Slide 1: 2019 Full Year Results
2019 Full Year Results 26 February 2020 London
Slide 2: Cautionary and supporting statements
Cautionary and supporting 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 n
Slide 3: J-S Jacques, Chief Executive
J-S Jacques Chief Executive
Slide 4: As pioneers in mining and metals we produce materials essential to human progress
As pioneers in mining and metals we produce materials essential to human progress Fe Cu Al Ni Li Perform & Transform Perform today Transform for tomorrow Portfolio Performance People Partners 4 ©2020, Rio Tinto, All Rights Reserved
Slide 5: A strong performance in 2019
A strong performance in 2019 Safety is our top priority. Strong safety performance across the business and first ever fatality-free year Financial performance $21.2 billion $11.9 billion Underlying EBITDA Paid to shareholders 47% 24% Underlying EBITDA margin ROCE** $10.0 billion $2.6 billion Free ca
Slide 6: Sustainability performance supported by strong profitability
Sustainability performance supported by strong profitability No fatalities in 2019 46% reduction1 ~$7.5 billion in emissions since 2008 paid in taxes and $17 billion royalties paid to suppliers 76% of power from renewables ASI 2 $36 No 2 in global certified million3 human rights index4 $100 million
Slide 7: $11.9bn of cash returns paid in 2019 with $3.9bn in H1 2020
$11.9bn of cash returns paid in 2019 with $3.9bn in H1 2020 $2.9bn $6.4bn $3.7bn + 2019 final ordinary Sustaining capex Ordinary and special dividends paid dividend to be paid in 2020 47% $2.6bn EBITDA margin Development capex $15.8bn $1.6bn of operating Buy-backs 41% TSR3 24% $0.9bn cash flow4 ROCE
Slide 8: Jakob Stausholm, Chief Financial Officer
Jakob Stausholm Chief Financial Officer
Slide 9: Strong financial results
Strong financial results ($bn, except for per share data) 2019 2018 Comparison Gross revenue 45.4 42.8 + 6% Underlying EBITDA 21.2 18.1 + 17% ROCE 24% 19% + 5pp Cash flow from operations1 15.8 11.9 + 32% Free cash flow1 10.0 7.1 + 42% Underlying earnings 10.4 8.8 + 18% Underlying earnings per share
Slide 10: EBITDA supported by price
EBITDA supported by price Underlying EBITDA $ billion 0.5 4.4 0.2 (0.2) 21.6 (0.0) 21.2 (0.5) 18.1 1.2 16.9 2018 Price Exchange CPI & Flexed 2018 Incremental Unit cash Other and 2019 underlying rates energy underlying volume costs one-offs underlying EBITDA EBITDA margin EBITDA EBITDA of divested as
Slide 11: Commodity prices moved in different directions
Commodity prices moved in different directions Iron Ore* (39% increase YoY) Aluminium** (-15% decrease YoY) Copper** (-8% decrease YoY) 120 2800 550 340 110 330 2600 500 320 100 450 310 2400 90 300 400 80 2200 290 350 280 70 2000 270 300 60 260 1800 250 50 250 40 1600 200 240 62% price HY average Pr
Slide 12: Maintained industry-leading profitability
Maintained industry-leading profitability.… Return on invested capital*, post tax Average ROCE 2009 to 2019 of 16% 35% Average ROCE 2001 to 2008 of 22% 30% Only one year of single digit ROCE in two decades 25% 20% 15% 10% 5% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Range for key div
Slide 13: …which we continue to translate into strong cash flows
…which we continue to translate into strong cash flows Cash flow in $ billion 20.0 Capital allocation framework in action 18.3 15.1 15.8 13.7 14.3 New returns 14.1 policy 11.9 9.2 9.4 9.4 9.7 10.0 7.7 8.5 6.9 7.1 5.8 4.8 3.9 2.1 (8.1) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Operating
Slide 14: Iron Ore
