucial role in the global economy
China is playing a crucial role in the global economy World GDP breakdown (in %) • Rio Tinto recognised the potential 100% 1 = 61966128of China very early: – iron ore first exported to China in 1973 Developed 45 – Channar mine joint venture world63 established in 1987 7677 – first to respond to Chin
Slide 7: Strong independent governance structures
Strong independent governance structures Corporate levelJoint venture level • Independent Boards and independent Chairman • Representation from • Chinalco may nominate two new Rio Tinto and Chinalco non-executive Board members (one independent 1 ) to add to the • Voting rights reflect Strategic econ
Slide 8: Xiao Yaqing, Chinalco President
Xiao Yaqing Chinalco President“Chinalco is China’s largest diversified mining company and one of the fastest growing companies in China” Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf 9
Slide 9: Partnership with Rio Tinto is driven by long term commercial objectives
Partnership with Rio Tinto is driven by long term commercial objectives • Significant demand for commodities over the long run • Confidence in the resilience of the Chinese economy • Increasing importance of the Chinese market– accounts for 1/3 of global metal demand and 2/3 of global metal Confiden
Slide 10: Chinalco is a leading Chinese diversified resources company
10Chinalco is a leading Chinese diversified resources company • Commercially driven aluminium, copper and titanium product groups Products and • Interests in assets primarily in China and across a range of geographies Geographies including Australia, Peru and Saudi Arabia • Seeking diversification a
Slide 11: Chinalco is on a journey towards integration into the global market
Chinalco is on a journey towards integration into the global market Becoming a leading Established in Rapid GrowthDiversification global mining 20012002-20052006-2007 company • Chinalco established in GrowthGrowthGrowth February 2001 • Further acquisitions of Chinese • Officially adopts diversificat
Slide 12: Chinalco business model focuses on long-term shareholder value and sustainability
Chinalco business model focuses on long-term shareholder value and sustainability • Commercially driven –primary focus is long-term financial returns –consistent growth in sales revenue • Separate legal entity, independently managed–committed to high standards of corporate governance –run by its Pre
Slide 13: Chinalco's senior management brings extensive industry experience
Chinalco’s senior management brings extensive industry experience Xiao Yaqing • Doctorate in Engineering • 20 years practical experience in President metallic materials and management • Previously vice President of Chinalco Ao HongZhang ChengzhongZhao Zhao • Degree in Metallurgy, holds • Doctorate i
Slide 14: Tom Albanese, Chief Executive Officer
Tom Albanese Chief Executive Officer Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf
Slide 15: Rio Tinto maintains existing strategic focus on low cost, long-life assets
Rio Tinto maintains existing strategic focus on low cost, long-life, large scale assetsRealises attractive value from Maximisation of shareholder value transaction and eliminates short term financial uncertaintyLarge scale, Emphasis on Excellence in Preserves flexibility to leveragelong life, low qu
Slide 16: Chinalco is the ideal partner for Rio Tinto
Chinalco is the ideal partner for Rio Tinto Strong performance and market ...with aligned values and position...objectives • Outstanding track record of growth • Governance structure which promotes across multiple sectorsindependent commercial decision making • Deep insight into Chinese trends and •
Slide 17: Superior financial solution providing cash proceeds and comprehensive benefits
Superior financial solution providing cash proceeds and comprehensive benefits • Sufficient to meet 2009 and 2010 debt maturities–US$ 12.3bn from joint ventures–US$ 7.2bn of long dated subordinated convertible bonds raised on attractive terms • The reduction in debt and the potential for additional
Slide 18: Developing world trends are changing the strategic landscape of the resource sector
Developing world trends are changing the strategic landscape of the resource sector MarketsSustainable longer term demand growth driven by ChinaTier 1 resources increasingly found in emerging geographiesResourcesGeopolitics playing a bigger role in accessing and developing new resourcesExecutionIncr
Slide 19: China will play an ever greater role in global commodity demand
China will play an ever greater role in global commodity demand AluminiumCopperSeaborne iron ore (%)(%)(%) Chinese 56 proportion 50 42 of total 343334 28 commodity 2021 demand 2004 2008 20122004 2008 20122004 2008 2012140106 Chinese 938983818184 proportion of commodity 53 demand growth 2004 2008 201
Slide 20: Strategic partnership will uniquely position Rio Tinto to lead the industry
Strategic partnership will uniquely position Rio Tinto to lead the industry into the next decade Immediate Resource industry trendsBenefits for Rio TintoinitiativesSustainable longer term • Insight into key Chinese demand • Marketing Marketsdemand growth driven by and supply dynamics, and · Market i
Slide 21: Commodity joint ventures represent minority stakes
Commodity joint ventures represent minority stakes 100% • Using H2 2008 data, reflecting falls in traded commodity prices, Chinalco’s Rio Tinto Alcan share of joint ventures Copper & Diamonds – represents 8% of Rio Tinto’s H2 2008 attributable EBITDA– consistent with NPV valuations Iron ore • Repres
Slide 22: Aluminium alliance focused on Queensland assets
Aluminium alliance focused on Queensland assets Resulting economic interests in ongoing businesses 1 Anticipated future opportunities Rio • Potential to capture synergies and pursue growth and AssetTintoChinalco development opportunities in– Queensland Weipa70%30%– China • Enhanced co-operation thro
Slide 23: Copper alliance built on current assets and future opportunities