Iron Ore World-class returns underpinned by robust price environment Operating metrics 2019 2018 2020 Strong financial results comparison guidance Average realised price* $85.9 / t + 37% Robust second half performance demonstrates operational recovery Shipments (100% basis) 327.4mt - 3% 324-334Mt Op
Slide 15: Aluminium
Aluminium Focus on cash generation with price and cost impacting profitability Operating metrics 2019 2018 2020 Lower prices impacted EBITDA by comparison guidance $1.3 billion Average aluminium price* $2,132 / t - 14% Average alumina price** $331 / t - 30% – Partly offset by $0.5 billion benefits m
Slide 16: A strong global aluminium business
A strong global aluminium business Upstream EBITDA margins* (%) Margin gap: portfolio quality and performance delivery 40 2019 EBITDA margin 26% 35 30 25 20 +15pp 15 10 5 0 H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 Rio Tinto Range for key aluminium peers *Aluminium underlying EBITDA margin is defined as U
Slide 17: Copper & Diamonds
Copper & Diamonds… Good operating performance masked by lower price and one-off items Operating metrics 2019 2018 2020 EBITDA and margin impacted by price comparison guidance and several factors: Copper price (realised) 275 c/lb - 7% – $0.2 billion charge at Escondida Production – mined copper 577kt
Slide 18: Energy & Minerals
Energy & Minerals Recovery from 2018 disruptions and solid pricing Operating metrics 2019 2018 2020 Strong pricing and operational recovery comparison guidance driving 41% increase in EBITDA excluding coal assets divested in 2018 IOC pellets price $137 / t + 20% TiO2 slag price** $776 / t + 14% High
Slide 19: 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 19 ©2020, Rio Tinto, All Rights Reserved
Slide 20: Controlled ramp-up of investments
Controlled ramp-up of investments Capital expenditure profile $ billion ~7.0 2019 capex of $5.5 billion ~6.5 ~6.5 - Sustaining capex of $2.9 billion 5.4 5.5 - Development and replacement capex Depreciation of $2.6 billion 4.5 $1 billion climate-related spend over five years. Capital portion already
Slide 21: Our strong balance sheet…
Our strong balance sheet… Net debt Operating cash flow of $14.9 billion after $ billion payment of $0.9 billion of capital gains 5.5 tax on coking coal disposals completed in 2018 1.6 Total cash returns to shareholders 10.3 $11.9 billion in 2019 Non-cash increase of $1.2 billion from implementation
Slide 22: …is an asset
…is an asset Net debt Balance sheet strength is an asset. $ billion Offers resilience and creates optionality. 14.1 Gearing 7% and net debt to LTM^ EBITDA of 0.17x 12.9 11.3 10.0 $0.2 billion of share buy-backs to be 9.3 9.3 completed by end of February 2020 8.0 9.6 7.6 5.2 5.6 4.9 3.8 4.9 3.7 -0.3
Slide 23: Shareholder returns based on a well defined pay-out policy
Shareholder returns based on a well defined pay-out policy Our pay-out ratio has consistently exceeded the policy Final ordinary dividend for 2019 of $3.7 160% billion or 231 US cents per share to be paid in April 2020 140% Total declared dividend for 2019 of $7.2 120% billion or 443 US cents per sh
Slide 24: Our investment case
Our investment case Our Assets Our Approach Our Performance Long life Sustainability (ESG) 2019 ROCE2 Competitive Operational Excellence $10.4 billion earnings1 24% Expandable + Value over volume = $10.0 billion free cash flow3 23% Sustainable Capital discipline $11.9 billion dividends 27% and share
Slide 25: J-S Jacques, Chief Executive
J-S Jacques Chief Executive
Slide 26: Rio Tinto is well positioned to deal with short-term volatility
Rio Tinto is well positioned to deal with short-term volatility … China daily property sales Global economic growth k sqm 1200 Day 0 = First day of Chinese New Year – Signs of stabilisation and some demand recovery in 1000 late 2019 800 – Supportive policy and restocking 600 400 200 Covid-19 virus 0
Slide 27: …with low-cost assets and strong balance sheet
…with low-cost assets and strong balance sheet Low-cost assets Strong balance sheet ($ billion) 2020 iron ore cost curve (2020 CFR VIU adjusted costs)** 90 11.3 60 9.6 30 9.3 0 8.0 0% 25% 50% 75% 99% Rio Tinto Pilbara 4.9 2020 aluminium cost curve (2020 real $/t) 3.8 3.7 2500 2000 1500 1000 500 -0.3
Slide 28: Pressures are growing in a 'New Era' of complexity
Pressures are growing in a ‘New Era’ of complexity Growing geopolitical tensions Higher societal expectations Technological disruptions 28 ©2020, Rio Tinto, All Rights Reserved
Slide 29: Transforming for tomorrow
Transforming for tomorrow Exploration Strong Building our sustainable Organic growth portfolio M&A watching brief free cash flow of the future New commodities per share Enhancing the Safety efficiency and Mine tailings Shareholder sustainability of Innovation for productivity returns our operations
Slide 30: Climate change portfolio matrix
Climate change portfolio matrix; 32Mt CO2e in 20181 low Diamonds Copper Uranium Pilbara Carbon intensity (tCO2e / tCu-eq) Borates IOC Atlantic Al Bauxite & Alumina TiO2 Size of bubble Pacific Al represents absolute emissions, scope 1 & 2, high Mt CO2e low EBITDA margin (%) / competitive position hig
Slide 31: Our assets mirror global demand themes
Our assets mirror global demand themes Minerals & Copper Iron Ore Aluminium Ventures Exploration Well-timed World leader World leader Products for World leading growth the future Transition to the Urbanisation Electrification low-carbon economy 31 ©2020, Rio Tinto, All Rights Reserved
Slide 32: Growth is all about value: invest in assets and create options through exploration
Growth is all about value: invest in assets and create options through exploration $2.6 billion Quality Margins Returns Development growth capital invested Focus on most promising exploration opportunities $0.6 billion Spent on exploration and evaluation >200 17 countries Opportunities reviewed by 6
Slide 33: We are accelerating Winu
We are accelerating Winu Extensive drilling & geophysical programmes completed. Drilled 16 km in 2018 and 124 km in 2019. Initial environmental and sub fauna base line studies completed. Other studies well advanced including: geotechnical, hydrology, mining, processing, basic engineering design. Sta
Slide 34: We need an honest debate amongst stakeholders
We need an honest debate amongst stakeholders Consumers Climate Shareholders change & partnership Business Government 34 ©2020, Rio Tinto, All Rights Reserved
Slide 35: Our climate change strategy is in four areas
Our climate change strategy is in four areas – track record of performance against each 01 02 03 04 Producing the materials Reducing the carbon Partnering to reduce Enhancing our resilience for a low carbon future footprint of our operations the carbon footprint to physical climate risks across our
Slide 36: Our climate change strategy update
Our climate change strategy update We do not mine coal or extract oil and gas Our targets1 30% reduction in emissions intensity by 2030 from 2018 levels 15% reduction in absolute emissions by 2030 from 2018 levels Our growth, overall, between now and 2030 will be carbon neutral Underpinned by Approx
Slide 37: Using technology to tackle critical climate challenges