Copper alliance built on current assets and future opportunities Resulting economic interests in ongoing businesses 1 Arrangements for future projects AssetRio Tinto ChinalcoProjectRio Tinto Chinalco Escondida 2 15.1%14.9%La Granja70%30% Kennecott75%25% • Potential to widen alliance through future d
Slide 24: Iron ore alliance through Hamersley Iron
Iron 0re alliance through Hamersley Iron Resulting economic interests in Anticipated future opportunities ongoing businesses 1 AssetRio TintoChinalco • Combined strengths in mining, infrastructure development and project financing will underpin an unrivalled Hamersley 85%15%project development capab
Slide 25: Key features of iron ore alliance
Key features of iron ore alliance15%85% Hamersley IronHope DownsBao-HIChannarRhodes RidgeRobe River 96mt11mt8mt10mt0mt50mt Cape LambertCurrent producing mines include • Tom Price • Paraburdoo Two Ports55% of 2008 • MarandooPilbara Parker PointEIIHamersley RailMines • Yandi production* • Brockman • N
Slide 26: Core benefits of transaction
Core benefits of transaction • Joint venture asset consideration at a significant premium to current implied enterprise valuation metrics • Convertible bonds convert at attractive premia Realises premium – Tranche A: 107% premium to plc unaffected share price 1 (68% to Ltd, respectively) value –Tran
Slide 27: Guy Elliott, Chief Financial Officer
Guy Elliott Chief Financial Officer Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf 28
Slide 28: Value enhancing US$ 19.5bn cash package for Rio Tinto
Value enhancing US$ 19.5bn cash package for Rio Tinto 1Direct investment in • At an implied joint ventures premium to current • These premia reflect: market valuations– the quality of Rio Tinto’s assets, management and 2aConversion option • Conversion prices options are at significant – the excellen
Slide 29: Cash proceeds from joint ventures
Cash proceeds from joint ventures • Investments in aluminium, copper and iron ore joint ventures and project development opportunities total US$ 12.3bn Attributable Values (US$ million) Aluminium Weipa1,200 Yarwun500 Boyne / Gladstone Power Station450 Total2,150 Copper Escondida3,388 Grasberg400 La
Slide 30: Chinalco transaction provides comprehensive benefits
Chinalco transaction provides comprehensive benefits Transaction • Both components of transaction at premium value without components at a altering control premium to the • Limits dilution for existing shareholders market... • US$ 19.5bn in cash exceeds required debt repayments for ... generating 20
Slide 31: Strategic alliances are at an implied premium to current market asset values
Strategic alliances are at an implied premium to current market asset values Comparison of Chinalco’s share of H2 2008 attributable EBITDA 1 with current market enterprise value 2 18%+124% premium to current market enterprise 8%value 5 Proportion of H2 2008 EBITDAConsideration as proportion of repre
Slide 32: Convertible bonds component of transaction
Convertible bonds component of transaction CharacteristicDetail • US$ 7.2bn through two tranches comprising an equal number of shares, issued at face value: Consideration– Tranche A: convertible at US$ 45 per share for US$ 3.1bn–Tranche B: convertible at US$ 60 per share for US$ 4.1bn • Subordinated
Slide 33: High conversion premium reflects confidence in value
High conversion premium reflects confidence in value Conversion premia of Chinalco-issued bonds Percent of share price 1 Rio Tinto plcRio Tinto Ltd • The conversion premium –represents a strong 176%signal regarding Chinalco’s confidence in the 124%valuation upside 107%potential of Rio Tinto’s assets
Slide 34: Attractive coupon reflects confidence in prospects
Attractive coupon reflects confidence in prospects • Competitive coupon given subordinated nature of bonds and Subordination premium absence of covenants 9.5% 9.0% • A clear indicator of Chinalco’s confidence 8.5% in Rio Tinto’s prospects in difficult financing markets Senior debt • Size of issue un
Slide 35: Break fee and exclusivity
Break fee and exclusivity • US$ 195m • Paid by Rio Tinto in the event that the Boards of Rio Break fee Tinto withdraw their recommendation • At 1% of transaction value, in line with market practice break fees • Rio Tinto has agreed not to solicit any third party competing proposal prior to completio
Slide 36: Conditions to closing
Conditions to closing Shareholder • Joint electorate vote of Rio Tinto plc and Ltd shareholders approval • Relevant Chinalco shareholder approvals • Australian Foreign Investment Review Board approval Government • Appropriate confirmation from the Committee on Foreign Investment in the approvals Uni
Slide 37: Paul Skinner, Chairman
Paul Skinner Chairman Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf 38
Slide 38: Partnership will allow stakeholder countries to continue to benefit from Rio Tinto
Partnership will allow stakeholder countries to continue to benefit from Rio Tinto • Strengthens market positions in key commodities through access and insight to Chinese market • Deepening of Chinese trade and investment relationships beyond resources • Establishment of a link to potential future r
Slide 39: Summary
Summary • A comprehensive package of benefits:– premium valuation of investment assets and highly attractive financing terms – strengthens Rio Tinto’s balance sheet – flexibility to undertake high value strategic growth at all points of the cycle – logical step to position Rio Tinto at the forefront
Slide 40: Appendix
Appendix Exhibit 99.8_Rio_Tinto_announces_pioneering_strategic_partnership_with_Chinalco_-_presentation.pdf 41
Slide 41: Reconciliation of attributable EBITDA to reported underlying EBITDA
Reconciliation of attributable EBITDA to reported underlying EBITDA • This presentation refers to attributable EBITDA which represents Rio Tinto’s beneficial interest in the underlying EBITDA of its businesses and operations • Underlying EBITDA, as reported in Rio Tinto’s full year preliminary unaud