Using technology to tackle critical climate challenges - $1 billion over five years Tailings: Water management: Work with industry to research and develop new tailings solutions Increase capability to enhance water use and reduce waste Source: Epiroc Solar: Wind: Hybrid & electric equipment: ELYSIST
Slide 38: $36bn cash returns since 2016 including $3.9bn in H1 2020
$36bn cash returns since 2016 including $3.9bn in H1 2020 $9bn $19bn + $3.7bn Sustaining capex Ordinary and special 2019 final dividend dividends paid to be paid in 2020 43% average EBITDA margin1 $50bn4 operating cash flows $9bn $62bn4 $4bn Development capex of cash Buy-backs 28% 18% + $12bn TSR3 a
Slide 39: Appendices
Appendices 26 February 2020 London
Slide 40: Higher iron ore prices partly offset by lower copper and aluminium prices
Higher iron ore prices partly offset by lower copper and aluminium prices Underlying EBITDA 2019 vs 2018 $ million 24,000 4,382 22,000 Iron ore Iron & Titanium Diamonds Copper Aluminium* Other, net 18,136 7,000 20,000 5,719 6,000 18,000 5,000 16,000 4,000 14,000 3,000 12,000 2,000 10,000 1,000 121 8
Slide 41: Lower iron ore sales mostly offset by improvement in third party bauxite sales
Lower iron ore sales mostly offset by improvement in third party bauxite sales Underlying EBITDA 2019 vs 2018 $ million 316 26,000 529 75 22,819 24,000 4,382 22,000 48 78 ( 303) ( 20) 19 0 ( 407) 20,000 18,136 18,000 ( 74) 16,000 14,000 12,000 10,000 Diamonds Gold Aluminium Copper Iron & Iron Ore Ot
Slide 42: Iron Ore
Iron Ore Higher prices partly offset by disruptions Underlying EBITDA 2019 vs 2018 $ million 18,000 5,475 247 51 17,078 6 16,098 16,000 ( 73) ( 426) 14,000 ( 560) 11,378 12,000 10,000 8,000 6,000 4,000 2018 Price Exchange rates Energy Inflation Flexed 2018 Volumes and Mix Cash costs Other 2019 under
Slide 43: Aluminium
Aluminium Lower prices partly offset by improved costs and higher bauxite volumes Underlying EBITDA 2019 vs 2018 $ million 3,500 3,095 315 2,285 2,500 153 16 316 1,866 ( 212) 1,500 ( 1,288) ( 110) 500 -500 2018 Price Exchange rates Energy Inflation Flexed 2018 Volumes Cash cost Other 2019 underlying
Slide 44: Copper & Diamonds
Copper & Diamonds Solid operational performance offset by lower prices Underlying EBITDA 2019 vs 2018 $ million 3,000 2,776 43 22 2,597 73 2,073 ( 196) ( 48) ( 77) 2,000 ( 199) ( 281) ( 40) 1,000 0 2018 Price Exchange Energy Inflation Flexed 2018 Volumes and Cash cost Escondida: Grasberg Other 2019
Slide 45: Energy & Minerals
Energy & Minerals Strong operational recovery from 2018 disruptions Underlying EBITDA 2019 vs 2018 $ million 3,000 72 2,464 29 2,140 327 ( 0) 1,762 281 2,000 ( 75) ( 118) ( 1) 1,000 ( 893) 0 2018 Price Exchange Energy Inflation Flexed 2018 Volumes and Cash costs Coal disposal One-offs Other 2019 und
Slide 46: Other movements in underlying EBITDA
Other movements in underlying EBITDA Underlying EBITDA impact Energy & Interest, $ million 2018 FX/ price Inflation Volumes Cash costs E&E Non-cash tax, other 2019 Other operations (70) 60 (15) (12) (58) - 15 3 (77) Exploration & Evaluation (net) (231) 13 2 - - (107) - 8 (315) Other (952) 5 2 - (25)
Slide 47: Group level financial guidance
Group level financial guidance FY2020 FY2021 FY2022 CAPEX Total Group ~$7.0bn ~$6.5bn ~$6.5bn Sustaining Capex Group ~$2.5bn ~$2.5bn ~$2.5bn 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 through the cycle 4
Slide 48: Group level financial guidance
Group level financial guidance 2020 production guidance1 2020 costs Iron Ore Shipments 324 – 334mt (100% basis) $14-15/wmt (FOB) C&D C1 unit costs 120-135 c/llb Mined Copper 530 – 570kt Refined Copper 205 – 235kt Diamonds 12 – 14m carats Aluminium Modelling guidance provided for Bauxite 55 – 58mt Ca
Slide 49: Debt maturity profile
Debt maturity profile 31 December 2019 debt maturity profile* $ million Reported gross debt increased by $1.3 billion year on year to $14.3 billion at 31 3,500 Millions Dec, mainly attributable to the implementation of IFRS 16 leases 3,000 Average outstanding debt maturity of 2,500 corporate bonds a
Slide 50: Pro-forma net debt reconciliation
Pro-forma net debt reconciliation 2018 2019 $bn $bn Reported net debt -0.3 3.7 IFRS 16 leases adjustment 1.2 Australian tax top-up in June of following year 0.4 1.0 Australian tax payable on disposals in following year 0.9 Shareholder returns remaining relating to disposals 5.1 0.2 Committed share b
Slide 51: Modelling EBITDA
Modelling EBITDA Underlying EBITDA sensitivity ($m) impact on FY 2019 underlying 2019 average price / rate EBITDA of 10% price/rate change Copper 273c/lb 350 Aluminium $1,791/t 482 Gold $1,393/oz 54 Iron ore (62% Fe FOB) $85.9/dmt 2,061 A$ 0.70US$ 529 C$ 0.75US$ 199 Oil (Brent) $64/bbl 72 Note: The
Slide 52: Modelling aluminium costs
Modelling aluminium costs Canadian* smelting unit cash** cost sensitivity ($/t) Impact a $100/t change in each of the input costs below will have on our 2019 Canadian smelting unit cash cost of $1,318/t Alumina (FOB) $191 Green petroleum coke (FOB) $34 Calcined petroleum coke (FOB) $30 Coal tar pitc
Slide 53: Application of the returns policy
Application of the returns policy Capital return considerations Comments 1 – Operating cash flow of $14.9 billion 1 Results for 2019 – FCF of $9.2 billion – Underlying earnings up 18% to $10.4 billion – Focused on Oyu Tolgoi Long-term growth prospects – Investing in replacing high quality assets in
Slide 54: Cash returns paid in 2019
Cash returns paid in 2019 2019 cash returns paid $11.9 billion of cash returns paid to $ billion shareholders in 2019: - $2.9 billion 2018 ordinary final 1.0 11.9 dividend or 180 US cents per share 2.5 - $3.9 billion 2018 special dividend or 243 US cents per share 1.6 - Share buy-back of $1.6 billio
Slide 55: Our diversified portfolio of products optimises end-to-end value
Our diversified portfolio of products optimises end-to-end value Diversified portfolio of products1 Superior value for Pilbara Blend Fines (PBF) We market our high liquidity Pilbara Blend, plus a suite of products to meet the Delivering higher value to our customers and extracting a premium needs of
Slide 56: China high-frequency data
China high-frequency data Daily coal consumption of major electricity producers Post-CNY property sales remain almost non-existent k tons k sqm 1000 1200 Day 0 = First day of CNY Day 0 = First day of CNY 1000 800 800 600 600 400 400 200 200 0 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 3
Slide 57: Group Income Statement and Cash flow statement
Group Income Statement and Cash flow statement Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) Proforma Rio Tinto Group (excluding OT and TRQ)(2) Dec-19 Dec-18 Dec-19 Dec-18 Dec-19 Dec-18 YTD YTD YTD YTD YTD YTD Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Consolidated sa
Slide 58: Group Balance Sheet
Group Balance Sheet Rio Tinto Group Oyu Tolgoi and Turquoise Hill(1) Proforma Rio Tinto Group (excluding OT and TRQ) Dec-19 Dec-18 Dec-19 Dec-18 Dec-19 Dec-18 YTD YTD YTD YTD YTD YTD Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Actual ($m) Non-current assets 70,499 70,047 9,589 10,375